By GGB Staff   Fri, May 30, 2008

The world has been amazed by the performance of Macau’s gaming industry since the new law was passed in 2001. That year, gross gaming revenues for Macau under the monopoly concession STDM were US$2.3 billion. For just the first quarter of 2008, they were $3.7 billion.

If the current pace continues for the rest of 2008, Macau will end up with gaming revenues for the year of around $15 billion, compared to $10.3 billion in 2007. Not only has Macau officially surpassed all of Las Vegas in gaming win; Macau’s gaming revenues in 2008 will likely exceed those of the entire state of Nevada—or alternatively, the combined gaming win of America’s two largest gaming cities, Las Vegas and Atlantic City.

But that raises a question, because the title of this article: “Macau – Confidence or Crisis.” Crisis? What crisis? How bad can things be with average annual revenue growth rates exceeding 20 percent? Yet many investors, analysts and observers are indeed concerned about what might be happening—and what might soon happen—in Macau.

The Cs

Most of the concerns of the skeptics stem from what we can call the “Cs”: Competition, Costs, Constraints (labor and infrastructure), Commission rates, Consumer profiles, Capital crunch, Credit availability, and China. The relative importance of each element in the Cs may differ from observer to observer. However, there is little doubt that these factors are significantly contributing to a cautionary sentiment among a growing number of observers regarding Macau’s future.

Consider the related issues of competition, commission rates, credit availability and costs. The Macau gaming market can be divided into mass market play, which consists of about 30 percent of the total; and premium play, which makes up 70 percent of revenues.

The premium play or VIP market has been dramatically shaken in recent months by the efforts of certain companies to consolidate and aggregate the business of smaller junket agents under the umbrella of a larger more powerful entity—with the smaller junket agents becoming subcontractors to the consolidators. The consolidators, as a result, gain considerably greater bargaining power relative to the concessionaires in delivering their players through their network of junket operators.

AMA International, a junket aggregation business formed by the publicly traded company A-MAX Holdings Ltd., in December 2007, was just such a vehicle.

AMA International established a “partnership” with one of the concession holders, PBL Melco and the Crown Macau Casino, and reportedly has been able to extract commission rates of up to 1.35 percent of monthly rolling chip turnover volumes. As a percentage of gaming revenues, this commission rate should result in about 50 percent of the premium play win being paid to the junket aggregator, who then distributes payments to the sub-junkets.

(Not all of the contractual arrangements between concessionaires and consolidators, or consolidators and junket operators, are presently reviewable by Macau's regulators, and none are released for public scrutiny.)

Because the government taxes gaming revenues at about 40 percent of actual win, the residual margins on such premium play are disconcertingly thin.

This commission rate is significantly higher than arrangements which existed for some time in the past in Macau, where major junket operators received commissions equivalent of about 40 percent of revenues. These were called 40/40/20 deals, or 60/40 deals for simplicity here.

Under the 60/40 deal, the casino would retain only 20 percent of theoretical win after taxes and commissions. With the new rates (assuming no other adjustments), margins would drop to only 10 percent, not to mention the fact that the casino has to absorb the volatility risk of fluctuations in wins and losses, which at high-end baccarat can be dramatic.

Casinos—as with other businesses—can make up for thin margins if volumes are large enough to generate adequate revenues and overcome volatility, and if the contractual agreements with consolidators are sensibly structured to ensure that fixed operating overheads are covered before other obligations are met. Nonetheless, in comparison to the pre-2004 monopoly STDM and SJM days, margins have significantly eroded and competition has dramatically increased.

Reaction to this junket aggregation model in the premium play sector has been swift. Market shares among the concessionaires swung dramatically in the last few months of 2007 and early 2008 and, as would be expected, emulation and pricing pressures to match these trends have emerged elsewhere in the industry. Some concessionaires, such as Wynn and Venetian, seem to be engaging in the price war on commissions, while still suggesting that they do not have to pay premium prices for commissions due to their size, brand power and quality of facilities.

Nonetheless, the traditional 60/40 structure is increasingly evolving to a 55/45 structure—perhaps not yet meeting the market price between AMA and PBL Melco, but still reacting to these competitive changes and attempting to win back market share or prevent further player or junket operator desertion. Other companies, such as MGM, have decided so far to concentrate on the mass market, and avoid the headaches and risks of this cutthroat competition.

Competition is therefore increasingly evident among all participants in the Macau market—at the junket agent level and among casino concessionaires as they vie for new players and fight to retain existing ones.

Supplier Power

Supplier power is significant in Macau, and the major junket agents have emerged as strong and powerful suppliers of VIP customers. While the concessionaires have sought disintermediation strategies, they have had significant difficulties in dealing with customers directly—not wanting to take on the substantial credit risks as well as having to deal with complex funds transfer arrangements in China. (They may also lack the personal connections and cultural understandings that junket operators exercise.)

Furthermore, high-value customers are notoriously disloyal, and will move from one casino to another to try their luck elsewhere if they have been on a losing run or can get a better offer. An advantage for the junket operators is that they can offer their services across a number of the various concessionaires’ properties (unless, of course, they have signed an exclusive deal, as with PBL Melco and AMA).

Commission rates in Macau have therefore risen in recent times, eroding margins and putting pressure on competitive responses. Pricing is often considered a “low level strategy” due to the ease of replication. This apparently is the case in Macau, where supplier power in the hands of the junkets has made them a very strong force with which to contend.

As they become even more powerful, the Macau SAR government and regulators may be forced to consider ways of gaining control over them.

Commission rates cannot go much higher. At the extreme, the maximum that the commission rate could be extended on the non-negotiable chip program would be somewhere between 1.42 percent and 1.62 percent. Any commission rate above that range creates a situation where baccarat players as a group, betting on any combination of player and banker (but not ties), would not generate enough losses to cover the commission rates and the tax obligations. For commission rates above this range, the casino concession holder would be losing money on every banker or player wager.

On a revenue-sharing basis, recent Macau street talk suggests that SJM may be offering a 45/55 structure to certain junket operators who then agree to cover all operating costs, leaving SJM with only about 5 percent of gross revenues after paying taxes and levies. In such an instance, SJM would bear no direct costs and would act as an intermediary only (effectively acting as a landlord for their VIP rooms).

Their thus-residual share of gaming win would have to cover the cost of capital and maintenance of their casino facilities, as well as any remaining returns on investment. Realistically, when margins get this small, other contractual arrangements would be necessary to insure the financial viability of the concessionaire’s casino. It is not hard to see how some operations—either through lack of volume, bad luck in the volatility arena, or an inability to come to survival terms with junket aggregators—may indeed fall by the wayside in the competitive Macau marketplace.

Competition, Credit

A related issue to commission rates is competition and credit availability. Significant cut-throat competition among different junket aggregators and consolidators might emerge as such organizations compete to sign up the most profitable junket operators—those with access to the biggest players—to meet their monthly targets.

To attract the biggest players, many junket operators extend credit facilities to players. If their contracts call for rolling chip turnover targets each month, the junket operators may over-extend such facilities, especially to new or high-value players, in attempts to secure higher business volumes.

While the casino concessionaires are presently somewhat insulated from the consequences of such activity, there is a real prospect of a “bubble” in VIP revenues occurring as a result. This is particularly relevant in times of general economic uncertainty or distress, where some players may gamble beyond their means in attempts to cover their losses from financial markets or from their own businesses.

Furthermore, pressure may be exerted on some concessionaires to extend credit to junket operators or even consolidators to continue to fuel the growth in volume at the baccarat tables. Thus, while credit risk for concessionaires seems to be relatively insignificant at present, the prospect of a shift in credit risk from junket operators to concessionaires could result in increased bad and doubtful debts coming onto the concessionaires’ books. Once again, this raises concern among investors, analysts and other outside observers.

It is also worth noting that the recent activity of the junket aggregators has been fueled to some extent by the liquidity brought into the system from stock market listings on the Hong Kong exchange. This has enabled junket aggregators with access to public equity to be more liberal with credit and capture the business of sub-junkets by offering higher commissions and also extending their balance sheet assets to these groups.

In such circumstances, the sub-agents are able to offer credit with less rigorous principles governing their lending decisions. The growth of the junket aggregator model beyond AMA International and other players already in the game may be limited in the near term by current economic conditions and a lack of market for any further IPO listings at the present time. Nevertheless, these competitive responses not only demonstrate the dynamic of the Macau VIP market, but also suggest continued volatility in market share of the VIP sector.

Costs and Constraints

The fourth “C” in this group is costs. Commission-related expenses and prospects of bad debt are not the only costs that are increasing in Macau. Labor costs have increased substantially over time, as have the costs of many other inputs into the integrated resort casino business.

Furthermore, rising prices for steel, cement and sand have driven up construction costs for Macau’s mega-casinos under construction. These inflationary pressures are part of a global phenomenon, related at least in part to increasing oil prices and the demands on capital due to rapid economic growth in China, India and other Asian economies. Such cost increases are pushing up the capital outlays required for various pipeline projects in Macau, and are dampening the expected returns on invested capital.

This leads us to constraints. The major constraints impacting Macau are those on labor and infrastructure.

One issue surrounding labor is the protectionist stance taken by the Macau SAR to protect its own constituents from imported low-cost labor from China and elsewhere in the region. This has led to the circumstance where, by law only, Macau citizens can be employed as staff working on the casino floor by the concessionaires.

While initially this was seen as a positive for the Macau population, it has meant that a relatively small and static Macanese population of less than half a million has had to cope with a burgeoning casino industry over the past few years. The unintended consequence of this has been to relegate Macau citizens to base-level dealing jobs within the casino sector (where demand is strongest) while inhibiting opportunities for promotion (because such workers cannot be legally replaced with non-Macau citizens.)

This has undermined staff loyalty and increased movement among concessionaires by gaming staff. Furthermore, with a limited pool of available labor and demand for casino staff being so high, various other sectors in the Macau economy have been confronted with significant upward pressures on wages and other costs of doing business.

There is also the question of how these changes in the local labor market impact the social fabric of Macau in the long term. Many young people in Macau are being attracted into the casino sector and away from either continuing their education or entering public service-related fields.

While the concerns to the investment community are more isolated to the increased cost of labor and its limited availability for casino operations, the broader issues for Macau have relevance at both the policy and political levels. What may result is a legislated differential wage structure for Macau and non-Macau citizens, or quotas introduced that would allow a certain proportion of staff working on the casino floor to be foreign workers.

Given the pipeline of capital projects presently under way, along with the expected future levels of operations in the casinos and other tourist-related businesses, the need to permit more foreign workers into Macau is already an issue whose importance can only increase in the next several years. Thus, the policies chosen that will affect the cost and availability of labor in the Macau SAR will have a major bearing on the industry structure in the future.

Yet another constraint that may well limit the prospects of Macau in the near future is infrastructure. The infrastructure in Macau has lagged the development of the casino industry and the ever-increasing number of visitors to Macau. The airport and ferry terminals both require physical expansion as well as enhanced servicing by customs and immigration personnel to cope with the numbers coming into Macau. Taxi services are another aspect of Macau that has been under pressure, as has been the road system in general.

Dramatic upgrades to critical support services are required if Macau is to one day host more than 50 million visitors a year, as is expected. While much infrastructure expansion and improvement is under way, the intra-Macau transport situation is lagging behind the development of the major resorts, and must be escalated in priority. As with Las Vegas, it is possible that Macau may be heading to a situation where gridlock occurs far too frequently at peak demand periods.

Consumer Profile

Another concern in the minds of some is the current consumer profile. The growth in the VIP market has been astounding, and it has so far overshadowed the growth exhibited in the mass market. In market share terms, VIP baccarat revenues accounted for around 70 percent of gross revenues in the first quarter of 2008. Since margins for the VIP sector are so much thinner than the mass market sector, this may not be a good sign for investors.

Possibly a greater source for worry, however, is the issue of mass-market retail, an important part of the so-called non-gaming spend. In recent years, the percentage of revenues in the largest Las Vegas Strip casinos coming from non-gaming sources has climbed to 60 percent or higher for many properties.

Much of the new Macau and the Cotai Strip in particular has been built on the prospect that mass-market retail spending patterns would mirror the Las Vegas Strip’s recent experience, and would be complementary to a substantial gaming spend. There is little doubt that some of the high-end retail offerings in Macau are doing exceptionally well, based on reported sales; various high-end retailers have indicated that their Macau-based retail stores now rank among their top 10 outlets globally, based on sales revenue performance.

However, there remains a concern that the mass-market gaming customers are not purchasing much from mid-level retail outlets that have recently opened. In other words, it might be the case that the mass-market visitors to Macau are—and will remain—far more gaming-centric in their motivations to visit Macau than their Las Vegas counterparts.

While some of the mid-level retail stores may benefit from initially favorable lease terms in the short term, they will face challenges in the long term if mid-level retail consumption does not increase. Many of the business models for integrated resort casinos in Macau are predicated on selling off retail assets into trusts. However, with the disappointing consumer demand for retail, along with the soft capital markets of 2008, such strategies are now being questioned, and plans for listed trust offerings are being deferred into the future.

The capital crunch that is sweeping the world has resulted in a number of projects in Las Vegas being postponed or cancelled. No projects in Macau have so far come into direct question, but investor uncertainty has once again led to a postponement of the planned IPO of SJM. It will also be interesting to see if any of the planned projects outside of the hands of the six direct concessionaires will continue to move forward.

Changing sentiment around Macau may indeed bring some of these projects into question over the near term. The financial assumptions on which these projects were sold to the market in many cases will need to be reassessed in light of the realities brought about by recent changes in Macau.

The Big C

Finally, there is the big “C”—CHINA. The authorities in Beijing have overseen the growth of Macau and the success of its developments with a “light touch” to date. China wants to show the world (and Taiwan) that the one country—two system approach can indeed be successful. The Olympics in Beijing—opening on the 8th day of the 8th month in 2008—is probably also a factor in their benign treatment of Macau, along with the fact that Macau allows China to contain gaming to an easily controlled single location while quietly evaluating their long-term options.

Many Asian governments have been looking at the success of Macau (and the orderliness of the Singapore Integrated Resort casino process) and considering how they might perhaps harness the casino economic engine for themselves. That might ultimately be the case for China itself, where it could harness the economic power of integrated resorts with casinos to regenerate other deprived areas of China, perhaps in the north of the country, or near Shanghai.

On the other side of the argument for Chinese gaming expansion, there are undoubtedly concerns over social costs associated with expanding the presence of casinos in Chinese society. Macau might end up being seen by mainland China as a net importer of economic benefits for itself but an exporter of social costs to the rest of China.

The extent to which social costs—such as political corruption, the fallout from excessive gambling, and loan-sharking activities—visibly exhibit themselves on the Chinese mainland may have a direct impact on Beijing’s attitudes and policies relating to the individual visit scheme or the direct movement of funds between China and Macau.

Harking back to the more liberal extension of credit by junket agents, it may turn out that the reckless extension of credit and cutthroat competition for players and junket operators may have long term negative consequences for Macau if Beijing concludes it must react to protect its citizens.

The point at this time is that no one knows for sure what Beijing may be thinking for the long term, or what levers they may want to pull to rein in the runaway growth and economic dynamic of Macau. There are a number of issues that may arise if concessionaires and junket operators act in ways that invite negative reactions by China in these regards. Short-term gains may result in longer-term pain if appropriate regulatory and operational policies are not implemented and followed.

The aggregate of all of these concerns culminated in announcements made by Edmund Ho, the chief executive of the Macau SAR, before the Macau legislature on April 22. He proposed that there should be no new gaming concessions given beyond the six that already exist, that no additional land should be permitted for casino development beyond what is already in the pipeline with existing concessionaires, that controls should be imposed restricting non-concessionaires from operating casinos, and that junket commission rates should be regulated.

He also indicated that these directives were in accordance with the wishes of Beijing. Whether these actions will indeed stabilize the rapidly evolving dynamic of Macau remains to be seen, but this action does point out that it is not just the analysts and investors who have gotten nervous.

Confidence or crisis? Confidence in Macau readily arises from the amazing successes achieved to date. It is a tiny city-state that has quickly transformed from a sleepy backwater into a thriving entertainment center with billions being invested in magnificent resort developments. It has gaming revenues that continue to outstrip even the most bullish analyst estimates. Macau’s visitor numbers continue to surprise and astound observers.

There is no crisis yet—but the emerging issues discussed above should not be overlooked. Turbulence and headwinds may very well characterize Macau’s competition in the short term and disturb the surprisingly positive trends that have emerged to date. However, there are increasing signs that the recent overexuberance in Macau’s prospects may indeed lead to disappointment for some investors, and disillusionment for policy makers.

It may be time for greater caution, and to reflect upon what lessons may be learned from the congruence of factors presently swirling around Macau. Indeed, Chief Executive Ho’s directives suggest that is likely to be the present course. In the long term, the burgeoning Chinese middle class will likely ensure Macau’s success, as long as the partners in Macau’s gaming industry—government, regulators, concessionaires and junket agents—all recognize and appropriately respond to the issues and challenges that arise.

Andrew MacDonald is founder of urbino.net and is also executive vice president of gaming for Genting Berhad, based in Kuala Lumpur, Malaysia. He can be reached at andrew.macdonald@genting.com.

Bill Eadington is a professor of economics and director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. He is an internationally recognized authority on the legalization and regulation of commercial gambling, and has written extensively on issues relating to the economic and social impacts of commercial gaming. Eadington can be reached at eading@unr.nevada.edu.

By Dino Guiliano   Fri, May 30, 2008

With all eyes focused on the growth of gaming in South America and Mexico, the countries of Central America are sometimes overlooked when it comes to gaming. But if what has happened in South America in the past several years is any indication, the nations of Central America may become the next golden gaming area.

In Panama, casinos see record revenues, continuing a five-year, double-digit growth trend. Also, much to the delight of operators is the likely legislative reform that is being sought to bring Panama’s gaming industry into complete transparency. Meanwhile, others vie for checks and balances to be considered toward the end of mitigating of the industry’s growing impact on local communities.

Elsewhere in Central America, governments struggle to comprehensively address ambiguous and outdated legislation, instead focusing on delivering half-measures that address only their most immediate concerns—none of which address the formation of a central body to control and regulate the industry.

Thus, ambiguity seems likely to remain on the horizon.

Red Hot Growth in Panama

Panamanian casinos and slot halls are governed by Decree Law No. 2, which in 1998 privatized the then-state-run industry by setting out detailed laws and regulations for the country’s new private operators. Casinos in Panama are permitted in any hotel of 300 rooms or more providing they are situated outside a certain distance from schools and hospitals. The low entry barrier was intended to accelerate the development of the nation’s then-burgeoning and now-booming tourism sector.

Nine years following the introduction of the law, wagers placed in Panama’s 14 full-scale casinos—eight of which are situated in the nation’s capital-—together with its 29 slot halls, eight off-track betting centers and a sole racino—amounted to nearly US$948 million, making it the second-largest gaming market in Latin America behind Argentina. Thus continues the double-digit growth realized every year since 2002.

Antonio Alfaro, president of the Association of Games of Chance Administrators (ASAJA), recently confirmed in a statement to the press that gaming visitation continues to increase on a monthly basis. However, contrary to the initial intent of the 1998 legislation, it is increasingly Panamanians, rather than international tourists, who are driving the sector’s steadfast growth. Increased locals visitation has occurred despite the well-organized campaigns of various trade unions to prevent locals from patronizing gaming venues, underlining the Panamanian appetite for casino gaming.

In the eyes of the administration, however, it is this “misplaced” demand growth that gives some weight to the cries of local gambling opponents and several gaming-related charities who actively voice concerns over growing social costs associated with allowing the supply-side to play catch-up—the JCJ (sub-section of the Ministry of Economy and Finance charged with the oversight of gaming activities) has already given permission for three more casinos to open in the capital city, and much to the dismay of opponent groups, is reviewing at least nine more applications for new operations across the country.

Adolfo Quintero, president of the Association of Economists of Panama, recently asked the government to strike a meaningful balance between the benefits and ills of gaming within Panamanian society, explaining that while growth in casino profits contributes to the growth of the national GDP, the volume of local play impacts the income of each family. He further stressed that casinos generate jobs, but added that they also contribute to the fact that players generate debts.

Quintero’s statements are thought to have put a breath of air to the sails of a bill that was recently presented in the Panamanian Assembly—the bill would allow only Panamanians with an income of more than $1,000 to enter the country’s casinos. Alfaro has noted the unconstitutionality of the bill, stating that were it to pass through the assembly, ASAJA would ask President Martin Torrijos to veto it accordingly.

That being said, ASAJA is not blind to the fact that something needs to be done to mitigate potential negative impacts of a rapidly growing locals demand base. For its part, the association introduced some measures to attack problem gambling in 2007. However, results have been negligible. For instance, only 52 Panamanians have since registered with Panama’s equivalent of Gamblers Anonymous. Alfaro says that association will look to launch a stronger, multi-faceted campaign in the upcoming months to further encourage responsible gambling.

Individually, however, local operators remain preoccupied with the blanket regulatory reform efforts being led by the JCJ, essential to maintaining a healthy reputation in the international context. This comes in the wake of a 2006 mutual evaluation report into Panama’s compliance with international anti-money laundering standards. Conducted by the Caribbean Financial Action Task Force, the probe found that stricter reporting and monitoring rules for casinos are largely necessary to achieve a higher standard of transparency and legitimacy in Panamanian gaming operations going forward.

In light of these findings, and given the rapid growth of the industry, existing operators are right to offer proactive support for the JCJ’s plans to tighten regulations on financial reporting and deepen background checks on market newcomers. “We want new legislation, not because the existing law is bad, but because the sector has evolved and it is necessary to include new things in the legislation,” Alfaro told La Prensa, a leading local newspaper. “Conducting a true investigation into the new operators is what can ensure that Panama remains a safe and proper gambling jurisdiction.”

Operators would be wise to proactively address concerns over problem gaming, lest politicians continue to make attempts to take the initiative for them.

Elsewhere in Central America:

Shades of Grey

Outside of Panama, industry growth has been hampered by ambiguous legislation and inadequate regulatory standards.

For instance, Costa Rica’s existing gambling laws date back to 1974. Under these, no central organization is set up to oversee Costa Rica’s 48—with some exception, mostly amenity-type—casinos, thus placing them under the authority of individual municipalities and leaving them largely unregulated.

According to the head of the Costa Rican Gaming Association, Jorge Hidalgo, a bill to modify and bring current the presently ill-defined legislation has sat dormant in the country’s assembly for the better part of 10 years.

A somewhat greater lack of legislative clarity has allowed illegal slot machines to proliferate throughout Nicaragua. In fact, the country has one of the largest illicit slot machine markets in Central America with an estimated 6,700 illegal machines, according to statements put forth by the National Lottery.

Meanwhile, in El Salvador, casinos and slot halls have been operating in a grey legal area since a 2000 law outlawed all forms of gambling except lotteries and raffles. Although the law technically prohibits the activities, challenges to the law by operators have succeeded in keeping the venues open while the debate is battled out in Salvadorian courts.

Central America Taking Action:

Interim Measures

Solutions to change the ambiguous legislation and to guide gaming in the Central American nations, whether in the interest of reform or eradication, have been slow to materialize.

When bills do appear, rarely will they make it past the legislature fully intact, if it all. Governments have resorted to piecemeal measures in the name of progress, but the failure to comprehensively address the roots of their problems leaves much to be desired.

Costa Rica’s 10 years of government silence ended abruptly earlier this year in a brash reaction by the present administration to announcements by Russian-based Storm International that it was preparing to open a new hotel and casino in the country. Costa Rican Vice President Laura Chinchilla leads a high-level commission in the review of Costa Rica’s gambling laws. It was made duly clear that Storm’s investment in Costa Rica was unwelcome.

The commission was quick to recommend (by way of presidential decree) the institution of new rules governing the development and operation of casinos in the country. Under the new guidelines, casinos will only be permitted to operate in three-star hotels with a minimum of 60 rooms, and will be permitted 60 slot machines and 10 tables per 60 hotel rooms. No casino may take up more than 15 percent of the total space of the hotel, and the casino must not be directly accessible from the street. Operating hours, currently 24 hours in many locations, will be limited to between 6 p.m. and 2 a.m., and casinos will no longer be able to offer free alcoholic beverages to players.

Much of the confusion in Nicaragua comes from severely contradictory laws which at once employ the services of the National Lottery, the Tourist Authority and the National Police to solely authorize, control and regulate
gaming in the country. A bill to create one single national authority to manage all issues concerning gambling has been proposed, but similar to the situation in Costa Rica, has effectively been on hold for years as Nicaraguan lawmakers have been incapable of coming to terms on a final version of the bill.

In a move taken from Peru’s playbook, Nicaragua’s national lottery authority and the Nicaraguan Police Department are collaborating to gain some control over the country’s casino industry. Operators who now wish to legitimize their gaming businesses must apply for official authorization from the Nicaraguan National Police. Venues that continue to operate without a license after the end of the application period will be subject to forced closure.

The Salvadorian Supreme Court ruled on a bill which proposed the closure of casinos and gaming halls in El Salvador, declaring it to be unconstitutional in December 2007. The ruling represents the last in a number of failed attempts by this and previous administrations to legally eradicate all gaming activities in El Salvador.

Central American Progress?

While operators in Costa Rica are shocked by the seemingly extreme measures taken by the government, their reactions thus far have been tame. Absent some wiggle room from the administration, however, things could heat up between the two sides later this year as the kickoff of the new rules draws nearer.

Either way, the country is still in need of comprehensive legislative and regulatory reform, a solution which would better quell the concerns of the public sector while enhancing the credibility of the industry itself. As has been proven so many times before in Latin America (Brazil, Peru, Mexico, Nicaragua, etc.), increased legislative controls absent an established regulatory mechanism tend to have adverse effects on all industry stakeholders.

Meanwhile, the collaborative efforts now being made by Nicaragua’s regulatory authorities provide a realistic opportunity for the country to get control over its illegal slots. Only time will tell if the measure will ultimately prove to be a successful interim step toward a more comprehensive reform.

Eight out of 10 El Salvadorians are said to be opposed to legalized casino gambling in their country. So says a 2001 Gallup poll of the country’s citizens. President Antonio Saca has publicly concurred numerous times, as have the heads of numerous past administrations.

However, despite popular and presidential opposition as well as a semblance of technical illegality, the El Salvadorian casino industry remains legitimately intact. It would seem logical that as tourism growth and casino gaming become ever more intertwined in the country that now enjoys one of the fastest inbound growth rates in Latin America, the opposition will have fewer and fewer reasons to oppose.

As immediate contentions iron themselves out and pressures are removed under the interim measures of these Central American administrations, however, the likelihood that any would proactively move forward an agenda of comprehensive overhaul seems less likely.

As seems to be the unfortunate, yet recurring case for these countries, today’s half-measures have the enormous potential of becoming tomorrow’s ambiguities. Who gains from such an outcome in the long term remains to be seen.

Dino Guiliano is the director of Latin American Operations for the Innovation Group, a Colorado-based gaming consultant. He can be reached at the company’s Latin American office in Costa Rica (+506-2-201-1544) or at dguiliano@theinnovationgroup.com.

By David Sofer   Fri, May 30, 2008

Everybody knows that baccarat is the world’s biggest table game. It’s a bonanza for Macau casinos, which won almost US$10 billion in 2007. It’s the great casino game, the game of James Bond.

Edward O. Thorp, who beat blackjack, could not beat baccarat. It’s the ultimate table game, wholly player-independent even while its players exhibit a high level of the illusion of control; a low house-edge game whose game structure makes it the star earner. For U.S. casinos, whose baccarat win is well beneath Macau’s, making baccarat the number-one game on the casino floor ought to be priority one.

But importing Macau’s success into the U.S. and other non-Asian venues requires effort and creativity. In the U.S., baccarat is too easily designated an Asian game, and that creates the excuse not to commercialize it for non-Asian consumption for fear of driving away the Asian play. That excuse is ridiculous.

Objective observation of the casino floor reveals quickly that Asian players are far more adaptable to non-Asian gaming than non-Asian players are to Asian gaming. In addition, Asian-oriented baccarat in U.S. casinos is generally unsuccessful at attracting non-Asian players. So, smart table games operators understand that aggressive commercialization of baccarat in the U.S. will substantially increase their non-Asian baccarat player population and win with no effect on their core Asian baccarat player population and win.

Commercializing baccarat is easy to learn but difficult to master. Once the commitment is made to commercialize U.S. baccarat, a number of tasks need to be accomplished in parallel, by top-performing employees enjoying the complete support of management.

Steps to Success

The following suggestions can transform baccarat into one of the leading table games in the U.S. and beyond.

U.S. casinos need to turn on the promotion and publicity machine for baccarat and turn it off for far less profitable games such as poker. If the multi-dimensional effort that has gone into promoting poker is put into promoting baccarat, baccarat should double or triple and maybe even quadruple its penetration and win.

Don’t blow amazing promotion and publicity opportunities like the most recent James Bond blockbuster film Casino Royale, where the actual Ian Fleming story that centered on James Bond’s favorite game baccarat was allowed to be altered to a poker theme. Cinema drives gaming—witness the effect of Chow Yun-fat’s legendary Chinese God of Gamblers films. So make a baccarat-oriented film or get one made. It’s good fun for everyone.

And promote the game every which way, using the lessons learned from the poker experience (and this time to make some real money). Baccarat has the built-in allure of its connection to style and intrigue, high rollers and James Bond. All casino industry psychologists understand that even middle-level players’ gaming experiences have one or more role-playing elements. What better role to play than the whale in the baccarat room, or James Bond on assignment? That’s entertainment!

It is easy to see that very entertaining single-player and multi-player machine implementations should be a priority for training in the new wave of non-Asian U.S. baccarat players. At the risk of being repetitive, this is an assignment for James Bond (the staying power of the 007 film series is irrefutable proof of the obviousness of this assertion).

Make baccarat entertainment for non-Asian U.S. players.

That familiar vintage photograph from the old Sands Hotel connects American baccarat to its glamorous beginnings with Frank Sinatra and his Rat Pack. Tighten the connection between baccarat and entertainment, and super-glue it with some kind of tie-in to Old Blue Eyes.

Blackjack dealers and craps dealers are significantly more entertaining than their baccarat counterparts, who tend to be businesslike. A notable U.S. exception: At Harrah’s Las Vegas, dealers like Kenny from Cincinnati and Kyong from Korea put on a consistently great show, the U.S. players love them, and the Asians like them too! The money will be won anyway; why not make the players smile? Harrah’s gets it! In blackjack, players become attached to dealers with style. They will come to a particular casino to play with a particular dealer. Ditto for baccarat—at Harrah’s, anyway.

Also, baccarat scoreboards in the U.S. need to be more like Megabucks displays than some of the new scoreboards, whose key data may only be discerned with a telescope or a magnifying glass. Give us more visual entertainment!

Noted Macau gaming and Chinese gambling psychology expert Desmond Lam has shown the tight junction of baccarat and the illusion of control, so tap into the illusion of control big-time by projecting that baccarat shoe data with the same flare as data displayed at the Las Vegas Strip sports books. The payback is certainly far better!

Taking a page from the craps playbook, bring back the original American baccarat side bets on banker natural eight and banker natural nine. That’s the side bet that makes perfect sense to non-Asian U.S. players, and what’s better, the numbers 8 and 9 are lucky numbers for Chinese players.

So what if Edward O. Thorp and William Walden published a method to beat the natural side bets? Closer analysis concludes that is of mostly theoretical interest and cannot break the game. Price the natural eight and natural nine side bets intelligently along the craps model and factor rationally expected Thorp-Walden attack losses into the price.

Popular side bets can make a table game. Notes gaming authority Frank Scoblete, author of Baccarat Battle Book and numerous other gaming books, “Proposition bets give the player that longed-for big hit with a small investment. The players are willing to buck what most of them know is a big house edge in order to play based on their dreams instead of on the reality of the big house edges. Not all players think this way, of course, only most of them.”

Harness the Edward O. Thorp Effect.

Blackjack exploded once people learned that Edward O. Thorp beat the dealer. Blackjack was not broken; it is doing just fine, thank you. Few can actually do what Thorp describes, and casinos can easily counter most of his methodology or just price it into the bet—witness the amazingly smooth transition to 6-to-5 blackjack payoffs. When U.S. players decided that “blackjack is beatable,” the popularity of the game exploded. Even today, the Edward O. Thorp Effect lives, as evidenced by the success of the recent Kevin Spacey film 21.

Baccarat should be commercialized the same way. Savvy U.S. casinos should embrace improved playing methods. After all, most blackjack dealers are encouraged to tell their players what Thorp’s basic strategy indicates in any given situation.

What’s more, the unique underlying psychology of baccarat offers it additional protection that blackjack does not have—a big real-world edge contained within its “test of luck” form factor. Baccarat cannot be made player skill-dependent like blackjack, but it can be made much more player decision-dependent, and that is just as good for the house if the game is pushed hard.

Invent American VIP baccarat.

The Macau VIP baccarat junket operations concept should be used as a starting point to generate U.S. VIP baccarat. With its marketing innovations, Harrah’s made every player a VIP to a lesser or greater degree. Every player can potentially be made a VIP baccarat player at some level or another in a fully integrated baccarat commercialization program.

Import the three most powerful elements of the astounding success and staying power of Macau VIP baccarat. Blanket the player with service. Immerse the player with best-quality hospitality from irresistible female hosts who are quick and smart as in Macau. Assist and advise the customer with his play, do anything and everything to reinforce the notion that “baccarat is beatable,” and embrace winners as in slots. Observe that baccarat expert Zuan Xin, like Edward O. Thorp in blackjack, describes the patterns of the game of baccarat but emphasizes that money management is the key to winning. Embrace winners!

Make the credit process appear more like Frank Sinatra’s Vegas and less like Sears or Pottery Barn.

Computers, computers, computers! There is nothing quite like sitting down to a waiting stack of chips to inject a baccarat player into the role of whale or James Bond. Use technology to make it so.

U.S. casinos must get to work. This is laziness. Massive baccarat win is being lost. It’s a strategic issue for U.S. casino industry management, and there’s a lot riding on it. With determination and direction, the baccarat chips can be rolled almost as fast in the U.S. as in Macau. This is a bonanza, it is beyond doubt. But an old gold rush saying applies: A prospect can make a mine, a mine a bonanza, and bonanzas can be mismanaged.

Harvard-educated polymath David Sofer is an expert on casino gaming specializing in baccarat. Appointed to teach Zuan Xin’s Baccarat Great Learning in the U.S., he is the featured baccarat columnist for Baccarat, Hong Kong’s gaming lifestyle magazine. Contact Sofer at dsofer888@bigstring.com.

By Rich Geller   Fri, May 30, 2008

In the April issue of GGB we saw the multiple problems facing operators in the mature market of Germany. In May, an overview of Switzerland revealed the meticulous planning that went into creating a new casino jurisdiction from scratch. Now, in this third and final installment, we’ll look at how one of modern Europe’s oldest—and most monopolist—jurisdictions is evolving with the times.

Part III: Austria

Say the word “monopoly” when speaking about a service business and visions of poorly maintained premises, surly staff and a general take-it-or-leave-it presentation come to mind. But down through the years, management at Casinos Austria seems to have missed the memo that they could slack off in the absence of domestic competition.

Whatever the reason, the ability to provide a high-quality, consistent product all these years is paying dividends now, in the face of increasing pressure from casinos in neighboring countries, online gaming and European Union treaties.

Casinos Austria took over a group of existing casinos in 1967, and has been the sole legal provider of full casino gaming in Austria ever since. The company operates a dozen casinos spread around this alpine nation of 8.2 million inhabitants. The 12 casinos offer a total of 238 gaming tables and 1,814 slots. Together, these produced gross gaming revenue of €193.5 million in 2007. That figure was up 6.5 percent over 2006 results.

The leading earner of the 12 is the Casino Wien, located in downtown Vienna’s tourism center on the car-free Karntnerstrasse. The main casino, which has a dress code, has 19 tables, 100 slots and one automated roulette table. The less formal “Jackpot Casino” has 88 slots, 12 automated roulette stations, and two each of regular blackjack and roulette tables. The modest (by mega-standards) property generated almost €41.7 million in 2007.

With many of the casinos situated in winter ski/summer hiking resorts, the company has done well with cooperative arrangements with four- and five-star hotels. At Innsbruck, the casino is located right in the Hilton, and in several other resorts the casinos are connected to hotels. The Casinos Austria website lets potential visitors book rooms online with partner hotels.

In 2007, the company invested €22.8 million in its properties, much of which went to redoing interiors, including restaurant and bar areas, at the casinos in Baden, Innsbruck and Linz. This year will see a second phase of refurbishment at Innsbruck, and Casino Bregenz is currently the subject of a call for architectural tenders.

Slots and Poker

As in Germany, and in fact most European countries, there exists alongside traditional casinos a much less formal, low-stakes slot market. In Austria, the maximum stake is 50 euro cents, and the maximum payout is €20. The machines can be found everywhere, including sports betting shops and poker clubs, and revenue figures for them, while believed to be massive, are hard to come by.

By far the most impressive of all the low-stakes slot locations is the Casino Admiral Prater. A product of the ubiquitous Novomatic group of companies, the casino—any gaming facility that has been designed by a professional and cost €20 million deserves to be called a casino—is located at the edge of the amusement park with the famous Ferris wheel.

Inside are 400 slots, taking in their 50-cent bets and paying out their €20 jackpots and earning their owner literally untold amounts of cash. The casino also has a well-appointed Admiral betting shop section and a very good full-service restaurant.

Another segment of gaming that has managed to carve a niche outside of casinos is poker. The game did make its first appearance inside the Casinos Austria properties, when seven-card stud was introduced at Casino Baden in 1988.

And Casinos Austria still has the longest running seven-card stud tournament in Europe, the Poker EM, which started in 1990. But as Texas hold’em and Omaha began to cross the Atlantic in the early 1990s, and the limitations of casinos regarding hours of operation and rake were not well-received by the then-small but demanding group of international players, opportunities arose for new businesses, such as the Concord Card Casino in Vienna.

Copying the model of a 24-hour California card room, the Concord quickly became the focal point of Austrian and European poker—and Austrian court cases, because of the monopoly situation. Decision after decision came and went, but the Concord and its local imitators remained, although for several lean years it looked like the game might die out.

But then came the online and televised tournament poker boom. Now, the game is flourishing more than ever, and Concord recently opened an additional 25-table card room in Salzburg, with plans for a total of 10 new rooms around the country.

Concord isn’t the only company looking to cash in on the new wave. In the ski/hiking resort of Hinterglemm, the five-star Alpine Palace Hotel will open a poker room with eight-10 tables this July. And Casinos Austria has not been standing still all this time. In fact, the company has made a huge about-face in recent years with respect to poker, and is now reaping the rewards of its policy.

Of the 2.44 million Casinos Austria visitors last year, 200,000 of them participated at the poker table, either in cash games or tournaments. That was an increase in poker players of 300 percent over 2006. The game is bringing in an entirely new crowd of young, urban men and women. To accommodate them, the casino is offering Texas hold’em at the previously unheard-of low limits of €2-€4. Plus, for the online poker crowd, there are €25 euro sit ’n’ goes.

One big barrier to offering lower-limit games in the past was the high cost of dealers. Management has gotten around the problem by using more part-time dealers and dealers who are trained in only poker and blackjack, as opposed to those who are qualified on all games. And in a truly radical change from the past, for the last two years young women have been dealing poker.

Monopoly Status

The monopoly status of Casinos Austria has caught the attention of the E.U. in recent years. To fend off action by Brussels, the Austrian Gaming Act has been modified recently in two meaningful ways. Foreign providers of gaming services will no longer be banned from advertising inside Austria. Also, Austrian citizens will no longer be treated differently than European Economic Area citizens. E.U. Commissioner Charlie McCreevy reportedly has no problems with the revised legislation.

Casinos Austria has taken steps to compete for the online spend of Austrians. The company previously owned 34 percent of the Austrian national lottery. It has recently increased that holding to 68 percent. One big reason for the move is to assume a stronger position in the online world. The lottery operates its own online gaming site at www.win2day.at. Last year the site registered 50,000 new users, bringing the total to 330,000 at the end of 2007. One draw for poker fans is that players can qualify for seats in the physical Casinos Austria major tournaments. The site’s strict registration requirements seek to keep out players from outside Austria.

Another lottery product is WinWin, a system of video lottery terminals now operating in 10 locations. Each has between 50 and 150 terminals. With stakes as low as one cent, the product is designed to compete with the low-stakes slot market.

The online site accounted for 39 percent of the lottery’s almost €2.1 billion revenue last year. The VLTs contributed over 10 percent.

Austria seems determined to make the monopoly system work for casinos, and the government seems willing to overlook just enough of the grey gaming market to make it possible. One surprisingly un-monopolistic move: No one is talking yet about banning smoking in the casino.

By Frank Legato   Fri, May 30, 2008

For the past several years, many of the industry’s top system and slot suppliers have been focused on a singular goal: to bring the casino floor—and the slot floor in particular—into the digital age.

Slot managers are anxious to manage their floors more efficiently through remote downloads and quick changes of denomination and game content. They also are anxious to create new players and generate more play from current customers through a variety of applications like instant tournaments, group play, on-demand games, bonusing and new customer service options.

But, before any of the promises of the networked gaming floor can be realized, the infrastructure must be in place. That process appears to be entering the final phase for some suppliers and casinos. It looks like server-based gaming will be approved and live in certain casinos as early as next year.

The manufacturers are racing to get ready.

While Cyberview Technology was the first to get a server-based system certified by Gaming Laboratories International a few years ago, the effort to create a digital, networked slot floor has largely proceeded on two fronts—the major slot manufacturers on one front; the Gaming Standards Association on the other.

The system certified for Cyberview used proprietary technology, developed during that company’s years of operating a successful server-based gaming network linking fixed-odds betting terminals across Great Britain. Now, as Cyberview officials hunker down in merger talks that may lead to an acquisition by leading slot manufacturer International Game Technology, IGT and other major slot-makers continue to refine their own technology for the digital age.

In fact, IGT and rival Bally Technologies have already been testing their proprietary networked systems in the field. IGT based its networked applications on its legacy “SuperSAS” (“SAS” for slot accounting system) architecture. Bally’s networked applications also are designed to work over its proprietary slot accounting system.

Those two manufacturers, as well as Aristocrat Technologies and others, are working feverishly to update their applications to fit into the open-architecture standards released last year by GSA. “We have five field trial sites that have been running for two years on the legacy SuperSAS protocol,” says Rich Schneider, senior vice president of systems development for IGT. “We realized we needed to join back with GSA and get back on the open-standards bandwagon; we took our applications and retooled them into a new system based on GSA open protocols.”

Bally, which has been delivering a collection of networked applications through slot accounting systems with its iVIEW player interface and system applications such as “Live Rewards” and “Power Winners,” is working on similar open-architecture technology under a partnership with Aristocrat, as well as revising its own GSA-compliant system.

According to Bruce Rowe, senior vice president of business development at Bally Technologies, the newest version of the company’s open-architecture Download and Configuration Manager, which will permit remote changes of denominations and game content, was set to go into field trials in May.

The company’s alliance with Aristocrat will create a common command-and-control system for applications created by any manufacturer. “It is the underlying DNA of the Download and Configuration Manager,” Rowe says. “With the system in place, their applicaions will be able to control our games very efficiently, and our applications will be able to control their games, as well as those of anyone who uses GSA standards.”

Meanwhile, WMS Gaming crafted its server-based applications, along with hardware such as the Bluebird slot cabinet and community-play games designed for networked gaming, according to GSA protocols. “Our CPU-NXT platform was designed from the beginning with a clear plan of being on a networked floor,” says Larry Pacey, executive vice president of global products for WMS. “We’re providing the full network supply chain.”

The first WMS server-based application, enabling remote configuration and download of games, was near approval at press time by GLI, which would make it the first approved server-based application fully compliant with GSA protocols.

Going Live

For all the advances of slot-makers in moving toward a networked gaming floor, the last major impediment in making server-based gaming a workable reality has been simple: There needs to be a casino equipped to handle it.

For networked gaming, the most basic need is the same as the need of any business environment in creating a local-area computer network. The computer terminals—i.e., the slot machines—need to have Ethernet ports or wireless communication cards, and there needs to be a broadband network in place.

Existing casinos are wired for the analog age, and changeover will require significant investment in most cases. Conversion of existing slots and systems to comply with GSA’s “G2S” protocol (for game-to-system) likely will be gradual for most casinos.

“Industry consensus is that 2009 and beyond is when adoption of networked gaming will start,” comments Jamal Azzam, Aristocrat’s director of product management for downloadable and server-based gaming. “How extensive is debatable. If you look at new openings and expansions, those will most likely be G2S-ready. If you look at existing casinos, some have already begun preparing for it, but we expect that conversion will be slower. You’ve got a lot of legacy product out there, and that product is not going to disappear overnight.”

“We’re seeing continued investment in upgrading the systems in place today on floors,” adds Bally’s Rowe. “Companies doing expansions are putting in the infrastructure to accommodate broadband and Ethernet.”

The first floor-wide applications of broadband technology are already appearing. Last month, MGM Mirage announced that its joint-venture, mixed-use resort CityCenter Las Vegas will open in 2009 with a completely networked slot floor. It will be an open system, which means games of any manufacturer will be able to link to the network.

The operator made the announcement in conjunction with IGT, which will supply its “sb Service Window” for on-screen messages to the player. The Service Window is a picture-in-picture application which serves as a portal through which the casino can send promotional messages, secondary bonus games, streaming video or other features directly to a portion of the game screen. “We actually shrink the active game graphics and show the Service Window graphics in the remaining space,” explains IGT’s Schneider.

“When we started the CityCenter project, one of our core operating principles was to examine how we could leverage technology to create greater operational efficiencies,” says Bill McBeath, president and chief operating offficer of CityCenter. “This technology allows us a true dynamic in managing the floor as it relates to pricing and content. The by-product of that is having a server-based technology platform that allows us to use this Service Window as a portal to communicate directly to the guests, and to develop marketing programs and promotions directly in the hotel.”

The sb Service Window is IGT’s version of video portals that will form the player experience in networked operations. Bally’s “iVIEW” technology, already in widespread use through online slot systems, will be employed in what will be another of the first floor-wide networks, at Barona Valley Ranch Resort & Casino outside of San Diego. Last month, Bally signed an agreement to upgrade Barona’s slot management system with its “Networked Floor of the Future” server-based technology, featuring the iVIEW player network utilizing Ethernet technology.

As part of the agreement, Barona is upgrading its player interfaces on all 2,000 slot machines with Bally’s iVIEW interactive network, which provides casino patrons an expanded communication portal, customer service enhancements, and “second-way-to-win” experiences.

“Many of the things people have been talking about for the future, we’re delivering today through iVIEW,” Rowe says. “We’re already downloading promotional and media content through iVIEW. We are continuing to roll out second-chance-to-win opportunities for players.”

The Application Business

As casinos gradually convert their infrastructure to handle networked gaming, manufacturers continue to work on what will remain the basis for heated competition: software applications for those systems that will be useful to casinos—and, perhaps more importantly, fun for players.

WMS Gaming was the first of the major slot manufacturers to begin tailoring all of its products for networked applications. Many of the slot-maker’s latest games have been network operations in miniature: Monopoly Big Event, and more recently, Star Trek, are complete networked games, linked to a dedicated server on the slot floor.

In addition to game content, WMS game style and hardware innovations have come with en eye toward the networked floor. The company’s “Transmissive Reels” games combine a video overlay with mechanical reels, providing a possible way to include reel-spinners in a networked floor. The Bluebird II cabinet, slated for limited deployment by this month, has a dual digital display tailored to provide a portal for communication with the player.

Rob Bone, vice president of marketing for WMS, says other applications coming out of the GLI lab—including WageNet 1.0, the first remote configuration/download application—are ready for any GSA-approved, open-archtitecture network that will be put in place.

“We created a platform form day one on the open-standards philosophy,” Bone says. “It is designed to be server- and technology-agnostic, which has allowed us to adapt the GSA standards very easily.”

He adds that the WMS applications have been tested to work on systems right along with products from IGT, Bally, Aristocrat and others—and on system architecture such as that being created by CityCenter and Barona. Bone notes that last year’s Global Gaming Expo provided evidence of this, as WMS games could be found in the booths of other manufacturers, and vice versa, in a display of the interoperability of the systems.

In fact, the drive toward networked floors has created strange bedfellows—companies that have historically been bitter rivals and fierce competitors are now forging alliances and cooperative arrangements to achieve open networks. In addition to the Bally/Aristocrat alliance, WMS and IGT are cooperating in an arrangement that allows them to test applications without worrying about intellectual-property lawsuits.

IGT also recently signed an agreement with Progressive Gaming International that will allow Progressive Gaming to integrate IGT’s sb NexGen displays and replicate IGT Advantage Bonusing products into its Casinolink Enterprise Edition slot management systems, currently linking around 64,000 slots worldwide.

“The universe in the gaming industry is going to change as this open-network environment evolves over the next few years,” says WMS’ Pacey. “This is just the dawn of a radical change, but it is a change for the good—better features, faster time to market, more innovations. Operators will benefit from more flexibility.”

Bone draws an analogy of future competition between slot-makers to competition between applications on the internet: IGT vs. Bally vs. WMS will be like Yahoo vs. Google, with the open-architecture system analagous to the internet.

Rowe from Bally notes that the variety of available applications will allow casinos to brand their properties through the slot machines. “Operators will be able to create a customized experience for an individual or group of individuals that could not be done in the past,” he says. “More and more, marketing becomes one of the key
system users creating value out of the network.”

McBeath at CityCenter agrees that customization may be the most valuable marketing tool of the networked casino floor. “We have a wealth of information about players—what they like, why they like it, what they like to eat, to drink—we were limited in what we could do with this information,” he says. “The slot floor will now be designed to provide value in terms of the entertainment experience for the guest.”

Some details of the slot floor need to be ironed out, to be sure. Manufacturers will determine ways to integrate reel-spinners—in addition to WMS’ Transmissive Reels, IGT’s “ReelDepth” system actually simulates spinning reels in a realistic video display—and also decide how to integrate popular slots that incorporate mechanical top-box bonus devices, such as IGT’s Barcrest games and AC Coin’s many popular bonus slots, as well as multiple-progressive displays like Aristocrat’s Hyperlink.

“Technology is catching up fast,” says Aristocrat’s Azzam. “There are smart people out there who are coming up with solutions for all of these problems.”

Meanwhile, the move toward a networked floor will continue in an evolutionary mode—its pace, notes Azzam, dictated more by casino customers than by casino vendors. “Networked gaming brings in new concepts,” he says. “To bring in new players, you have to bring in more challenging concepts. Technology is not going to cause the industry to change. The players are.”

By Roger Gros   Sun, Jul 06, 2008

By Greg Jones   Mon, Jun 30, 2008

By Roger Gros   Thu, Jun 26, 2008

By Roger Gros   Sun, Jun 08, 2008

By Roger Gros   Sun, Jun 01, 2008

By GGB Staff   Fri, May 30, 2008

 The Horseshoe Casino in Hammond, Indiana, may open two or three months ahead of schedule, if work crews continue the current pace. The $485 million casino expansion, which includes more gaming space, restaurants and a theater, had been scheduled to open in the fall of 2008. Now, it could open in the late summer. The number of employees is expected to increase by 400 to 2,700.

By GGB Staff   Fri, May 30, 2008

The Massachusetts town of Mashpee has signed an agreement with the Mashpee Wampanoag Indians. In return or dropping its land claims against the town, and saying that it will never attempt to build a casino there, the tribe gets some key parcels, such as a tribal burial ground, and the pledge of the town to help the tribe in its quest to get more than 500 acres in Middleboro placed in federal trust so they can build a casino there. The agreement was first approved by the town’s selectmen, and then by the voters.

By GGB Staff   Fri, May 30, 2008

 After making a fortune with his online gaming empire Bodog, Calvin Ayre announced last month that he is retiring from what has been a largely ceremonial role in recent months. Ayre transferred ownership of the Bodog brand to the Morris Mohawk Gaming Group in Canada in 2007, and has served as a figurehead of the gaming operations as much as anything else.

By GGB Staff   Fri, May 30, 2008

Dublin-based internet gambling software developer CryptoLogic Ltd. announced that its recently acquired Casino.co.uk gaming portal along with its other related online casino and poker assets significantly exceeded post-closing performance targets over the past six months. CryptoLogic stated that it would be releasing an additional US$1.2 million to leading online advertising group Media Corporation as part of an earn-out agreement for Casino.co.uk made through its Gaming Portals Ltd. subsidiary.

By GGB Staff   Fri, May 30, 2008

One of the Top 50 architectural firms in the country, KKE Architects, Inc., has expanded to serve Arizona’s anticipated growth. The full-service firm has opened offices in both Phoenix and Tucson in addition to locations in Minneapolis, Las Vegas, and Irvine and Pasadena, California. “This achieves significant steps in our strategic plan: strengthening our geographical diversity, and expanding into high-population, fast-growing market segments,” says President and COO Tom Gerster. “Our new Phoenix and Tucson offices strategically position KKE to flourish and thrive across the Southwest.” In Tucson, KKE has also acquired Gresham & Beach Architects Inc. It will be known there as KKE Gresham & Beach.

By GGB Staff   Fri, May 30, 2008

A recent media report that Spain’s Gran Scala project was not meeting its deadline for a €20 million deposit to local authorities has been dismissed as “false” by Thibault Verbiest, who is working very closely with the project. Verbiest said, “The guarantee will be provided as agreed and as scheduled, within two weeks. Things are on track, despite this sort of useless attempt to tarnish the image of the project.”

By GGB Staff   Fri, May 30, 2008

South Africa’s Gold Reef Casino Resorts reports that talks on a possible acquisition of the company by Tsogo Sun Holdings “have been terminated.” The latest setback to Gold Reef hit the company’s stock hard, resulting in a 17 percent drop to 20 rand a share.

By GGB Staff   Fri, May 30, 2008

Harrah’s Entertainment, Inc. is the first gaming company in the country to earn the Environmental Protection Agency’s highest award for environmentally aware “green” programs. The company was recognized for improvements at its four Atlantic City casinos, which, since 2002, have used more efficient lighting, non-toxic cleaning agents, energy-saving thermostats, eco-friendly refrigerants and better heating, cooling and ventilation systems. Harrah’s has eliminated the equivalent of more than 94 million pounds of carbon dioxide annually. Each year it recycles 50,000 gallons of cooking oil and 1.6 million pounds of cardboard. It uses waterless urinals (saving 30,000 gallons of water each per year) and has eliminated 1.1 million polystyrene beverage cups.

By GGB Staff   Fri, May 30, 2008

Station Casinos laid off nearly 70 corporate management and support staff last month. The move follows a similar one by MGM Mirage, which let go of 440 management positions throughout the company. Unlike MGM Mirage, however, Station spokeswoman Lori Nelson said there was a connection between the layoffs and the economy. “We continue to be impacted by the economy,” she said. “With no immediate signs of letup, we had to take these measures.”

By GGB Staff   Fri, May 30, 2008

According to a report on gamblingcompliance.com, the International Olympic Committee will track betting on Olympic sports in Beijing this summer, and at the Vancouver winter games in 2010. In an unprecedented move, the IOC will reportedly use the same early warning system used by football’s governing body, FIFA, to monitor betting on World Cup qualifying games. Reports attribute the move to concerns about match fixing, which has recently marred the image of tennis and soccer, and the growing prevalence of online wagering.

By GGB Staff   Fri, May 30, 2008

As expected, the U.S. Court of Appeals for the District of Columbia Circuit last month dismissed an appeal of federal trust status for the site where Michigan’s Gun Lake Band of Pottawatomi Indians and Station Casinos of Las Vegas plan a casino 20 miles south of Grand Rapids. The tribe said it will schedule groundbreaking soon for the 2,500-slot casino. The group Michigan Gambling Opposition, though short of funds, is pondering whether to carry its three-year-old suit to the U.S. Supreme Court.

By GGB Staff   Fri, May 30, 2008

Wyoming’s Northern Arapaho tribe held a soft opening for its non-compacted, Class III Wind River Casino near Riverton last month with 200 slot machines and eight tables in play. Designed by architect Charles Schiffner of Phoenix, Arizona, Wind River “is gorgeous. It equals the tribal casinos I’ve seen in Arizona,” said one of the first players. The 45,000-square-foot casino, which will have 750 slots at the June 5 grand opening, has an advanced air filtration system to minimize cigarette smoke.

By GGB Staff   Fri, May 30, 2008

Curtis Bashaw is one of the most dynamic developers active in and around Atlantic City today. He began his development career in Cape May, New Jersey, where he redeveloped historic Congress Hall into one of the gems of that Victorian town. As the former director of the Casino Reinvestment Development Authority, Bashaw worked closely with casino executives and public officials to extend the influence of Atlantic City to the entire Jersey shore. His dedication to improving the Boardwalk during that time has already paid dividends, and his sense of style will become evident when the Chelsea, a boutique non-gaming hotel, opens this month in Atlantic City. But his big play is a $2 billion project he is directing, along with former Caesars Entertainment CEO Wally Barr, at the far western end of the Boardwalk. He met with Global Gaming Business Editor Frank Legato in his offices at the Chelsea in May. To hear the full version of this interview, listen to the Global Gaming Business Podcast. Go to the website, www.ggbmagazine.com, and click on the GGB Podcast button to access this and all GGB Podcasts.

GGB: While CRDA director, you started the drive to redevelop the Boardwalk. What will the Chelsea bring to the Boardwalk?

BASHAW: We’re obviously very, very excited about the Chelsea. We’re combining the Holiday Inn and Howard Johnson’s into a 330-room resort, right on the Boardwalk. We think, as we’ve said in some of our literature, that we’re going to be returning style and luxury to the Boardwalk.

The Boardwalk was, in its heyday, just this wonderful strand where people went from beautiful shops to beautiful shops, to fun arcades, and it was just a great place for people to have a good time at the resort. So, our goal with the Chelsea is to really re-emphasize those resort amenities and resort qualities, and return style and luxury to the Boardwalk.

The Chelsea is both a new and an old concept for Atlantic City. What will it offer that the casino hotels do not?

One thing is intimacy, in that it is on a much smaller scale than a casino hotel. Secondly, we won’t have the constant din of slot machines as a backdrop to lobby settings. And finally, we’re really able, because we are just a hotel, to focus on what the core competency of a hotel is supposed to be, which is service, and also the resort amenities. So, the Chelsea’s going to be that sort of haven, a place people can call home when they’re in Atlantic City.

Let’s move on to the next big project. You’ve submitted plans for a proposed casino resort south of the Hilton. What can you tell us about the project?

We feel the Albany Avenue corridor is a wonderful gateway to Atlantic City. We’ve worked very hard to assemble a site there we think will surprise folks, with its size and its ability to handle a large resort like folks are talking about up and down the Boardwalk right now. We’re very excited about how the assemblage has come together, and about the redevelopment plan the city approved.

We’re working to put together a site plan for the project that will really allow Atlantic City to see yet another resort casino property develop along the Boardwalk. We love the location; we think it’s on a great beach on a great end of town. We think there are synergies with the prospects of what might happen at Bader Field as well. So, the project will be 1,500-2,000 keys out of the gate. It will have a large gaming floor, and meeting space, and all the amenities you’d expect from a new casino development project.

What do you think about the potential development of Bader Field? Would it make a difference to the development of your project?

Absolutely. I think Bader Field, over a 10- or 20-year time horizon, is a logical place for additional gaming development. I am a big believer in critical mass, and in rising tides lifting all boats. I don’t think the issue should be forced in a market not conducive to financing large-scale projects, so how the city manages the timeline of that whole process is important. You want to go to the market at the right time; there are a lot of other projects on the drawing board in Atlantic City as well. But, in terms of the medium- to long-term view, we absolutely think Bader is great for Atlantic City.

Bashaw/Barr, your partnership with former Caesars Entertainment CEO Wallace Barr, is partnering with a major investment bank on this project. Do you believe this will make it easier to finance the new project in this tight credit market?

I think the credit markets are bleak for all real estate development right now. That choppiness needs to settle down, and we believe it will settle down. Is that six months, or 12 months? It’s hard to predict. That said, obviously, having partners with real muscle in the financial community makes a lot of sense, and if you have a shot at getting something financed, it’s good to have partners who understand the markets well and are well-versed in manipulating and managing those markets to help projects get done.

What’s your general outlook on the Atlantic City market? How much more capacity can it handle? What are the biggest challenges?

From a capacity standpoint, Vegas has shown us that there is certainly plenty of room for growth in Atlantic City. When you look at our location and the demographic around this location, I love to say we’re a tank of gas away from 25 percent or 30 percent of the U.S. population. That’s staggering.

I think the biggest impediments to Atlantic City going forward are, one, making sure it rises above the stereotype that the place is just a little unorganized, and a little seedy. We’ve got to believe in ourselves as a community, and we’ve got to raise the bar on the sort of press that goes out from here nationally. We need to get past scandals and have leadership that’s setting a new standard to help lead this resort well into this century.

By GGB Staff   Fri, May 30, 2008

Buffalo Thunder Resort near Santa Fe, New Mexico, named Mike Allgeier general manager. He will be responsible for overall management of the casino and will oversee all gaming operations when the resort opens in August 2008.

Allgeier has almost 30 years of gaming experience, most recently as vice president of casino operations at Caesars Palace in Las Vegas. He has also served as vice president of casino operations at the Las Vegas Hilton.

In another announcement, the casino named Duff Taylor executive director of gaming operations. Taylor will manage all aspects of gaming including casino floor operations, casino staff, security, revenues, promotions and the Lightning Rewards Player’s Club.

Taylor brings more than 30 years of management, development and consulting experience in the gaming industry to his new position. He most recently was vice president of casino operations at the Crystal Palace Casino in Nassau, Bahamas.

Elixir names finance VP

Slot machine distributor Elixir Gaming Technologies announced that Traci Mangini has been named to the new position of senior vice president, corporate finance, reporting directly to CFO David Reberger.

Mangini will be in charge of managing and expanding the company’s worldwide financial community and shareholder communications program. She will work with Reberger and the company’s investor relations firm, Jaffoni & Collins, to develop further awareness and understanding of Elixir Gaming’s operations and growth opportunities among a broad group of constituents, including institutional and retail investors, analysts and the media.

Mangini most recently worked at ThinkPanmure, where she was a partner and senior research analyst responsible for coverage of companies in the domestic and international gaming sector including Elixir, Cash Systems, Inc., Fortunet, Inc., Gametech International, Inc., Gaming Partners International Corporation, Gigamedia Limited, Monarch Casino & Resort, Inc., Progressive Gaming International and WPT Enterprises, Inc.

Brown resigns from ACEP

Two months after Whitehall Street Real Estate Funds acquired American Casino and Entertainment Properties from Carl Icahn, Richard Brown announced he is stepping down as CEO of the gaming company.

A filing with the Securities and Exchange Commission did not disclose whether Brown will give up other positions he holds at ACEP, including president and director.

The move is something of a shock, considering Brown told gaming regulators he would continue to oversee daily operations after the Whitehall transaction closed.

The filing said, “There were no known disagreements with Mr. Brown on any matters relating to the company’s operations, policies or practices.”

Brown started at the Stratosphere in 2000 as vice president of marketing. In 2001, he was promoted to COO of the Stratosphere and the Arizona Charlie’s properties.

By GGB Staff   Fri, May 30, 2008

Power conglomerate Sierra Pacific Resources’ board of directors named former Harrah’s Entertainment CEO Phil Satre as nonexecutive chairman. He will succeed Walt Higgins, who stepped down as CEO August 1.

Satre will take over as nonexecutive chairman for a one-year term after Higgins’ yearlong tenure ends August 1.

Satre said one of his priorities for the board over the coming year is to continue efforts to develop renewable energy sources, including wind, geothermal and solar power. He said he will continue his current role as a liaison between the board and the power company’s executives.

Sierra Pacific’s two subsidiaries, Nevada Power Co. and Sierra Pacific Power Co., returned to investment-grade bond ratings and stock dividends over the past few years.

Satre served as CEO of Harrah’s Entertainment for 10 years. He currently serves on the boards of Nordstrom, Rite Aid Corp., the National Center for Responsible Gaming and the Nevada Cancer Institute. He is vice chairman of the National World War II Museum and a trustee of Stanford University.

By GGB Staff   Fri, May 30, 2008

The Gaming Standards Association has named software development expert Line Robichaud as the organization’s new educational director. In her new role, Robichaud will create and oversee GSA’s educational outreach programs, including its Executive Awareness Program and its Certified G2S/S2S Engineer Programs.

Robichaud has been an active participant in GSA since 2003 and was chair of the Transport and G2S committees. She comes to GSA with more than 18 years of experience in the software development industry, with her most recent focus being in the area of analysis and design of communication protocols. She has a long history in the gaming industry, and was with Spielo/GTECH as principal software analyst.

“We are thrilled to have Line join GSA on a full-time basis,” said GSA President Peter DeRaedt. “Her roles on the G2S and Transport committees have been invaluable, and her knowledge of protocol analysis and design makes her perfect to lead our global education efforts. GSA will provide local education around the world to anyone who wants to learn about the technical details of our standards.”

By Frank Legato   Fri, May 30, 2008

It is once again time for that popular regular “Frankly Speaking” feature, which I just made up, that we like to call “Busting On The News.”

OK, it’s only the name I just made up. This is yet another one of those columns where I take the casino news of the day and make it seem goofy. It is a common column-writing trick, known in all the journalism textbooks as the “Frankification of the News.”

Our first item comes from the “Casino Gambling Web,” an online news site dealing exclusively with our beloved industry. Larry Rutherford, staff editor of the website, wrote the following in reference to the drive by Pennsylvania lawmakers to add table games to the slot machines now legal in casinos:

“Once casino gambling comes to an area, it is hard to stop the momentum that begins to build for full-blown casinos. States usually start with slot machines, then gradually increase the game offerings until full-blown gambling is legal.”

Imagine that. Slots are a gateway drug. You start out saying, “I’ll just spin a couple of reels,” but then you need more of a rush, so you move up to blackjack, and before you know it, you’re throwing dice and ditching markers like Charles Barkley.

I don’t buy it. Diehard slot players and table-game players are two different breeds. Besides, look at the little old ladies. (Alright, you don’t have to. I was speaking figuratively.) I’ve seen women who have been going to casinos since Al Jolson sang on the Boardwalk who have never bought a gaming chip or sat down at a felt table. Case closed. Off my machine, Sonny!

In other Frankified news, the MGM Grand at Foxwoods opened at midnight on May 17, after an evening in which us press types were treated to a “dine-around” to sample all of the place’s great celebrity restaurants and lounges. We also were graciously permitted to be the first to dump money into the casino-within-a-casino’s new slot machines. I gladly obliged. I don’t know how the other reporters fared, but I was like a fatted calf led to slaughter.

But considering the food, and the absolutely gorgeous casino and hotel rooms, I didn’t mind at all throwing a few “gaming entertainment” dollars to the luck gods. My initial thoughts: Craftsteak is amazing, you’ve got to get a burger and cheesecake at Junior’s Restaurant, the Shrine has some of the best single-malt Scotch I’ve found in a casino, and… I don’t remember the rest. (I guess it was the Scotch.)

Next up, the Sands casino name is coming back to America. Las Vegas Sands Corporation is going to call its Bethlehem, Pennsylvania, property the Sands Casino Resort Bethlehem. Esther Lee, a member of the anti-casino group Citizens for a Better Bethlehem, doesn’t like it.

“We used to be known as the Christmas City,” Esther told a reporter. “I don’t like the sound of this at all. This will transform how we are viewed, and ultimately who we are.”

Do you think she’d be happier if they called it the “Christmas City Casino?” “Three Kings Casino Resort?” “The Manger Resort Hotel, Casino and Spa?” “Frankincense and Mirth?” (I’ve got a million of them, but I’ll spare you.)

The operator changed the casino’s name to the Sands because focus groups reacted to the original Rust-Belt-friendly “BethWorks” name as if they had just been treated to a seminar on theoretical mathematics.

While “Sands” doesn’t exactly fit the region’s industrial roots, it will be a great place for the hundreds of fake-Rat-Pack reviews. (Motto: “The Sands. Home of the Dead Crooners.”)

Shuffling up to Buffalo, the Seneca tribe has begun construction on its new casino, called the “Buffalo Creek Casino” to generate images of a pristine wilderness in the middle of downtown Buffalo. I like the name. It’s certainly better than the original name that casino drew from the surrounding region, the “Big Friggin’ Pile of Snow Resort Casino.”

In our last item, two men were arrested on suspicion of manufacturing methamphetamine inside motor homes parked at California’s Feather Falls Casino. I knew it! All the years I’ve seen RVs parked outside of casinos, I figured they were cooking up meth in there. No, seriously, the two men, 30-year-old Michael Taylor and 35-year-old Eric Selvidge, allegedly used a 1990 Toyota motor home and a 1978 Winnebago as mobile meth labs.

Suspicions were raised when police were notified of recreational vehicles parked on casino property by drivers under the age of 100.

There was no comment from the casino. However, blackjack drop reportedly soared after two unidentified men spent two weeks straight at the tables, without stopping to eat.

That’s the news. Good night, and good luck.

By GGB Staff   Fri, May 30, 2008

IGT reprises an older title in its latest technology with this game, based on the TV game show The Price Is Right.

The slot’s theme is centered on one of the price games from the television series, called “Cliff Hangers.” The slot game replicates the game show gimmick in a huge display—depicting an alpine hiker ascending a mountain—in front of three individual machines. Each player sits at his own independent slot game, and the display serves as a common device for each player’s bonus events.

The base game is a rare three-reel video slot, with two, three or five paylines. The top jackpot is a “MegaJackpots” wide-area progressive, resetting at $2,000 in penny versions of the game.

When the bonus trigger symbols land on the reels, the player is given a choice between two bonus events. The main TV-themed “Cliff Hangers Bonus” allows the player to collect credits along the way up the big mountain on the bonus display, while keeping the hiker from walking more than 20 “steps” and falling off the cliff.

When the bonus is initiated, back-lit spots on the big display flash between credit amounts, “Climb” symbols, and “Price Is Right” price tags. The player is prompted to press a “Stop” button on his screen to stop the flashing on one of the results. If it’s a credit amount, that award is banked for the player. A “Climb” symbol sends the hiker up the cliff a random number of steps. The price tag awards five credits. The bonus round continues. Two price tags pay 25; three, 125; four, 1,000 credits.

All of the credit amounts accumulate as the bonus continues. Once the hiker passes the 10th spot on the mountain, the player must decide whether to take his accumulated win or play on. If he plays on and the hiker goes over the cliff, his total award is reduced by half.

Players have the option of choosing a separate “Wheel Bonus” when the triggering symbols land in the base game. (It’s designed for when the main bonus is occupied.) The player presses “Spin the Wheel,” and a video wheel spins to a credit amount. Players have the option of accepting that amount, or risking a second spin, in which the award will be either higher or lower.

Manufacturer: International Game Technology

Platform: AVP

Format: three-reel; multi-line video slot

Denominations: All denominations available

Max Bet: 1—25

Top Award: Progressive; $2,000 reset

Hit Frequency: Approximately 25%

Theoretical Hold: 2%—15%

By GGB Staff   Fri, May 30, 2008

California-based TableMAX Holdings LLC has released the industry’s first electronic blackjack game to feature a wide-area progressive jackpot.

Progressive Blackjack is a multi-player, automated version of blackjack employing modular player stations and a large LCD video screen displaying the table layout. The five-player format consumes 20 percent less square footage per gaming space than a comparable number of slot positions.

The game itself is standard player-operated blackjack, with standard rules for the main game. It is a four-deck blackjack game with cards shuffled after every hand. A progressive side bet of 50 cents gives the player a chance to win a jackpot according to a pay schedule corresponding to a number of progressive Aces dealt to a player in any given hand.

When making the side bet, players are paid a progressive for one, two, three or four Aces dealt consecutively in a single hand. According to the company, players will land one of the jackpots every 13 hands on average. The odds of the wide-area progressive (for four consecutive Aces) hitting are 18 million-to-one, with an average jackpot of $3,000.

The house edge on the base blackjack game is the same as traditional blackjack, but the side bet raises the overall hold percentage on the game to between 17 percent and 20 percent.

In addition to the patented wide-area Progressive Blackjack, TableMAX offers electronic versions of Caribbean Stud Poker, Caribbean Draw Poker, Texas Hold’em and Bonus Blackjack, a 21 game with bonus jackpots for certain cards.

Manufacturer: TableMAX Holdings LLC

Platform: TableMAX system

Format: Electronic blackjack with progressive side bet

Denominations: All denominations available

Max Bet: Operator configurable

Top Award: Progressive; reset level configurable

Hit Frequency: Approximately 45%

Theoretical Hold: 17%—20%

By GGB Staff   Fri, May 30, 2008

This game, based on the famous magician Houdini and his escape tricks, initiates what WMS calls the “Rotating Wild” series. The video “reels” are made up of circular reel symbols, arranged as five symbols going left to right on the top and the bottom, with four symbols in the middle row. During normal spins, pays happen just as in any other video slot, by matching symbols on predetermined pay lines. The name of the series comes from what happens when wild symbols land in the center of the screen.

When one “Rotating Wild” symbol lands in either of the two center symbols on the middle row, any win is paid, and then, the six symbols surrounding the wild symbol rotate clockwise around the stationary wild symbol, until they form a new pay-line combination. This repeats until the circle of symbols makes a complete rotation, stopping seven times to evaluate new symbol combinations for additional wins. The same thing happens if the two middle symbols are both wild—the eight surrounding symbols rotate, for near-certain repeat wins, thanks to the two wilds.

There is a combination second-screen/free-spin bonus event on top of this. Two bonus symbols on the ends of the middle row trigger the event. The screen displays four chests, locked up as in one of Houdini’s escape illusions. The player is prompted to select a chest, to reveal a number of free spins—six, eight or 10—with all jackpots doubled. If Houdini pops out of the chest, the player gets the initial number of free spins, plus he selects another chest for up to 10 more free spins. If Houdini is revealed on the first try, all jackpots during the free spins are multiplied by four.

Manufacturer: WMS Gaming

Platform: CPU-NXT2

Format: Five-reel; 30-line video slot

Denominations: .01, .02, .05

Max Bet: 600

Top Award: 30,000

Hit Frequency: 35.26%

Theoretical Hold: 6.11%—13.74%

By David Ross   Fri, May 30, 2008

Revealed to a few select individuals at the International Casino Exposition in London this year, the Digi Playcard, the size of a credit card, but a functioning miniature gaming device, was developed by inventor Allan Howard and his partner in China, who formed London-based Digi Playcards Ltd.

The Digi Playcard is fully electronic and looks like a mini-slot machine with a miniature LCD screen, PLAY and HOLD buttons and vibrant graphics.

You could call it an electronic scratch card or instant ticket. It contains a chip, EPROM, battery and LCD and can use a solar cell, sound chip or a timer.

It contains two games—the “Accumulator” game and the “Bonus” game, giving customers two opportunities to respond to a promotion.

For the Accumulator game, you press the play button to start the reels spinning and keep pressing the hold button to stop the reels and view the combination of symbols.

At the end of the last play, after all of the spins have been used, the LCD will display the total score of the points accumulated, which the player can match up to the reward levels posted on the card, or on its packaging.

Then the LCD will flash “Claim your prize” and “Your bonus icons” and three new icon symbols will appear. This is the Bonus game, giving the patron a second chance to win.

For the Bonus game the player must bring the card to the casino to view a monitor to ID the prize. This gives an incentive to return daily. The casino can develop a promotion to fit.

The Digi Playcard is flexible when it comes to promotions and can be programmed to control the payout odds. The casino can custom-print the packaging and add advertising or marketing promotional incentives.

They cost less than $2.50 each. The casino controls the graphics on the card, the prize pool odds, the promotional budget and other marketing costs. It can control the timing and offer double bonus points to help drive business to the casino during off-peak times.

For more information on the Digi Playcard, visit info@digiplaycards.com, or call +44 (0)20 7717 8454.

By David Ross   Fri, May 30, 2008

JCM Global, the automated transactions solutions provider of such products as the Universal Bill Acceptor, recently introduced the Trident Table Safe System, which applies the security features of the company’s bill validators to cash-handling at the tables.

In the old days, a dealer used a plastic paddle to insert non-validated currency into a cash box to hand-sort and count. The Trident Table Safe System modernizes the pit by introducing baseline accuracy and real-time control, giving operators an accurate picture of pit activity.

More than “just a bill validator for a table game,” Trident is a complete pit accounting system that automates revenue handling, providing accurate information, in real time, on how tables are performing. Its bulk-note feeder processes multiple notes simultaneously. Its validator reads currency and alerts security automatically if counterfeits are discovered.

Also a complete table management system, it tracks assets from table to pit to soft count room, and to the back office; gives live drop information to the pit manager/shift manager; and has an automatic identification of the drop with its asset. It gives an audit of each asset dropped for the day and breaks that down to a specific time period, such as a week, a day, a shift, or an hour.

It does this without slowing the game or adding additional steps to the dealer’s tasks, while reducing operational costs. After thousands of “live table days,” customers notice no change in the game’s pace.

For more information on the Trident Table Safe System, visit www.jcmglobal.com or call 702-651-0000.

By Mark Balestra   Fri, May 30, 2008

The prohibition of most forms of internet gambling in the United States has lopped off a massive portion of an industry that not long ago thrived in North America—an impressive feat considering that 19 months after enacting the Unlawful Internet Gambling Enforcement Act, the government has yet to implement Enforcement mechanisms.

Make no mistake, the UIGEA explicitly outlaws internet gambling (with a few exceptions), but Congress punted the task of rules for enforcement to the Federal Reserve and the Treasury. Following enactment in October 2006, the agencies were given 270 days to iron out rules through which banking institutions are to prevent payments for online gambling services and 350 days later put forth their draft rules for further consideration. This was followed by a two-month public comment period.

If one thing was clear after comments from over 200 parties, it was that the enforceability of the UIGEA was under intense scrutiny. Banks pointed out that enforcement is simply not within their capabilities. Compass Bank, for example, argued, “The proposed regulation fails because it requires a specific kind of functionality within the payment systems that simply does not exist,” adding that the issue cannot be resolved “in the foreseeable future.”

The North American Association of State & Provincial Lotteries, meanwhile, pointed out that the prohibition on payments for gambling could hurt organizations offering legal forms of internet gambling. “The proposed regulations,” NASPL stated in its submission, “fail to ensure that excluded transactions are not blocked.”

The majority of institutions commenting in support of the regulations expressed their satisfaction with its exemptions, which include certain payment systems like automated clearing house (ACH) systems; card systems (including credit, debit and pre-paid cards or stored value products); check collection systems; money transmitting businesses; and wire transfer systems.

These issues are not new, as detractors of prohibition voiced their doubts about enforceability for 10 years while Senator Jon Kyl, Rep. Robert Goodlatte and their colleagues pressed for a ban. Rep. Robert Wexler, who has proposed a bill to exempt games of skill (including poker) from the UIGEA, reiterated the long-running concern before the House Committee on the Judiciary in November. At that meeting, Wexler was highly critical of actions taken by the Department of Justice against internet gambling operators. “The beauty of the Department of Justice’s position as you enunciate it, which is ‘All forms of internet gambling are prohibited,’ means there’s no grey area: Shut it all down,” he said in response to U.S. Attorney Catherine Hanaway’s testimony on behalf of the Department of Justice. “So, when we see selective enforcement, that’s what suggests a very untoward result in some of our minds.”

Wexler isn’t alone in Washington. Rep. Barney Frank, an exceptionally vocal opponent of internet gambling prohibition over the years, responded to the UIGEA in April 2007 with the introduction of the Internet Gambling Regulation and Enforcement Act to regulate rather than ban online gambling. The legislation hasn’t seen any action for several months, but Frank has expressed intentions of pushing forward in 2008. In the meantime, he is championing a bill that would prohibit the Treasury and Federal Reserve from “proposing, prescribing or implementing” regulations under the UIGEA—a prohibition of prohibition, if you will.

Policy-makers are considering regulatory measures on the state level as well, with an emphasis on poker, which has a growing lobbying presence via the Poker Players Alliance. The most notable effort on the state level came pre-UIGEA in the form of a bill to legalize internet poker in North Dakota. That campaign withered in 2005, but the spirit was invoked in April 2008 through a similar bill in California, where terrestrial poker rooms have much at stake.

A parallel movement could gain traction in the U.S. lottery industry, where everyone is waiting for the “other guy” to take the plunge first. Georgia (sort of) led the way as the first state to take a crack at an internet lottery regulatory bill with multiple legislative efforts, but the real potential for action could come through privatization. A handful of state governments are considering selling their lotteries to private companies, and it is likely that private operators will much more aggressively seek permission to conduct sales over the internet.

In case they need further motivation, a recent analysis conducted by Pricewaterhouse-Coopers estimates that regulating internet gambling would generate about $3.1 billion and $15.2 billion in federal revenues during its first five years and about $8.7 billion and $42.8 billion over its first 10 years.

All this begs the question: What will come first, the implementation of UIGEA enforcement mechanisms or a series of bills that virtually make the UIGEA obsolete?

Testimony from the Federal Reserve and the Treasury during a House hearing in April titled “Proposed UIGEA Regulations: Burden without Benefit?” would seem to indicate that the agencies are less then enthusiastic about making implementation the winner in that race. The “burden,” according to some witnesses, is amplified by the law’s ambiguous language.

“I think it is very difficult without having more of a bright line about what is intended to be unlawful internet gambling,” Louise Roseman, director of the Federal Reserve’s bank operations division, told the House Subcommittee on International Monetary Policy, Trade and technology. “The challenge we have is interpreting something, particularly federal laws, when Congress itself isn’t sure what they mean.”

Following the hearing, Roseman said the hope was to issue final rules by the end of 2008, but she did not infer any certainty that it would get done.

Dan Walsh, director of governmental affairs at Greenberg Traurig, defined the status of the UIGEA as “regulatory limbo.”

“The regulations are in trouble,” Walsh told IGamingNews.com. “I don’t think there is any way they can finalize the proposed rules. UIGEA would still be on the books, but its practical effect was to come from the regulations.”

Mark Balestra is the director of publishing for Clarion Gaming. A veteran of 11 years in the online gambling business, Balestra is the editor and co-creator of Interactive Gaming News (www.iGamingNews.com) as well as the editor and co-author of Internet Gambling Report, a legal guide to interactive gambling.

By Frank Fahrenkopf   Fri, May 30, 2008

Macau is in the vanguard of the growth of the commercial casino industry in Asia, with Singapore, Malaysia and other neighboring markets also pursuing their piece of this business.

Macau is now host to 29 casinos, with 21 projected for completion next year. A pair of world-class casino entertainment projects is under construction in Singapore, including the $3.6 billion Marina Bay Sands. Malaysia is already home to the Genting Highlands Casino and Resort, often called the “City of Entertainment.”

This level of development points to a bright future for the region. And, as it has in the United States, the commercial casino industry in Asia should prove to be a solid community partner. That said, the current success and projected progress will also present the region with challenges.

In Macau, some of these challenges are already looming. A labor shortage has been projected, and the local infrastructure is being rigorously tested. Transportation is severely strained, and the demand for electricity and water could be overwhelming. In response to these and other developments, Macau Chief Executive Edmund Ho announced recently that the government will not issue any new casino licenses in the near future.

Most maturing industries experience arcs of success and challenge. One of the most useful ways to understand and address the fits and starts felt in any economic sector is to bring together industry, government and academic leaders in the field. So was born Global Gaming Expo Asia, created by the American Gaming Association and Reed Exhibitions—co-sponsors of the G2E portfolio of events.

For the past seven years, the AGA and Reed have staged the flagship G2E event held in Las Vegas. Although it has consistently attracted hundreds of attendees from Asia, we recognized the call for the same caliber of trade show and conference in Asia to specifically address the needs and interests of the industry’s fastest-growing marketplace.

Macau hosted the inaugural G2E Asia last year and it proved to be a tremendous success. An overflow crowd of 3,000 gaming professionals from 50 nations attended, and the trade show space sold out. G2E Asia 2008 will be held June 3-5 at the Cotai Strip Convention and Exhibition Center in the Venetian Macao, and attendees will witness a dramatic transformation of the event just one year removed from its debut. Most striking will be the sheer size of the affair—this year’s show will feature nearly 90,000 square feet of exhibition floor space—three times the size of last year’s space.

We learned a great deal from our inaugural event about the types of exhibits that are of interest to the Asian marketplace as well as how much and what kind of educational content should be featured.

This education called on us to include more local experts on our G2E Asia program advisory board, which has allowed us to attract a notable roster of speakers, and helped develop sessions that truly speak to the needs of the entire Asian gaming market. In addition, a number of valuable new features will be introduced at G2E Asia, including the debut of specialized exhibit pavilions on the show floor and an extra day of conference content.

In fact, expert-led conference sessions will examine crucial issues in the Asian gaming markets and provide gaming industry professionals with three full days of conference content in a new multi-track structure. Eight distinct conference tracks will address critical aspects of the gaming industry, including Asian Markets, Casino Design, Corporate Social Responsibility, the Gaming Floor, iGaming, Macau Market, and Security and Surveillance. All the sessions have been geared to help industry, government and community leaders meet the challenges facing Macau, Singapore and the broader Asian region.

Economists and developers will debate the potential impact of prospective expansion in Thailand, Korea and even Japan. The value of integrity and transparency in gaming operations is also sure to be put on the table for discussion.

Another critical issue that will be a focus at G2E Asia is corporate social responsibility. It is a key component of the sustainability of our industry, and its importance cannot be overstated, especially in relation to problem gambling.

I anticipate that discussions around the subject of marketing will produce one of the most interesting sessions at G2E Asia. Experts in the field will suggest how best to determine and satisfy the needs and expectations of the various sub-markets in Asia. Database marketing, another subject that should garner attention, is very popular in the U.S., but has yet to be reviewed to determine the validity and form of its use in Asia. The need for creative advertising strategies will also be studied in light of the various regulations in the region, some of which ban the mention of gambling altogether.

G2E Asia also is addressing the need for educated supervisors and managers in the region with the debut of the G2E Asia Gaming Management Certificate Program. This one-day training workshop has been developed through a partnership with the University of Macau and UNLV Singapore.

The advent of G2E Asia last year established a forum for considering the many similar challenges and opportunities we in the gaming business face no matter what continent we call home. There is much we can learn from each other, and there is no better example of the value of cooperation and partnership than the success of the inaugural G2E Asia, which I’m certain will be repeated this year and for many years to come.

Just as with our flagship G2E event, G2E Asia is an event by the industry and for the industry, and the input and participation from gaming executives in Asia is the key to our continued success. In fact, I am convinced that such collaboration will be a key to continuing success for the entire region and the overall global gaming entertainment industry. My hope is that G2E Asia can be a catalyst for this movement, resulting in solutions that benefit us all.

By Frank Fantini   Fri, May 30, 2008

First-quarter earnings—or in many cases, loss—reports were even uglier than expected, as casino company after casino company saw revenues, cash flow and earnings fall.

And it did not matter how big or small the company or what segment it occupies. They all fell—big companies with Tiffany properties like MGM Mirage, geographically diversified operators like Harrah’s and Boyd, regional little Tiffanies like Ameristar and Pinnacle.

What has become clear is that casinos now are cyclical like cars and cruises.

And yet, we are not in a recession, at least not by government statistics.

Perhaps Ameristar CEO John Boushy best described the phenomenon. We are in a discretionary recession, he said. By that, Boushy meant that consumers are making decisions on how to spend their discretionary income, and it is more often than before going to gasoline or groceries, not entertainment. Or, at least, they are spending less on entertainment.

The latter seems to be the case. Illinois provides some evidence. Casino visitation fell 9 percent in April, but the amount casinos won dropped 19 percent. Obviously, people stayed away from casinos. And those who visited spent less.

OK, so casinos are in a funk, but there may still be investment opportunities elsewhere in the gaming sector.

Here are a few thoughts in that regard:

Asian Gaming Boom

Asia has been, and promises to be, the big growth story for casinos for a long time to come. Already, companies such as Las Vegas Sands, Wynn and MGM Mirage have projects and partners in Asia.

But there are lots of other publicly listed companies in the region that are participating in the growth.

Some of them, such as Elixir Gaming Technologies and Melco PBL, trade in the United States. Many others trade in Hong Kong or elsewhere, but may be worth a look.

Among casino companies: Hong Kong-listed Galaxy; Australia-listed Crown Gaming; Singapore-listed Genting. And a wild card—Amazing Holdings, a London-listed stock angling to build a casino in Taiwan.

Suppliers include Elixir mentioned above, Aristocrat and Ainsworth in Australia, Aruze and Sammy Sega in Japan, and U.S.-listed PacificNet.

Another interesting approach is AMAX. This Hong Kong-listed company aggregates the VIP casino junkets that fill Macau’s higher-roller gambling rooms, in this case for Melco PBL.

There are more, but this should provide enough homework to get started.

Before we leave Asia, we should note that Wynn Resorts is producing record revenues in Macau.

Internet Gaming

Always speculative, and once high-flying, the internet companies got killed when the United States government began cracking on down i-gaming.

But all of that is old news. Now, i-gamers are coming back, both because they are resuming growth after having lost their American customers, and because they have learned how to reach out to new markets elsewhere in the world.

But the U.S. government, once their bane, could become their friend if Rep. Barney Frank and the Poker Players Alliance win legalization of i-gaming in the U.S., as appears more likely today than it did two years ago.

And European governments might give a boost, too, if they bow to pressures from the European Union to break up their government gambling monopolies and allow companies to compete in their countries.

Publicly listed companies that stand to benefit from American and/or European liberalization include Party Gaming, 888, BetAndWin, and bookmakers such as William Hill and Ladbrokes.

Software suppliers such as Cryptologic and Boss Media will benefit from any i-gaming explosion.

Meanwhile, even without liberalization, GigaMedia is a fast-growing company focusing on Asia.

Supply Side

Suppliers, of course, benefit from all the international casino growth, plus the proliferation of slots in the United States.

In addition to companies mentioned above, the suppliers include some well-known names: IGT, Bally, WMS and Shuffle Master.

It should be noted that WMS knocked the cover off the ball last quarter, and promises more of the same. And Bally has been abuzz about its improving business outlook for some time, even as the stock weakened.

Government Lotteries

Lotteries remain the stealthy way for governments to expand gaming, whether to allow lotteries to run VLTs or slot-like keno, or to use their expertise and systems to extend into slot and amusement-with-prize systems.

The two best-known publicly listed companies are Lottomatica in Milan, Italy, and Scientific Games. But Athens-listed Intralot is the second-largest lottery company, and growing aggressively.

Finally, for the brave and the patient, casino companies are selling at low levels and should go much higher when the economy turns.

So, there are a bunch of names—without recommendation as buys, sells or holds—to put on your radar screen.

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 GGB Staff   Fri, May 30, 2008

Alabama officials have filed a lawsuit in U.S. District Court challenging the authority of the U.S. Department of the Interior to permit video gaming machines in gaming halls operated by the Poarch Band of Creek Indians on tribal lands.

The tribe has sought video gaming under the Indian Gaming Regulatory Act, since the video machines are currently legal at racetracks and off-track betting parlors. Tribal officials appealed to the Department of the Interior after attempting to negotiate a compact with the state.

Interior Department officials said they were going to permit the tribe to install the machines under IGRA. (The agency refused to order implementation of another request from the tribe for permission to run poker and other card games.)

“The Department of the Interior’s recent actions represent a complete disregard for fundamental principles of states’ rights and an arrogant lack of respect for the people of Alabama,” Alabama Attorney General Troy King said in a statement after filing the lawsuit. “Federal bureaucrats simply lack the authority to override the will of the people of Alabama by allowing casino gambling to invade our state. I will not stand idly by and allow them to do so.”

By GGB Staff   Fri, May 30, 2008

Attendees at last month’s Canadian Gaming Summit got an unusual spin on the market in a conference session titled “A View from the Top… Off the Record.”

The information was delivered by Rob Scarpelli and Lyle Hall, both of HLT Advisory Inc. The two oversaw a series of confidential interviews with top Canadian gaming executives and officials from the private and public sectors.

The general conclusion was that Canada is a market nearing maturity. A flattening growth curve can be seen across all sectors of gaming.

For casinos, the payback period on capital investment is getting longer, and increases to the supply of slots and tables are not generating additional income in the same proportions as previously.

Canada has at the provincial level a large public-sector involvement in casino ownership. However, it is felt that there is a lack of consistency across these jurisdictions. More involvement by the private sector might result in better operations, according to the respondents.

Questions about the personnel situation revealed that casinos are having difficulties training and retaining staff. Turnover at some properties can be 30 percent annually. The competition for qualified labor and management is an issue, on several levels. In jurisdictions with government ownership, officially regulated pay scales make it difficult to compete with the private sector for top managers. Another complicating—and expensive—factor can be artificial constraints on staffing levels.

For success into the future, respondentsbelieve the industry needs to work on a number of areas. These include a continued focus on responsible gaming, a more customer-oriented viewpoint and an increase in non-gaming amenities. In general, the industry needs to be thinking more on a strategic level.

The main issues to be resolved are regulatory alignment on a national level, the labor situation, infrastructure replacement and satisfying any unmet demand.

By GGB Staff   Fri, May 30, 2008

Jamaican Prime Minister Bruce Golding took the occasion of the 2008/09 budget debate in the House of Representatives last month to formally announce the government’s decision to allow casinos in Jamaica.

Golding went on to reveal that the government has already entered into an agreement with the developers of the Palmyra Resort & Spa at Rose Hall, operating under the name Celebration Jamaica Limited, to build the Caribbean island nation’s first casino resort. The $1.8 billion project will feature a 75,000-square-foot casino and sports book, a hotel with 1,500 of the 2,080 total new rooms, restaurants, meeting space, retail space, a spa, state-of-the-art disco and other amenities.

The resort will be built on 65 acres in Rose Hall, St. James, adjacent to the existing Palmyra Resort & Spa. Across the road are Jamaica’s three championship golf courses. The site includes approximately one kilometer of beachfront property, and is less than 15 minutes from Montego Bay International Airport.

Dennis Constanzo, president of the Palmyra Resort & Spa, said, “The casino is just a fraction of the investment. We want to build a world-class destination, which will result in the creation of thousands and thousands of jobs.”

The project surpasses the official minimum requirements for casino development, which are:

    • minimum investment of US$1.5 billion;

    • construction of no less than 1,000 hotel rooms; and

    • casino component no more than 20 percent of total project.

The prime minister also spoke of some changes to a project agreed upon earlier with the Tavistock Group. Tavistock will increase the size of its Harmony Cove development from 4,500 rooms to 8,500 rooms and invest an additional $1 billion to $2 billion.

Said Golding, “These will be configured in a cluster of nine hotels with a stupendous array of facilities and amenities.”º

Tavistock also agreed to changes to its previously negotiated arrangement regarding slot machines. The company got an exclusive license from the previous administration to operate slots within a 10-mile radius of Harmony Cove. This would have blocked further development in the desirable region, which includes Rose Hall.

Also last month, the Jamaica Observer reported that an unnamed local hotel operator is interested in applying for a casino license, but does not meet the minimum requirement of 1,000 rooms. The operator does have the required $1.5 billion to invest, according to the report.

Wayne Cummings, president of the Jamaica Hotel and Tourist Association, would not reveal the name of the operator, who is hoping for a review of the requirements or to be grandfathered in under existing rules.

“We have always existed in Jamaica on a smaller scale, but now a main avenue of investment may have been opened up, and there are people who may want to consider it,” said Cummings. He spoke of “an opportunity for investment which should be taken advantage of by Jamaicans and others.”

Tourism Minister Edmund Bartlett may have hinted at a way around the problem while speaking about the potential for a license for the top-end properties being developed at the eastern end of the island. Bartlett said the requirement concerning the number of rooms could also include villas spread across a property, and did not necessarily refer to a hotel tower.

By GGB Staff   Fri, May 30, 2008

For the first time since the 2003 tribal/state gaming compact was signed, Arizona’s 22 Indian casinos’ revenues declined over the year before. The state’s casinos have been operating since the 1990s.

Although profit for Indian casinos is a closely guarded secret, the amount of money they contribute in total to the state in taxes is known. In the first quarter of 2008 they paid $24.4 million, which is 1 percent less than the same period the year before. The state collects between 1 percent
and 8 percent of the profits, depending on the individual casino.

That figure is still higher than the average quarterly figure for the past three years, $22.3 million, according to Sheila Morago, executive director of the Arizona Indian Gaming Association. She said that wasn’t surprising, considering that the industry depends on disposable income.

The Arizona Lottery is also seeing a slight decline of 2.2 percent for most of its instant winner scratch-offs, a dip that was only reversed for the overall total by the popularity of games which have a large jackpot. They brought the overall total up 2.45 percent for the last quarter.

By GGB Staff   Fri, May 30, 2008

Last week’s ruling for the Rincon Band of Mission Indians could affect tribes, state governors and gaming compact negotiations nationwide, some reports said. Others noted that it may simply give California tribes leverage in compact negotiations, depending on the outcome of the state’s planned appeal.

U.S. Magistrate Judge William McCurine Jr. in San Diego gave the state and Rincon 60 days to renegotiate a compact covering the Harrah’s Rincon Casino and Resort near Valley Center. The casino runs 1,600 slot machines. The tribe has been trying since 2003 to get 400 to 900 more to compete with tribes that agreed to share revenue on thousands more machines.

Governor Arnold Schwarzenegger was ready to amend Rincon’s 1999 compact for 900 new slots in 2006, but he wanted revenue the state calculated at $37 million a year while leaving Rincon an additional profit of $1.7 million. Rincon says the state sum would have equaled 79 percent of casino profits. (In 2005, the tribe kept $61 million of $250 million in casino revenue.)

The state conducted those negotiations in bad faith, McCurine wrote in his opinion. “It is difficult to regard the state’s proposed plan as anything more than a tax when it functions as a tax,” he said.

Shared revenue would go to the state general fund at Schwarzenegger’s insistence. But federal law allows tribal gamers only to pay fees for specific purposes such as mitigating casino impacts, the judge wrote.

The court saw the state’s offer of an exclusivity zone for slot operation, where revenue sharing would cease if non-tribal gaming machines started, as an intangible redundancy under existing law. Commercial gaming machines are illegal under the state constitution, and the amendment to it that authorized tribal casinos allows only tribes to run slots. “The state must provide other meaningful concessions to Rincon,” the judge wrote.

“We are disappointed in this unprecedented trial court decision,” said a Schwarzenegger spokesman who denied bad-faith dealings. The state last week was seeking a stay on the order to negotiate a new compact within 60 days. Beyond that deadline, the state and the tribe would face mediation.

By GGB Staff   Fri, May 30, 2008

Phil Hogen, chairman of the National Indian Gaming Commission, wants to wind up implementation of proposed rules that might define many unregulated Class II bingo machines in tribal casinos as Class III slot machines subject to various states’ rules and revenue sharing. Tribes seeking more “consultation” have delayed the progress Hogen wants, and he says he resents congressional suggestions that even more talk should be required by new law.

After the federal Interior Department dismissed 11 tribes’ off-reservation casino applications in January over new emphasis on “commutability,” U.S. Rep. Nick Rahall (D-West Virginia) proposed a House bill that would require “regular and meaningful consultation and collaboration” with tribal officials as agencies develop any policy affecting tribes. Rahall was also influenced by the lengthy Class II debate.

“I think the proposed act of Congress that is the House bill would do a disservice to us, the regulators who have a job to do,” Hogen told the U.S. Senate Committee on Indian Affairs. NIGC would probably have to hire more staff to handle lawsuits that could result from more consultation, Hogen predicted. In the words of one report, he said that “tribes often don’t consider consultation adequate unless federal regulators agree with them.”

J.R. Matthews, vice chairman of the Quapaw Tribe of Quapaw, Oklahoma, retorted that “the NIGC has a pre-determined decision… and they tell us they are for change, but they don’t listen to us.”

Hogen would disagree after numerous comment periods and extensions on the Class II changes. “The thing is, I’ve got to get this done,” he said. “I mean, I’ve been at it now for more than five years. It’s time to draw this bright line so the industry, the manufacturers, the tribes and the states know what’s going on.

“Right now, there’s confusion,” Hogen added. “That’s not good for the industry, and if and when it appears that there’s a loss of integrity in the system, then the goose that laid the golden egg will be at risk. I don’t want to be responsible for that.”

By GGB Staff   Fri, May 30, 2008

What began in early 2007 as a request to invest €2 billion on Vietnam’s Phu Quoc island has grown into a €6 billion project.

Pearl of Asia Development Corp., an entity of Switzerland’s Trustee Suisse, will construct a 3,200- hectare complex on the resort island. The village-like Pearl of Asia will feature a casino area, luxury hotels and villas, a marina with mega-yacht capacity, and the now-usual cultural and retail amenities.

The report received confirmation from a provincial official, the director of Kien Giang Province’s Department of Culture, Sport and Tourism, Le Minh Hoang, according to the Daily. The official said the plan has won approval in principle.

As of 2007, Switzerland was the fifth-largest European investor in Vietnam, according to Vietnam News Agency.

Meanwhile, U.S.-based Oaktree Capital Management has presented its plan for a 500-hectare, $5-billion resort in Danang, the Vietnam News Agency reports.

The plan features a casino open to foreign tourists, hotels, a golf course, sports complex, spa, villas, helicopter landing pad and cable cars.

An additional 1,500 hectares have been okayed for expansion of the original concept.

“The project will mainly attract travelers from Europe, North America and Southeast Asia and the authority continues to call for other potential investors interested in taking part in the project,” said Le Canh Duong, deputy director of the Danang Investment Promotion Center.

Chairman of the Danang People’s Council, Nguyen Ba Thanh, granted the developer permission to go forward with the project.

By GGB Staff   Fri, May 30, 2008

Only four of the six casino concession holders in Macau ended 2007 with positive net numbers. Local Macau media reports that Galaxy Casino, SJM, Venetian Macao and Wynn Resorts posted net profits for the year, while Melco PBL Gaming and MGM Grand Paradise finished in the red.

• The biggest winner was Stanley Ho’s SJM, which showed a profit equal to around $234 million. Then came Venetian Macao with $200 million, Wynn Resorts at $188 million and Galaxy Casino with $71 million.

• Melco PBL Gaming had a net loss of $132 million for 2007 plus a deferred loss from 2006 of $49 million.

• MGM Grand Paradise started operations in mid December 2007 and ended the year with a loss of over $90 million.

By GGB Staff   Fri, May 30, 2008

Popular South Korean vacation and honeymoon destination Jeju Island, also known as the “Island of the Gods,” is the site of a new $3.6 billion resort project for Berjaya Land Bhd.

Malaysia-based Berjaya got the provisional ok from the Jeju Free International City Development Center, or JDC, which will own 19 percent of the joint company to be known as Berjaya Jeju Resort Ltd. The agreement will become official in July with dedication of initial capital of $30 million.

Berjaya Jeju will be the master developer of the project, which will include an international-class hotel and condominium, casino, medical facilities, and retail and cultural offerings.

The goal of the development is to attract tourists primarily from Asia, the Middle East and Korea, using Berjaya Group’s global marketing network.

Berjaya has operations in Malaysia, Mauritius, Seychelles, United Kingdom, Singapore and Sri Lanka.

By GGB Staff   Fri, May 30, 2008

The launch of the Maharajah Casino ship last month was joined by the news that Goa intends to make available another five licenses for shipboard casinos. If the plan goes through, it will bring to eight the number of gaming vessels plying the waters just off this popular tourist destination.

The plan has met with a huge response, according to Goa Chief Secretary J.P. Singh.

“The cabinet has approved ‘in-principle’ to grant five more licenses to operate offshore casinos in the state,” Singh said, according to a report in TravelBiz Monitor. “We have received a total of 15 applications for fresh licenses to operate floating casinos, but only five licenses have been approved.”

Two of the five “in-principle approved” licenses are said to be going to local operators Goa Coastal Resorts and Recreation Pvt. Ltd. and Victor Hotels and Motels Ltd. Also among the rumored winners is Cannosa Investment of Hong Kong, one of the companies that was at the center of the battle for control of Nepal’s casinos.

Other proposals reportedly have come from Creative Gaming Solutions Pvt. Ltd., UB Infrastructure Projects Ltd., Herald Publications Pvt. Ltd., Highstreet Cruises and Entertainment Pvt. Ltd., V. M. Salgaoncar and Bro Pvt. Ltd. and Hotel Leela Ventures Ltd., all from India. From the U.K., interest has come from Clermont Leisure and Victoria Club, according to TravelBiz Monitor.

The government has also decided to collect an additional fee of 100,000 rupees—$2,500—from hotels that have casino licenses. There are currently about 10 hotels licensed and offering some slot machines on premises.

By GGB Staff   Fri, May 30, 2008

The major U.K. casino operators are pulling back from previous plans to bid on 16 new licenses should the long-overdue Casino Location Order become law.

The Mail on Sunday quotes an unnamed industry insider as saying, “Enthusiasm has evaporated.”

Part of the blame is put on an increased tax, to be 24 pence on each pound of profit. Another factor was the comment last year by the former culture secretary that casinos might not be allowed to advertise.

By GGB Staff   Fri, May 30, 2008

Another two new slot casinos from Estonia’s Olympic Entertainment Group have recently opened, one in Ukraine and one in Poland.

In Kiev, capital of Ukraine, the €1 million, 235-square-meter Dorogozychi is in a densely populated area near the metro station of the same name. The casino, with 43 slots and a bar, is the 22nd OEG property in Ukraine.

In Warsaw, Poland, the Metropol is the first re-branded property acquired in the takeover of Casino Polonia. An extensive renovation of the interior and exterior, together with the upgrading of machines, cost €2.8 million.

The 550-square-meter Metropol has an underwater world theme, 70 slots and a spacious bar area. It is the seventh OEG property in Poland, including five still operating under the Casino Polonia brand.

By GGB Staff   Fri, May 30, 2008

Ireland is getting closer to having a regulated casino business. According to Gambling Compliance, a parliamentary committee has been created specifically to set up a regulatory body and write new gaming laws. The new group will study the report by the Casino Review Committee set to be released in the coming weeks.

In February a new bill was introduced that would require casinos and private gaming clubs to comply with European Union money laundering guidelines.

By GGB Staff   Fri, May 30, 2008

Storm International’s new Shangri La casino in Yerevan, Armenia, held its grand opening May 2.

Storm became a partner in the existing Cleopatra Casino several months ago with the intention of developing a luxury facility that would meet international standards.

The complex is currently 2,400 square meters, with planned expansion to 3,200 square meters by the end of 2008. The main gaming floor features 12 tables, with the possibility to add tables as required. The casino has a poker room and a multi-level slot area with 85 state-of-the-art machines. Three bars, a restaurant and a fully equipped stage for shows and concerts complete the offering. Parking is available for 100 cars.

“Together with my partners we believe in the future of Armenia and are proving our belief by introducing a facility that will meet and exceed the highest International standards,” said Michael Boettcher, president of Storm International.

By GGB Staff   Fri, May 30, 2008

It was just six months ago that Petter Nylander, head of online betting firm Unibet, was arrested in the Netherlands on a French warrant, accused of breaching France’s monopoly laws regarding betting. Now, in a complete about-face, the French budget minister, Eric Woerth, has told Le Parisien that the online betting market could open up for a testing period within the next two years.

The move is said to come from the Sarkozy government. President Nicholas Sarkozy has previously indicated he is open to experimentation in the online betting market.

Under the as-yet unformulated plan, online betting companies would be licensed by the French authorities and be subject to the same rules and regulations as the current monopoly horse-race betting operator, Pari Mutuel Urbain, or PMU.

Online casinos and online poker rooms also could be licensed, but Woerth said that further study would be necessary first. At the moment, one area where online gaming is not expected to make much progress is in online slot machines. Woerth said this form of gaming is considered too addictive.

According to a report at Online Casinos.com, the new French system for online betting could be developed in cooperation with other E.U. member states in similar legal positions regarding Brussels. A steering committee is looking at the situation.

Meanwhile, the Copenhagen Post reports that Denmark may also be ready to explore a new future for online betting.

Denmark has already been the target of an E.U. lawsuit over the monopoly of its national games provider, Danske Spil. Faced with the prospect of losing the suit—and the fact Danish players will continue to seek out alternative online providers anyway—the reality of the situation is beginning to set in.

Anders Samuelsen, a legislator who belongs to the political party New Alliance, which supports an open-market policy, believes the important thing now is for the government to be able to count on revenue from betting in the future.

“We must be able to guarantee that the money is still available,” said Samuelsen. “And by selling licenses to international gaming companies, a new source of income will be established.”

By GGB Staff   Fri, May 30, 2008

A retired Michigan banker opening a Detroit-area horse track in July says he will pay $100 million for 40 percent of the Greektown casino in Detroit. The owners need the cash to meet overdue income-to-debt ratios set by the Michigan Gaming Control Board.

Jerry Campbell’s offer was in fact announced days after the April 30 deadline GCB had set for the Sault Ste. Marie tribe to raise at least $79 million to match the board’s 2007 income benchmarks for the tribe’s commercial casino. GCB, which had threatened a forced sale of the casino if the tribe failed, was due to consider the proposal and needed approvals at a meeting last month.

The payment from Campbell’s Entertainment Interests Group LLC in Bloomfield Hills will include $21 million “to pay off former stakeholders,” one report said. Several small investors hold about 10 percent of the property.

But the proposed purchase was thrown into question in May when the Michigan Gaming Control Board gave Greektown a mid-June deadline to complete the sale.    

Greektown is the last of Detroit’s three casinos to be building permanent facilities state law requires. While some observers note that it is having cash-flow problems, they say it is profitable.

By GGB Staff   Fri, May 30, 2008

Station Casinos announced plans for a major development that is not only the most ambitious project in the company’s history, but also the most expensive project in the city of Las Vegas.

The company has tentative plans to build a meta resort near Tropicana and the I-15—the current site of Wild Wild West—that will be bigger than MGM Mirage’s CityCenter.

The project, that bears the working title “Viva,” would carry a price tag of $10 billion. It would be built on 110 acres—CityCenter is on 66 acres—and feature at least three casinos and three hotels with as many as 10,000 rooms.

The first phase of the project would open with three hotels and 5,200 rooms accompanied by one large casino.

“As we started looking at the site, originally we were talking about one hotel-casino,” Station Casinos President Lorenzo Fertitta said. “But as we got more property we decided we have the ability to put multiple properties on there and create a whole development.”

He added that the company has been working on plans for the project for the past year, and that it is on top of the company’s list of developments. Presumably, this means projects like the one proposed for Reno, as well as other Las Vegas projects, could be put on hold.

Of course, just because some details of the project have been released doesn’t mean that it will be taking shape anytime soon.

“It takes years to get a design completed,” said Station Casinos Chairman and CEO Frank Fertitta III. “Point of fact is we’re going to be in a position where CityCenter is going to be open. We’re going to have some visibility on how they’re doing before a project like this is even going to be in the ground.”

The delay might also help the company when it comes to attracting lenders, according to Deutsche Bank gaming analyst Bill Lerner.

“When you have land and you have expertise, money will follow,” Lerner said. “The good news is they don’t have to raise the capital for it right now. The credit market will work itself out over a period of time.”

Lorenzo Fertitta said the company is talking to all potential partners and investors, as well as hotel operators who might be looking to enter the Las Vegas market.

“There isn’t a hotel company we haven’t been talking to,” Frank Fertitta added.

The company has no time frame for the project right now, but a statement from Lorenzo Fertitta might shed some light on how far out construction might be: “It will be a pretty significant development and a significant property that will keep us busy for the next 10 years.”

By GGB Staff   Fri, May 30, 2008

Bashaw (see interview, page 62) is the former executive director of the New Jersey Casino Reinvestment Authority; Barr is the former president and CEO of Caesars Entertainment. They did not release details of the proposed project until a construction permit with the state became public.

The project would be the latest in a string of mega-resorts in Atlantic City. Revel Entertainment is currently building a $2 billion casino resort on the opposite end of the Boardwalk; MGM Mirage has plans for a $5 billion casino resort near Borgata; and Pinnacle Entertainment is still deciding whether to proceed with its proposed $2 billion mega-casino on the site of the old Sands. The onetime airport, Bader Field, also has been proposed as a multiple casino site.

Bashaw says his planned mega-resort will only enhance the city’s prospects for a vigorous future. “I’ve always been a big believer that a rising tide lifts all boats,” he said in an interview. “I think the developments on the drawing board are all going to come into the marketplace and take Atlantic City to the next step, including Bader.”

His proposed resort would “create a nice rhythm on the Boardwalk,” Bashaw added.

In preparation for the proposed project, AC Gateway has assembled about 14 acres of land. Construction could begin as early as next year, but tight credit markets have put a damper on financing for major casino
projects. Pinnacle said in February that its casino resort is on hold until the credit crunch lets up.

By Roger Gros   Fri, May 30, 2008

The time has come to draw the line. Casinos  have been hurt dramatically by the anti-smoking advocates. Revenue has dropped, jobs have been lost and customers have been disappointed.

But more importantly, our society has been damaged by these supposed do-gooders.

It’s not even a debate anymore. The evidence is overwhelming that the introduction of smoking bans reduces gaming revenues by as much as 20 percent, depending upon the availability of competing gaming venues that permit smoking.

From around the world the reports are coming in on the impact of smoking bans.

In Australia, gaming in the state of Victoria has been demolished by the extraction of smokers from the marketing pool. And other anti-gambling trends have exacerbated an already-serious problem.

In the U.K., casinos and bingo halls have experienced such a loss of business that many bingo halls have closed and some of the smaller casinos may soon follow suit.

French casinos are also teetering on disaster as tobacco smokers were shut out earlier this year.

In Illinois, six months of a smoking ban have seen revenues plunge more than 20 percent on most of the boats.

Colorado casino revenue plunged more than 10 percent the first two months of a smoking ban.

Atlantic City casinos have endured a partial smoking ban for a year and are soon slated to do away with smoking altogether. Along with increased competition from Pennsylvania (where smoking is still permitted) and the economy, the city’s 30-year win streak of increasing revenues was ended in 2007.

These revenue declines have caused job losses and had a very real impact on the lives of investors, employees and customers.

And it’s time to fight any further expansion of this unfortunate trend. I’m guilty of not being forceful enough in my opposition to a smoking ban.

As a dealer in Atlantic City for six years, I experienced firsthand the rudeness of smokers at gaming tables. It was very annoying, especially since I never smoked in my life. But I knew what the job was before I started and didn’t have the right to complain—at least to management.

But if smokers were rude at my tables, the anti-smoking zealots are purely hateful when it comes to imposing a smoking ban. They accuse casino executives of not caring about—even plotting against—the health of their employees and customers.

The fact is they care very much about the employees. They want their employees to thrive and continue to be employed by their company. When revenue drops as much as it has as a result of smoking bans, layoffs are inevitable. So not only do the smoking-ban fanatics cause a loss of jobs, but they also impact the very lives of casino employees.

And casinos certainly care about their customers. It is those very customers who enjoy smoking who will find another place to gamble where they can smoke if a ban is introduced.

It’s time we fought back and stopped accepting the “facts” as demanded by the anti-smoking zealots. The body of work on secondhand smoke is not all they pretend it to be. A study published recently in the British Medical Journal found that secondhand smoke does not increase the risk of heart disease or lung cancer. Now to be fair, this is a controversial study that many disagree with, but that may be because it challenges the very assertion that secondhand smoke is deadly in any form.

Absolutely no attention is paid to the enormous technological leaps that have been made in recent years with air-filtration. The top-of-the-line equipment can filter all the air in a large casino in about five minutes.

So, the facts about the impact of smoking bans on casinos are well-known. They result in job losses, precipitous revenue declines and a devaluing of the casino company.

Do we know enough about secondhand smoke to take these drastic steps? And have we researched the viability of air-handling systems and their ability to eliminate secondhand smoke? I think the answer to both of these questions is “no,” and I think it’s time we learned more before we turn our businesses over to people who know nothing more than their anti-smoking fanaticism.

 It’s time we drew that line in the sand.