By Dean Macomber   Thu, Mar 05, 2009

Are the Philippines poised to break out and become a major Asian gaming destination, or will it continue to be a country interminably relegated to serving a predominantly local resident market?

Only time will answer this question, but what is clear is that the Philippines has the innate potential to become a major force in Asian gaming if the stars and the moons align just right. What will it take for that to occur? A retrospective look at gaming in the Philippines will help us see into the crystal ball and the future of Philippine casino gaming.

To Know Philippine Gaming Is To Know PAGCOR

In 1977, modern-day gaming came to the Philippines in the form of legislation. The objective was to clean up a hodgepodge of loosely structured, barely controlled and sometimes illegal gaming enterprises.

This legislation created the 100 percent government-owned Philippine Amusement and Gaming Corporation, or PAGCOR. Its mandate is to “regulate all games of chance, particularly casino gaming in the country, to raise funds for the government’s socio-civic and national developmental efforts, and to help boost the country’s tourism industry.”

The result some 30 years later? In 2006, the most recent edition of PAGCOR’s annual report, PAGCOR declared that it owned and operated 13 casinos, nine VIP slot clubs, and three slot arcades. Casino and casino-like gaming generates approximately 80 percent of its total revenue. PAGCOR also operates and/or oversees bingo, internet sports betting and online casinos in addition to earning income from rent, management fees and miscellaneous operations.

PAGCOR also promotes private company ownership and operation of casinos. There were five private casinos operating in the Philippines in 2006/2007 offering a total of 114 table games and 700 slot machines. These establishments pay a 5 percent franchise tax and 25 percent of what is left of their gross gaming revenue to PAGCOR.

As PAGCOR President and COO Rafael “Butch” Francisco explains it, “We don’t compete with these private casinos. We only grant licenses to private companies when we are sure they won’t compete with PAGCOR casinos. And when a private company gets a license to open a casino, we consider it a PAGCOR casino. There’s no need for us to put up another gaming facility. We’re happy with 25 percent of the gross revenues. It allows us to respond through the private companies.

“Sometimes other private companies want to open casinos in those areas, but we try to keep competition for the gaming market to a minimum. We don’t want to put a PAGCOR casino or gaming facility in an area where a private casino is operating.”

High-limit, third-party VIP rooms are operated in both PAGCOR and private casinos. Regarding PAGCOR VIP rooms, Francisco explains, “We try to compete aggressively in this market. We have served as an alternate venue to Macau or other areas. There are a number of junket operators who come to the Philippines on a regular basis. They cater to their players and we are glad to host them. This is a different environment with different amenities and entertainment than they find in other areas of Asia.”

Unlike Macau, where VIP operators receive a percentage of the money deposited by their players, Francisco says PAGCOR does it differently.

“There is no commission structure in the Philippines,” he says. “To encourage the VIP operators, we provide them with a private VIP room and don’t impose the same cut that we do with private casinos. They pay the 5 percent tax to the government and we collect just 10 percent of their gross revenues rather than the 25 percent we charge the private casinos. It’s an incentive for them to bring in players to the Philippines. Any other arrangements they have with sub-agents or others, they’re on their own. And it’s the operators’ responsibility to extend credit to their players because PAGCOR does not extend credit. And of course, we have strict money-laundering provisions.”

PAGCOR Beneficiaries

PAGCOR announced it earned income of approximately $532 million in 2006 (all financial amounts in this article will be in U.S. dollars unless otherwise noted). Fifty-five percent of PAGCOR’s income went to the government, making PAGCOR the third-largest contributor to government revenue. General revenue, mandated programs and a variety of PAGCOR-inspired programs and operations result in a long list of beneficiaries, e.g.:

• The People’s Government Mobile Action Project, an initiative that brings together local government units, the private sector and non-government groups to execute various social, civic and development projects of certain key government agencies. PAGCOR acts as project coordinator.

• The Bureau of Claims, a unit under the Department of Justice that compensates victims for wrongful detention and prosecution.

• The Early Childhood and Development Program, which provides funds for the construction and maintenance of day-care centers nationwide.

• Poverty alleviation programs designed to encourage the establishment of small to medium businesses in the barangays, the smallest governmental unit in the Philippines.

• Children Staying Away from Drugs campaign, which seeks to educate children between the ages of 6 and 12 on the hazards of drug addiction.

• The Saving Innocents Program, a feeding program for children at risk of malnutrition.

• The National Sports Commission.

• Ad hoc programs when needed to benefit the community, e.g., providing food, medicine and potable water to communities when they were ravaged by Typhoon Reming.

• Support of problem gambling initiatives.

• Income sharing with host cities where PAGCOR operations are located.

• PAGCOR employment of almost 12,000 employees pumping their payroll in addition to the goods and services they purchase into the Philippine economy.

PAGCOR has certainly impressively met and continues to exceed the goals set for it.

Sources of Philippine Gaming Revenue

In 2007, the estimated total gaming revenue from all PAGCOR and private casino-type operations in the Philippines (excluding revenue from online gaming and its derivatives) was estimated at $783 million. Of this total, $572 million or 73 percent was generated by Philippine residents and $211 million or 27 percent was generated by international visitors.

RESIDENT MARKET: Approximately 49 million or 54 percent of the Philippine population is of adult gaming age. In the Philippines, this gross number must be diluted to account for the relatively high poverty, unemployment, low family income, and an uneven wealth distribution. This leads to an adjusted 10 million adults who are “qualified” and capable of gaming. Applying a 19 percent penetration rate (i.e., the ratio of adults who gamble in a casino one or more times in a year) leads to a projected 1.9 million actual players in 2007.

Assuming an annual gaming budget for each of these “players” of $319, this leads to a domestic gaming potential of $613 million. As one might expect, the bulk of the resident gaming revenue is generated by Metro Manila residents (66 percent) followed by the remainder of the residents on Luzon (23 percent), and then the residents residing on the other islands (10 percent). Assuming further approximately $40 million of this total amount was gambled outside the Philippines leads to the $572 million projected domestic-generated gaming revenue shown previously.

Relative to other gaming venues, the metrics used to forecast demand from resident demographics and calibrate to known gaming revenue are low across all of the variables. Applying the “glass is half full” philosophy, these low penetration rates, annual gaming budgets and other metrics indicate the potential for growth in domestic demand if the overall economy improves and/or keys can be found to unlock latent demand.

TOURISM: The Philippines attracted approximately 3.1 million international visitors in 2007. Almost 60 percent or 1.8 million of these visitors came from Asia, the remaining 1.3 million from other countries. Ironically, East Asian countries that are further away generated 55 percent of total tourists to the Philippines while closer ASEAN and other countries accounted for only 4 percent. As can be seen by the chart below, South Korea produces the greatest number of Asian visitors at approximately 1 million, followed by Japan at 0.4 million, and China at 0.2 million.

Tourism-wise, the Philippines enjoys a central location with travel times to most locations ranging from 1.5 to 4 hours with round trip air fares ranging at the low end from $80 per hour to $230-$290 per hour at the high end.

Historically, given the absence of significant casino-centric resort capacity, the primary reason for these international tourists to visit the Philippines has not been to visit a casino. It was therefore assumed that little gaming revenue was driven from this category in 2007, probably in the $10 million range (assumes 5 percent of these visitors visit a casino once during their trip with a $60 gaming budget). This number is included in the projected international gaming revenue of $211 million.

THE DEDICATED, HIGH-LIMIT INTERNATIONAL CASINO PLAYER: The international high-limit player—i.e., the visitor for whom the primary reason to visit the Philippines is to gamble and who makes high average bets—is, however, a substantial market. This market segment is primarily driven by third-party VIP room owners/operators or junket representatives who proactively market and promote these trips to the Philippines on behalf of a local casino in exchange for a commission and other compensation. These players could also be invited by the internal marketing program of the casino, thereby circumventing the middleman. But, in Asia, premium players from other countries are predominantly marketed to and served by third parties.

This market segment was forecast to account for approximately $200 million (rounded) or 26 percent of the total annual Philippine gaming revenue in 2007. Both PAGCOR and the private casino operators compete for this business: in 2007 it is estimated that PAGCOR generated $110 million in total international-player gaming revenue, and the private casinos approximately $90 million.

These players can typically choose anywhere in Asia to play and, in some cases, anywhere in the world. They patronize the Philippines because: (1) the VIP room owners and junket representatives and the players are more highly incentivized by Philippine casinos than casinos that are closer and/or are located in venues with bigger and newer casinos (e.g., Macau); (2) a Philippine casino is a change of pace from the casino they typically patronize; (3) the weather is more favorable during certain parts of the year; and/or (4) a Philippine casino is smaller, personal, more friendly, and offers attractions not available elsewhere.

The Butterfly Is Ready To Emerge From The Cocoon

Just prior to the onset of the financial crises, the Philippines was on the cusp of being a target-rich gaming development opportunity ready to emerge from the cocoon of its first life to be something more resplendent in its second.

The first to recognize the dormant, raw upside potential were those closest to it, PAGCOR. In fact, in PAGCOR’s 2006 annual report, Chairman Efraim C. Genuino said it perhaps best when he stated that PAGCOR “must undertake a paradigm shift from purely gaming to world-class entertainment.”

The gauntlet was laid down, the trial period was over and with the confidence of the start-up years, the government and PAGCOR were now both willing to more aggressively develop its gaming product to better serve the domestic as well as the international tourist and high-limit player. As part of this paradigm shift, PAGCOR began updating its existing casinos to modern standards, building new free-standing, purpose-built casinos under their complete control and, in all, better fulfilling the broader range of gaming, food, beverage and entertainment needs of the marketplace.

The second half of the PAGCOR chairman’s announcement clearly set the scene for the Philippines to compete internationally, “… so the company may dovetail with what the Bayong Nayong Pilipino-Manila Bay Integrated City would have to offer.”

The Manila Bay Integrated City is an epoch new meta-entertainment, resort and lifestyle development that could not only be transforming for PAGCOR and Manila, but also allow Philippine gaming to compete among the best-of-the best in Asia and the world.

At full build-out, estimates are for a total of $15 billion to be invested in this meta-project spread across 2,000 acres (800 hectares) of reclaimed land along Manila Bay in Paranaque City, not far away from the international airport and the central business district of Manila. A true entertainment, leisure, resort and lifestyle destination, only a small portion of the massive development is to be devoted to casino-centric integrated resorts, with the remainder containing a cornucopia of hotels, a theme park, residential condominiums, office developments, commercial center, retirement village and wellness center, plus an array of other minor leisure/entertainment activities.

The stated goals for Manila Bay Integrated City are to: (1) boost tourism, (2) generate employment, and (3) increase earnings for the national government. PAGCOR estimates that when fully built out, the Manila Bay Integrated City project could boost tourism from the current 5 million annual goal to 10 million; directly employ 40,000 Filipinos and create another 150,000 additional indirect jobs; and triple the income generated by PAGCOR from $500 million today to $1.5 billion.

Each casino developer must commit to a total investment of $1 billion and a minimum Phase 1 investment of $400 million. Genuino announced three committed private casino developers enraptured by his vision:

• Travelers International: A joint venture between Alliance Global, a Philippine investment company; and Star Cruises, a subsidiary of Genting Bhd. The project is tentatively planned to include a casino, hotels and a theme park. The first phase is projected to open in mid-2010.

• Aruze Corporation: A major Japanese company known best for its pachinko and slot machines as well as its partnership with Steve Wynn in Wynn Resorts (although Wynn is not involved in this investment). This project is planned to tentatively include a casino, hotel, sports arena and a “Manila Eye” mimicking the famous giant ferris wheel known as the London Eye in London. It is projected to open its first phase in 2010.

• SM Investments: The largest corporation in the Philippines involved in retail and tourism. They are also owners/operators of the nearby Mall of Asia, a retail and entertainment mall containing over 4.4 million square feet (410,000 square meters) that already attracts over 200,000 visitors per day.

• There is one more casino site available for casino development that is currently uncommitted. PAGCOR has held discussions with Melco Crown, MGM Mirage, Harrah’s Entertainment and others, but the site remains available.

Gaming development interest in the Philippines does not stop with the Manila Bay Integrated City, however.

Travelers International also announced plans to open a casino at a 74-acre (30-hectare) mixed-use development near the airport called Newport City. The casino and hotel portion of the development is expected to comprise 25 acres (10 hectares). The opening is expected in 2009.

Elsewhere, Jimei Entertainment, a private casino owner/operator which has already invested $36 million in its Fontana Lesiure Park located at Clark Field, is in the latter stages of investing another $48 million. The facility already includes a casino, golf, guest villas, conference center, restaurants, lounges and water park.

At least two other private green-field casino-resort projects in the $75 million-to-$100 million range have been rumored recently to be in the planning stages at Clark Field. There is room for others. Clark Field has a modern airport served by an ever-increasing number of scheduled and chartered flights. Tourists and players arriving by air can be at the gaming tables literally 10 minutes after departing from the airport, something few other gaming venues in Asia can offer.

Subic Bay is now connected to Clark Field by an expressway and is only 30 to 40 minutes away, and located on the ocean. At one time, two very active casinos operated there, but both closed last year. There is one casino open and operating now. An article appeared regarding a proposed $1 billion casino-centric project ostensibly aligned with Trump Entertainment, but little has been heard about this project since. Subic was the former site of a major U.S. naval base and, like Clark Field, has an airport capable of serving international flights and is only 10 minutes away from the casino-resort area.

Another private owner/operator, Thunderbird Resorts, entered the Philippine market in 2005 and now has two casino-resorts, the first in Rizal and the second in San Fernando at Poro Point. Both began as relatively small resorts with a casino, golf course and boutique hotel, but are pursuing hotel, meeting, restaurant, spa and other resort amenity expansion plans.

Interest by private operators is also being shown in some of the beach and many other exquisite resort areas located throughout the Philippines, albeit small to medium in size. None of these projects seems to have gained sufficient traction to be listed as a viable new project yet.

The Future of Gaming in the Philippines

It is worth noting that three adjunct forms of casino gaming are also permitted, regulated, and/or being tested in the Philippines: online, live video stream, and proxy gaming. The opportunity to complement a bricks-and-mortar casino with an online, online video stream and/or proxy gaming operation could be very attractive for a casino project because they provide the opportunity for marginal revenue and profits.

What might all of this mean to gaming in the Philippines? Well, excluding the Manila Bay Integrated City meta-project and any consideration for online casino gaming and its derivatives, or the current financial crises, one estimate of potential future results is presented below:

Manila Bay Integrated City could, of course, add significantly to PAGCOR’s expected results. For each $1 billion of investment a typical developer would hope to generate $380 million in gaming revenue. Even if only the three announced projects go forward at the minimum investment of $1 billion each, this could lead to over $1 billion in additional gaming revenue, while a fourth casino and/or greater than the minimal investment could lead to $2 billion in gaming revenue.

It is not unreasonable to expect that one of the possible ripple effects of this meta-project could be a greater interest in additional private casino development elsewhere in the Philippines.

To put the future of Philippine gaming into context, Asia and Pacific Rim gaming revenue (including Australia) was estimated at $22 billion in 2007. Pre-financial crises, it was projected to increase to $34 billion in 2010 and exceed $50 billion in 2012. This growth may not occur as fast as thought in 2007, or these limits may not be reached, but this potential still resides within Asia and the Pacific Rim. This potential leaves a large amount of room for the Philippines to earn the relatively small share it needs to achieve the above forecast.

In all, if the stars and the moons align in the Philippines’ favor, gaming revenue in the foreseeable future could reach $2 billion to $3 billion, making the Philippines a major gaming destination in the Asian and world market. Borrowing an oft-used phrase, ultimately reaching these goals is more a matter of “when” than “if.”

Dean M. Macomber, president of Macomber International, Inc., has 35 years of diversified experience in the gaming industry ranging from dealer to president; development to operations involving mega-destination resorts to locals’ oriented casinos in numerous domestic and international venues. Approximately half of his consulting work has involved projects in Asia. Macomber provides high-value, executive-level consulting in the areas of strategic and business planning, feasibility and all other project development phases, restructuring, and pre- and post-opening management and profit improvement engagements. Macomber may be reached at macomberinc@aol.com, office 702-456-6006, and cell 702-682-2229. Also contributing to this article were Stephen J. Karoul, Euro-Asia Consulting LLC; and Scott Fisher, the Innovation Group.

By Scott Fisher   Thu, Mar 05, 2009

After more than a decade of referendums and discussion regarding the possibility of legalizing gaming in Taiwan, it appears that 2009 will be the year when voter and legislative approvals, at least at some level, will finally be granted.

On January 12, Taiwan’s Legislative Yuan passed a bill to decriminalize casino gaming on offshore islands, with the goal to increase demand for tourism to the islands to shore up their economies. The legislation was supported by President Ma Ying-Jeou, who took office in 2008. Ma pledged during his campaign that he would consider legislation for casino gaming, thus setting up a positive political climate to consider the measure.

Passage of local referendums (by a simple majority) later this year will be required before casinos will be permitted. This is in stark contrast to the National Referendum law, under which previous efforts have stalled due to a requirement that 50 percent of all eligible voters partake in voting. Previous polls were taken during the harsh winter months when less than half the population remains on the islands. As such, even with a majority of poll-casters voting in favor, low voter turnout made passage impossible.

Offshore Action

This legislation reflects a major revision to the Offshore Islands Development Act, which has historically provided subsidies to the islands. Year-round indoor tourist activities (such as casinos) would diversify the now-summer-only economy, in turn making the economies more self-sufficient and (hopefully) helping end the flight of the younger generation forced to move to the mainland for more stable and permanent job opportunities.

The bill allows for a referendum on legalized gaming on all offshore islands, including Penghu, Kinmen (also known as Jinmen or Quemoy), Matsu and Lamay Island in the Taiwan Strait and Orchid Island (also known as Lanyu) and Green Island off the east coast. Some say that only Penghu and either Kinmen or Matsu are being seriously considered as sites for casino resort development due to their locations, size, population bases, accessibility and comparative infrastructures.

Penghu County, comprised of 64 islands, is located halfway between the China and Taiwan mainland. In contrast, Kinmen and Matsu are located just off the Fujian Province, China coast. Kinmen is an archipelago of 15 islets, and is less than two kilometers from the city of Xiamen. Penghu and Kinmen both have land areas in excess of 100 square kilometers, and local population bases in excess of 80,000. Matsu is considerably smaller in both regards, but is already a popular tourist destination, easily accessible from China.

The islands off the east coast of Taiwan and Lamay Island are very small in both size (less than 20 square kilometers) and population base (less than 5,000 residents for the islands to the east, and less than 15,000 for Lamay Island), and thus are unlikely to be able to support large-scale resort development.

While casino gaming has now been supported by the legislature, the intention is for the industry to be small in comparison to Macau, with only two or three licenses anticipated in Penghu. Total investment budgets are also expected to be just a fraction of the Singapore budgets. Among all the islands, it is believed that no more than five casino resorts in total will be considered, with possibly as few as three.

Market Madness

Despite the intention to develop moderate-scale casino resorts, the market potential could be deeper, assuming gamers find accessibility not to be a challenge. Penghu is a 50-minute flight from Taipei, and a 30-minute flight or one-hour ferry from Kaohsiung, so given that gaming will not be permitted on the mainland, Penghu should be a popular alternative to gaming in other countries.

From an eco-demographic standpoint, Taiwan has a population base of approximately 23 million, and has a GDP per capita of approximately $30,000, slightly below that of Hong Kong and Japan. Together with the potential demand from Fujian Province and from gamers of other countries, properly sized facilities could be very successful in this market, particularly given the government’s primary focus of jobs and tourism-boosting rather than tax revenue generation.

In 2008 the central government gave the Council for Economic Planning and Development the task of developing guidelines for the gaming act; in December, CEPD returned with recommendations for its framework such as locations and tax rates, which will form part of the regulatory guidelines. The casinos will need to be part of a defined International Tourist Resort, which must contain non-gaming facilities including international conference/tourist hotels of four- to five-star standards, exhibition space, retail and other tourist amenities, essentially based on the Singapore IR model.

The government must still arrive at a gaming tax and license fee, which will be legislated under a separate bill. Preliminary discussions have unofficially mentioned several levels of taxes, which may put the total burden in the 10 percent to 15 percent range. The criteria for development and regulations are likely to be provided in either 2Q or 3Q 2009, with local referendums expected sometime in the early summer.

The RFP process is expected to start in 4Q 2009, at which time bidders will need to submit their plans to a central government agency responsible for tourism affairs. Assuming a process similar to Singapore, if licenses are awarded in mid-2010, resorts could potentially be operable by 2013. This would require that the selected sites are nearly ready for development, which may be a major assumption.

Another notable requirement in the draft recommendations is that the resort must have a minimum site size of 10 hectares, or 100,000 square meters. This could become a major challenge for proposed developers, as there are few sites available of large contiguous size, and zoning changes would likely be necessary for most who try to assemble parcels that would likely currently be agricultural lands. Land reclamation may be possible, though this would also result in significant delays in project development.

Picking Penghu

With these considerations, it appears at this juncture that the best-positioned location of all is Penghu, but even there, the proposed requirement of a minimum $1 billion initial investment by individual operators may be tough to expect in the current economic environment. Instead, the more attractive concept for Penghu or any other location selected would seem to be phased development with key milestones monitored by the government.

There is one operator, AMZ Holdings, which has been present in Penghu for eight years, and has acquired a sizable contiguous parcel of land. It has obtained all necessary permits to develop a resort, with the obvious exception of getting permission for gaming. AMZ Holdings now has a 10.7-hectare (26.6-acre) site zoned for commercial development and approved to build an international tourist resort. The site is approximately 15 minutes from the airport, 20 minutes from the ferry terminal, and a third of a mile from the harbor, where additional ferry access may be possible.

AMZ has had the opportunity to develop a hotel on its site for several years, but is waiting to develop a more substantial property, which would be made possible with the gaming license. AMZ’s team of directors includes Larry Woolf, president of Navegante Group in Las Vegas, and a veteran operator of major casino resorts both in the U.S. and abroad. AMZ has announced that it would bring in at least one major international operator to co-develop and operate the resort.

AMZ Executive Vice President Carl Burger is optimistic about his group’s prospects in the region.

“It has been years of complicated land assembly, zoning and resort design to obtain the International Tourist Resort approval which is the requirement for a gaming license,” Burger says. “We are now set to participate in the emerging tourism gaming opportunity for Penghu.”

There are other potential development sites in Penghu being considered, including one currently held by the Great Penghu Company. Great Penghu’s site is only 7.06 hectares, and permits have already been obtained for construction of a 320-room international tourism hotel and duty-free shops. The size of the site is below that which is expected to be mandated by the government, though it may be possible either to get a waiver or to expand the footprint of the property.

Other competitive sites, which would require large land areas for potential development, could become available through reclamation, or may be sold by the government in a fashion similar to that of Singapore. With the exception of the AMZ site, however, the ability to do this in a short time frame may be difficult, as it is not possible for the government to exercise eminent domain to obtain an attractive site for this type of activity.

While his company may be viewed by many as having the upper hand in a licensing process, Burger points out that Taiwan will seek to attract the gaming brand names first.

“We recognize that we will probably have to do a deal with a major name, who will then apply for the license,” he says. “This provides Penghu, which has land issues for all the licenses, and the operator with a quick start to operations as all the preliminary project work has been achieved.”

Bidding Scramble

There have been no major announcements as yet for potential bidders for Kinmen or the Matsu Islands, and the proximity to the Chinese mainland could be either a blessing or a curse.

Resort developers in these locations will not be able to solely or even primarily rely on Taiwanese gamers for project feasibility, due to the distance and lack of ease of access from the Taiwan mainland. Rather, it will require a steady stream of Chinese tourists and gamers for projects on these islands to be successful.

Neighboring Fujian Province is relatively sparsely populated by Chinese standards, but still has a population base of over 35 million. Based on evidence from Macau, however, the People’s Republic of China central government could choose at any time to curb the volume of travel, and in so doing compromise the viability of gaming on these islands.

This scenario appears very likely, meaning that Penghu would have the only real possibility of allowing casinos. However, if this does not occur, Taiwan and Fujian have a combined population base of nearly 60 million, which is certainly a figure that could support several large-scale casino resorts.

Global Outlook

The challenge may be attracting population to the islands in large numbers, however. From a development standpoint, there will be numerous obstacles, both in terms of economics and infrastructure.

The economic issues are numerous, and for the most part obvious. Several years ago, the capital markets were strong, and Macau looked like the model of bottomless riches in the Asian gaming world—one that could easily be replicated in other jurisdictions, particularly one with an attractive tax rate.

But the past year has certainly tarnished the image of the industry as a cash cow for tourism, tax revenue and job generation. There are critical issues on both the supply and demand sides. Globally, the timing is tough for even the world’s largest gaming companies, which the Taiwanese government has publicly stated it intends to seek as operators, to access capital markets for large-scale investments. Divestment seems to be more the expected modus operandi than investment for the near future, to relieve some of the current debt burdens.

As a result, it may be difficult to propose developing something to the scale that the government would like to see. From a demand standpoint, year-over-year declines in Macau have been attributable more to declining fortunes in the Chinese economy than changes to the individual travel visa scheme, and with other gaming markets opening or expanding elsewhere in Asia, the combination of base demand contraction and market dilution should make developers and the government think conservatively about the scale of what needs to be built.

Michael Chen, president of Caesars Asia Limited/Harrah’s Entertainment, Inc., is among those closely monitoring developments in the market.

“We are enthusiastic about the prospects in Taiwan,” Chen says. “However, the ultimate attractiveness of the market will highly depend on the framework that is implemented. Tax rates, exclusivity for outer islands and open access are all critical issues which, if implemented correctly, could make Taiwan very attractive.”

Chen also recognizes that the timing of the approvals may prove significant, adding, “Taiwan’s unique issues are particularly acute when we are faced with a global liquidity crisis. For Taiwan to have an internationally competitive leisure product, it must make the conditions highly attractive for investment. We look forward to seeing the outcome of the legislative debate.”

Infrastructure is also a major concern for the outlying islands. Penghu has an airport capable of landing Boeing 757s, and is currently much larger than capacity. Penghu also has provincial, county and rural highways, and the county has committed to linking supporting roads to project sites as they initiate.  

Major desalination efforts will need to be undertaken to support any property, and power grids will need to be developed to accommodate tourism growth, which currently stands at approximately 500,000 per year. Another consideration is adequate food supply for the additional tourists, which could impact the Straits’ fisheries. These infrastructure issues all can be overcome, though the timing and cost are still uncertainties.

Several years ago, the level of risk tolerance was comparable to the size of resort projects—very large. With risk tolerances now much lower, phasing projects to market potential, and expanding as the market grows, may be the only way to get a project financed for Taiwan. There will need to be infrastructure improvements ongoing on the islands, likely through the middle of the decade or beyond, and as such the level of demand several years into operation may well exceed initial volumes.

Thus, as the ability to accommodate tourism expands, so too should the resorts, but not well beforehand. The importance of this issue is the CEPD’s recommended minimum US$1 billion development cost. This may be a reasonable sum over the course of a phased project, but consideration should therefore be given, both by bidder and the government, to allowing (or even recommending) development in phases with specific milestones required to commence additional phases.

Scott Fisher, Ph.D. is managing director for gaming consultant The Innovation Group. Fisher assesses international markets, from their cultures and growth potential to the unique industry regulations and competitive threats. He can be reached at the company’s New Orleans office (504-523-0888) or via email at sfisher@theinnovationgroup.com.

By Caitlin McGarry   Thu, Mar 05, 2009

The worldwide web is both literal and figurative—in one aspect, the phrase finds its source in the internet, which has forever changed the way people interact with one another. But the web also references globalization, which has seeped into our collective consciousness and brought the world to our attention.

With the growing interconnectivity that now drives our everyday lives, business and leisure are instantaneous experiences, brought to you by the worldwide web. The internet facilitates both professional needs and play time, a fact most easily demonstrated by the case of online gaming.

Internet casinos, poker websites and other online gaming resources bring people together from all over the globe to spend money and make money, to risk it all on a game of chance or test their abilities with games of skill.

As it stands, the United States—a willing participant in global trade agreements, conventions and other capitalist-driven endeavors—has decided to remove itself from the worldwide web when it comes to online gambling. However, a new president and his administration could very well change the rules of the game.

Rules and Regulations

Two congressional acts have halted the rise of online gaming as a viable business in the United States—at least for now. The Interstate Wire Act of 1961 prohibits the use of “wire communication facilities” (which could now be interpreted as the internet) to bet and receive money from wagers. Though the act explicitly refers to sporting events or contests, many gaming opponents have used the legislation to fight online gaming in its entirety.

In 2002, the U.S. Fifth Circuit Court of Appeals ruled that the Interstate Wire Act only pertains to electronic sports betting across state and national borders, and does not expressly prevent online gaming (a phenomenon no one could have anticipated in 1961).

Online gaming foes in Congress set out to clarify the law as defined by the Interstate Wire Act. At midnight on September 29, 2006, both the Senate and House of Representatives passed the SAFE Port Act, a bill based on boosting security at U.S. ports. Tacked on in the last moments before passage was Title VIII of the act, also known as the Unlawful Internet Gambling Enforcement Act of 2006.

The legislation, which had been the subject of much discussion prior to September 29, had never before appeared in versions of the SAFE Port Act. The UIGEA prohibits financial institutions from transferring money to online gambling websites. Internet gaming supporters would later protest the late hour at which the language was added to the bill, but it was too late. President George W. Bush signed the act into law on October 13, 2006.

UIGEA was not implemented until January 19, 2009, the day before President Barack Obama took office. In the two years preceding the bill’s implementation, some important members of Congress took up the mantle of clarifying the act’s vague language as to what constitutes an illegal gaming website (language that would thus necessitate banks to investigate each transaction and enforce the law).

With confusion over which transactions banks must police, mistakes are cropping up all over the place. In New Hampshire, where they allow online lottery subscriptions, credit card companies are blocking transactions between customers and the lottery website, as if they were illegal (they are not).

One man in particular is attempting to clear the air as far as internet gambling: U.S. Rep. Barney Frank, Democrat from Massachusetts, is one of online gaming’s legislative champions. In April 2007, he proposed the Internet Gambling Regulation and Enforcement Act, which would repeal the UIGEA and provide a licensing system for gambling websites.

Frank’s bill never made it to the House floor for a vote, but he has not given up: He told the Financial Times he intends to “reintroduce a bill in the next few weeks to establish a licensing and regulatory framework for online gambling operators.” With Democratic majorities in both the House and Senate, as well as a Democratic president, Frank says he’s confident this bill will succeed.

Frank did manage to clear the way for passage of the Payment System Protection Act of 2008 by the House Committee on Financial Services last September. The bill would categorize types of online gaming and exempt certain websites (such as those relating to poker, thought to be a game of skill) from the UIGEA. The bill was never introduced to the House floor for a vote, though it seems Frank intends to pursue all avenues until the UIGEA is repealed, or at the very least modified.

In addition to Frank’s protests, both the online gaming community and financial institutions have voiced concern over the UIGEA. After the bill was passed in 2006, online gaming operators like Sportingbet and PartyGaming cut off service to U.S. customers to comply with the new law. The websites were financially slammed by the lack of American business, and most have come out in opposition to the law. After the bill’s regulations were outlined in November 2008, the Poker Players Alliance, a U.S. nonprofit organization that represents poker players, spoke out against President Bush’s decision to push the UIGEA forward.

“Today’s action finalizes a truly bad public policy—one that even the banks and federal regulators called unworkable in congressional testimony,” wrote PPA Chairman Alfonse D’Amato in a letter to the group’s more than 1 million members. “However, the PPA remains optimistic that the new administration and the new Congress will recognize the failures of the UIGEA and will act swiftly in the new year to overturn this flawed policy.”

Many in the online gaming community think that with Frank’s encouragement and congressional support, President Obama will repeal the UIGEA. Obama has expressed an interest in keeping an open mind about the UIGEA; however, new U.S. Attorney General Eric Holder said during his Senate confirmation hearings in January that he would actively enforce the UIGEA. The president and his administration have yet to act on any legislation regarding online gambling.

Official Position

In the midst of the controversy swirling around internet gambling, the American Gaming Association became the eerily calm eye of the storm. Many onlookers from outside the gaming industry looked to the AGA for its stance on the topic. The official position: neutral.

AGA President Frank J. Fahrenkopf Jr. talked to the Washington Post just after the UIGEA was passed, and told the newspaper that his members were not worried about the state of internet gambling—after all, there was no competition between online gaming and the thrill of a casino experience at the time.

“The guy who comes home and goes to his den and cracks open a can of beer and bets on the internet is not really our customer,” Fahrenkopf said at the time. “We never viewed the internet as being competitive.”

The trade group has maintained that internet gambling needs to be the subject of a thorough study, such as the one proposed by U.S. Rep. Shelley Berkley of Nevada in 2007’s Internet Gambling Study Act. The act would enable the National Academy of Sciences to study online gaming and how the United States should react to its future growth.

Any other pieces of legislation regarding the subject of internet gambling must meet three requirements to garner support from the AGA: first, the legislation must not impede upon states’ ability to regulate their own gaming industries; secondly, it must not create advantages or disadvantages among mainstream casinos, tribal casinos, state lotteries and parimutuel operations; and last, it must not infringe upon any form of gaming that is currently legal.

Individual AGA members, such as Harrah’s Entertainment and MGM Mirage, have their own vested interests in internet gambling. Harrah’s owns the popular World Series of Poker brand, which could easily parlay into an online gaming experience with its own cash flow. In 2001, MGM Mirage became the first U.S. casino operating company to start an offshore gambling website. The site, based on the Isle of Man off the British coast, was inaccessible to U.S. players, who comprise 70 percent of the internet gambling base. The website folded in 2003.

“There may be a business outside of the U.S. but the cost of doing this when you’re complying with U.S.-style regulations is significant,” said MGM spokesman Alan Feldman to the Associated Press at the time. “To lock out 70 percent of the market while you’re operating on a cost basis that’s so high means it’s not a viable business in the long term.”

Crisis in Kentucky

Gaming is an issue of states’ rights, though perhaps the state of Kentucky went too far when it recently attempted to seize 141 gaming-related domains. The owners of the sites were located in other states or countries, but Governor Steve Beshear pointed to state law in his quest to grab the sites: According to Kentucky law, certain gambling devices are illegal.     

The state decided websites fell under the category of illegal gambling devices, and a Franklin County Circuit Court judge granted an order that transferred ownership of the domain names from their owners to Kentucky.

The Interactive Media Entertainment and Gaming Association pursued an appeal, and on January 20, the Kentucky Court of Appeals ruled in favor of iMEGA and the websites it represents. According to the court, domain names themselves are not gambling devices.

“The judges clearly agreed with our interpretation of the law and, thankfully, this reverses what would have been a terrible precedent for our country and the internet,” iMEGA Chairman Joe Brennan said in a press release.

Some of the world’s most successful gambling websites were seized as part of the Kentucky fiasco, including PokerStars, Full Tilt Poker and Absolute Poker, among others. While the court’s recent judgment protects the sites for now, Kentucky is in the process of appealing the decision to the state Supreme Court.

The battle over online gambling in Kentucky is further evidence of the grey area that has always been the internet.

Worldwide web

Though the confusion around internet gambling continues unabated in the United States, other countries have a firm grasp upon online casinos and their revenues.

The European Union is an example of one such entity that has regulation of internet gambling down pat, even strongly encouraging its members to legalize online gaming (most recently Finland).

Caribbean countries have also legalized online casinos. The island of Antigua and Barbuda licenses internet gambling operators, and when the United States began actively cracking down on internet gaming, the island’s government headed straight for the World Trade Organization.

The WTO found that U.S. prohibitions on Antigua’s services violated the General Agreement on Trade in Services, and in 2007 ruled that the United States had done nothing to rectify the situation. Both Antigua and the European Union have pursued action against the United States for its restrictions on internet gaming and the effect they have upon the global nature of business today.

Until the United States clarifies its internet gaming laws and re-evaluates past legislation, it is unlikely that online gaming will be allowed to infiltrate the country’s borders—at least not without a fight.

By John Schadler   Thu, Mar 05, 2009

We’ve all heard or read about it by now, and most of us are experiencing it:  significant cutbacks to the marketing budgets that promote the gaming industry’s greatest assets, its brands.

Sure, it’s tempting. Cutting advertising expenditures allows an operator to show immediate improved results through reduced expenses. Arguably, these cuts may not have an adverse effect in the short term. Their long-term impact, however, can be forever detrimental to a brand’s performance and equity.

Some may say this line of thinking is self-serving, coming from a marketing agency whose livelihood is somewhat based on clients’ marketing expenditures. We are certainly not alone, however, in the belief that limiting brand-focused communication during a downturn can be a mistake and something that deserves serious consideration and attention before dropping the ax.

According to a recent nationwide gaming survey, “Brand is the primary driver of casino preferences topping gaming options, comp program, service and amenities.” This notion is supported by a recent national leisure and lifestyle study conducted by the SK+G marketing agency which found a casino’s brand was viewed as one of the primary factors in driving visitation, along with location, types of games offered, ambience/environment, and quality and variety of amenities (one could make an argument that all of these elements comprise the casino’s respective brand).

A number of other studies over the years have confirmed the benefits of brand marketing during a down economy:

In an article from US Banker that compared leading brands in 1925 with leading brands in 1985, in 19 of 22 categories the brand leader in 1925 was still the market leader in 1985, a testament to the staying power of strong brands.

In an analysis performed by McGraw-Hill Research that reviewed the performance of 600 companies from 1980 through 1985, results indicated that brands that maintained or increased ad spending during the 1981-1982 recession realized higher sales growth, both during the recession and over the subsequent three years, versus those companies that eliminated or reduced advertising expenditures.

 A 1993 report from Coopers & Lybrand and Business Science International titled “Companies That Maintain Aggressive Marketing Programs Are Less Affected by a Recession” stated, “Businesses that maintain aggressive marketing programs during a recession outperform companies that rely more on cost-cutting measures. A strong marketing program enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery.”

In its annual branding report titled “Best Global Brands 2008,” brand consultancy Interbrand published an article from Nancy F. Koehn, a brand strategist, consultant and professor at the Harvard Business School. Koehn eloquently summarizes why brands are important, especially in a down economy. Her words ring true to all in the gaming and hospitality industry:

“It may seem counterintuitive, but brands actually matter more—not less—in uncertain economic times. This is because in a downturn or in a moment, such as ours right now, when there is so much confusion on the economy, most people are running scared. In all this turbulence and seeking, brands offer direction and clarity. Given this, it makes good strategic sense for CEOs to pay careful attention to brand in the midst of turmoil and doubt. After all, most of one’s rivals are likely to be running away from brand. So there is competitive advantage to be had.”

During tough economic times, it makes more sense than ever to “fish where the fish are” and focus on driving business from existing customers. Your bread-and-butter clientele is the audience that is more loyal than anyone to your brand. It goes without saying that keeping a good customer is less expensive than finding a new one (some estimates say five to seven times less costly). Remind your best customers of what your brand stands for, and emphasize your value proposition.

Too many marketers (gaming companies included) resort to price and rate reductions as a first and ongoing reaction to adversity. This is a slippery slope, difficult to recover from when the economy eventually turns around. Instead, combine a brand message with a strong call to action that is based around value and experience, not just price.

A look at some of the gaming industry’s most successful brands provides strong evidence that stellar brands are able to survive tough times better than the competition:

Bellagio—In the midst of one of the gaming industry’s most severe recessions, Bellagio recently experienced its best revenue-generating quarter in history.

Borgata/The Water Club—As Atlantic City deals with its second consecutive year of declining gaming revenues, Borgata and its sister property Water Club continue to buck the trend as the market leader in both gaming and non-gaming revenue.

Seminole Hard Rock Hotels and Casinos, Hollywood and Tampa, Florida—All one needs to do is set foot in a Seminole Hard Rock property in Florida to realize the importance of a brand. In Seminole’s case, they’ve taken one of the world’s most recognized brands in Hard Rock and activated it in a meaningful and relevant way to their target audience.

Many skeptics doubted the ability of a youthful brand such as Hard Rock to succeed in the semi-retirement and “snow bird”-dominated populations of Hollywood and Tampa. Seminole Hard Rock has proven them wrong by creating a Hard Rock experience that is welcoming and comfortable to all.

It’s no coincidence (or surprise, considering the strength of their respective brands) that each of the examples cited above represents a company that continues to invest in its brand through marketing and communications efforts targeting core customers.

Beyond the gaming, restaurants, room accommodations and other amenities they offer, Bellagio, Borgata and Seminole Hard Rock provide guests with a level of comfort and assuredness. Consumers know each of these brands will provide them with a quality experience and overall good value, because they trust them. All of these property brands consistently deliver on their respective promises and meet, if not exceed, guests’ expectations.

While we may not want to admit it, gaming is a commodity today. The brands that guide and create the experiences millions enjoy in casinos around the world are what make the difference and lead to long-term success.

Think twice before taking the easy way out next time. Invest in your brand and promote it. Strong brands can be your best friend when the economy is your enemy.

John Schadler is managing partner and Jim Gentleman is senior vice president of strategy and account management at SK+G, a full-service marketing agency based in Las Vegas that specializes in leisure and lifestyle brands. Clients include MGM Mirage, Borgata Hotel Casino and Spa/Water Club, Trump Hotel Las Vegas, Montage Laguna Beach, Montage Beverly Hills, The Grand Del Mar, L’Auberge du Lac Casino Hotel (Lake Charles, Louisiana), Lumiere Place (St. Louis), and Belterra Casino Resort (Vevay, Indiana). The company may be reached at 702-478-4000 or contactus@skgadv.com.

By Rich Geller   Thu, Mar 05, 2009

When the European Gaming and Betting Association held its second annual “Responsible Gaming Day: Integrity & Sport” event in Brussels in February, the message of the day could be summed up in the words of Christofer Fjellner, a Conservative member of the European Parliament from Sweden, who said, “Today’s experts showed that the internet offers more possibilities rather than less in terms of preventing fraud and match fixing.”

Fjellner was referring in part to online betting industry tools that can help spot suspicious betting patterns, which could tip off sports regulators to malicious manipulation of an event—just one example of how technology is transforming sports betting in Europe and the world over.

Starting with the Horses

The story of technology in sports betting is incontrovertibly tied to the story of online gaming. The revolution began in the 1990s when online operators began to offer betting on horse racing. As the customer base began to grow, more betting opportunities were gradually added—popular sports like soccer and such. Today, betting sites offer action on every sport imaginable, from handball to hurling, with some political and pop cultural opportunities thrown in for good measure.

The same software that was developed for online betting was easily adapted to telephone betting, according to David Loveday, CEO of Orbis Technology. Using a single account, players could choose between betting by computer or by phone.

“In essence, telephone betting uses the same software as the online betting, other than it’s a telephone operative with a screen,” says Loveday, speaking of the software development process. “We then made sure it could run across multiple platforms—on the internet, on the telephone, on the television, the various channels run by Sky that are exclusive to betting, and PDA devices and mobile phones as well.”

Orbis was one of the pioneers of the online betting industry and today supplies the technology for some of the better-known operators like Paddy Power, Ladbrokes and William Hill, among others. Orbis belongs to the NDS Group Ltd., a private company which is owned by Permira Funds and News Corporation and deals with delivering digital content to various devices.

Advances in technology always seem to produce a number of unanticipated benefits. For sports betting, the development of online software has allowed the commercial introduction of new products, such as in-running betting, which is basically watching a live event and betting on what happens next.

“In-running is more sophisticated technically, because you’re predicting an outcome such as which guy will score next,” says Loveday. “To calculate the odds you have to have some complex algorithms in place. That’s very different from fixing a price at the start of an event. The algorithms, the Monte Carlo calculations, all these very scientific processes go on and are at the traders’ fingertips, so they can keep on offering prices for the in-running betting. Without the technology you wouldn’t have in-running betting, and that whole market never would have gotten off the ground.”

Although interest in the product is increasing—in some markets, bookmakers are said to be reporting up to 80 percent of their business as coming from in-running betting—the future growth of the product is tied to the owners of the transmission rights to the various sports. Currently, a player will be watching a match on television while placing bets on a computer. But the real explosion will come when live events are being streamed right onto the same screen that is displaying the player’s betting account.

Some bookmakers have developed models that employ historical data to come up with a price for in-running bets. But according to Brian O’Sullivan, CEO of Global Betting Exchange, a lot of the work still relies on manual processes. That can cause problems, especially if there are multiple events simultaneously offering in-running action. The solution, says O’Sullivan, is to get the price from another creation of technology: the betting exchange market.

Pricing the Games

One big difference between the traditional bookmaking product and the betting exchange is a matter of who sets the price. A bookmaker has odds compilers who determine a value, and that translates into the price offered the punter. A betting exchange allows punters to come into contact with one another and then agree on a price between them.

Another big difference is in how the operator makes a profit. Or doesn’t. A bookmaker is counting on the odds compilers’ ability to price an event being good enough to guarantee a positive return over time. The exchange operator is just going to take a broker commission on the winning bets, regardless of the outcome.

“The technology we’re developing allows the sports book operator to actually price his market directly from the underlying exchange market, with a fixed margin on each bet, as chosen by the operator,” says O’Sullivan. “It’s for the operator who doesn’t have the resource to price up the product on a second-to-second basis, or who doesn’t want the risk management resource associated with being able to implement price changes quickly enough to respond to what’s actually going on in the game.”

The product GBE has developed, the GBE iBroker, follows the action on GBE’s exchange. The tool allows the bookmaker to reduce exposure by making selective use of the betting exchange model.

“From the risk management point of view, we believe that the exchange-backed product is a safer choice for the operator who does not want to invest heavily in risk management or does not want the volatility of returns that sports betting can provide,” says O’Sullivan. “The operator can take a risk-free fixed margin on every bet or can gradually begin taking risk on a customer-by-customer basis over a long period of time, almost as a sort of CRM risk management-based system.”

Basically, the operator can push the bets of historically winning customers through to the exchange, while accepting the risk—and implied profit—from the less-skilled customers.

The advent of online betting is not similar to the online poker phenomenon in the sense that it has not produced an increase in people visiting traditional bricks-and-mortar shops. Players who bet online do so because they’ve grown up with the internet.

“You have to look at the whole growth of the internet,” says Loveday. “People started booking their airline tickets online, Amazon came along and people started buying their books online, every traditional business was looking to see if they had a valid online business.”

Betting shops, with their more traditional product, are generally associated with an older, more traditional crowd. But one U.K. shop operator is combining the betting exchange product with High Street presence.

The Better chain of about 50 shops incorporates touch-screen kiosks that link to the Betdaq online betting exchange. Betdaq is the online betting company originally created to showcase GBE technology, and is now second in size only to Betfair.

The Betterex kiosks give bettors the opportunity to access betting exchange prices and products while in a shop environment. The machines only offer sports betting and take only cash in the Better shops, but O’Sullivan sees more potential given the right legal environment.

“The kiosk was developed to offer the opportunity for people to trade the exchange in a shop or in a café or in a licensed betting office,” says O’Sullivan. “The power of that really depends on the extent of regulation in a particular country. In some countries you can have a machine that can offer casino-type table or slot games alongside a sports betting opportunity. That’s where our i-kiosk product will work best and will be very attractive to some operators.”

Some Time Off Line

Meanwhile, the traditional bookmaker betting shop is still a vital part of the sports betting market.

Paddy Power, which operates about 200 shops in Ireland and 70 in the U.K., recently announced the opening of its first retail business in Scotland, with plans to establish another 80 shops around the U.K. in the next three years. The technology in the shops “completely revolutionizes the customer betting shop experience,” says Paddy Power Head of Technology John O’Donnell.

Customers get their information from a 24-screen system that lists the various products offered. There is also a large number of television screens that show the live events. Each shop has two satellite feeds from horse racing providers and one from Paddy Power’s in-house studio, broadcasting content tailored to each region.

“Compared directly to the off-course bookmaking shops in the States, it’s a lot more sophisticated; there is a lot more content and a lot more product,” says O’Donnell, who spent a number of years in the U.S. working in the financial world, including time spent on a project to deliver a new trading system to Nasdaq.

Each shop has an ePower system from Finsoft, a server-based custom application connected to as many as nine cashier tills. Bet slips are filled out by the customer, scanned with a bar code reader, and the bar code and image of the slip are recorded into the shop database and transmitted automatically to the head office, where the information goes into the central risk system.

Paddy Power’s online business, started in 2001, accounted for over 50 percent of group profit in 2008.

The bottom line is that developments in technology and legislation will continue to transform the sports betting industry—everywhere, it seems, but in the U.S.

By Steven Rittvo   Thu, Mar 05, 2009

Throughout the past several months, the gaming industry has seen an increasing number of development projects fall victim to the ongoing credit crisis and the lack of consumer spending. Construction sites once lauded for their unprecedented volume and the rapid emergence of their dramatic towers have suddenly become equally notorious for their voluntarily delayed schedules and darkened project sites. The wave of bad news has many wondering… who will be next?

At first glance, the pendulum swing from “full speed ahead” to “hit the lights on your way out” is just one more indication of a once-impenetrable industry finally showing signs of vulnerability. While it is hard for anyone to argue that a growing collection of delayed or canceled projects is good news, we should also consider that the recent shift may be generating some level of optimism, if for no other reason than it hints at a renaissance of reality so notably absent from the industry in recent years.

Granted, it is difficult for any entity to cancel, scale back or economize a planned development (especially those whose project is already in the ground), but sometimes it is simply necessary. In the coming months and years, though, we will likely see that the owners willing to make those tough decisions and adopt a deliberate, market-appropriate construction strategy will find themselves not only better weathering these unprecedented turbulent times, but also in an enhanced position to capture market share when the economy improves.

A Strong Dose Of Reality

Gaming as an industry has traditionally been exceptionally resilient, holding strong through most of the economic downturns. But as we all now know, the recession of 2008/2009 is proving unsympathetic to even the most diverse industries.

This environment is particularly trying for those of you who have a significant project already under construction. If you are like the majority of your gaming peers, your company’s ability to obtain financing has been impacted, and you are in need of a solution that addresses short-term economic considerations while simultaneously minimizing the long-term impact that a delay or stoppage can have on your business.

Your first priority should be to make sure you have a grasp of the realities of the status quo. Even if it hurts, you need to know where you stand, what you have spent and have left to spend, and what you can salvage of your investment to date. The findings may not be pretty, but with this arsenal of information behind you, you can begin to meet with your internal management, creditors and consultants to discuss your options. It is also important that you review your obligations and rights with legal advisors before any formal discussions about delays, stoppages or concessions come into play.

To Build Or Not To Build

The decision to cancel a project is not one to take lightly. If you are lucky enough to have the option to decide the best course of action for your organization (i.e., your creditors aren’t making the call for you), there are a number of key questions you must ask before you decide to cancel, scale back or economize. Do your research and, if necessary, hire outside consultants to help make sure that you understand your financial picture and regional market conditions. Engage your design and construction consultants to review all of the potential impacts of a delay or stoppage.

Since the answers to such questions vary by location, the remainder of this article looks at regional-specific considerations impacting the primary markets of Las Vegas, Atlantic City and the Gulf Coast, as well as for other regional casinos across the country.

LAS VEGAS

There are several priorities for Las Vegas properties in the foreseeable future: continue minimum capital expenditure investments to maintain property quality (and therefore market share); prioritize “right-sizing,” which may mean program changes/eliminations, phasing plans, delays or cancellations; and think ahead—even if it is difficult in light of tremendous current challenges—to how the property should be positioned when the economy improves.

Up until last year, Las Vegas was in the midst of a huge construction boom focused on “mega” developments. Almost like self-sustaining cities, each was planned to have a broad mix of amenities. Some inclusions were key, cash flow-contributing components, while others were part of a value-added equation with minimal direct returns. Such loss-leaders were valuable for the incremental revenue they brought at the peak, but are now a key reason why the drop in consumer spending has had a more severe impact.

The initial task, then, for a mega-type project currently in progress is to triage these components. A basic ROI analysis will help you classify your planned scope elements into a spectrum of three categories: profitable, mid-level and unprofitable. When it comes to pending construction in this environment, your aim is to implement as much of the former and eliminate as much of the latter as possible.

The harder part will be your implementation plan for the amenities in the middle of your ROI spectrum. These are the functions whose projections depend to a large degree on regional market demand, assessments of when the economy will turn, and to what extent it will recover.

ATLANTIC CITY

Potential projects and projects already under way in the Atlantic City market present a simpler set of choices, primarily because they were/are going to be more focused in their program. Developers and operators here are faced with relatively straightforward “go” or “no go” decisions on projects in their entirety. As we have seen with Atlantic City’s large projects in recent weeks, the preferred option at this time is “no go.” The current serious market slowdown and the concurrent continuing rise of competing gaming options in the Northeast region speak to the need for a full reassessment of how each Atlantic City property sees itself as most effectively marketable in this new environment.

So the first step for most Atlantic City properties will be to gracefully and efficiently stop any current construction and development projects, and likewise to tie up and set aside any projects in the planning and drawing stages. Once the slate has been cleared, it will be time to do some serious analysis of market projections and to assess your relative position within these markets.

Economic realities are going to dictate for some time going forward that Atlantic City will not develop into a collection of Borgata-like, high-end, big-dollar properties. Instead, each property needs to evaluate its present competition to understand what they do better than you, and where you might target efforts to differentiate yourself within the pack.

It will likely not be possible to achieve a goal in this financing and revenue market to become the non plus ultra all-suite hotel property, but it will be possible, and in fact necessary, to define a niche that you can market around. If you haven’t done so already, get experts on board now to help determine the right course of action. If it’s to offer a brew-pub-based sports bar with new brews each month, offer a reasonably priced romantic weekend package with a hip-hop theme, offer “Always The Newest Slots,” a holistic “green” spa experience or celebrity chef restaurants at different price points, develop and offer focused amenities and facilities that set you apart from your peers. It is no longer realistic for Atlantic City operators to plan to hit the ground at a best-of-everything level. Instead, aim to capture and retain market share by having the absolute best-of-something up your sleeve.

When you find your niche and define your opportunities, take the time to plan your moves carefully. There is no rush to the finish line in this market. Projects will take time to make it to reality anyway, so use the time to plan them carefully. Spend some extra time planning theme execution and finessing design. Tune menus and projected staffing plans and proposed goods and services. Then, tune them again. There is no excuse for not having things right and operating like a well-oiled machine at this juncture. Customer service is everything when you are competing in today’s market.  

GULF COAST

If there is such a thing as a stable gaming market in today’s economic environment, the Gulf Coast is probably it. The level of optimism is higher along the Gulf than the rest of the country, and the numbers being generated by the gaming operators there are not as erratic as we are seeing in other key markets.

As such, properties along the Gulf should be prioritizing their preparation for market recovery. For many, this still means post-storm rebuilding, even if anemic credit markets limit initial investment to planning/design services. As for the operators whose projects have been stopped in this area, they should (at a minimum) be actively evaluating their competition and developing their wish list for the turnaround, since as the overall market heals, delayed projects are certain to come back to life in this region.

Life on the Gulf Coast will continue to grow at a steady pace due to the large population available to drive the market. The gaming industry should be looking at this region for its comparative stability throughout this economic crisis as well as the opportunity to drive traffic, win customers and build loyalty through the planning of new and diverse entertainment amenities.

REGIONAL CASINOS

If you are in an area of the country that the real estate bubble never really reached, consider yourself very lucky. The local economy in these areas is still moving forward slowly or even with growth compared to the rest of the country. Similarly, regional gaming facilities in these communities are performing significantly better than their counterparts in other markets.

Even with relative stability, however, owners need to be very careful about what is invested in these markets right now. We see and support properties finishing the projects they currently have on the books, and doing so with tight oversight of the budget. These expansions are focusing only on amenities appropriate to the market, and rightly so. Operators should keep a close eye on their surrounding markets looking for signs of recovery, or potential slippage in the guest count.

In the meantime, regional operators are pursuing only tightly focused, modest expansion plans as local visitors will prove to be the most resilient market through the recession. Recognize that this is the time for you to win new customers and build customer loyalty. Consider only strategic amenities that are proven winners in your regional market.

Moving Forward

For projects that remain a “go” in any region, work with your consultant team to define how to make all of the parts more efficient. For example, a new hotel tower may be critical to your operations, but the convention center it was originally designed above may not. Be creative with and open-minded to your options. Always aim to avoid substantial re-design costs by determining if the plan naturally lends itself to program exclusions, or if you can save comparable dollars by delaying the fit-out (interior design, etc.) of non-priority shelled spaces. In this example, emphasize the quality of the hotel tower, and finish the interior elements of the meeting space later.

If you need to leave secured spaces unfinished for a time, preserve the investment of construction dollars already in place by completing the minimum necessary to allow the space to comfortably weather a period of what may be two to four years before construction recommences (i.e., temporary roofing/skins, moving equipment to off-site storage, and paying cancellation charges and restocking fees for order items that will no longer be received).

As a general rule, if you are well into a project, it tends to be more cost-effective to allow your architect to finish design documents, even if you will not start construction for some time. If you stop the design process, it will render the plans significantly more costly for the completion of the project later. Consult your architect to make a clean break in the drawings if you have to stop, but recognize that the team working on your project now will likely not be available if you have to restart the process. The value of such continuity is difficult to put a price tag on, and should be factored into your decision.

Clearly, the right construction strategy varies significantly from market to market, and while we have structured our discussion here by region, there will be overlap of situations and recommendations across regions. Regardless of your location, though, it is important that you be thorough and realistic in determining your path, open-minded to all of your options, and deliberate in executing the strategy.

Right-size for your conditions, stop or delay in the most cost-effective way possible, continue to invest what you need to in order to maintain your current client base, and plan, prepare and position for the future… even if that is difficult to do at this point. Down the road, you will be glad you did.

Bob Kelly is president of Innovation Project Development, an owner representative entity based in Ocean Springs, Mississippi and affiliate of the Innovation Group of Companies. Kelly’s background includes a 16-year career with various divisions of Harrah’s, where he was responsible for the design and development of gaming and hospitality projects throughout the world. He can be reached at 228-248-0088 or bkelly@innovationpd.com.

Steve Rittvo is chairman of the Innovation Group of Companies—a group of affiliates whose broad range of expertise and experience covers almost every aspect of the casino/resort economic development process: The Innovation Group to consult, Innovation Capital to finance and advise, Innovation Project Development to coordinate build-out, Innovation Marketing to position and Innovation Management to operate. Rittvo can be reached at 970-927-1400 or srittvo@theinnovationgroup.com.

By Greg Jones   Tue, Mar 03, 2009

M Resort might be the newest casino in Las Vegas, but at its core are the old values that helped turn the city into the entertainment capital of the world.

The $1 billion casino has everything both local customers—the primary audience for M Resort—and out-of-town visitors could want. It features 92,000 square feet of gaming space with 1,800 gaming machines, 64 table games, a poker room and state-of-the-art race and sports book; a 390-room hotel; a 23,000-square-foot spa; 60,000 square feet of meeting space and nine different food and beverage outlets.

Located on Las Vegas Boulevard about 10 miles south of Mandalay Bay, everything at M Resort is designed to take advantage of the view of the Las Vegas skyline—even from the porte cochere on the south side of the building, you can see through the property to the Strip.

The view is a major part of the rooms at M Resort, particularly the flat suites and the loft suites, from which the 270-degree angle of view allows guests to take in the lights of the casinos as well as the surrounding mountains. Similarly, the majority of the restaurants—from Veloce Cibo on the top floor of the hotel tower to the coffee shop—are set up in a way to also take in the views, as does the pool area.

But for Anthony Marnell III, the most important component of M Resort isn’t the views or the gaming or any of the amenities; it’s service and value, the human touch. The most important part of M Resort is the people working there and the service they can provide to the customers.

It is not only a return to the city’s traditions, but also a return to the family’s approach to running gaming properties. Tony Marnell II served as CEO and chairman of the board for Rio Hotel & Casino Inc. before it was acquired by Harrah’s. From the time it opened in 1990 until the acquisition nine years later, Rio developed a strong customer base among locals and tourists alike because of its unrelenting commitment to value and service.

Marnell hopes he can re-create that success by sticking to what worked before.

“We’re offering a lot of fantastic products here that the consumer is going to find enormous value in,” he says. “It’s what built a lot of loyalty to the Rio brand.

“We won’t make as much money as others who price their products differently, but we’ll make a good living and we’ll make our customers happy.”

Service-centric

The most important thing M Resorts brings to the table is a new approach—or perhaps more appropriately a revitalization of the old approach—which emphasizes customer service above all else. It is something that Marnell feels has been missing from Las Vegas for a number of years. It is something that got lost in the shuffle as the town experienced unparalleled success and it seemed there was an endless supply of customers and the casinos couldn’t do anything wrong.

A cursory look at the revenue figures from Las Vegas over the past couple months clearly shows that like every other industry, gaming is also not impervious to the fickle whims of the common consumers. That is not to say that the only reason that the industry is hurting is because customer service in Las Vegas is terrible. That is not the case at all. Las Vegas is still a world leader when it comes to servicing guests and customers, but the competition seems to be narrowing the gap as companies are forced to reduce staff to deal with the troubled economy.

“I don’t think there was as much emphasis placed on service as there should have been,” Marnell says. “Things were booming. Everybody was flush with cash and it really became a bidding war—not on the building site, how much can you spend and how big can you build it, but how much can you charge for it and who will pay the most.

“I think clearly that strategy is over with. That is not coming back for a long time.”

Marnell calls his approach high-touch and low-tech. In an age where almost everyone spends a majority of their time dealing with computers, they don’t want to have to use kiosks to cash tickets or use computer terminals to book rooms or make special room arrangements. Those options are available, but where some people have used this technology to replace the human component or to seriously augment it, that won’t be the case at M Resort.

“I’ve been a guest in some places and I had an issue and they say whatever the computer says is what you get. That’s not service, that’s not hospitality and that’s not the gaming business,” Marnell says.

Even little things like treating a valued customer to a free meal or a show is something that needs the personal touch. M Resort will have a player club—iMagine rewards club—through which guests can accumulate points that they can redeem for food or entertainment options, but that’s not as personal or as valued as the simple hand comp.

“I don’t know what happened to the hand comp in Las Vegas,” Marnell says. “The hand has got to come out the other way from the casino to show the customers we appreciate, recognize and value them. That is how we make our living; it is how our team members feed their families.”

The team members are a big part of Marnell’s plans for his new resort, and the distressed economy offered him the opportunity to find the best workers available. There were some 50,000 applicants for about 2,000 jobs (the property opened with 1,800 positions), which gave Marnell and his staff the opportunity to find employees who have the right attitude about taking care of the customers.

“The No. 1 thing to get a job at M Resort was how you approach and look at service,” he explains. “If you didn’t have the skills, but you had the ability to present yourself in the right way and you had the correct mindset that the customer was No. 1 and at all costs you must take care of the customer, then we made a position for you. If you weren’t qualified to do it, we trained you how to do it.

“It didn’t really matter where you were or what you’ve done, it was about your approach to service.”

Complementing the service approach is a focus on value. Price points at the restaurants top out around $50—that includes the 20-ounce rib eye—and drinks are priced in a similar manner, with nothing more expensive than $8.50.

“You can’t serve a 16-ounce steak for $70 anymore,” Marnell says. “It doesn’t matter who you are, when you walk out you feel ripped off. It happened on a regular basis because people could get that, but those days are gone. I think the days of the $15 martini are gone, too.”

He also notes that unlike some smaller restaurants in the area, the outlets at M Resort are at a considerable advantage in setting price point because the individual restaurants do not necessarily need to post a profit; it only matters that the overall property is profitable.

Anthony Layton Matthews, vice president of food and beverage at M Resort, explains that the approach to the dining options at M has evolved as the economy has worsened. The restaurants need to be comfortable for everyone who comes in, “whether it’s a lady and gentleman in a pair of shorts and a T-shirt or someone wearing a sports coat.”

“Our overall approach to food where we were a year ago is different than today,” Matthews says. “We’re getting back to the fundamentals of food. Charge what you need to charge, but don’t get too aggressive.”

Fab Food Court

Modest price points and outstanding views aren’t the only thing that makes the dining outlets at M Resort special. Whether a guest is looking for a steak—from the Marnell family ranch in Montana—or a quick sandwich, or even just something to drink, M Resort will have everything.

Located on the top floor of the M Resort hotel tower, Veloce Cibo and Bar Veloce are a primary focal point for the property. It is not only a place for dinner, but Marnell also sees it working as a lounge at night. Matthews describes the menu as “Asia meets Italy meets California.” It features everything from appetizers to sushi to steak.

“It’s difficult to get people from the casino floor to the rooftop for the first time, but I think once they go there once, they won’t want to go anywhere else,” Matthews says.

The Studio B buffet is another draw at the property. It is very likely the most entertaining buffet in Las Vegas, bringing a unique approach to this casino staple. It is a multifaceted area that features a live-action cooking studio as part of the attraction. (And, unlike some other buffets in town, beer and wine are included with meals at no additional cost.) The main dining area is also ringed with televisions showing what is happening in the studio kitchen. It has prompted some people who took tours well before the property opened to wonder whether the area was actually the sports book.

“The heart and soul and really the entertainment of the property is the Studio B buffet,” Matthews says.

There are a number of new approaches on the beverage side, too. A beer bar, 32 Draft, will have 96 beers on tap, and the idea is to run the beer through a cooler to get the temperature down to 32 degrees as it comes out of the head. It has a prime location next to the Vig Deli and the race and sports book.

M Resort also has a number of Enomatic Wine Serving Systems, which can dispense wine by the glass or even the ounce. These machines are available in the Hostile Grape wine bar, at Veloce Cibo, and via several portable units that can be brought into the convention space if requested.

On the casino floor there will be several self-serve soda dispensing machines. Rather than make people wait for a server to come around—not that it should be a long wait with the commitment to service—the idea is that guests can come in, grab a soft drink and proceed to their favorite machine. This will become increasingly attractive when summer temperatures set in.

“We are truly looking at F&B as an amenity to the casino and an amenity for the gaming customer,” Matthews says. “I think our commitment to keeping the food quality up and the costs down will give us a competitive edge to fill our restaurants better than our competitors.”

By Roger Gros   Thu, Mar 05, 2009

The current economics have been hard on everyone in the gaming industry. During a time when consultants are the first expenses cut, the Innovation Group has seen its business change. Steve Szapor, the president of the group, has a long history in the gaming industry, serving with Sahara Gaming, Hollywood Casinos, Colorado Gaming & Entertainment and other operators. At this time, his operational and analytical skills have become valuable as he recognizes that many companies need help. Szapor explains  Innovation Management and how it serves clients from investors to operators. Szapor spoke with Global Gaming Business Publisher Roger Gros at the GGB Las Vegas offices in February.

GGB: You’ve been in the gaming industry for many years, for quite some time on the operations side. Have you ever seen a more difficult operating environment than we have today?

Szapor: Well, I’ve seen a couple of mild recessions—in 1991 and right after 9/11, of course—and this is the most serious downturn I’ve ever experienced. Consumers are getting hit badly in their net worth, their homes and their portfolios, so it’s a really trying time for our business.

So much of what is happening is out of the control of operators. What should operators be focusing on to get through this time?

You have to take both a short-term view and a long-term view. You can’t cut your costs too much where it affects customer service. There’s a fine line here. You have to be focused on cutting costs that don’t impact the customer experience. You have to hone in on your customers who are bringing in the most money and concentrate on those areas.

You have to be careful about chasing the business, however. Everyone is out there promoting and you must watch your margins. You have to concentrate on customer service. Times are tough but you still have to put cap-ex back into your product to keep it competitive. More detailed database mining is required so you can spend your marketing dollars more efficiently.

Do you find that casinos now have more time to devote to the customers who do arrive?

We do a lot of research with casino customers. We just finished two studies and found consistently that in hard economic times or not, the top thing on customers’ minds about why they choose one casino over another still is customer service—how they are treated. It’s very hard to cut back in this environment.

You have to get the buy-in of your employees as well. They see business slowing down and they know how important it is to keep the customers who still come.

The Innovation Group has established itself as the premier consulting company in the business. You’ve always had a component that advised on operations, but recently you’ve launched a new division that concentrates on that. Explain how this came about.

There were a number of catalysts for this. First, our clients include many lenders to the industry who have been asking for third-party analysis of operations, management and what they’re doing. Not necessarily to look over someone’s shoulder but just to know that things are running the best they can. We’ve been getting a lot of inquiries in this area.

Then, we put together a team of four or five people who have direct operating experience, including myself. Together, we have over 100 years experience in the business. It made sense to jump in and make a commitment to that business.

Bankruptcy obviously has to be an option for some of the more distressed casinos. Can this be managed to minimize the long-term impact on any operation?

It can. Before joining the Innovation Group, I was with a number of companies and went through some difficult bankruptcies. It’s very important to manage it for both the short and the long terms. The long term means you must keep your employees and customers around and that means managing your communication with both groups. For the customers, it means making them aware that you’re not going out of business and that they’ll get paid if they hit a jackpot, or you’re not tightening the machines to help pay your costs. It’s communication that is most important in this situation. Keep your employees informed and let them know they’re a part of the solution. And you also have to manage the press to keep them informed and make them understand what’s going on.

Bankruptcy is often a business tool to get things back in order. It’s not always about shutting down or liquidation. In fact, very few bankruptcies end up that way.

Marketing is becoming more important as competition heats up. For many years, there were two easy options: build it and they will come, and follow the leaders. Why is it more important to be creative and innovative today?

We have so much capacity in this business. We’re competing with many other casinos for the discretionary dollars. And we’re also competing with many other forms of entertainment. So you just can’t do the same old things. You have to try new promotions and new ways to communicate with customers. That’s important. They’re not all the same. You can’t talk to them the same way. You can’t give everyone the same offer. You can’t even address the envelope the same way. If you can be more creative that way, segment them and diversify the promotions, I think you gain the upper hand.

What jurisdictions/casinos/operations will be in the best position to rebound more quickly as the economy improves?

I’ll get on my soapbox. My company testifies before committees and legislatures and we’re currently active in a number of states and jurisdictions contemplating gaming. I always point to the states that have lower tax rates as the states that have created a sustainable and viable industry for the long haul. When you have a tax rate low—enough to allow operators to put money back into their facilities, develop non-gaming amenities and invest in their customers—you have a healthy industry. In that respect, I believe states like Nevada, Mississippi and New Jersey will be among the first to rebound because operators have the money to put back into their properties when they see customers returning in good numbers.

By GGB Staff   Thu, Mar 05, 2009

Slot and system manufacturer Bally Technologies announced that it has named Marcel Heutmekers director of Europe, responsible for managing all of the company’s activities within Europe and in North Africa.

Prior to joining Bally, Heutmekers was responsible for slot operations and product placement at all 14 Holland Casino gaming properties throughout the Netherlands. He also previously worked for Atronic, where he was responsible for business development for all of Atronic’s international markets.

Heutmekers will be based in the firm’s new European headquarters for its sales and service operations in Amsterdam, Netherlands.

“I am extremely pleased to be joining Bally Technologies during this impressive period of growth for the company, especially in Europe,” Heutmekers said. “The company’s outstanding product line, its dedicated sales and service staff, and its unwavering commitment to its customers are just a few of the reasons why Bally is doing so well, even in the midst of these uncertain economic times.”

“We couldn’t be more pleased to welcome Marcel Heutmekers to Bally,” said John Connelly, vice president of international and gaming operations for Bally Technologies. “His extensive background in gaming, working for both a major gaming operator and a gaming supplier, gives him a unique and invaluable perspective on our industry.”

By GGB Staff   Thu, Mar 05, 2009

Detroit’s Greektown Casino-Hotel anonounced that Christopher Colwell, a senior vice president of marketing firm The Fine Point Group, has been named the property’s general manager, subject to regulatory approvals.

Colwell is one of a group of industry veterans from Fine Point Group recently hired by the property. He will oversee all operating departments.

“Christopher Colwell possesses vast experience in the gaming industry, having held senior roles on both sides of the proverbial fence—as an operating executive over gaming operations, and a senior leader with a major slot and systems provider,” said Fine Point Group Managing Director Randall A. Fine. “He understands the issues the property is facing, and more importantly, understands the opportunities the property can take advantage of. I have no doubt that Chris is the right person for this position and that we will see outstanding results in the future as a consequence of his appointment.”

During his tenure with Fine Point Group, Colwell has led a major slot profit optimization program for a billion-dollar tribal gaming company and developed a new table games business for a major technology supplier startup. Prior to joining the marketing firm, he was director of development for Station Casinos, Inc.

By GGB Staff   Thu, Mar 05, 2009

Printer manufacturer FutureLogic announced that it has made two new senior appointments to drive business development initiatives in Europe and Asia.

Fivos Polymniou, a 25-year veteran of the European gaming industry and former western regional sales manager for Bally Technologies Europe, will now head up FutureLogic business development for Europe, Middle East and Africa. Prior to joining Bally, Polymniou worked as commercial manager for LeisureLink, now part of Gamestec and Coral (now GalaCoral).

Alfred Hwee will now head the company’s business development in Asia. Hwee previously was sales and support manager for Sincere Supply Ltd., regional distributors for IGT, Konami and Money Controls.

Both Hwee and Polymniou will report to John Edmunds, vice president of FutureLogic International. “Fivos’ and Alfred’s experience in selling gaming technology hardware and systems solutions, combined with their network of relationships across Europe and Asia, made them an excellent choice to help promote FutureLogic’s gaming printer business,” said Edmunds.

By GGB Staff   Thu, Mar 05, 2009

Leading slot manufacturer International Game Technology announced that its board of directors has elected former Harrah’s Entertainment Chairman and CEO Phil Satre to serve as a director for the company.

Satre retired from Harrah’s in 2005 after 10 years as CEO and holding numerous top management positions during a 25-year career with that company. He is currently the chairman of NV Energy, Inc., and recently completed several years as chairman of the National Center for Responsible Gaming.

Reno-based IGT is the gaming industry’s largest equipment manufacturer.

Satre will officially join the IGT board after obtaining regulatory approval. He will serve through the company’s March 3 annual shareholders meeting. His name will be added to the slate of directors proposed for election to serve through the 2010 annual meeting.

“To add a director of Phil’s caliber, who brings valuable related gaming industry knowledge as well as broad business and board service experience, is a great plus for our company,” said TJ Matthews, IGT chairman and CEO.

By GGB Staff   Thu, Mar 05, 2009

Table game supplier Shuffle Master, Inc. announced that Tim Parrott, former president and CEO of slot-maker Aristocrat Technologies, will succeed Mark Yoseloff as the company’s CEO.

Yoseloff, who stepped down from his CEO position in September 2007, has helped in the 18-month executive search. He will remain at the company part-time to assist Parrott during a transition period. He headed Shuffle Master for 12 years.

Parrott, a 20-year gaming industry veteran, headed Aristocrat Technologies (the U.S. subsidiary of Australia’s Aristocrat Leisure Ltd.) for less than two years—a difficult period in which sluggish U.S. sales caused the slot-maker’s stock price to plunge.

Prior to Aristocrat, Parrott was chairman and CEO of casino operator Boomtown, a subsidiary of Pinnacle Entertainment since 1998.

“Given his proven track record of success and deep gaming expertise, I believe Tim is the clear choice for the future leadership needs of our company,” Yoseloff said in a statement.

Parrott takes over Shuffle Master at a time when the company’s struggles are not unlike those of Aristocrat. Thanks to the global economic crisis, flat sales have caused the company’s stock to go from a high of $10.24 to $2.50.

Initial analyst reaction to Parrott’s selection has been positive. Steven Wieczynski of Stifel Nicolaus & Co. predicted in a note to investors that Parrott will oversee a rebound in Shuffle Master’s stock, setting a $7 price target and reaffirming his “Buy” recommendation.

“We continue to believe that the worst is behind Shuffle Master and while this turnaround story will take time to play out, we believe the shares have either found a bottom or are close to it,” Wieczynski wrote.

Shuffle Master also announced that Chris Philibbosian will step down as a director of the company, effective immediately, to devote more time to SAAK Management, the company he created last year.

“We are disappointed to lose Chris’ contributions to our board; however, we understand and respect his need to devote time to SAAK Management and wish him continued success in the future,” board chairman Philip Peckman said in a statement.

By GGB Staff   Thu, Mar 05, 2009

Las Vegas Sands Corp. announced several changes designed to improve its international management team.

Bradley H. Stone, the operator’s executive vice president since 1995, has been given the additional, newly created title of president of global operations and construction. According to the company, the new title reflects both his overall contributions to the company and his role in the development and operation of the company’s integrated resort properties in the U.S. and Asia.

“For more than 13 years Brad has played an integral role in helping us grow from a start-up company into a truly global organization,” said LV Sands CEO Sheldon Adelson. “We recognize Brad for his accomplishments and will continue to rely on his unique talents as we execute our operating plans through today’s uncertain economic environment and as we prepare to open our newest developments in Bethlehem, Pennsylvania and Singapore.”

In other changes, Las Vegas Sands named Leonard DeAngelo as senior vice president of Asia operations, and appointed Nigel Roberts as president of the $2.7 billion Marina Bay Sands in Singapore, slated to open later this year.

DeAngelo most recently served as executive vice president of operations at Penn National Gaming. He will oversee all Asian gaming and hotel operations for Las Vegas Sands, as well as sales and marketing.

Roberts will oversee the preparations for the opening of Marina Bay Sands, and will manage day-to-day operations after opening. He previously served as senior vice president of operations at Langham Hotels and Resorts.

By GGB Staff   Thu, Mar 05, 2009

What is Trump without Trump? We’ll find out now that Donald Trump has resigned as chairman of Trump Entertainment Resorts after bondholders rejected an offer to buy the company from them. His daughter, Ivanka, also stepped down from the board.

In a statement released last month, Trump said essentially the casino company just wasn’t worth his time.

“While the Trump Organization grows and flourishes, Trump Entertainment Resorts, of which I am a stockholder, has languished,” he said. “The Trump Organization’s portfolio of residential, commercial, hotel and golf properties has expanded all over the world, while Trump Entertainment Resorts has yet to diversify outside of Atlantic City.”

Trump has not had power in the reorganized company—after emerging from bankruptcy in 2006, his role was diminished. And he has not been happy with the decisions made by the board.

“During the past number of years, in exercising their oversight authority, the bondholders’ representatives have made a series of bad decisions and encouraged wasteful spending, which has led to severe problems within the company,” he said.

Trump continues to have contractual obligations to the company, such as appearing at openings and special events, which he will abide by, he said.

Mark Juliano, the CEO of Trump Entertainment, says Trump’s departure is just another problem for the company.

“Obviously, the buildings and the company could lose quite a bit of cachet, and that goes for Ivanka as well,” Juliano said. “So much of the company is built around the image of the Trumps, so we have to figure out how this all works out.”

Trump is leaving the door open, however, to a possible return.

“I will give strong consideration to saving what was once a great casino hotel operation that bore my name,” he said. “But unfortunately it is clear that I will have to work from the outside—the existing bondholder control will not permit a brighter future.”

By GGB Staff   Thu, Mar 05, 2009

Slovenia-based Elektroncek, which produces the Interblock gaming devices, including the Organic line, has acquired a gaming license for Nevada in the U.S.

The company already had licenses in 19 North American jurisdictions.

The license caps seven years of work and an investment put at millions of dollars.

Electroncek partners Joc Pececnik and Thomas Zvipelj spent the past five years working with the Nevada Gaming Control Board and a team that included lawyers, American financial experts, gaming veterans and former regulators.

“I think the applicants have done a pretty remarkable job in responding to regulators’ concerns,” said board chairman Dennis Neilander at the hearing in December. Neilander had previously referred to problems with the application as “irreparable.”

The company will soon begin distributing its electronic table games in Nevada. The games include roulette, blackjack and craps, and have been popular in jurisdictions around the world.

By GGB Staff   Thu, Mar 05, 2009

San Berdino’s San Manuel Indian Bingo & Casino became the first casino in California to install International Game Technology’s new “REELdepth” slot machines, in the form of multi-game units.

The 54 multi-game units—with six more on the way—offer players several setups of the game “Indiana Jones and the Last Crusade.”

REELdepth technology places two LDC screens on top of each other with a filter in between to create a 3D effect. The games at San Manuel allow the player to choose between several games that appear as reel-spinners, but are actually 3D video slots. Players pick between three-reel, four-reel or five-reel formats in various denominations.

Animation on the primary game and bonus events is presented in 3D video.

By GGB Staff   Thu, Mar 05, 2009

TableMax Gaming, a distributor of electronic table games, has signed a contract with Kis Gaming to supply content on the TableMax system. Under terms of the agreement, Kis Gaming will provide its SUM+IT+UP game content for use on the TableMax platform.

SUM+IT+UP was initially invented as a live table game and was displayed at the Global Gaming Expo in 2006 and 2007. It was later converted into a video format. It is widely considered to be very easy to play, and gives the player multiple chances of winning, multiple payouts, and jackpot potential.

Table game players have been found to quickly understand SUM+IT+UP. The object of the game is for the player to receive a higher five card numerical total than the dealer. There is a side bet for a low or high total and a video poker game built into it. The TableMax system adds a progressive jackpot to the game.

By GGB Staff   Thu, Mar 05, 2009

NCR Corporation took the occasion of its first-ever appearance at the International Gaming Expo in London to announce its entry into the casino market. The long-established supplier of cash registers and ATMs introduced several products, which are intended for self-service use by visitors or employees and are grouped under the name SelfServ.

The NCR SelfServ ATM/TITO kiosk allows players to buy and redeem slot tickets, withdraw cash from bank accounts, arrange a cash advance and break banknotes into smaller denominations. The company has been the leading provider of ATMs for the past 22 years.

The SelfServ Cash Office is a freestanding kiosk that automates the dispensing and depositing of note and coin floats, basically allowing any employee to participate in the cash reconciliation process.

NCR Wayfinding is a mapping kiosk that enables guests to find their way around the casino floor or resort. Unlike static systems, the NCR product can be instantly updated from the central mapping application, to reflect changes in floor layout or kiosk repositioning.

NCR also offers self-service kiosks for hotel check-in and order-and-pay at F&B locations, plus other consumer-friendly interactions. The company has between 80 percent and 90 percent of the U.S. airport self check-in kiosk market.

Scott Winzeler, vice president for marketing for gaming at NCR, said, “NCR is uniquely able to provide a holistic approach to the gaming environment—from the hotel to the casino floor to the buffet—for a seamless and consistent experience. A guest might check in to a gaming resort using a self-service kiosk, locate a favorite blackjack or roulette table using an interactive wayfinding device, or purchase tickets to a live show by waving a mobile device in front of a digital poster.”

By GGB Staff   Thu, Mar 05, 2009

Table-game supplier TCS John Huxley Europe Ltd. announced a new patent the company has been issued for a live gaming system in which players in a card game like blackjack can make their decisions on hands simultaneously.

The system uses a live dealer and real cards, but has individual electronic player stations for wagering and decision-making.

Huxley was issued patents for the system itself and for the simultaneous wagering method. Worldwide links of patents for both inventions are pending.

“This represents a major milestone in achieving TCS John Huxley’s vision for live gaming, which is to enable customers to vastly expand the distribution of their live card games electronically at low cost, and to broaden mass-market appeal by lowering minimum bet thresholds,” said a statement from the company.

“Essential to delivering our vision is 100 percent reliability of live card value recognition and verification, which has been achieved through many years of intense research and development.”

By GGB Staff   Thu, Mar 05, 2009

The Choctaw Nation of Oklahoma has chosen Aristocrat Technologies’ Oasis 360 casino management system for seven of its casino properties in Oklahoma.

When completed, Oasis 360 will be installed on more than 6,700 gaming devices across the Choctaw Nation enterprises, which are a mix of Class II and Class III casinos. Aristocrat will be installing Oasis 360 casino-by-casino beginning in March and is expected to complete the last installation prior to the end of 2009.

The first installation will take place at the new Choctaw Casino Stringtown in Stringtown, Oklahoma. After all installations are completed, the firm will install its OneCard system, which will allow players to play for points and redeem across the entire Choctaw enterprise. In addition, Aristocrat will assist Choctaw Casinos in the development and launch of individual players clubs at each Choctaw location.

“Our old system had several obstacles that kept us from providing the level of customer services that we envisioned and planned for,” said Janie Dillard, executive director of Choctaw’s casinos. “After reviewing all of the systems options available to us, we believe we have found the answers we were looking for and a great partner for our properties in the Oasis 360 solution.”

“We are thrilled that Aristocrat and Oasis 360 were chosen as the new systems partner by the Choctaw Nation,” added Nick Khin, president of Aristocrat Technologies. “We are confident that the new Oasis 360 solution from Aristocrat is the perfect fit for the Choctaw Nation.”

By GGB Staff   Thu, Mar 05, 2009

Harrah’s Entertainment has signed an agreement with slot manufacturer WMS Gaming to install the slot-maker’s networked “Star Trek” game at all its properties.

Star Trek, the first game in a series WMS calls “Adaptive Gaming,” uses a wide-area network to give players an “episodic” experience. The game includes several “episodes” of the original Star Trek television series, each episode a completely different slot game with different reel symbols, bonuses, etc. Players earn “medals from Star Fleet” by achieving different bonus levels in a game, and with enough medals, can move into a new “episode”—a new slot—on the same box.

The network allows players to stop playing at one casino and pick the game up exactly where they left off at another casino. The game prints out a log-in code that can be used to save progress on the game.

Harrah’s will have the Star Trek network active at its 40-plus casinos across the U.S.

By GGB Staff   Thu, Mar 05, 2009

More than 55 regulators and other dignitaries joined officials of Gaming Laboratories International in Macau for the grand opening of the GLI Asia Interoperability and Testing Center, the first gaming test lab in the region. The event drew a large mix of dignitaries from across the region and from many aspects of the industry, including suppliers, government officials, operators and regulators.

The GLI Asia Interoperability and Testing Center will serve several regional markets such as mainland China (lottery), Japan, Macau, Malaysia, the Philippines, Singapore, South Korea, Taiwan and other emerging Asian gaming and lottery markets. Many of these markets have already utilized GLI’s services.

“Our goal was to have more than just a testing laboratory or a ‘Macau office,’” said GLI Asia General Manager Larry Xiao. “Our goal was to establish an Asian base for GLI, which we now have. From GLI Asia, we serve multiple countries along the Pacific Rim, including their governments, local and international suppliers, as well as the casino and lottery operators.”

The new lab also has an agreement with Macau Polytechnic Institute to work on joint research projects, to provide training at the school, and to cultivate and hire future graduates.

By GGB Staff   Thu, Mar 05, 2009

The 2009 International Gaming Expo in London was perhaps the most varied gaming trade show in the relatively brief history of the genre.

Besides the traditional, land-based casino suppliers—which originally gave the show its hard-to-forget acronym, ICE, for “International Casino Exhibition”—the IGE featured a large number of very busy stands from the online casino sector.

Live and online sports betting and bingo were also well represented, joined for the first time by numerous versions of the automated poker table, whose suppliers seem to be multiplying as fast as did those producing automatic roulettes not so long ago.

And last but not least, there were the higher-end brands of street market machines, which in the genesis of the London show preceded even the casino exhibitors, when the event was dominated by video games and rides for the arcade and amusement park sector.

Although the organizer of IGE, Clarion Gaming, as of press time had not yet released the official numbers, the final tally of exhibitors came in somewhere between 350 and 400.

On the visitor side, however, it was clear to see from the first two days of the show that the numbers for visitor attendance would be down from those of the previous year. The organizers were hoping for another record year, but the same sickly economy that had helped discourage visitors to G2E in Las Vegas this past November kept the crowds relatively thin in London as well.

Going by appearance and “feel” only, the primarily casino section of the show seemed to have between 10 percent and 20 percent fewer attendees than the 2008 show. Whereas in past years the flow of visitors had remained steady throughout the Wednesday—traditionally the busiest of the three days—this year the crowd was already beginning to thin out by 4 p.m., two hours before the show would close for the night.

However, there was no such slowdown in the online gaming section of the floor. Perhaps it was the location of the ICEi Bar, sponsored again by Microgaming, right in the midst of the online stands. But off-the-record questions confirmed what the eyes suspected, namely that the online gaming world continues to draw interest from investors, from inside and outside the gaming industry.

Still, even with attendee numbers apparently down, some casino suppliers reported that the serious visitors were still present. The same phenomenon was evident 10 weeks earlier, at G2E in Las Vegas.

The sad irony of the show was that, in a year of such economic uncertainty, there were so many new and potentially transformative technologies and products being introduced.

By Caitlin McGarry   Thu, Mar 05, 2009

Hamden, Connecticut-based TransAct Technologies, which sells market-specific impact, thermal and inkjet printers to gaming, point-of-sale and banking customers in Europe, the Americas, Africa and the Pacific, unveiled its new, compact Epic 880 printer at the International Gaming Expo in London in January, to highly positive reviews.

This small-footprint, affordable, high-speed printer has standard-option connectivity, so it is easily integrated into most games or kiosks. Despite its small size it has 8MB of RAM. The Epic 880 is suited for gaming applications such as video lottery terminals, fixed-odds betting terminals, amusement-with-prizes, skill-with-prizes, and pachinko machines in Japan. Because of its modular design and variable-position spindle mount, it can be configured to any available space.

The product uses either four-inch or six-inch diameter rolls, rather than fixed-length tickets, making it flexible for graphics, coupons or promotions.

The printer was built on knowledge gained from the company’s earlier product, the Epic 430. But the new printer has been improved with features such as an easy-access clamshell that makes for quick replacement of paper rolls.

It supports variable-length receipt printing of up to 10 inches for flexibility in printing options. It also provides a built-in path for a ticket to be retracted back inside the game in the event a player does not take the ticket.

The printer is self-contained, with an electronics base built into the printer, and an adjustable paper spindle for maximum flexibility in paper roll positioning.

For more information on the Epic 880, call 877-748-4222 or visit the company’s website at www.transact-tech.com.

By Caitlin McGarry   Thu, Mar 05, 2009

Gaming solutions company Gaming Support’s latest product, BonusBox, is designed to boost slot revenue by enticing and exciting potential players.

BonusBox can be installed at eye level on standard slot machines, to garner maximum player response. The unit’s transparent cylinder can contain any prize the operator chooses: cell phones, watches or even redeemable tickets. The prizes contained within BonusBox can also be dummy products for security reasons.

A BonusBox unit can be attached to each slot machine on a casino floor, enabling operators to place units on individual slots, rows of slots or on every slot in the house.

With BonusBox, Gaming Support has three consumer-driven goals: first, to deliver prizes to players in an easy, customizable way. “When people see the potential for winning more than just money, they will be drawn into playing the bonus-driven machine,” says a company official.

The BonusBox also enhances slot play by upping the ante on what players can win—an array of options, making the games much more enticing than standard slot machines with straight credit prizes.

With BonusBox, operators are able to target specific demographics with specially selected prizes. A high roller’s comps are typically free meals or rooms, but with BonusBox, more options are available to draw in highly desired clientele.

The BonusBox can be integrated with player tracking programs to personalize the prizes within the casino’s reward system. There is a wide range of options involved in establishing BonusBox links to the slot machines on a casino floor.

 Gaming Support has already begun working with casino operators to connect BonusBox units to slot machines, and the company claims the product grows revenues by at least 50 percent. Gaming Support will be presenting BonusBox at this year’s G2E Asia trade show.

For more information about BonusBox, contact Gaming Support at

1-866-426-0303 or visit the company’s website at www.gamingsupport.com.

By Frank Legato   Thu, Mar 05, 2009

This is a rare example of a strong game for the traditional single-line reel-spinning market—a segment that has been overlooked by many slot-makers.

Tower Of Power is the latest game in Bally’s “Quarter Million$” wide-area progressive series—which, as the name states, features a progressive jackpot resetting at $250,000.

The progressive is won through a unique combination of a bonus video monitor in the top box and a mechanical, ladder-style bonus apparatus on top of the machine.

The primary game is a three-reel stepper in either the standard S9000 or the wide-body “CineReels” cabinet, in quarter or dollar denomination. It is a modification of the classic Blazing 7s pay schedule, using basic bar and “7” symbols exclusively. A “Wild Bar” symbol substitutes for any other bar symbol.

Three Tower Of Power symbols trigger the main progressive bonus. A giant single bonus reel appears on the top-box LCD video screen, and spins to reveal the number of spaces the player advances up the bonus ladder, which ascends from 20 credits eight rungs to 10,000 coins, and one more space to the progressive jackpot.

The player continues to spin the big reel to advance up the ladder until the video reel spins to “Collect.” The bonus feature occurs more frequently on the program designed for Nevada—every 66 spins on average, as opposed to every 86 spins on the model designed for the GLI jurisdictions. The average award is 84-86 credits.

Manufacturer: Bally Technologies

Platform: Alpha Elite

Format: Three-reel, single-line stepper

Denomination: .25, 1.00

Max Bet: 3

Top Award: Progressive; $250,000 reset

Hit Frequency: 27.80%

Theoretical Hold: 12%—16.87%

By Frank Legato   Thu, Mar 05, 2009

This is the latest game in Konami’s “KonXion” series (pronounced “Connection”), which features the clustered hexagonal reel symbols, with adjacent symbols returning jackpots.

The minimum bet is 40 credits, which activates all symbols on the screen. The player wins for combinations of left-to-right touching hexagons—two or more on some jackpots or three or more on others. All jackpots are multiplied by the total bet, which can be as high as 2,000 coins on a spin.

The new version of this series features what is called “KonXion 4-5-4-5-4,” because of the new way the pay window is set up—four stacked hexagons form each of the first, third and fifth reels, with five hexagons forming each of the middle two reels. According to the manufacturer, this permits a much higher hit frequency than the original version of KonXion.

Full Moon Diamond adds a few wrinkles to the KonXion game style. It is the first game to feature a new feature within the free-spin bonus round, called “MirroReels.” If the same winning symbol appears in “mirroring” reels—the first and fifth reels, or the second and fourth reels—the same symbols will appear in the other mirroring reels to add to the jackpot payoff.

Three, four or five adjacent Moon symbols trigger 10, 15 or 25 free spins, respectively. A different set of reel symbols appears for the free-spin round. If you land the symbols again during a free spin, the feature is re-triggered.

Manufacturer: Konami Gaming

Platform: K2V

Format: Five-reel scatter-pay video slot

Denomination: .01—1.00

Max Bet: 2,000

Top Award: 4,000 times bet

Hit Frequency: 37%

Theoretical Hold: 4%—18%

By Frank Legato   Thu, Mar 05, 2009

The series of slots based on the TV game show Deal Or No Deal has been an absolute franchise player for Atronic, and this latest game is one of the strongest in the series.

The game is available in four initial base-game titles. All are available in either a nine-line or 20-line configuration.

At the core of this game, like all in the “Deal” series, is the familiar “Briefcase Bonus,” which mimics the gambler-friendly game show. Ten briefcases or 20 briefcases (depending on the base game) appear on the main video screen, and the player is shown all the bonus amounts that are hidden within the cases. He selects one briefcase.

The player then selects briefcases to reveal their amounts, and based on the likely amounts behind the remaining briefcases, the computer makes the player a “Bank Offer.” The player selects “Deal” to accept it or “No Deal” to reject it and open more briefcases. This repeats until only two hidden credit values remain, and the bank makes a final offer. If the offer is rejected, the player’s case is open and the player is awarded the hidden bonus.

This version of the game, though, also includes three other bonus events. A side bet, as clearly communicated to the player, quadruples the frequency of entering a bonus. Each of the three bonuses is a “pick-a-tile” style of event, involving a choice between icons hiding credit awards.

The progressive bonus is enacted through a “mystery” trigger, and it presents the player another risk-or-reward choice: The player can choose the Briefcase Bonus, or can choose to play “The Experience,” with a guarantee of one of the two progressives. The player is offered an amount that is midway between the two progressive jackpot amounts. If he picks “No Deal,” he gets either the higher or the lower amount. It’s a 50/50 shot, and a great gambling proposition.

Manufacturer: Atronic Americas

Platform: e-motion

Format: Five-reel, nine-line or 20-line video slot

Denomination: .01, .02, .05

Max Bet: 150, 200

Top Award: 30,000, 50,000, 100,000

Hit Frequency: 35.7%, 45.2%

Theoretical Hold: 8%—12%

By Frank Legato   Thu, Mar 05, 2009

This new two-level progressive video slot from IGT employs the classic Australian math model, with a 20-line setup and medium volatility. It is a multi-denomination unit, but the manufacturer suggests that the program works best in the 2-cent and nickel denominations.

The 20-line setup and mixture of clovers, horseshoes and other lucky reel symbols is presented in cartoon animation with over-sized reel spots. Classic Australian poker symbols augment the lucky reel images.

There are two wild symbols, the rainbow and the pot of gold. The rainbow appears on the second and fourth reels only, and the number of pot-of-gold symbols increases as the per-line bet increases. This is communicated to the player under each of the progressive jackpots, which should be an effective means of increasing the average wagers on this game.

The reason the message appears under the progressives is that the pot-of-gold symbols figure into the prizes. The lower, “Mini” jackpot—resetting at around $15 (determined by the casino)—is triggered by five of a kind on any of the poker symbols that is formed with at least one pot-of-gold wild symbol. Five of any of the other lucky symbols on a payline with a pot-of-gold wild wins the “Maxi” jackpot, which starts at around $80.

There is a free-spin round added into the mix, triggered by clover symbols: three clovers trigger 10 free spins; four trigger 15; five trigger 25. All jackpots are tripled on the free spins. Free spins are re-triggered with at least two clovers on a payline, yielding an extra two free games. The rest of the re-trigger amounts are the same as in the primary game.

Manufacturer: International Game Technology

Platform: AVP

Format: Five-reel, 20-line video slot

Denomination: Multi-denomination

Max Bet: 200

Top Award: 38,000

Hit Frequency: Approximately 50%

Theoretical Hold: 4%—9.5%

By GGB Staff   Thu, Mar 05, 2009

The owner of the Blackpool Tower, a potential casino site, reportedly contributed £200,000 to the Conservative Party of the U.K. Trevor Hemmings made the contribution in 2007, which made him the largest independent corporate sponsor at the time. The Times said the donation was made to the Tories in an effort to ease restrictions on slot machines that pay out £500.

Early last year, Tobias Ellwood, the Tory culture representative, demanded a review of the rules, backing the gaming industry’s call for the gaming machine stakes to be returned to £2, after the Labor government had lowered them to £1, and for the limit on payout of the machines to be dropped.

“Family arcades are a vibrant part of many seaside towns, and it is wrong that they have suffered from an unintended consequence of government legislation,” he said.

By GGB Staff   Thu, Mar 05, 2009

The U.K.’s Gala Coral group has opened its new casino at Ocean Village, the largest residential and leisure development in Gibraltar.

The £6.5 million casino began operations in the last full week of January and is open around the clock. The casino features 12 tables, 180 slots, a Coral sports betting lounge and a 450-seat bingo hall.

Amenities include a branded 18 Degrees Below Zero ice bar, the Epernay Champagne Bar and the Chargrill Restaurant.

The casino gives new visitors the chance to acquaint themselves with casino games and poker in a lighthearted way, in Gala Coral’s Casino Magic and Poker Magic educational sessions.

Interior consultant and contractor WFC developed the casino to fit within the Ocean Village theme.

The Ocean Village development encompasses waterfront and marina-side residential properties, restaurants, cafés and bars, pools and spas, water park attractions, a promenade with international shopping, a marina with 200 berths and an office center.

By GGB Staff   Thu, Mar 05, 2009

The Netherlands’ government-owned casino group, Holland Casino, was the first major operator in Europe to gear its product and marketing efforts to the average citizen. Now, the director of the concern, Dick Flink, wants to see an investment of hundreds of millions of euros to expand the entertainment aspect of the primarily casino-gaming operator.

The new concept includes an emphasis on greater variety in the food and beverage offering, the creation of dance clubs and lounges, even the introduction of live stage performances—plus the inclusion of gaming that does not necessarily involve wagering.

Holland Casino has always been willing to experiment with its product, which now totals 14 casinos around the small country. The new decision is the result of a combination of factors that have resulted in lower gaming revenue, plus a perception that casino gaming may have reached its peak in 2007, with gross gaming revenue of €750 million and net of €85 million.

Flink refuses to put all the blame for the lower results on the recession, a smoking ban and higher gaming tax.

“Before you start crying about what the big, bad world has done to you, you have to take an honest look at yourself,” Flink told the Dutch financial newspaper Financieele Dagblad. “When I came here a year ago I saw a company that had grown heavily over the past 30 years. But I also saw an organization for which growth was a given, but which did not always look at the quality or costs of that growth.”

Almost all of the 14 casinos were still profitable last year, according to Flink. Even those that were not are in no immediate danger of closing, however, because the Justice Department, which oversees the casino company, wants all residents of the country to be within a 30-minute drive of a Holland Casino property.

The original mission of the government-owned group was to counter the illegal gaming that was occurring at over 100 unregulated casinos.

The plan is meeting with resistance from the Dutch Labor party, which believes the expanded entertainment concept works against the original mission and instead could open the market to outside operators as well. The party also worries that the state company would present unfair competition to private operators in the food, beverage and entertainment industries.

As for where the money might come from to fund the projects, Flink is not expecting to have to turn to the Finance Ministry. He expects to be able to obtain funding from banks or, if necessary, from outside investors, when conditions improve six months from now.

“You don’t rebuild a casino for €20 million,” Flink said. “It will take a substantial sum, hundreds of millions of euro, and many years. We’re talking about entertainment venues that have to accommodate 400,000 to 1 million visitors per year.”

By GGB Staff   Thu, Mar 05, 2009

An investment firm controlled by the Manila Jockey Club intends to build and operate a casino and hotel in a section of northern Manila.

According to the Business Mirror, MJCI Investments Inc. will construct the project on 1.6 hectares of a 12-hectare parcel owned by the Jockey Club in the Santa Cruz section of the city. The casino will be built first, followed by development of plans for the hotel.

Last year the Philippine Amusement and Gaming Corp. gave MJCI approval to run a casino with 200 slot machines and 10 gaming tables to start.

Funding for the $8.2 million project will come from either the stakeholders or bank loans, corporate information officer Peter Francis Zagala told the Business Mirror.

“We hope to start with the casino project this year,” said Zagala.

By GGB Staff   Thu, Mar 05, 2009

If she’s got half the business savvy of her father, casino magnate Stanley Ho, Pansy Ho will do just fine. But right now, times are tough and she’s scrambling to expand her empire.

Pansy Ho’s first entry into the casino business came as a joint-venture partner with MGM Mirage for the MGM Grand Macau. While that property struggles through the current downturn in Macau, she is turning her attention to some other projects. Discussions about a second MGM joint venture are ongoing but construction will not commence until it’s clear that the current economic climate is improving.

As managing director of Shun Tak Holdings Ltd., a real estate and transportation company controlled by the Ho family, she recently signed an agreement with a Dubai partner to build a new hotel in Macau’s Cotai area.

Another Shun Tak development is about ready to be opened. The One Central is a luxury condo project in Macau. Although the large majority of the units had been pre-sold, it’s unclear how many sales would be completed in the current economy.

Shun Tak has a cushion, however. The company recently received about US$90 million (HK$700 million) when it sold a 50 percent stake in the city’s Mandarin Oriental to Stanley Ho’s SJM.

By GGB Staff   Thu, Mar 05, 2009

The idyllic vision of shipboard casinos languidly plying India’s Mandovi River has been disrupted of late. Recent accusations of the ships dumping raw sewage into the waterway were followed by the arrests of three casino employees accused of conspiring with “con men” to cheat their employer.

But the bigger problem facing operators is the anti-casino sentiment that seems to have reached critical mass, according to accounts in the local press.

Sindh Today reports that Digambar Kamat, Goa’s chief minister, has told the state assembly that the Goa casino policy will be reviewed, following accusations of corruption in the awarding of gaming licenses to the casino ships.

Alleged problems include some ships having sailing licenses only but still operating casinos. The leader of the opposition BJP Party also found it objectionable that, according to his claims, the vessels were registered in the Cameroon Islands and not India.

Longtime casino critic Annand Madgavkar, a local salvage expert, fears that the next generation is being threatened by the presence of a gambling culture.

“Goa is gaining a reputation around the country of being a gambling destination. Our youngsters must be taught that they should earn their money through hard work and not through dirty money,” he said, according to Times of India.

Kamat has said that changes will be made to the Goa Public Gambling Act 1976 to ensure that the offshore casinos are parked more than a mile away from the coast. But whether this will be enough for the anti-casino faction is doubtful.

By GGB Staff   Thu, Mar 05, 2009

In a positive outlook for the Macau gaming industry, Melco Crown Entertainment will open the first two phases of its massive City of Dreams casino resort in the second quarter of this year. A job fair was held last month that attracted 10,000 applicants for 7,000 positions. The City of Dreams is located on the Cotai Strip, directly across from the Venetian.

City of Dreams will open with 550 gaming tables and 1,500 slot machines on a 420,000-square-foot gaming floor. It will include 2,200 rooms, suites and villas at the Crown Towers, Hard Rock Hotel and Grand Hyatt.

CEO Lawrence Ho Yau-lung says a slow economy is actually working for the project.

“Opening the City of Dreams now is actually not a bad thing,” he said. “Recruitment is easier now, we are not over-budget; nor are we over-time. Financing is difficult now, but thankfully we did well in getting enough funds in 2006 and 2007.”

Ho says he believes things can only get better after the worst economic decline in Macau in years.

“The worst period for Macau’s tourism industry is over; 2009 will get better,” he said. But he predicted a “very tough” first six months of this year for gaming revenue.

“I predicted a fall from 15 percent to 30 percent. It’s going to remain flat, and then we will see single-digit growth later,” he said.

By Frank Legato   Tue, Mar 03, 2009

Monorail... Monorail... Monorail...”

That chant, a response to an out-of-town huckster selling a multimillion-dollar bogus monorail project to the townspeople of Springfield in the cartoon TV series The Simpsons, took on special meaning for me last month.

For the first time since it opened in 2005, I actually rode the Las Vegas Monorail. This raises a couple of questions:

1. Why did it take me so long to take advantage of this much-heralded civic accomplishment?

2. Will I ever do it again?

The answers to these questions are as follows:

1. I don’t like air travel.

2. Not if I was being chased by a gang of giant, knife-wielding mutant ape-men.

Here’s what happened. My wife and I were out for an evening on the Strip with a couple of good friends. We had just escaped from the Vinnie Favorito comedy show at the Flamingo with our dignity fairly intact (not an easy thing, as it turns out), when we decided to go down to the Wynn to give some of our gambling dollars to Mr. Steve.

Now, the journey from the Flamingo to the Wynn is definitely walkable—it’s about a mile down the Strip. Normally, that would take 15-20 minutes, assuming a few nimble maneuvers around the human scum who line the sidewalks shoving those naked-girlie cards in your face.

The ladies in our party, though, were wearing shoes with heels that pretty much became instruments of torture with extended walking. Standing there at the corner of Flamingo and Las Vegas Boulevard, we looked just across the street to Bally’s Las Vegas, where a promise of an easy journey beckoned: “Monorail Entrance.” Hey, why not? We scooted over Flamingo across the convenient overhead bridge and got on the super-easy moving walkway.

Now, all that was left was to follow the Monorail signs to begin our comfortable ride. We began what we expected to be an easy stroll.

The stroll became a walk. The walk soon became an epic journey. We walked, and walked, and walked some more, all the while looking at the signs, which repeatedly mocked us with promises of “Monorail Entrance.” I could almost feel the swelling of the feet of our female companions as we walked, and walked, and walked.

“Monorail... Monorail... Monorail...”

After a period during which we surely could have walked to and from the Wynn—and knocked out a couple of girlie-card peddlers along the way—we finally reached the glorious Entrance to the Holy Monorail. Time to pay the fare—can’t be more than a couple of bucks, right?

Ha-ha!

Five bucks apiece to ride the damn thing. That’s right. Twenty bucks for the four of us. We almost could have grabbed a cab, had him wait at the Wynn, and then rode back to the Flamingo for that much. Oh, well, at least we were there, and now we could ride to the Wynn in comfort...

Ha-ha again! We watched the Wynn pass into the distance as we went to the stop it said had “access to Wynn.” We were greeted by a sign: “Shuttle to Wynn closed. Proceed to Harrah’s.” Turns out the last shuttle to the Wynn leaves the Convention Center stop at 8 p.m. It was around 9:30.

Eight o’clock? What is this, Mayberry?

So, it was back to Harrah’s, which is about a block from our original starting point. Then, it was time to walk again. And walk. And walk.

By the time we got inside Harrah’s—the feet of the women in our party approaching a horrific, elephantine state—we decided to just park our bottoms at our favorite games and give our gambling dollars to Mr. Harrah, or at least to Mr. Private-Equity Harrah’s Parent Company. (He’s an old pal of mine.)

We never did get to the Wynn that night, but we did learn a valuable lesson about the Las Vegas Monorail. As it says on the monorail’s website, it is “a quick and easy way to avoid traffic congestion,” and “cost-effective and hassle-free,” and “convenient,” and “reliable,” and “climate-controlled.”

Ha-ha!

OK, I’ll give it “climate-controlled.” However, if you decide to take the monorail less than two miles, here’s a clue: Get a cab. And, if you ever find yourself running from giant, knife-wielding mutant ape-men, just turn around and direct them to the monorail. Maybe they’ll get their pals Godzilla and Mothra and tear the cars from the track, all the while chanting...

“Monorail... Monorail... Monorail...”

By Frank Fantini   Tue, Mar 03, 2009

Call it the Bellagio Effect.

It was once a given that a casino resort would generate cash flow exceeding 20 percent of the cost to build it.

Resorts were relatively inexpensive to build and quickly filled with gamblers.

In the final example of that time, New York-New York opened in 1997 at a cost of $485 million and generated $130 million in EBITDA its first year.

Then came the Bellagio. Steve Wynn invested $1.6 billion into what he promised would be the best hotel in the world. And gambling would not be the only way to make a profit. The old amenities—shows, restaurants, stores—would become upscale profit centers as resorts broadened their reach to free-spending, though often low-gambling, tourists.

It worked. Bellagio was and remains a great financial success.

What followed was to have been expected—imitation. Mandalay Bay, Venetian and Wynn came along. Each a billion-dollar-plus lure to upscale customers.

Soon, $1 billion or $2 billion wasn’t enough. Resorts of $3 billion, $5 billion and, when CityCenter is complete, $9.2 billion, filled drawing boards.

Of course, eventually supply exceeds demand, though developers in every industry don’t seem to know when that is until too late.

We appear to be there, with the weak economy and credit crunch making the excess all that much more visible, and shocking some companies into freezing projects already under construction, not to mention causing others to postpone or cancel grand plans.

The story can be told in simple percentages. (See Chart A.)

The numbers probably will get worse as mega projects, conceived in the era of easy money, come online: $2.9 billion Fontainebleau, $9.2 billion CityCenter, $3.9 billion Cosmopolitan.

Deutsche Bank analyst Bill Lerner said future cash flow returns are likely to be in the single digits, and some projects won’t generate enough money to meet their cost of debt.

Nor are investors likely to risk billions to earn single digits, especially today. Compounding the problems are higher interest rates.

How all of this plays out is uncertain.

Companies are trying to cut their debt loads by buying back loans at a discount. Station Casino note holders rejected their offer of 20-50 cents on the dollar. Isle of Capri found buyers at 55-58 cents.

Some companies will sell assets, as MGM Mirage did with TI for $775 million to Phil Ruffin.

Some will go belly up and back to lenders, like the still-unfinished Cosmopolitan.

Who will benefit? Those with cash and borrowing power. Penn National is always mentioned. So is Jack Binion. Neil Bluhm has bucks. And Boyd has the buying power, but also has its own unfinished project at Echelon.

Speculation turns to persons outside gaming, including international players. But that assumes the owners of such deep pockets would subject themselves to the intrusive licensing process.

Perhaps the surest result isn’t so much who, as what.

Americans are paying the price of living off way too much debt in every area—consumer, corporate, government. Unwinding is a long process.

Future growth may be muted by greater caution by both borrowers and lenders. Perhaps casino projects will scale back to be more like New York-New York and less like Cosmopolitan.

In that case, the owners of today’s upscale mega resorts will enjoy an oligopoly when the economy returns.

Until the lessons of overbuilding and over-borrowing are forgotten. But that could be a long, long time.

Price To Sales

All of this gets us to a favorite measure—price to sales.

If there’s an understandable yardstick, it is how much a stock costs compared to sales. P/S isn’t the definitive statistic, but it is a good starting point.

It can’t be manipulated like so many other stats, including earnings. And it shows the potential of a company when conditions normalize.

Right now, it’s showing a lot of potential for gamers.

In a world where stocks should routinely trade at 1.5 to twice sales, most are a fraction of that.

Consider the recent P/S ratios of what might be called the Big Four regional casino companies:

Ameristar            0.45

Boyd Gaming        0.24

Penn National Gaming    0.69

Pinnacle Entertainment     0.43

These stocks could double and still be cheap. They could quadruple and not be expensive. And they should survive for the return to normal.

The Big Three Las Vegas-Macau operators also sport low P/S ratios:

Las Vegas Sands     0.36

MGM Mirage    0.23

Wynn Resorts    1.04

Of course, they have to deal with the fear of over-building in Las Vegas, worries about Macau, and the high capital and operating costs of their upscale business models.

Suppliers have healthier numbers, perhaps reflecting investor belief that whether casinos make or lose money, they need slot machines and gaming tables.

As mentioned, price-to-sales is a starting point to be used with other fundamentals such as price-to-book and debt ratios to begin finding stocks that are cheap of companies that will survive.

Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

By Frank Fahrenkopf   Tue, Mar 03, 2009

The economic stimulus bill, the constantly shifting behemoth that dominated national politics and national headlines for the past month, is finally in the books. Much already has been written—in these pages and others—about the victories for the gaming industry that appear in the bill. Provisions allowing companies to defer tax payments on income from the repurchase of debt and to deduct up to 50 percent of the cost of new equipment purchases or upgrades in the first year of service are real wins—both for casino operators and equipment manufacturers.

Together, these provisions will add up to billions in savings for our companies, allowing the industry to better deliver on its promises to its employees, customers, shareholders and the communities where we operate. There still is much to be done before we emerge from this recession, but the stimulus should be hailed as a productive step forward.

The AGA and a coalition of industry representatives worked closely with members of Congress to ensure that the language in the stimulus bill was as inclusive of the industry as possible. Efforts to extend the cancellation of debt income provisions to cover more than just cash-for-debt transactions were particularly vigorous, and the Nevada congressional delegation played a major role in making sure the final language was most helpful to the industry.

Despite these victories, there were troubling incidents that occurred in the midst of the stimulus negotiations that signal there is still much work to be done to ensure members of Congress and the administration understand the value of the gaming entertainment industry to the overall economic health of communities across the country.

A case in point was the noted exclusion of the gaming industry from the appropriations section of the stimulus bill. Both the House and Senate included the carve-out in their versions of the legislation, lumping casinos with aquariums, zoos, stadiums, museums and other venues deemed not worthy of receiving direct stimulus dollars. The language was eerily reminiscent of the exclusion of the industry from certain aspects of the Gulf Opportunity Zone legislation crafted in the wake of Hurricane Katrina. And while it could be said that we are keeping better company today—back then, the industry was lumped with massage and tattoo parlors and liquor stores—the fact that such an exclusion exists at all is troubling.

Even more troubling was the fact that several senators from gaming states voted for the carve-out. Perhaps they understood that the gaming industry was not pursuing any specific appropriations funds in the package and figured the language would do no harm.

In truth, it does not keep the industry from receiving benefits it otherwise would have. But the exclusion is far from harmless. It bolsters the perception that the industry somehow does not deserve the same benefits that other industries are privy to, despite the fact that gaming provides significant tax revenues and capital investment and directly employs more people than the U.S. automobile industry, software manufacturers or wireless phone carriers.

More evidence of the perception problem that still plagues the gaming industry was revealed in the final week of the stimulus negotiations, when President Obama admonished businesses for scheduling meetings in Las Vegas. The president’s comments set off a wave of cancellations, further depressing what already has been a dismal start to the year for the nation’s flagship gaming market.

In reality, more than 22,000 business events took place in Las Vegas last year, accounting for $8.5 billion in spending and directly sustaining more than 43,000 jobs. We all know Nevada is currently grappling with the nation’s highest foreclosure rate and a 9.1 percent unemployment rate—a substantial decline in business travel would put thousands more out of work.

And Vegas isn’t the only gaming jurisdiction that benefits from business travel. In Atlantic City, from January to November last year, 351,000 people attended meetings or conferences at the local convention center. They spent 134,000 nights in nearby hotel rooms and spent $167 million. Tunica, Mississippi—a one-stoplight town before gambling was legalized—hosted nearly 4,000 meetings and conventions in 2007.

Even without the demonization of business travel, all evidence was pointing to an alarming decrease in corporate travel in 2009. Meeting Professionals International, a trade group, projects a 12 percent drop in conference attendance this year and a 9 percent decrease in off-site meetings and other corporate events.

There is no question that businesses should exercise spending restraint right now. In particular, companies that receive federal bailout funds should spend prudently. But making business travel for meetings and conventions the symbol of corporate misspending is putting at risk jobs and tax revenues that can stimulate the economy.

According to the U.S. Travel Association, of which the AGA is an active member, without the jobs generated by meetings, events and incentive travel, the current unemployment rate of 7.6 percent could rise to 8.2 percent and cost the average American household an additional $136 in taxes annually.

Clearly, these incidents reveal there is still much work to be done in Washington to change perceptions in Washington—both of the value of business travel and of the gaming industry as a whole.

Exclusion of the gaming industry from future economic and business stimulus legislation cannot become a fait accompli. The AGA will be at the forefront of this effort, conducting targeted member education and outreach on Capitol Hill and with senior administration officials. We also will continue to strengthen our partnerships with the broader travel and tourism industry, working together to promote and protect our common interests. For while the stimulus certainly is a step forward, there still is a long road ahead.

By GGB Staff   Tue, Mar 03, 2009

Midwest Gaming & Entertainment will bring its casino proposal before the Des Plaines plan commission in about six months, and, if approved, begin construction in about a year from now. The project should cost about $1 billion, the company said last month. Illinois recently awarded its 10th casino license to Midwest.

By GGB Staff   Tue, Mar 03, 2009

Repayment on the $625 million loan Elad IDB Las Vegas took to purchase the New Frontier from Phil Ruffin has been postponed until August 2012. The company plans to build a $5 billion megaresort on the site across from Wynn Las Vegas.

By GGB Staff   Tue, Mar 03, 2009

A new casino in Medellin, Colombia, has been opened by Russia-based operator Ritzio International. The 2,600-square-meter Allegre Casino has 490 slots connected to a SmartBoss system and 25 gaming tables, and includes a VIP gaming lounge. The up-market casino is located in a large shopping center in the heart of the city. The casino was designed by Peruvian architect Willy Gomez-Moron, who also designed the Admiral Prater Casino in Vienna, Austria, and Ritzio’s New York Casino in Lima, Peru. 

By GGB Staff   Tue, Mar 03, 2009

Developer Forest City has submitted plans to build Downtown Las Vegas’ first new casino in 30 years. The city has granted Forest City 6.4 acres in the new Union Park development just west of Downtown in exchange for first building a new city hall building. The Culinary Union is opposed to a new city hall, saying it is unnecessary in a period of high unemployment.

By GGB Staff   Tue, Mar 03, 2009

A report by Media & Entertainment Consulting Network puts the annual gross gaming market of what it identifies as the Balkan region at €4.5 billion in 2007—about $5.8 billion at current exchange rates. The amount wagered was near €25 billion. Countries included in the report were Bulgaria, Croatia, Greece, Montenegro, Romania, Serbia, Slovenia and Turkey. Omitted were Albania, Bosnia-Herzegovina and Macedonia.

By GGB Staff   Tue, Mar 03, 2009

Residents of Black Hawk, Colorado, are not very happy about Ameristar Casinos’ resort project in the town. The legislature voted to expand gambling into the town as a way of drawing tourists and preserving the historic nature of the area, but locals think the large hotel will be an eyesore. Ameristar CEO Gordon Kanofsky said residents are romanticizing the pre-casino town. Prior to construction of his casino, Black Hawk was small and run-down, Kanofsky said.

By GGB Staff   Tue, Mar 03, 2009

Impersonators from the Riviera show Evening at La Cage will have to find a new gig: The casino is ousting the act after more than 20 years. Officials say falling ticket sales and slow hotel bookings signaled an end for La Cage, which stars Vegas celebrity Frank Marino. Marino, who hosts the impersonator show as Joan Rivers, told columnist Robin Leach he plans to take a month-long vacation and then begin work on the “ultimate drag show.”

By GGB Staff   Tue, Mar 03, 2009

Barbara Cappaert, a bond analyst with KDP Investment Advisors, recently predicted that Hooters Casino Hotel in Las Vegas may default on its $130 million bond if conditions do not drastically improve. Just prior to the release of the analyst’s note, Hooters reported its fourth-quarter operating loss was likely to hover around $1.5 million. The company must pay a $3 million bond payment by April 1, and Cappaert said this payment is unlikely, considering that the first quarter is expected to be just as bad as the fourth. In December, Moody’s Investment Services downgraded the property’s debt to “in poor standing” due to its seeming inability to avoid default.

By GGB Staff   Tue, Mar 03, 2009

Pinnacle Entertainment plans to ask for permission to delay Louisiana casino projects in Baton Rouge and Lake Charles. Charles Gaudin, chairman of the Louisiana Gaming Control Board, said the company informed him it will ask for a 90-day delay. Gaudin said he is not concerned about Pinnacle’s intention to complete both Louisiana boats. “They’re very optimistic about going ahead with everything,” Gaudin said.

By GGB Staff   Tue, Mar 03, 2009

Once again, hotel operators in the south of Cyprus will have to wait for the chance to offer casino gaming. Cypriot President Demetris Christofias closed the matter firmly recently, stating, “There will be no casinos in Cyprus as long as I am president.” In the north of Cyprus, which is not under the control of Christofias, casinos have been operating for many years.

By GGB Staff   Tue, Mar 03, 2009

The casino at the Ricoh Arena in Coventry, U.K., may close down if the current owner, Isle of Capri Casinos, cannot find a buyer. The U.S.-based operator blames “restrictive” U.K. regulations for making the less than two-year-old casino unprofitable. The company had once hoped for super-casino status for the property. Ricoh Arena management believes it will find a new, domestic operator.

By GGB Staff   Tue, Mar 03, 2009

At the end of January, Antonio Alfaro, president of Panama’s Association of Games of Chance Administrators, appealed to the country’s Gambling Control Committee for more transparency in approving casino licenses.

Alfaro is protesting the committee’s disregard of the trade union’s opinion in approving a casino license for the Hotel Four Points Sheraton.

The association argues that the license approval violates Panama law, which requires a hotel to have at least 300 rooms and international five-star status to win a gaming license.

“We do not oppose the arrival of new competitors to the market, but we do believe that these new competitors should comply with the things stipulated in the law,” Alfaro said.

By GGB Staff   Tue, Mar 03, 2009

The announcement that the Wyndham Nassau Resort and Crystal Palace Casino will close for two months during the slow summer season— August 17 to October 5—has sparked more interest in gaming reform in the Bahamas.

“We are now in the 21st century and a completely different economic climate. To compete we need to be proactive in our approaches and this call for total and not partial reform,” said Sidney Strachan, chairman of Bahamas Gaming Reform in a news release.

“Now is the time for the government to take this issue of reform serious and meet with interested parties including the BGR to move the process forward. The expected casino closure is a typical example of what can happen when citizens are not stakeholders in our No. 1 industry.”

The main concession that BGR wants is the approval of gaming by Bahamians, who are currently prohibited from playing in a casino located there.

“If expatriate residents are allowed to gamble while continuing to deny Bahamian nationals to both engage in the gaming industry and to own and operate casinos, it will further aggravate nationals and will severely handicap the aspirations of many entrepreneurial Bahamians,” said BGR.

The closure of Pinnacle Entertainment’s Casino at Emerald Bay at the Four Seasons resort in Exuma is another example of how the ban on locals gambling impacts the nation’s gaming industry.

The development of casinos in Florida and other nearby regions targeted by the Bahamas as prime markets is also cited as a need to institute reform.

By GGB Staff   Tue, Mar 03, 2009

A group known as Embo has decided to compete with Sun International for the sole casino license of Nelson Mandela Bay.

The license is currently held by Sun, which operates the Boardwalk Casino & Entertainment World, situated on the waterfront at Port Elizabeth. The casino has 800 slots and 21 tables. The license comes up for renewal next year.

The Embo consortium consists primarily of local businessmen, including Ben Nyaumwe, CEO of Auspex Property. Embo is partnering with WhiteSand Consulting, a gaming specialist with offices in the U.S. in Las Vegas, Atlantic City and Miami.

The bid from Embo was revealed in a report by the Herald, which quoted acting CEO Menzi Mbina of the Eastern Cape Gambling and Betting Board, who said, “I received Embo’s bid and that of the Boardwalk Casino, the current license holders. We will now start investigating the bids, hold public hearings, receive objections and make up our minds.”

The new entertainment center would be built on a 33-acre parcel of disused land next to the harbor. The ambitious plans include a casino, hotel, restaurants, retail shopping, train station, cruise ship terminal, ice skating rink, IMAX theater, and parking and childcare facilities. Total investment is pegged at 1.8 billion rand, about $180 million.

If Embo wins the bid, the group plans to convert the Boardwalk Casino property into a convention center for up to 4,000 delegates. The existing Boardwalk conference facility can handle only about 500 people at maximum configuration. The cost of converting the Boardwalk is listed in the bid at about R45 million.

WhiteSand would train the new casino staff and operate the casino at start-up. The consultant would eventually turn over operations to local management.

By GGB Staff   Tue, Mar 03, 2009

The winner in the bid to operate the casino in the Carrasco Hotel in Montevideo is a consortium of Spain-based operator Codere and international hotel operator Sofitel.

Total investment in the project is expected to be about $63 million. It is expected that the new hotel casino project will create 450 jobs.

The Codere-Sofitel consortium managed to beat out three competing bidders. A bid by Hyatt Hotels and Grupo Liberman finished second, followed by offers from Tsakos and Pestana.

The Montevideo Council released the results in the third week of January. The four groups who submitted bids were to have five days to comment on the process.

The following step will see the results go to the Court of Auditors and then be studied by a local committee. The latter is expected to be a formality as the ruling political party has the votes necessary to pass the decision. The advice of the Court of Auditors on any comments delivered by the bidders is non-binding and will have no effect on the deliberations of the local council.

Should the local committee approve the tender process, the full project will then be presented to the committee for approval. The time allotted for the presentation and approval process is four months.

There is a two-year deadline for the construction process to be completed and the hotel and casino ready for business.

The concession to operate the hotel casino is good for 30 years.

By GGB Staff   Tue, Mar 03, 2009

MGM Mirage, the world’s second-largest casino operator, signed a deal with Ho Tram Project Company to brand and manage one of five resorts planned for the Ho Tram Strip project in Vietnam’s southern Va Ria-Vung Tau Province. MGM Mirage is investing no money in the project, nor is it involved in raising financing, according to the company.

The operator plans to open the resort in 2011 under the name MGM Grand Ho Tram. The $1.4 billion beachfront resort will feature two hotel towers with 1,110 rooms total, along with a casino, an entertainment facility, luxury retail, restaurants, meeting space, live entertainment stages, spa services and an exclusive VIP area. A championship golf course is being designed by PGA legend Greg Norman to coincide with the opening of the MGM Mirage project.

The MGM project will be part of the massive Ho Tram Strip development, a $4.2 billion project with 9,000 planned hotel rooms, to be built in three phases over 10 years. It is owned by Ho Tram Project Company, a division of Asian Coast Development Canada Ltd. The project is being designed by Steelman Partners.

“MGM Grand Ho Tram will be the first component of the Ho Tram Strip, which at US$4.2 billion and with 9,000 planned hotel rooms is the largest tourism project to receive the approval of the Vietnamese government,” said David Subotic, general director of the Ho Tram Project Company, in an interview with The Daily newspaper.

“We continue to bring our expertise in developing and operating some of the world’s leading integrated leisure complexes to the design process,” added Lloyd Nathan, president of MGM Mirage Global Gaming Development, who said the design will use “uniquely Vietnamese architecture.”

By GGB Staff   Tue, Mar 03, 2009

A delayed and diminished casino resort project on Tinian Island in the Northern Marianas appears to be on hold indefinitely.

Bridge Investment Group LLC had originally planned to build a $200 million property on the island, but trimmed the investment to maximum $50 million last year.

Now, citing U.S. Department of Homeland Security policy that mandates a visa for visitors from China, Bridge Executive Vice President Phillip Mendiola-Long told the Saipan Tribune that construction has been halted “until a clear and final U.S. Immigration regulatory environment can be determined.”

The revised project, known as Tinian Oceanview Resort and Casino, calls for 128 hotel rooms, 268 condominium units and a 30,000-square-foot casino.

Tinian has a total of five casino licenses. The only casino built and operating is the Tinian Dynasty Hotel and Casino.

Two other licenses are held by Marianas Resort Development Corp. and Neo Gold Wings Paradise Saipan Corp.

By GGB Staff   Tue, Mar 03, 2009

The relationship between Las Vegas Sands Corp. and the citizens of Macau has never been cozy, but it is now approaching open hostility.

Reports that the company has directed profits earned in Macau to other foreign developments (a charge vigorously denied by LV Sands President and COO Bill Weidner) have led to public protests recently in the SAR. The group points to the halt in construction in Macau and the continuation of construction in Singapore as proof.

“The suspensions of Parcels 5 and 6 were a direct outcome of the global credit crisis which has affected the company’s investments not only in Macau, but has also resulted in the suspension of several projects in the United States,” Weidner said.

Despite Weidner’s denials, the organization, the Concerned Residents Group, is adamant that LV Sands is betraying Macau.

“This resulted in the suspension of works in Macau and will eventually create adverse competition between Macau and Singapore. After that more local people will become jobless,” said Ip Kim Fong, the group’s coordinator.

The group is asking the government to force LV Sands to resume construction on the Cotai Strip.

“Sands Casino was given most favorable treatment by the Macau Government and granted land concessions in the Cotai area at a low price on certain representations and promises that it has now failed to fulfill: there was no significant incremental foreign tourism as originally represented and no substantial increase in convention business; and now, projects in Cotai are left uncompleted,” said Ip.

The group also objects to the trademarks that LV Sands has garnered for nearly everything Cotai— Cotai Strip, Asia’s Las Vegas, Cotai Tours, CotaiJet, CotaiRewards Club and more.

By GGB Staff   Tue, Mar 03, 2009

The Tohono O’odham Nation plans to build a casino, hotel and convention center near the University of Phoenix Stadium and Jobing.com Arena in Phoenix, Arizona.

The resort will be the tribe’s fourth casino in the state, and also the largest casino in Arizona. Positioned on 134 acres on 91st and Northern avenues in Glendale, Arizona, the West Valley Resort (its working title) will be close to the University of Phoenix Stadium, where the Arizona Cardinals play.

Glendale Councilwoman Joyce Clark and Glendale City Manager Ed Beasley told the Arizona Republic they had concerns about the project, with Clark calling the proposal “absolutely awful.”

Peoria Mayor Bob Barrett told the newspaper he supported the plan, particularly in regards to the economic growth the resort is expected to cause. Economic evaluations state the casino will create 6,000 new jobs and bring 1.2 million visitors to Arizona.

Before the tribe can begin work on the West Valley Resort, it must first gain approval from the federal government. The Tohono O’odhams purchased the land in Glendale from the $30 million federal compensation they received from the United States for flooding that was caused by the construction of the Painted Dam Rock. Tribal land was devastated by the flood, and the tribe can now purchase up to 9,880 acres in the state to compensate for the loss.

The land needs to be put into federal trust and designated as part of the tribe’s reservation prior to the casino’s opening.

Allen Anspach, the Bureau of Indian Affairs’ Western regional director, told the Arizona Republic he supports the plan, telling the newspaper that the bureau is in general “supportive of tribes taking land into trust. It promotes, in this case, economic development.”

Anspach also said because the land was purchased to compensate for land lost in the flooding, it would likely ease through the process of being taken into trust.

By GGB Staff   Tue, Mar 03, 2009

One of the commissions in charge of regulating gambling in California is backing off from claims that it has the right to demand “prompt access” to Indian casinos and their books.

The California Gambling Control Commission, one of two regulatory agencies overseeing gambling in the state, last fall moved to assert that it has oversight authority over nearly 50 Indian casinos. The commission adopted regulations that gave its inspectors access to financial records, gambling operations, and other activities that have been handled in the past by reservation gaming commissions.

The commission said it was reacting to a federal appeals decision of two years ago that ruled that the National Indian Gaming Commission didn’t have the authority to regulate some Las Vegas-style casino activities.

Then in December the commission delayed a vote that would have set its regulations in motion. Some tribal leaders say the commission realized that it was overreaching itself.

Howard Dickstein, an attorney who represents several gaming tribes, commented last month, “The dispute really isn’t about the standards. The dispute is over who has the authority to enforce them. The state apparently doesn’t have adequate respect for tribal governments and their gaming agencies’ independence.”

But the commission may also be reacting to the threat of lawsuits from several tribes, who have also been applying intense pressure on state legislators. That’s the opinion of Cheryl Schmit, of Stand Up For California, a non-profit that opposes tribal gaming. She said the commission is “caving” to the pressure.

But Evelyn Matteucci, chief counsel for the gambling commission, insists that the commission just wants to work with the tribes and wants to keep talking.

Dickstein quipped, “They’re managing to unite every tribe in the state of California against them.”

By GGB Staff   Tue, Mar 03, 2009

President Barack Obama hasn’t announced any nominees to head the Bureau of Indian Affairs, but opposition is already forming behind a potential candidate, Larry EchoHawk.

EchoHawk, a member of the Pawnee Nation of Oklahoma, served as attorney general of Idaho from 1991 to 1995. His actions during that tenure have some concerned that he will not be friendly to expanded tribal gaming.

Attorney Scott Cromwell said EchoHawk’s efforts to push Idaho lawmakers to change state law to avoid negotiating a Class III gaming compact with state tribes makes him an enemy of tribal gaming.

“Imagine that, while at the table with a federal obligation to negotiate in good faith, Larry EchoHawk instead headed up the extraordinary effort to change Idaho law to deprive tribes of their federal and inherent rights to operate Class III games on their lands,” Cromwell wrote in an open letter.

Cromwell’s criticism was countered by the Shoshone-Bannock Tribes of Idaho and Chairman Alonzo Coby.

“As attorney general, he supported legislation and efforts to protect native religious freedoms, salmon treaty fishing rights, and other legal matters impacting tribal sovereignty,” Coby stated. “While attorney general, Larry also led efforts to improve state-tribal relations through the Conference of Western Attorneys General.”

EchoHawk himself tried to blunt the criticism.

James Allan, chief of the Coeur d’Alene Tribe of Idaho, said EchoHawk contacted the tribe to apologize for his mistake and to assure the tribe that he does not want to do anything to take away tribal gaming rights.

“His answers were honest and from the heart,” Allan wrote in a letter supporting EchoHawk. “We all make mistakes in life. When I heard that Mr. EchoHawk regretted the actions he took as Idaho’s attorney general against gaming during the ‘90s, it eased our fears and put an end to negative speculation that had clouded his nomination.”

Colorado Senator Ken Salazar has already been confirmed to take over as secretary of the Interior.

There is no announcement who will head the Bureau of Indian Affairs or when such an announcement will be made.

By GGB Staff   Tue, Mar 03, 2009

In a sign of the economic times (and a 66 percent tax rate), when the deadline passed last month for bids to be submitted for licenses to operate slots at five locations across Maryland, only six proposals had been submitted.

And when two of the bids were thrown out for not including the application fee, only four remained.

In Anne Arundel County, a bid for a slot-only casino at Arundel Mills Mall seems to be a winner after the gaming commission rejected a bid from Magna Entertainment, which wanted to install 4,750 slots at its Laurel Park racetrack. PPE Casino Resorts Maryland LLC, owned by principals of Baltimore’s Cordish Company, is proposing a 4,750-machine casino at the sprawling retail complex not far from the racetrack.

Some of the other bids were modest in size. Penn National Gaming submitted a bid for a $75 million slot casino in Cecil County, near the Delaware border, with only 500 slots. The state’s gaming law permits up to 2,500 slots at each facility.

Baltimore City Entertainment originally submitted a bid for a casino in Baltimore with 3,750 slots, but paid the licensing fee for only 500 machines.

And a group proposed 500 slots at Ocean Downs on the Delaware border.

Empire Rocky Gap LLC, a subsidiary of New York’s Empire Resorts, submitted a bid for a 750-machine casino at Rocky Gap State Park in Allegany County, but failed to include the fee, leaving Rocky Gap without a bid.

It’s expected to take months to sort out the details.

By GGB Staff   Tue, Mar 03, 2009

The gaming industry had low expectations of President Barack Obama’s massive stimulus bill last month. After all, the bill contained a provision that prohibited any funding to companies involved in gambling. And Obama’s distaste for companies that had received federal bailout money holding meetings in Las Vegas actually resulted in several canceled gatherings in Sin City.

But provisions that reduce the tax burden on companies that seek to relieve some of their debt actually work out in favor of many gaming companies laboring under huge debt loads.

Several versions of language modifying the discharge of indebtedness rules were considered at various times during the drafting of the bill. The measure centers on companies buying back debt at a lower rate than initially subscribed. For example, bonds that originally sold at $100 are now selling for $70. By buying back that debt, a company would realize a theoretical gain of $30. Prior to passage of the stimulus bill, the tax on that income was due in the first tax year following the transaction. According to proposals discussed as part of the stimulus bill, however, companies would not have to pay the tax for a number of years and would then have the tax spread out over another term of years.

The House-passed version contained no such measure, and the Senate-passed bill would only have permitted debt repurchased with cash to qualify for the deferment. This would not greatly have benefited the casino industry since most gaming companies have little free cash.

House and Senate conferees, at the urging of the Nevada delegation, improved the Senate language dramatically during conference. The compromise language included in the final bill allows for debt-for-debt exchanges, not just cash buybacks.

It was all the industry had hoped. Companies that refinance their debt are granted a five-year exemption from paying taxes on the income gained, and then can spread the tax burden over an additional five years.

“This is a real win for our industry,” said Frank J. Fahrenkopf, president and CEO of the Ameican Gaming Association. “These tax incentives add up to billions in savings for our companies, allowing us to better deliver on our promises to our customers, shareholders and the communities where we operate. We still have a long way to go to pull out of this recession, but this is a good step forward.”

There is some question about how much of an impact the bill will have because of the type of debt most casino companies hold. The bill says that debt will only qualify “in connection with the conduct of a trade or business by such person.” That provision prevents debt that is issued by a private-equity partnership from qualifying for the tax break.

But the impact may be substantial because the debt that private equity firms use to acquire companies is typically “bootstrapped”—borrowing is done by the company being acquired, and equity from the private-equity partnership helps complete the deal, therefore qualifying for the tax savings.

Also included in the bill is a bonus depreciation provision, which permits companies to deduct 50 percent of the value of new equipment purchases or upgrades in the first year. This provision is expected to benefit slot manufacturers as well as operators, who will now have another incentive to upgrade existing equipment.

Tribes also got a boost. Current law allows tribes to issue tax-exempt bonds for essential government functions (i.e. roads, bridges, schools). A provision in the stimulus bill will permit them to also issue these bonds for economic activity. These “tribal economic development bonds” could be used on resorts, but not on gaming facilities, whether they are Class II or Class III.

A carve-out was included in the appropriations part of the stimulus bill, prohibiting the use of appropriated funds for a “casino or other gambling establishment, aquarium, zoo, golf course, swimming pool, stadium, community park, theater, art center, and highway beautification project.” This provision does not impact the ability of the gaming industry to take advantage of the tax benefits included in the bill.

By Roger Gros   Tue, Mar 03, 2009

By now, we all know that the idea gaming is “recession-proof” is a complete fallacy. Even the hope that it was “recession-resistant” has gone by the wayside.

We also know gaming is suffering intensely during this current economic downturn.            Thousands have lost their jobs. Millions in tax revenues have disappeared. Some of gaming’s most important companies are teetering on the brink of bankruptcy. And the worst part is that there is no end in sight.

But, if I may be so bold, we have a potentially bigger problem: the perception that gaming is no longer acceptable entertainment when discretionary dollars are scarce.

In the 1930s, the Great Depression wiped out many companies and created an unemployment rate of more than 25 percent, making our current situation seem like a mildly annoying week on Wall Street. It was a devastating time for the entire world.

One industry that thrived during this period was the movie business. No matter what troubles people had, they saved their nickels and dimes to be able to see a movie and escape from reality for a couple of hours.

Since there were no legal casinos anywhere in the U.S. until Nevada legalized gambling in 1931, we don’t know whether people stopped gambling.

Even today, the movie business hasn’t been hit as hard as most other industries, although it’s hard to quantify since revenues from DVDs play a big role in the bottom lines of movie companies, along with the theater revenue.

But what is disturbing for today’s casino industry is that people don’t seem to be viewing a visit to a casino as an option for their “escape” from the woes of everyday life. And if they do, they are much tighter with their gambling budgets than ever before.

This comes down to the perception of gambling. Unfortunately, it seems gambling is still seen as a “vice” and something that should be avoided when times are difficult and money is tight.

One need only to listen to the new U.S. president, Barack Obama, when he was chastising firms that received government bailouts.

“You can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayers’ dime,” said Obama. “There’s got to be some accountability and some responsibility.”

Wells Fargo was forced to cancel an incentive trip for its sales staff to Wynn Las Vegas, and Goldman Sachs moved a Las Vegas meeting to San Francisco after the Obama critique.

Las Vegas Mayor Oscar Goodman and other city officials were rightly upset about the president’s remarks. But it goes deeper than that. It demonstrates that gaming still has not taken that great leap forward and continues to be viewed as not legitimate when it comes to industries that are important.

Even in the so-called stimulus package, gaming gets specifically cut out of any distribution of appropriations. Not that we were asking for any—we’re not that stupid—but to create a carve-out for gaming is insulting.

When you consider that gaming actually employs more people than the auto industry—which went hat in hand to Congress and received billions of dollars in federal bailouts—there needs to be more respect and a greater acknowledgement of the role gaming plays in communities across the country. Especially in light of the many non-gaming states that are once again looking to gaming to stem the red ink flowing from their budgets.

So it’s back to the drawing board to figure out how and if we can ever change the perception of gaming as a vice.

Frank Fahrenkopf and the American Gaming Association have done a great job spreading the good word about gaming. They point out the positive impacts gaming has on communities, charities, employees, tourism and state tax revenues.  

But they need the help of all casino employees and executives, and folks who work for companies that serve the casinos. We need to let our neighbors, public officials, local media outlets, local businesses, churches—anyone who will listen—understand that casinos are not the evil thing that we’re made out to be. We need to educate everyone on why gaming will continue to play a big role in the economic revival of the world.

And stop talking down to us!