Integrated Resort Casino Development and its Impact on Tourism in Slovenia

7/22/2019 Integrated Resort Casino Development and its Impact on Tourism in Slovenia

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Integrated Resort CasinoDevelopment and its Impact on

Tourism in Slovenia

Institute for the study of gamblingFaculty of Economics, Unviersity of Ljubljana

dr. Hugo Zagorek


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Institute for the

study of gambling Overview of the presentation

1.What is the relationship betweencasinos and tourism?

2.What are the specifics of the Sloveniangambling market?

3.Case study: Hit-HET integrated resortcasino: what went wrong?


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study of gambling

Border

casinos as

touristattractions?

Linkages between casinos and tourism

3. Significant tourism

enhancing benefits can

occur only if majority of the

customers come from

outside the region

Several categories of

tourists exist

Gambling

tourists

General

tourists

Day-triptourists

Regular

(overnight)

tourists

1. Casino-style

gambling haspotential for

attracting out-of-

region visitors

2. It is attractive,

because itssupply is severely

limited.

Primary purposeof visit

Length of stay

Border

casinos as

tourist

attractions?


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Factors that influence the degree of developmental

impact of casinos on a tourist destination

Level 1 2 3 4

Relative importance ofcasino in relation to other

touris t attractions on thedestination

Casino is the

main attraction

Casino is the

main attraction

Casino is the

main attraction

Casino is theadditional

(secondary)attraction

Category of vis itors Gambling GamblingMostly

gamblingGeneral and

gambling

Predominant typeof visitors

Localvisitors

Out of stateday-trip visitors

Out of statetourists that

spend at leastone night at the

destination

Out of statetourists that

spend at leastone night at the

destination

Possible typesof venue

Stand alonecasino, urban

casino

Stand alonecasino, resort-casino, border

casino

Integratedresort-casino

Stand alonecasino,

integratedresort-casino

Degree of tour ism anddevelopmental impact onthe destination

No impactModerate

impactSignificant

impactModerate

impact


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Geographic distribution of casinos in

Slovenia


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Total gambling market in Slovenia

5572 60

81 85 88

15

1819

2534 52

178

187193

207

240

23916

21 38

60

77

110

264

298311

373

435

489

0

50

100

150

200

250

300

350

400

450

500

2001 2002 2003 2004 2005 2006

Year

Grossgamingrevenues(mio)

Casino parlors

Regular casinos

Sportrs Lottery (betting)

National Lottery

Gambling

parlors and

sports

betting

segments

exhibit

fastest

growth

Casino-

stylegambling

holds

72%

market

share


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Number of visitors in gambling parlors is

increasing; it is stagnating in casinos

Source: Office for Gaming Supervision, 2007.

4.336

3.842

3.392

2.8302.5832.546

4.830

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

2001 2002 2003 2004 2005 2006 2007Year

Number(in

thousand

Domestic visitors in gambling parlors

Foreign visitors in gambling parlors

Domestic visitors in regular casinos

Foreign visitors in regular casinos

Foreign visitors represent 68% of all visitors


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Market shares in the Slovenian casino

industry

0 4 8 12 16 20 24 28 32

C. Perla (N.Gorica)

C. Park (N.Gorica)

C. Korona (Kr.Gora)

C. Lipica (Seana)

C. Portoro (Portoro)

I.S. Princess (Nova Gorica)

I.S. Vrtojba (empeter pri Gorici)

I.S. Paquito (Vol

ja Draga)I. Kobarid (Kobarid)

I.S. Astraea (Lipica)

I.S. Larix (Kr.Gora)

I.S. Gold (Seana)

I.S. Karneval (kofije)I.S.Kongo (Grosuplje)

I.S. Joker (Maribor)

C.Ljubljana (Ljubljana)

I.S. Lev (Ljubljana)

C. Bled (Bled)I.S. Fortuna (Nova Gorica)

I.S. Koper (Ljubljana)

Trni de le v le tu 2006 (v %)

Hit is the largest

player with 54%

market share.

Several gambling

parlors are bigger

than regular

casinos

Two biggest

casinos create45% of all gross

gaming revenues


Market shares in 2006


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Export versus domestically oriented

casinos: spending per visitor


8389 94

100

107110

6459 57

6054 53

45

58

6662 64 60

37

2326

30

3844

0

20

40

60

80

100

120

2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006

Export-oriented Domestically-oriented

Year and type of casino

Averaterevenue

pervisitor()

Regular casinos

Gambling parlors


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3545

5359

70 7313

1517

24

31

35

50

40

123

104

90

77

5760

48

0

20

40

60

80

100

120

140

2001 2002 2003 2004 2005 2006 2007*

Ave

ragegambling

relatedspendin

gperresident(

in

)

Spending per

resident for casino

type gambling

Spending per

resident for lottery

and sports betting

* Projection

Average total

gambling spending

per resident

Domestic spending for gambling is

growing rapidly (17% per year)

Slovenian residents spent 67% of their gambling

budged on lottery and sports betting in 2006.

Casino-style gambling expendituresare the fastest growing segment

G bli dit f f i t i t


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Gambling expenditures of foreign tourists

represent 30% of total tourism service

purchases

Inbound tourism

consumption

Domestic tourism

consumption

Non-specific products

Connected products

6.2-Gambling

6.1-Sports and recreational sport serv ices

5-Cultural serv ices

3-Passanger transport services

2-Food and beverage serving serv ices

1-Accomodation services


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The contribution of gambling sector to

Slovenian tourism

1. Tourism represents approximately 4,9% of GDP.

2. Gambling expenditures of foreign tourists: 196 million

1. 30% of total tourism service purchases

2. 19% of total foreign tourists expenditures

3. Casino-style gambling industry generates the highestvalue added percentage: 75%

4. Multipliers for gambling industry are high: 1,43 & 2,05

1. However, 92% of all foreign tourists are day trip tourists

2. Major challenge of casino industry: to increase tourism

component of their offering


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Overview of the proposed Hit-HET

project (I)

1999 Hit begins discussing megacasino project

2005 Hit begins talks with Harrahs entertainment

2005 Public announcement of the negotiations

2005 Government cautiously supportive, but not taking theleading role

2006 Negotiations between Hit HET

2007 Final version of integrated resort casino project is

released to public

2007 Government prepares changes in the legislation, but

does not send them to the parliament


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Overview of the resort-casino project

(II)

Basic facts about project:

1. Investment: up to 850 million

2. Hotel with 1.500 2.000 rooms

3. 3.000 slot machines

4. 120 tables

5. Plenty of other facilities

6. Full capacity in 5th year

7. 562 of total revenue in 5th year

8. 25% of non-gambling revenue

9. 3.250 employees

10.4,4 million visitors per annum

Existing gambling capacity in Nova

Gorica

1. 2.270 slot machines2. 105 gaming tables

3. 1,6 million visitors

Impact of resort on tourism sector

in Slovenia:

1. 11% - 15% increase in the number

of hotel rooms

2. 50% increase in total gambling

capacity


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Institute for the

study of gambling Benefits of the resort casino

1. Increase in tourism, increase invisibility and attractiveness ofSlovenia as a tourist destination

2. Economic development of theregion

3. Development of the economy and

growth of GDP

1. Increased revenues of companies

2. Increased houshold income3. Increase in employment

4. Increased value added

5. Increased tax income

Positive economic benefits

occur because majority of

visitors come form abroad

export of services.

Economic benefits may be

direct and indirect. Indirect

effects emerge because of: spending of the resort-casino

for goods and services in the

country

Spending of the resort-casinos employees in the

country

Spending of the tourists

outside the resort-casino


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Total impact of the proposed resort-

casino

Construction phase* Operations phase (5th

year)Type of effect

Direct Indirect Total Direct Indirect Total

Output 118,4 144,5 262,8 550,9 307,2 858,2

Value added 35,2 76,6 111,8 445,2 169,7 614,9

Employment 1.760 2.481 4.241 2.896 6.048 8.944

Net householdincome

13,1 18,6 31,8 56,5 43,4 100,0

Gambling privilegetax**

68,7 - 68,7

Other taxes and

contributions

33,9 19,0 53,0 75,2 62,4 137,6

** Gambling privilege tax was calculated assuming the 18% total effective tax rate. in mio EUR


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Costs of the resort-casino

Substi tution effects

Cannibalization of Hit

Cannibalization of other casinos

Increased social costs caused by gambling

Players: Problem gambling

Employees: difficult working conditions, night shifts,

Society: increased crime ?

Increased social costs caused by mass tourism

Strain on local infrastructure (traffic, water, )

Damage to the environment Immigration of workers as a burden on local infrastructure ?

Potential negative impact on other tourism sectors,associated with image of gambling destination

Most of thesocial costs

associated

with

gamblingare

exported

abroad.

Impact of resort-casino

on changes in values of

local communities andsociety as a whole?


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Problematic issues

1. Who will have majority ownership in the Hit-HET

resort? Legal manipulations?

2. Lack of transparency

3. Role of the government?

4. Resort opened out a broader debate in Slovenia on

the merits of gambling became focal point of

anger for anti-gambling interest groups

5. Unrealistic business plan?

6. Fear of cannibalization of existing casinos7. Public opinion grew more and more negative

Opposition to gambling in general

Opposition to foreigners in this sector

Fear for local casino companies

In mid 2007letter of

intent was

signed

betweenHit and

HET but

was not

revealed tothe public.


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Institute for the

study of gambling Leassons learned

1. Need for open and broad public debate BEFORE

the investment.

2. Need for transparency of process on all levels.

3. Need for clear objectives (strategy) from the

government regarding gambling sector.

4. Government should lead the process:

international public tender instead of trilateral

negotiations.

5. Large foreign direct investments may be difficult in

jurisdictions with well developed domestic

casino industry.

6. Public opinion does matter!

In the

begging of

2008 Hit andHET

announced

that they are

stopping thenegotiations


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Integrated Resort CasinoDevelopment and its Impact on

Tourism in Slovenia

Institute for the study of gamblingFaculty of Economics, Unviersity of Ljubljana

dr. Hugo Zagorek


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Institute for the

study of gambling Substitution effects

Degree of

substitution0% 20% 40% 60%

Output 858,2 794,3 730,4 666,6

Value added 614,9 569,0 523,1 477,2

Employment 8.944 8.308 7.672 7.036

Net household

income 100,0 92,6 85,2 77,8

Gambling privilegetax 68,7 56,0 43,3 30,7

Other taxes and

contributions 137,6 127,5 117,3 107,2

* Degree of substitution refers to the percentage reduction in revenues of two largest casinos in the regions, operated by the Hit.

** Gambling privilege tax w as calculated assuming the 18% total effective tax rate.

St t i id ti d


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Strategic considerations and

implications

1. The resort-casino is focusing on day-trip visitors.

2. Optimistic revenue projections?

3. The project is only possible in the low gambling tax rateenvironment.

4. Questionable merits of partnership in the joint venture.

5. The project might provoke retaliation from the other side ofthe border.

Conclusion:

Largest tourism investment, increasing total tourism revenues

in the country by 15%.

Benefits far outweigh the costs.

Various stakeholders (negotiating parties) may influence the

size of total net impacts (upwards or downwards).


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Institute for the

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Institute for the

study of gambling Thank you!

Studies of the Slovenian gambling industries and the impact of

proposed casino-resort are available at:

Ministry of Finance:

http://mf.gov.si/slov/zakon/predlogi_igre_sreca.htm

and

Institute for the study of gambling:

http://www.ef.uni-lj.si/enote/ipig
http://mf.gov.si/slov/zakon/predlogi_igre_sreca.htmhttp://www.ef.uni-lj.si/enote/ipighttp://www.ef.uni-lj.si/enote/ipighttp://mf.gov.si/slov/zakon/predlogi_igre_sreca.htm

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Integrated Resort Casino Development and its Impact on Tourism in Slovenia