Economics

White Paper: Japan Integrated Resorts

The next emerging integrated resort market is on the horizon in Japan. After years of debate, Japan is in the process of developing legislation to create the regulatory and market structure for integrated resorts (“IR”). While the debate still has several issues to work through, Japan has the potential to be one of the largest gaming markets in the world with a revenue potential of $24.2 billion, assuming fully developed IRs are introduced in six regions. Global Market Advisors (“GMA”) completed a detailed analysis that examined the current gaming market, the prospective legislation, components of the RFP process, potential sites, definition of an integrated resort, and the full market potential.

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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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Strategies to Grow International Tourism into Las Vegas and Stimulate Economic Activity

Few would argue that sustained growth in air passenger volume into Las Vegas is a critical factor in the health and vibrancy of the Southern Nevada tourism industry. While McCarran International Airport (“LAS”) continues to enjoy steady growth in domestic passenger volume, growth in international traffic has experienced a far higher rate in the last five years, fueled by the opening of the new international terminal and marketing initiatives by the Clark County Department of Aviation. International visitation grew from 14% of total visitor volume in 2009 to 20% in 2013.1 International tourism continues to represent the greatest opportunity for new market growth, particularly visitors from Asian countries.

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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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New Kid in Town: Can Vietnam emerge as an international gaming-resort destination?

Despite the recent downturn in gaming revenue in Macau, Asia remains the region of the world with the greatest opportunities for casino development. While Japan and Taiwan remain the most enticing markets, if only enabling legislation were to be passed, other markets are attracting the interest of casino developers. Unfortunately, most of those opportunities are in markets that are loosely regulated, difficult to get to, surrounded by poor infrastructure or require border crossings that can best be described as challenging.

One market that continues to interest investors is Vietnam. With 92 million citizens, a burgeoning middle class, good airport infrastructure and airlift to a number of nearby countries, Vietnam appears poised to emerge as a regional gaming market that is capable of producing a prodigious amount of gaming revenue. Nevertheless, a number of issues must be resolved before the country can live up to its potential.

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How to Increase Gaming Revenue in an Economic Downturn

The economic downturn continues to impact gaming revenues in markets throughout the United States. In the face of declining or stagnant revenues, casino operators continue to look for new ways to grow gaming revenue. Some have allocated resources to new media such as social networks, yet none have been able to monetize these new channels of communication. Others have simply turned up the volume of promotions, offering more drawings for cash, vehicles or simply giving away stuff to get people into the door. While those efforts often increase foot traffic, they don’t necessarily have a positive impact on profitability. So what new methods are there for a casino operator to grow revenue? The answer often lies within its own database.

Casinos have long recognized the value of their databases. With the advent of newer slot system technologies casinos have over the last decade introduced tiered reward programs to better acknowledge the value of higher value customers. Caesars Entertainment has long been at the forefront in utilizing a tiered reward program to acknowledge those customers and develop them into very loyal customers. Customers in those premium tiers, referred to as Platinum, Diamond and Seven Star levels, receive a suite of benefits so great that they often gamble exclusively within the Caesars brand family of casinos. They would rather aspire to the next higher tier than spend their gaming dollars at another casino.

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Swapping Out Debt: Solving the riddle of debt-asset swaps and triangular deal structures

The riddle of “debt-asset swaps” is currently befuddling CFOs, public debt analysts, casino buyers and hedge funds.

All look to profit from discounted gaming company debt and the sale of distressed assets. Right now, there is a disconnect between a gaming company and its debt. On the one hand, the gaming company’s debt—whether $5 billion of publicly traded bonds or $50 million in privately held notes—is trading at prices that may be 10 cents to 70 cents on the dollar. On the other hand, the gaming company may be willing to retire that debt at face value, as part of its de-leveraging process.

The theory of a debt-asset swap is to take advantage of that disconnect. If one could purchase the gaming company debt at today’s steeply discounted price, and then present it to the gaming company for retirement at face value, then one should be able to profit greatly.

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Rising Gas Prices and the Possible Effects on Casino Visitation

The steady rise in gasoline prices over the past year and the possibility of further increases in the near future is a growing concern among gaming executives as well as financial analysts that watch trends in the gaming industry. While casinos in a number of jurisdictions have recently enjoyed steady increases in visitation and gaming revenue, the question that is on many peoples’ minds is, “how will rising gas prices affect the gaming industry?” The question is of particular concern to managers of Indian casinos since the majority of Native American gaming operations are located outside of metropolitan areas in rural locations that require patrons to drive further and expend more fuel than if they were to participate in other entertainment options closer to home.

A recently completed survey by a research company in Nevada attempted to gauge the effects that rising gas prices will have on drive-in traffic from Southern California. The study noted that 48 percent of respondents said higher gasoline prices would deter them from planning vacations to Las Vegas and that 57% said fuel costs are affecting their decisions to go on weekend trips. At first blush, the results of this survey would cause casino managers in all US jurisdictions to be concerned. However, the Las Vegas Sun newspaper reported that as gas prices rose earlier this year, auto traffic to Las Vegas increased. From January to August of 2005, gasoline prices in California increased by 40% but auto traffic on Interstate 15 at the Nevada-California
border increased by 30%. Las Vegas continues to enjoy historically high levels of visitation and gaming revenues. Even with gas prices hovering at $3.00, people continue to drive into the city from Southern California for gaming/entertainment vacations.

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Harnessing Demo Software to Improve Casino Marketing

In the casino industry, the process of querying and analyzing a market’s demographic composition has long been the function of consultants who conduct market feasibility studies or, in large multi-unit gaming companies, analysts who dedicate the majority of their time scrutinizing demographic data. T he vast majority of casino marketers conduct a cursory review of area demographics as part of their annual marketing plans. This is not to suggest that marketers do not recognize the value of analyzing regional demographics. Rather the cost of demographic software coupled with its limited applicability has restricted its application.

In recent years the costs of software that generate detailed demographic reports for any geography and demographic mapping software have dropped to the point where any casino can now justify their expense. More important, the contributions that these software products can make to a casino’s advertising and marketing efforts far outweigh their costs.

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