Panama, coming off of its sixth consecutive year of double-digit revenue growth, continues to defy expectations, as it seems there is no limit to the Panamanian appetite for gaming activities.
Will it continue, or are indications pointing toward a potential end to Panama’s hot streak? That probably depends on who you ask.
A History: 1997 to 2009
Panamanian casinos and slot halls are governed by Decree Law No. 2, which in 1997 privatized the then-state-run industry by setting out detailed laws and regulations for the country’s new private operators. Then as now, barriers to entry were relatively low, as complete casinos were permitted in any hotel of 300 rooms or more providing they were situated a certain distance from schools and hospitals, and that the proper approvals were gained from the national gaming authority.
By 1999, three private operators offered gaming activities at 18 venues throughout Panama City. This included six complete casinos, split evenly between Canada’s Thunderbird Resorts and Panama’s Alta Cordillera, S.A. (Alta Cordillera operated as Crown Casinos, and has since been acquired and expanded by Spain’s CODERE) and 12 Type “A” slot halls run by Spain’s CIRSA.
The years between 2000 and 2008 brought an additional 10 complete casinos and 16 new slot halls both from these operators and a few new entrants. The province of Panama (which includes Panama City) contains nearly 50 percent of the county’s total population, a somewhat larger percentage of its aggregate incomes, and over 70 percent of the country’s total available hotel capacity. However, fewer than a third of these newer venues were developed in the Panama province with the remainder opened in secondary and tertiary population centers/tourist destinations across the country.
Today, Panama’s gaming market is still very much dominated by the original players, though the largest facility in the market is currently operated by a more recent entrant. Between them, these four operators offer nearly 8,400 slot machines and nearly 250 tables. Sixty-five percent of these positions are located in Panama City.
• CIRSA operates 28 slot halls under its Magic, Money, Lucky and Fantastic brands as well as one complete casino under the Majestic moniker. While official numbers aren’t available, it is estimated that nearly 4,000 slots are distributed among these venues, 65 percent-70 percent of which are located in Panama City.
• Thunderbird Resorts operates six complete casinos under its Fiesta brand, and has recently received authorization to develop a seventh in the city of Veraguas. Thunderbird’s Fiesta facilities house 2,130 slots and 76 table games, just under half of which are in Panama City.
• Codere operates five complete casinos and a racino under its Crown Casino brand as of December 2008, and is awaiting the approval of a sixth, to be the company’s second operation in the port city of Colon. To date, Codere’s 1,606 slot machines are largely concentrated within Panama City’s limits.
With approximately 40,000 square feet of gaming space, Panama’s largest complete casino is the Veneto Casino in Panama City’s banking district-owned and operated by Silver Entertainment of New York.
Between them, venues operated by these four groups are estimated to have generated at least 85 percent of Panama’s gaming win in 2008.
Total gaming win at all Panamanian casinos and slot halls grew to $246.9 million in 2008, a gain of 14 percent over the previous year. State collections of gaming tax are broken down by type of operation (complete casino or slot hall) rather than type of game as provided by the JCJ.
Payments collected from complete casinos in 2008 increased only 4 percent year-over-year, while those collected from Type “A” slot halls increased an amazing 36 percent, implying substantial growth in gross gaming win at these venues-all of which are operated by CIRSA. This is in contrast to the trend in previous years, where growth was primarily driven by tables and slots at complete casinos.
Data gleaned from reports and press statements of Thunderbird Resorts and Codere indicate both operators’ revenue performance for same-store Panamanian gaming operations increased by approximately 10 percent between 2007 and 2008. In the case of Thunderbird’s operating portfolio, nearly 78 percent of this growth was driven by venues outside of Panama City. Over the same period, the number of same-store positions offered grew 16 percent at Thunderbird’s Fiesta facilities and just under 10 percent at Codere’s Crown Casinos.
This implies that the newer market entrants (referring to anyone who is not CIRSA, Thunderbird or Codere) would have incurred a loss of approximately 7 percent-10 percent on average in 2008. The reality is that this more than likely translates into a substantial year-over-year decline for just one or two of these newer operators.
That being said, we now have two very different perspectives on the accessibility and sustainability of Panama’s thundering growth going forward.
Back to the Future
All indicators lead to the conclusion that aggregate revenue growth will likely continue at least through 2009 and likely into 2010, though some operators will prove increasingly more successful at capturing it than others.
CIRSA has really fortified itself as Panama’s 800-pound gorilla. Already well distributed from a geographic perspective and with its flexible operating model, the group can continue to patiently tweak size and positioning of each facility in each of its markets in efforts to penetrate the demand base deeper than the competition.
If payments to the state for the first quarter of 2009 are any indicator, they continue to do just that. Casinos have been fairly flat the first quarter while CIRSA’s slot halls continue to demonstrate strong growth (over 20 percent).
For their part, casino operators will challenge this reality by seeking further geographic penetration in secondary and tertiary markets and will likely be successful on this front (in fact, both Thunderbird and Codere have already initiated such efforts with the JCJ, as previously mentioned).
Panama City may offer small niche opportunities for the development of new facilities by new or existing operators, as well. Already well-positioned geographically, however, casino operators will likely choose to focus on finding incremental growth via increased marketing/promotional efforts and continued enhancements to existing facilities via additional gaming positions and/or ancillary offerings. Accordingly, we can expect that resultant top-line growth will be tempered by profit erosion caused by increased marketing/promotional expenses.
In the long term, it is likely someone will try to disrupt the Panama City market with a best-in-class type development-CIRSA (via parent Nortia) and Trump have made announcements in this regard, and certainly others have been quietly contemplating it.
However, while a sizeable investment would almost certainly grow the market in aggregate, this move will have to be perfectly timed and even more perfectly located to provide the necessary returns for the development itself to be considered successful.
Dino Guiliano is an independent gaming industry consultant working with a global network of services partners to deliver value through strategic and tactical solutions in emerging and transitioning gaming markets worldwide. Guiliano can be reached at his offices in Costa Rica +506-8862-8419 (from the U.S. dial 610-572-2030) or via email at [email protected]