Sri Lanka Targets Wealth in Singapore-Style Casino Push: Economy

Beach in ColomboPeople stand on a beach in Colombo. For decades a destination for backpackers, religious pilgrims and beach lovers, Sri Lanka is building high-end hotels and casinos to woo wealthier tourists from India and China as it seeks to emulate the success of Singapore and Macau. Photographer: Brent Lewin/Bloomberg

Louise Fernandez has visited Sri Lanka about five times in the past decade, drawn by its white sandy beaches, tea plantations and historic temples. The South Asian island is about to give her more reasons to return.

The Sri Lankan parliament is due to approve today a tax amnesty for the island’s first foreign casino venture, a $350 million investment backed by Australian James Packer’s Crown Ltd. The 400-room waterfront project will join a growing lineup of luxury Colombo hotels, including a $400 million beachfront Shangri-La, the Taj group’s upgraded five-star Samudra Colombo, and a John Keells Holdings Plc. gaming resort.

“I’ve been coming back to Sri Lanka (SNGPYOY) for its beaches and cultural heritage sites,” Fernandez, a 42-year old Mumbai resident, said while shopping with her daughter and husband at Odel, a department store in a wealthy Colombo enclave recommended by the Lonely Planet as a place to shop with the glamorous. “Casinos will be another reason.”

For decades a destination for backpackers, religious pilgrims and beach lovers, Sri Lanka is building high-end hotels and casinos to woo wealthier tourists from India and China as it seeks to emulate the success of Singapore and Macau. The push is part of a drive to spur an economic revival after the government ended a 26-year civil war against the separatist Tamil Tigers in 2009, and takes aim at the growing affluence of Asian travelers.

Lawmakers Debate

Sri Lanka’s lawmakers will debate and pass an order to give a 10-year tax exemption to the Crown venture in the D.R. Wijewardena Mawatha waterfront area close to the capital’s financial district, according to the parliament office. Billionaire Packer’s gaming resort, which will also include fine dining restaurants, could almost double tourism revenue to $1.7 billion a year, according to Capital Alliance Ltd.

“This is what Sri Lanka tourism needs: mega projects bringing in a new brand of tourists,” said Sanjeewa Fernando, an analyst at CT Smith Stockbrokers Pvt. in Colombo. “Tourism revenues will be driven up and it’ll bring in relatively richer tourists. Just like with the casinos in Singapore, the Crown project will bring Sri Lanka tourism to a new phase.”

There is a growing market. Wealth among Asia-Pacific millionaires may top North America’s as soon as next year, according to a report published last month by Cap Gemini SA and Royal Bank of Canada. Asians with at least $1 million in investable assets are set to see their riches climb to $15.9 trillion by 2015, the 2013 Asia-Pacific Wealth Report says.

Beach Front

Hong Kong-based Shangri-La Asia Ltd. is building an upmarket resort on Colombo’s main “Galle Face” beach front. Taj Hotels Resorts and Palaces is spending $21 million to upgrade the Samudra Colombo to be on par with its luxury brand of hotels, according to Sujit Samant, director of sales in Sri Lanka.

The government in July offered tax concessions for a more-than $650 million integrated resort by John Keells, Sri Lanka’s biggest diversified company. Located across the Beira Lake from the Crown project, it will include a luxury hotel as well a shopping mall and gaming and entertainment facilities, according to a government gazette.

“Sri Lanka was, on account of its problems, off the radar, and now it is on the radar,” Vikram Madhok, managing director of luxury travel company Abercrombie & Kent India Ltd., said in New Delhi. The company has entered a joint venture in Sri Lanka.

Risk Averse

Sri Lanka is a latecomer compared with other Asian destinations, after years of conflict put off risk averse visitors and hampered infrastructure development.

Macau, which is half the size of Manhattan, earned $38 billion in casino revenue last year, six times more than the Las Vegas Strip. The city is the only place in China where casino gambling is legal and it gets two-thirds of its gaming revenue from high-rollers.

In Singapore, Las Vegas Sands Corp. and Genting Singapore Plc poured more than $10 billion into the two gaming resorts that opened in 2010 after the country lifted a casino ban. The nation’s economic growth surged to a record of almost 15 percent that year.

Sri Lanka isn’t alone in planning to follow Macau and Singapore. A Japanese lawmakers group plans to submit a bill with the aim to legalize casinos.

The South Asian nation risks falling behind if its tourism projects are delayed, said Bimanee Meepagala, a Colombo-based analyst at NDB Aviva Wealth Management Ltd.

“Sri Lanka is facing tough competition in this spectrum,” she said. “We’ve got to get the product out fast, as our economy can’t afford delays.”

[Via Bloomberg Businessweek]

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