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A Cautionary Tale

Casino commitment in an era of era of saturation

A Cautionary Tale

When we heard that Sarkis Izmirlian wanted to make a big splash at G2E Asia 2013 to introduce his Baha Mar resort in Nassau, the Bahamas, to the Asian market, those of us who were working on the conference and trade show were excited. After all, Izmirlian had taken a great leap of faith to propose the huge development in a country that had really been passed by in the gaming industry.

Ever since the Atlantis had debuted almost 20 years ago, the Bahamas was essentially a closed jurisdiction. The Atlantis, originally built by Sol Kerzner and Sun International, completely dominated the market, even though it too had faltered and was sold to Brookfield Asset Management at a fraction of its cost.

So the idea that another massive mega-resort could be operated successfully in the Bahamas was something of a question and an opportunity. Izmirlian had conceived of the property prior to the recession, and even signed up the at-that-time-powerful Caesars Entertainment. But after the recession hit, Caesars backed out and Izmirlian was left empty-handed.

But then he reached an agreement with a variety of Chinese entities, mostly connected to the Beijing government, and the project was back on.

At G2E Asia, Izmirlian was introduced by Global Gaming Asset Management (no connection with GGB), whose principals, Bill Weidner and Brad Stone, were grizzled veterans of the gaming industry and integral parts of the successful opening of the Macau projects of Las Vegas Sands. Together, the group was persuasive that Baha Mar was a concept that hadn’t been tried anywhere in the world.

For a year after G2E Asia, the property was humming along with Chinese laborers and an aggressive marketing campaign that promised great things at Baha Mar. And then it ground to a halt. Disputes between Izmirlian and his Chinese masters proved to be the undoing of the property, and today it sits vacant and decaying on a Bahamian beach.

So, can you blame companies for backing out of similar grandiose plans when the market changes? Korea is seeing an exodus of companies that were originally interested in integrated resorts open only to foreigners after the Chinese crackdown on casino visits intensified and the flow of cash went from a fire hose to an eye dropper.

Those companies that invested in PACGOR’s Entertainment City in Manila are struggling, stuck in the pipeline of billion-dollar promises to the Philippine government. And plans for more massive gaming development in the country outside of Manila have evaporated.

Vietnam’s insistence on casino resorts costing north of $4 billion has discouraged even the most aggressive companies as officials continue to hem and haw about allowing Vietnamese citizens to gamble in country.

In Massachusetts, where billion-dollar projects were demanded, the competition from surrounding states has become daunting. The two Connecticut tribes, which operate two of the largest casinos in Massachusetts, aren’t going down without a fight. A satellite casino will challenge MGM’s Springfield development, and Wynn Resorts will have to contend with a tribal and possibly other commercial casinos close by, and increased competition from Rhode Island, all with a budget well north of $1 billion.

Even in New Jersey, where Atlantic City has fought valiantly to prevent in-state competition, politicians are demanding a $1 billion commitment for two casinos in North Jersey, even though rival casinos in Pennsylvania and New York will battle tooth-and-nail to retain and gain customers, and cause marketing budgets to compete with construction budgets.

So the lesson to be learned in this era of saturation is never commit to a price tag until and unless you’ve done a deep market study about what the traffic will bear. And don’t forget gaming. This lesson has been learned already in places like Atlantic City (Revel) and Las Vegas (Fontainebleau). Izmirlian realized this when he brought in GGAM, but bad financing and impossible agreements sunk the project.

Will Macau realize the same hard lesson with the resorts slated to open in Cotai over the next few years? The Macau/Chinese government insistence on non-gaming attractions makes sense, but you can’t forget the engine that makes it all happen—gaming.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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