The Russian authorities expect tax revenue at the Primorye Integrated Entertainment Zone – a casino development area located 50 kilometres (31 miles) from Russia’s Pacific port of Vladivostok – will reach RUB165 million (US$2.5 million) this year.
The figure was provided by the vice-governor of Primorye, Sergey Nekhaev, quoted in a Friday release available on the official website of the Primorsky Krai Development Corp. The latter is a government-owned company overseeing the development of the Primorye Integrated Entertainment Zone.
Tigre de Cristal – majority owned by Hong Kong-listed Summit Ascent Holdings Ltd, a firm controlled by Asian casino investor Lawrence Ho Yau Lung – is currently the only casino in operation in Primorye. The property had a soft launch in October last year and an official one the following month.
The scheme opened with 121 hotel rooms and 321 slot machines, 33 mass tables and 35 VIP tables.
No other casinos are scheduled to open in Primorye in 2016, although several new projects are planned for the zone.
Mr Nekhaev stated that the Primorye Integrated Entertainment Zone is forecast to generate tax revenue of more than RUB700 million a year by 2019. The figure is expected to reach RUB2.5 billion by 2022, he was quoted saying.
The release did not clarify whether Mr Nekhaev was referring only to gaming tax revenue or to overall tax revenue.
According to brokerage Union Gaming Securities Asia Ltd, Primorye offers a very competitive fiscal system for casino operators. There is no tax on gross gaming revenue, as the Primorye authorities only charge a fixed monthly tax of RUB125,000 per gaming table and RUB7,500 per slot machine.
Recent media reports in Russia have however hinted that the federal authorities could be considering changes nationally to the tax system for the gaming industry. But in February the management at Tigre de Cristal told GGRAsia that any tax hikes would be at odds with Russia’s policy of encouraging regional investment via integrated entertainment zones.
Increased hotel capacity, more jobs
Mr Nekhaev stated – as quoted on the website of Primorsky Krai Development – that hotel room supply in Primorye is expected to reach 1,500 units by 2019. Once all the planned developments are completed, by about 2022, the figure will amount to 6,500 units, the official stated.
He added that Primorye had already generated 1,000-plus non-construction jobs, with the number of such jobs likely to tally more than 9,000 by 2019. In 2022, the Primorye Integrated Entertainment Zone was expected to employ more than 15,000 people, Mr Nekhaev stated.
Primorsky Krai Development’s Friday release also quoted the deputy head of Russia’s federal tourism agency, Roman Skoriy, praising the development strategy for Primorye.
“It is necessary to attract well-known operators, who will be able, together with the government, to create the infrastructure… and then to manage it effectively. A good example is the casinos,” Mr Skoriy reportedly said.
He also highlighted the important role of casino resorts in generating “stable” tax revenue for the regional government.
In July 2009 the Russian federal government closed down all the then existing casinos and electronic casino game halls in the country. In 2010, it identified four specific casino gaming zones nationwide: Primorye was among them, along with Azov City in the Krasnodar region, the Russian enclave of Kaliningrad on the Baltic Sea coast, and Altai in Siberia. In 2014, Russia’s President Vladimir Putin signed a law allowing the establishment of additional gambling zones also in Sochi and in the Crimea.
Hong Kong-listed casino operator and developer NagaCorp Ltd is one of the investors in Primorye. The firm broke ground on a casino resort at the end of May 2015. NagaCorp had previously stated – following the autumn 2013 announcement of its Russian investment agreement – that its resort would have 100 gaming tables, 500 electronic machines and a large theatre facility to accommodate 2,000 people as well as entertainment offerings such as a karaoke complex and spas. The property is forecast to open in the third quarter of 2018.
Two Russian groups also are investing in casino projects in Primorye. Royal Time LLC has plans to build an integrated resort in the zone, with the working title ‘Phoenix’. According to a May 2015 statement from Primorsky Krai Development, the multi-stage development would involve a minimum investment of US$215 million. Phoenix’s first phase, including a 320-room hotel and casino, is scheduled to be open in late 2017.
Russia-based Diamond Fortune Holdings Ltd aims to develop four casino resorts in Primorye, with the first due to open in 2018. Once all its schemes are completed – involving a total investment of US$914 million – Diamond Fortune says it will be the casino operator with the largest footprint in Primorye.
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”Given that the blanket casino closure [in Macau due to Typhoon Mangkhut] happened on an all-important weekend day… we expect that somewhere between MOP1.1 billion [US$136.2 million] and MOP1.5 billion in GGR will be lost”
Analyst at Union Gaming Securities Asia