Casino

History and Current Status of Gaming in Taiwan: A White Paper

Taiwan has long been a venue of interest among foreign casino investors, originally because of the importance of Taiwan as a source of customers and more recently because of the potential to reach Chinese customers through the ever-increasing transportation and tourism links between Taiwan and China. The effort to bring casino gaming to Taiwan, however, has been a journey of stops and starts over the past 25-plus years, though there has been fairly steady progress since 2009.

In 2009, the Taiwanese island of Penghu held a public referendum on the establishment of casino-based tourist zones. The referendum was the culmination of nearly twenty years of advocacy on the part of politicians, gaming companies, university professors and professional advisors. The referendum failed. However, in 2012, Matsu held a referendum that passed. While the success of Matsu’s referendum was supposed to politically incentivize the Taiwanese government to pass gaming legislation regulating casino operations, and the government did retain a law firm to draft the Tourism Casino Administration Act (the “Act”), the Act has been stalled in Taiwan’s legislature since 2013.

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Asia’s Sleeping Tiger

Since the emergence of Macau and Singapore as two of the world’s largest gaming markets, casino developers have looked at other jurisdictions within Asia for the next great opportunity. Japan, South Korea, Vietnam, the Primorye region of Eastern Russia, the Philippines and Cambodia have all generated varying amounts of interest from international casino developers. Japan, with its large and prosperous population, now appears to be out of play, at least for the foreseeable future.

The remaining countries’ nascent casino industries are all highly dependent on gamers from China and, as has been clearly demonstrated over the past two years, gaming revenue from Chinese. As such, the next great Asian casino development opportunity remains elusive.

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Gaming in India: An Evaluation of the Market’s Potential

Although Macau’s gaming market is struggling, its reliance on the Chinese gamer still allows it to dominate the global gaming landscape and maintain its role as the largest gaming market in the world. As a result, the global gaming industry remains transfixed by the potential value of the Chinese gaming market. Not surprisingly, gaming destinations throughout the Asia Pacific region, including Singapore, Cambodia, Philippines, Vietnam and South Korea, have opened hoping to capitalize on the market’s potential. Some gaming operators have attempted to target other possible valuable demand segments in Asia like the Japanese. With these large sources of demand capturing the attention of the gaming industry, many gaming operators and markets have yet to fully explore other alternative sources of Asian based gaming demand.

So far, few gaming operators have considered China’s democratic and capitalistic neighbor, India, as a potential source of demand. India shares many of the same characteristics that make China such an attractive source of gaming demand. India also has a large, prosperous economy, an enormous population, and favorable consumer/gaming habits. On top of that, India is able to offer a stable and less reactionary government and volatile economy.

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Urban Alliances: The unique challenges of building casinos in a city

Casinos located in cities have long had an uneasy alliance with their host communities.

Local municipalities have enjoyed the tax revenues and jobs that casinos brought and civic leaders have recognized the charitable contributions casino leadership have made to their communities, as well as their greater economic contributions. Yet, cities have long treated casinos with a certain degree of disdain, relegating them to locations that would be unappealing to any hotel developer.

At the same time, many city governments have showered developers of sports venues, hotels and convention centers with a wealth of benefits including tax abatements, generous land leases, municipal bond funding and sales tax rebates in the hope that those developments would somehow lead to a revitalization of their urban cores.

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Casinos and the City – A White Paper

Casinos and the places where they can be found have increased dramatically over the last twenty five years. Where at one time there were only a few places on the planet where one could go to participate in legal gambling activities, today casinos are a fairly common enterprise. In the United States alone, there are over 900 commercial and Indian gaming establishments. Casinos can be found not only in North America but also throughout Europe, Central and South America, Oceana and Asia.

Since the passage of the Casino Control Act in 1976, legalizing casino gaming in Atlantic City, NJ, casinos have been narrowly viewed as a tool for urban redevelopment, providing tax revenues to state and local governments and jobs to its citizens. Their success in providing those benefits cannot be disputed. Collectively, the casinos in Atlantic City, the riverboat and barge casinos in the Midwest and southeast United States, Indian casinos, and the land-based commercial casinos in a number of US cities as well as those on the Macau Peninsula and Singapore have contributed billions of dollars to government coffers and created hundreds of thousands of jobs. However, their success as a tool for stimulating commercial activity within the neighborhoods that they are located in has produced less dramatic results.

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The Tipping Point: Rising slot hold percentages are driving players away, and revenue down

Gaming revenues, and in particular slot revenues, continue to decline in most U.S. gaming jurisdictions. This pattern of decline began at the onset of the recession and has continued even as the economy improved.

Casino operators often cite increases in gaming supply in adjacent states and a slow economic recovery in their markets as reasons for this decline. While the recession certainly affected discretionary spending during the height of the recession, hitting casino gambling hard, the U.S. economy has largely recovered. Gaming revenues, though, have not.

Key macro-economic indexes have returned to pre-recession levels. Two indexes, employment and consumer confidence, have long served as bellwethers for gaming revenue forecasts. In August 2013 the U.S. unemployment rate stood at 7.5 percent, down from 8.2 percent for the prior-year period. By August 2014, the unemployment rate dropped to 6.4 percent. In August 2013, the consumer confidence index stood at 80.3, up from 75.3 in 2012. By August 2014 it rose to 82.0.

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Killing the Gaming Experience

Regional U.S. gaming markets continue to see month-over-month declines in gaming revenues. Analysts tend to blame the weather, the economy, market saturation, increased competition in neighboring states, and of course, Obama for this decline.

What has yet to be cited is that the gaming entertainment experience has fundamentally changed over the past few years, and many casinos no longer deliver the experiences that players have been used to historically.

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So, Have You Been to Poipet?

When examining the major casino markets of Asia, Macau and Singapore most often come to mind. Most gaming executives are familiar with these markets, and their prodigious gaming revenue performance continues to attract the interest of the media and financial analysts.

The extraordinary performance of these markets has caused casino developers to look more closely at other regional Asia markets such as South Korea, Vietnam and Japan as they look for that next great opportunity.

What are often overlooked are other regional Asian markets that are already established yet are somewhat removed from major Asian cities. These gaming markets generate prodigious amounts of gaming revenue and serve as convenience-based gaming destinations to regional populations.

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Marketing Strategies That Get Results

The effects of the recession continue to linger. While some gaming operators have begun to enjoy a modest amount of gaming revenue growth, for most that growth has been tepid. To grow market share many operators have resorted to the same tactics that have been used for years in the gaming industry: drawing drum promotions, hot seat promotions, point multipliers and increases in the amounts of free play that players receive as part of their monthly mailers. While many casinos have employed new technologies such as kiosks and electronic drawing drums to better manage these promotions, they essentially use the same tactics that previous generations of casino marketers have done to get bodies in the door.

What the recession has taught casino operators is that tactical offers that are created without sound strategies are rarely effective. They may increase traffic, shift play from one time
period to another but they rarely have an impact on profitability. The following are some of the best marketing strategies of 2013 that astute gaming operators have implemented..

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Seven Keys to Casino Success

The success of Singapore’s recently established casino industry, along with the unprecedented growth in gaming revenues in Macau, has attracted the interest of governments throughout Asia. Several are considering instituting new policies that will permit the expansion of casino gaming in their countries in the form of so-called integrated resorts, as a means to boost
economic and tourism growth and generate tax revenues.

The examples of Macau and Singapore, together with those of other Asian countries that did not manage to enjoy quite as much success with their casino initiatives, have helped identify seven factors that are critical to the success of any new gaming venue in the region.

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