Elsewhere: Heads or Tails

Many countries adopt new legislation seeking to streamline the gaming industry. But the result of those reforms just as a solution to a game theory problem may prove quite unobvious.

Transformation of Casinos

Multifunctional complexes providing residential, retail and entertainment facilities are becoming increasingly popular across the globe. In the opinion of Natasha Varnica, vice-president at the international entertainment design and architecture company IdeAttack, along with changing market and new urban trends of mixing residential, retail, and entertainment components, gaming industry is adapting and taking this new direction.

Urban casinos are gradually giving way to more profitable and more popular casino resorts, she says. Small in scale, single-purpose, secluded projects are giving way to large, multifunctional and visually prominent complexes; elitist establishments turn into family-oriented and tourist centers.

There are two major casino resort hot spots in the world today: Las Vegas (USA), and Macao (SAR of China). Las Vegas – the Casino Resort Center of the U.S. from almost exclusively gambling and adult entertainment destination became during the 1990s more family oriented with gambling only as a part of the experience. New millennium brought new era for Las Vegas with developments of upscale, neoclassical or contemporary, luxury in style, mega resorts (like Mandalay Bay and Wynn). Typically, those new mega resorts comprise: shopping centers, world-class restaurants, conference facilities, outdoor-indoor swimming pools, fitness centers, casinos, billiard halls, children’s amusement playgrounds, golf courses, show theaters, beauty centers, health spa, centers, banking facilities, medical courts, etc. They are destinations created according to the principle of “a lifestyle center”, which is a mixed-use development with entertainment, restaurants, retail, and accommodation - all in one place.

A gambling center of Asia, Macao, for a long time was introduced to Resort Casino concept by Las Vegas developers amid Asian economic boom and tourism expansion from mainland China. It is the biggest center of the future development of Casino Resorts with brands like Venetian, Sands, MGM, and Wynn on its grounds. Sands Macao, the world’s largest casino, has recently completed the expansion of its casino floor to over 229,000 square feet (21,274sqm). With a total of 740 tables now on the casino floor Sands Macao is the largest casino in the world. The completion of the gaming floor expansion adds more than 64,000 square feet of gaming space spanning three floors of the casino area. The expansion allows the Sands Macao to accommodate an additional 273 gaming tables -- a 58% increase -- and 365 slot machines. The total area of casino space now houses an unprecedented 740 table games and 1,254 slot machines -- all designed specifically for the Asian market.

"The Sands Macao has welcomed more than 20 million visitors since it opened in May 2004 as the first Las Vegas style casino in Macao," said Mark Brown, president of the Sands Macao. "The expansion will allow us to provide additional gaming options for our guests, while at the same time enticing new customers to visit our property. We are particularly enthused that the expansion will enable us to serve a larger portion of the highly profitable and rapidly expanding mass table game and slot markets. Our new table game capacity is aimed squarely at that mass market segment, and has allowed us to expand our mass table game capacity by nearly 70 percent."

Earlier, the world’s largest casino was in Ledyard, Connecticut. Foxwood Resorts Casino, launched in 1986, measures 17,900sqm, providing over 7,000 slot machines and 400 table games. The so-called Indian casinos are becoming increasingly popular in the U.S. The 1988 Indian Gaming Regulatory Act set the rules of operations for such establishments. According to expert calculations today Indian casinos account for nearly 25% of the total revenues from gaming in the U.S. Those projects offer jobs and social security to the indigenous, as well as a chance to get a good education and contribute to the development of public amenities in the areas where they live.

Casino Resorts Economy

The transformation of secluded urban casinos into casino resorts is already yielding visual economic results. For example, in 2004 Las Vegas Strip’s revenues from gaming business dropped as compared to 1990 from 57% to 42%, while revenues from rooms grew from 18 to 25%. Revenues from sales of food and beverages grew from 17 to 19% of overall revenues; revenues from other business segments grew as well – from 8 to 14%. The U.S. experience shows that casinos, unless they are a part of large entertainment complexes, do not operate in proximity to large cities.

Harrah’s Entertainment reports that residents of New York City, Boston, Atlanta and Dallas need to drive at least two hours to the nearest gaming facility. But then, residents of Phoenix, Chicago, LA and San Francisco live only a 15 to 30 minutes’ drive away. However, U.S. citizens do not rush to get rid of small casino resorts, which are quite popular with local residents in small and mid-sized cities and towns and travelers staying at hotels available at casino resorts, holds Robert Heller, President, Heller Gaming & Leisure.

Both mega casino resorts and local mini casinos operate under established national casino brands and provide large gaming floors with a wide array of gaming options. Both types feature entertainment venues, shops, hotel rooms and various amenities such as golf courses, bowling alleys, spa and health clubs. The only difference is their size. While mega casinos provide 1,000 and over hotel rooms or several hotels and 10 restaurants and over, smaller projects have only 200+ hotel rooms and 3 to 4 restaurants.

Reforms Hit Conservative Isles

It appears that gaming industry undergoes considerable changes worldwide, including even the most conservative nations. Last year Great Britain adopted the Gambling Act creating a new system of licensing and regulation for the commercial gambling industry.

It will come fully into force in September 2007. The Act gives Councils extended responsibilities for licensing premises for gambling. In some cases (such as gaming machines – also known as Amusements with Prizes Machines) these build on existing responsibilities. But in other major areas, including betting, casino gaming and bingo, they transfer to Councils those responsibilities that formerly lay with the Magistrates Courts.

The government seeks to prevent an increase in number of smaller casinos however the number of gaming enterprises will grow automatically. By late October 2006 the number of casinos in UK was to increase by 111 new projects.

Leading gaming operators are establishing presence in Britain, one of those being Thistle Hotels controlled by Malaysian billionaire Quek Leng Chan. The group has applied for permission to launch 16 new casinos including three projects in London, on the premises of the hotels Thistle Victoria, Thistle Hyde Park and Thistle Marble Arch.

London Club, a leading national chain, has secured licenses to open six casinos. Harrah's Entertainment Inc., the world's largest casino company, said recently it bought most of the shares of a U.K.-based London Clubs International PLC, The Associated Press reported. Harrah's said it bought or received nearly 83 percent of London Clubs' shares and expects to eventually control 100 percent of the company by the end of the year. London Clubs operates seven casinos in the U.K., two in Egypt, one in South Africa and is a consultant for a casino in Lebanon.

New Design Concept

Usually, the architecture of Casino Resorts is themed. The newest trends suggest that themeing is now “toned down” and developers opt for more stylish architectural design instead of theme-park approach with reconstructions of world landmarks and heavily thematized environments. Gambling areas within resorts usually just echo the overall theme of the resort. The interior is designed not to distract players from concentrating on the game.

In Natasha Varnica’s opinion, the focus on the future development of casino resorts would probably be in a resort part of it with casinos as only one of the amenities. “In our opinion, key elements for the success of new age casinos are: innovative design, best location, focus on customers’ experience, and efficient operations.”

Ms Varnica has cited several examples of the most successful casino projects designed by IdeAttack. Those are:

• Gardens of Granada, Belize, (2002, 70 acres in size), a mega complex of four casino resorts interconnected with monorail system. It has a large indoor shopping center with series of themed market places and world class retail. Envisioned as a main destination for cruise ship tours, it contains all elements of biggest mega casino resorts: golf practice field, conference center, shopping center, sports facilities, beaches, boutique hotels and luxury villas. Architectural style is defined as Moorish /Moroccan based on rich heritage and legends of Maghreb region of North Africa. IdeAttack, Inc. developed the masterplan, paying special attention to the property’s 1km long prime Caribbean coastline.

• Dragon Palace Casino, Macao, (2001) a complex designed in the traditional Chinese architectural style. The casino is part of a resort complex with all world class luxury features and amenities.

• Greek Town Casino, Detroit (2002), an urban casino in Detroit, Michigan. It covers 75,000 sq ft, featuring over 2,500 slot machines, and 86 table games. Designed in a contemporary architectural style, the complex houses dozens of restaurants, a hotel, and unlike other urban casinos the new Greek Town Casino has a strong entertainment element mixed directly with gambling content.

• Barona Casino (1999) in a remote inland location of Southern California (near San Diego) is a typical American Indian casino themed as a traveling circus / carnival and built using Sprung modular structure that is easily maintained and expanded. A hotel and restaurants are also part of the complex.

Virtual Games – Real Cash

Another challenge for traditional casinos is the onset of online gambling industry. Gaming zones will have to adjust to the changing market requirements. Those changes, however, will most likely be of technological nature (credit vs. cash operated machines, virtual dealers, automated gaming machines, etc.)

Online games have good chances to take the leading positions on the market. The U.S. research company Christiansen Capital Advisors reports that last year that segment collected $8.2 billion or 3% of the entire gambling market. In two years alone, from 2002 to 2004, revenues from online gambling grew from $92 million to $1 billion. By the year 2009 revenues are to hit $23 billion and return rates are to reach 22%, whereas traditional casinos will only see 3% rates, according to Christiansen Capital Advisors.

These forecasts already saw confirmation when the Gibraltar-based ParyGaming, the company that controls the world’s leading poker gaming website PartyPoker.com raised 1.04 billion pounds through an IPO, breaking the earlier record of Yellow Pages Directories, which had raised 1.02 billion pounds. Today, the company’s capitalization has nearly doubled exceeding the market value of the company British Airways.

Russia – Between Las Vegas and Macao

Russia is predominantly a slot machine market. Over the past five years their number grew from 35,000 to 250,000 units, i.e. more than 7-fold. Russian online gamblers, on their part, have a little time left to indulge in their favorite pastime. On November 15 the State Duma – the lower house of Russian parliament – gave a first nod approval to the draft bill on government regulation of gambling. The bill effectively bans Internet and telephone gambling.

The bill tightens control over gambling and ultimately bans gambling except in four special zones beginning 2009. The four special zones are to be located in sparsely populated regions: two in European Russia, one in Siberia and one in the Far East. Federal authorities will grant five-year licenses for operation inside the zones. The zones are to be created before July 1 2007. Territories where zones are to be established will be either municipally or government-owned.

Gaming operators will have to adjust to requirements set by the new law. In particular, their net assets must stand at least 600 million rubles; the minimum payout percentage for a slot machine must be 80%; Also under the bill, slot-machine halls smaller than 100 square meters and providing less than 50 machines and casinos smaller than 800 square meters and providing less than 10 tables would be shut down by July 2007.

The Moscow city hall decided not to wait until the federal law comes into force. The Prime Tass news agency has reported that as early as October 12 the mayor of Moscow ordered a crackdown on gaming business in the capital.

“The government of Moscow submitted a drat to the Moscow City Duma (municipal legislature) and a year ago it was adopted,” Yuri Luzhkov noted. “Given the lack of federal regulations Moscow adopted its own legislation to the effect. On the basis of that law we have “purged” the capital of certain gaming spots. Over 1,500 outlets were closed.” By the end of this year the authorities plan to close 315 clubs. As a result, there will be 540 casinos and gaming arcades left in the city.

Robert Heller believes that what Russian gaming industry entrepreneurs need to move forward is stability through regulation and enforcement, evolution from gambling to gaming business, access to global capital markets and partnerships with global gaming brands.

Russian gaming industry is booming. Over the past four years alone Russian gambling revenues quadrupled, having increased from $1.6 billion in 2002 to the forecasted 6.6 billion in 2006.

The transformation U.S. casinos into mega resorts, the first of which – Mirage – was launched in 1989, took over 15 years. Russia is set to achieve the same result in three years.