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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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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
Source: Office for Gaming Supervision, 2007.
Market shares in 2006
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Export versus domestically oriented
casinos: spending per visitor
Source: Office for Gaming Supervision, 2007.
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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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
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