The first thing you notice when you enter an Olympic Casino property is that the personnel are smiling at you. A lot. So much so that you start to wonder if you aren’t suddenly much better-looking than life up until now has led you to believe.
Armin Karu, chairman of the three-man management board of Olympic Entertainment Group-OEG-laughs good-naturedly as he de-mystifies the phenomenon.
“They are collecting smiles,” said Karu, who founded the company in 1993. “Our people are trained to smile at the customer in an attempt to get the customer to smile back. When they succeed, they mark it down, and it counts towards their monthly total. Then, when it comes time to divide the tips, the number of smiles they collected during that pay period is part of the equation.”
So what stops an employee from just writing down a big number of smiles collected for a bigger share of the tronc? Social control: the employees keep a friendly eye on each other, just to keep it honest. The result is that visitors feel more welcome, while the employees with all that smiling end up creating a better work environment for themselves.
The practice of collecting smiles is just one of the things that have allowed this innovative casino operator from Estonia to prosper. OEG has managed to spread its particular brand of gaming throughout eight contiguous countries in eastern and central Europe, stretching from the Baltic to the Black Sea. And the corporate strategy calls for that number to grow to 10 countries in the next two years.
In general, the Olympic Casino is a very different product than most of its current competition.
“We have always represented what we call a Las Vegas-style gaming concept, where the slots and tables and bars and entertainment are all together,” said Karu. “In Europe it’s traditionally just gaming clubs with tables, quiet and smoky, and not fun. So we try to implement venues that are more enjoyable. Most of our casinos are slots-only casinos, but we still call them casinos because the environment that is created, the design work and craftsmanship are all done according to casino standards.”
The inspiration for the expanded gaming concept came from Karu visiting Las Vegas in the early 1990s. In June, Karu spoke with the Slovak Spectator in Bratislava, just days before the opening of OEG’s newest full casino there and the company’s first in Slovakia.
“I saw that casinos are about much more than simply gaming,” Karu said of his Las Vegas experience. “It is sophisticated, multi-level entertainment for people who value their free time. All the casinos in Estonia (in the early 1990s) were focused only on gaming. The quality of service was mediocre, no added entertainment was offered and the games themselves were outdated. This is when the idea was born to create casinos that offer an entirely different level of quality.”
One important element of all Olympic Casinos is the thought and effort put into the interiors. All of the company’s full casinos, no matter in which country they operate, are designed by the Estonian firm Meelis Press Architects. The company carries the name of lead architect Meelis Press and has worked on projects such as the Radisson SAS Hotel & Business Centre City Plaza in Moldova and the headquarters of Baltic ferry operator Tallink Group.
Press has worked both on full casinos and slot casinos for OEG. His work ranges from subtle, elegant interiors such as that of the Reval Park Hotel & Casino renovation in Tallinn, Estonia in 2005, to imaginative marble mosaics and hanging-garden effects of the Casino Sunrise in Warsaw, Poland. Press has also created fanciful interiors for some of the local Olympic slot properties, including exotic tropical and pirate themes, and a French cabaret style for the Moulin Rouge casino.
The interiors of Olympic slot casinos in other countries are often created by local architects, designers and contractors. The Olympic management team, coordinated by Chief Development Officer Meelis Pielberg, works closely with the outside firms on themes, floor plans and exterior elements.
David Kranes, a U.S. casino interior design expert, has said of the company’s approach, “Olympic Casino interiors are winning interiors. They are both beautiful and emotional. Their sensuous and delight-promoting designs enable strong experience and pleasure for their customers. They are, at the same time, contemporary and classical.”
More than Arcades
The investment in the interior design of the slot casinos in particular is a huge departure from the minimal effort that goes into the standard slot arcade. Each property features an attractive, full bar prominently situated in the room, where players and non-players alike can relax with a drink, listen to recorded music and socialize.
The machines in the Olympic slots-only casinos are not to be confused with AWP machines. These are modern, cutting-edge casino devices, with linked jackpots and state-of-the-art accounting and player tracking systems. A full 70 percent of the collective floor is occupied by IGT machines, with the rest a mix of Novomatic, Atronic, Aristocrat and others. And, we are not talking about $50 jackpots, either. The regulations regarding limits on stakes and jackpots differ per country, but stakes can be as high as €400 per game and jackpots up to €250,000.
The Reval Park Hotel & Casino was the first in Europe to launch a pilot project with the IGT EZ Pay IVS cashless system in early 2004, just months after the technology had been introduced in Las Vegas. Soon after that, the system was used in a new casino and eventually adopted throughout the Olympic Casino network.
Said Karu at the time, “Our main principle that has helped us to achieve the leading position in the casino market in the Baltic States is basically simple: You have to provide the client with the best games and the best technologies.”
A Growing Enterprise
Growth and expansion have been the watchwords of OEG in the area of business development. The first Olympic Casino was opened at the Tallinn Olympic Yachting Center in 1993. Ten years later, OEG was operating 14 casinos in Estonia, four in Lithuania and one in Latvia. Then, over the past four years, the pace picked up.
By 2008, OEG had 122 casinos operating a total of 202 tables and 4,690 slots in Estonia, Latvia, Lithuania, Poland, Romania, Ukraine and Belarus. Employees numbered around 4,000. Gross gaming revenue reached €148.3 million, which on December 31 was equal to $218.4 million.
To give an idea of how rapidly OEG is expanding, at the end of 2006 the group had 79 casinos in operation with a total of 125 tables and 2,912 slots. Revenue for 2006 was €98.4 million, about $130 million.
In 2007, new casinos were being opened at the rate of one every eight or nine days. OEG increased its properties by 54 percent, the number of gaming tables by 62 percent, slots by 62 percent and gaming revenue by 51 percent. Investment in the new properties totaled €92.4 million for the year. That might be a straightforward task-and-result for a single expansion project, but for OEG it involved adding new properties in four jurisdictions where the company was already operating, and starting from scratch in two others.
By the end of the first quarter of 2008, through an array of around 30 subsidiaries, OEG was operating 131 Olympic Casinos with a total of 5,228 slot machines and 216 tables.
In the second quarter, growth continued with four casino openings in Ukraine, two in Romania, one in Poland and one in a new jurisdiction for OEG, Slovakia. Some of these are new properties developed from scratch and some are existing properties acquired by OEG and given complete makeovers to rebrand them as Olympic Casinos. The third quarter kicked off with yet another opening, the 22nd Olympic Casino in Ukraine, and by the time you are reading this there will undoubtedly have been several more.
As the numbers show, the Ukrainian market has been a recent hotbed of OEG activity. The company has been active there with slot casinos since late 2004 and acquired five additional locations from the locally popular Eldorado group in September 2007. The €9.2 million acquisition opened the way for OEG to start operating table games inside the country.
Activity started early this year with the opening of a new slot casino in the train station of Kiev, the capital of Ukraine, on January 2. An investment of €1 million produced a 232-square-meter casino with an underwater theme-one of OEG’s go-to styles-and 44 slots, plus a bar.
The first of the rebranded, former Eldorado casinos was opened in late February. Now going by the name Olympic Casino Opera-owing to its location near the Ukrainian National Opera, in Kiev-it was the first Olympic Casino in Ukraine to have table games as well as slots. The €2 million project features nine tables and 37 slots, plus a full bar, in a space of 432 square meters spread over two floors. The interior has a tropical theme, which is another favorite of OEG.
The biggest project of the first half of 2008 was undoubtedly the opening of the Olympic Casino in Slovakia. The casino is situated in the 168-room Radisson SAS Carlton Hotel, in the center of Bratislava, the capital of Slovakia. The €4.7 million investment marked OEG’s entry into its eighth jurisdiction.
The new Olympic Casino features 11 gaming tables and 61 slots. The casino includes a stage and a spacious bar in a total area of 1,000 square meters.
Within days of the casino opening, it was the scene of a major media event. The occasion was the launch of Fashion TV Slovakia, which was ushered in with Fashion TV Week Bratislava, in cooperation with the Carlton Hotel, Bratislava River Center and Olympic Casino. Events included four days of pre-selection for the Miss Slovakia FTV 2008 competition in the Carlton Hotel, the grand opening of Fashion Club in the Carlton Bar, and a fashion party inside the casino. It was a good opportunity to announce that a new type of casino was in town, one which values the fun of entertainment.
Entering the Slovakian casino market was a coup for OEG. There were previously only two casino operators in the country-Casinos Slovakia with six properties and Regency Casinos International with one. The gaming license for the Olympic Casino in the Carlton was the first new casino license to be issued in Slovakia in the last 10 years.
Slovakia’s gaming industry, both public and private, saw €1.8 billion wagered on all forms of gambling in 2007, according to a report in the Slovak Spectator. Only €54 million of that was gambled in full casinos. However, €672 million was wagered on slot machines. Gaming companies in all sectors combined had a collective win of €415 million. The country has only 5.4 million inhabitants, but Bratislava is less than a one-hour drive from Vienna and two hours from Budapest.
In October 2006 OEG decided to go public. Listing on the Tallinn Stock Exchange, the casino operator became the first of its kind on the Eastern European and Baltic stock exchanges. The IPO presented 14 million ordinary shares in a range between 63 and 75 Estonian kroons-EEK-the equivalent of €4.026 and €4.793 per share at the time. An additional 1.4 million shares were allocated should the original offering be oversubscribed. This represented 20.4 percent of the share capital of OEG. Depending on the final number of shares in issue and the final share price, the total value of the company on the first day of listing was expected to be between €298 million and €361 million.
The IPO ran from October 2 through October 17. As it turned out, all 15.4 million shares were sold at EEK 73, equal to around €4.66555, raising €71.8 million in total.
What surprised everyone, though, was the interest in the IPO. Institutional investors subscribed 94.26 million shares, an oversubscription of around 7.5 times. These investors were allotted 12.6 million shares.
“This is a historic result,” said Lauri Lind, head of the equity market department of Hansabank, the lead manager of the IPO. “No Baltic companies have until now received subscription orders worth around €479 million in the course of an IPO.”
Karu saw the overwhelming success of the IPO as a vote of confidence in the company and in the Baltic gaming and entertainment business in general.
“In a little more than a decade, we have developed an entertainment service whose good quality and modernity is recognized by all colleagues from countries that have much longer casino traditions,” said Karu.
At the time of the IPO, OEG was operating 74 properties in five countries: the core Baltic States, plus Ukraine and Belarus. The company had already announced its goal to enter another five markets within the next three or four years.
“Our ambitions are notably higher than our current success,” said Karu. “This is the main reason we decided to list our shares.”
In September 2007, OEG shares began to trade as well on the Warsaw Stock Exchange. OEG had been present in Poland since acquiring the Casino Polonia group in April of that year, and following that up with the opening of the Olympic Casino Sunrise, Poland’s largest casino, inside the new Warsaw Hilton in May. The listing was significant, because now shares of OEG would be available to a wider range of foreign investors, including Polish pension funds, which were not allowed to invest in companies not listed on the
Going public positioned OEG for rapid expansion. Now that the company has almost completed its first major goal-to be operating in 10 countries-the energetic Karu has posed a new challenge.
Bigger and Better
At the OEG website, on the main investor relations page, Karu states his goal clearly and unambiguously in an open letter to investors, in a piece titled simply: “On the road to becoming a global casino and resort operator.”
Karu explains in the letter that OEG will now focus on developing destination hotel-casino resorts, with entertainment and other services, as well as on its existing business.
Karu said he is not talking about mega-resorts. He said that at this point, hotels with a maximum of 300 rooms would be manageable, with the appropriate scale of entertainment and amenities such as retail shopping. Karu gives a rough time frame of three to five years if the company has to develop a casino resort from the ground up, with a shorter period needed if OEG simply acquires an existing property.
On completing the original goal of being in 10 countries by 2010, Karu said they are studying a short list of three to five countries. Without identifying them, he said “some are in the region and some are not.”
Certainly challenges remain in the existing markets as well. Smoking bans, changes in operating regulations and potential increases in tax rates-which in OEG’s markets are nowhere near the crippling variety imposed in most Western European jurisdictions-are always just over the horizon. But looking at the methodical, sensible, smart progress the company and its management have engineered over the past 15 years does inspire confidence in many.