The international gaming business is yet another sector suffering from the economic downturn, as revenues tumble and construction financing for new projects dries up. The new economic environment has created two significant shifts – one in the way the on-land gaming business model is structured and the other in a change in global market opportunities.
In terms of the way gaming developments are structured, the casino world falls into two camps. Some governments issue multiple licenses, which tends to spawn numerous small venues in five-star hotels and some city centres. This model predominates in most eastern European countries, such as Poland.
The other model is the big casino resorts seen in Macau and Kazakhstan. These are becoming more widespread as they offer governments greater tax revenues, are easier to regulate and attract tourism. At the same time, Asia is fast becoming the new gaming hub, eclipsing the US and Europe.
One company demonstrating both factors at play is casino developer Eighth Wonder, which is focusing on the emerging economies of the East. Chief executive officer Mark Vlassopulos is a proponent of what he sees as a recession-proof model for casino development, which he summarises as building medium-sized properties in younger markets on a win-win basis with local government interests.
The company operates from hubs in Las Vegas and Singapore, with satellite offices established for each major project; Mr Vlassopulos bases himself in Geneva. The company builds privately financed small and medium-sized casinos in Asia and the Commonwealth of Independent States costing between $135m and $270m, with no debt financing. These markets are largely untouched with plenty of available gamblers, even in an economic slump.
The real issue, says Mr Vlassopulos, is not a dearth of gamblers but the lack of people to build facilities to service those markets.
“We’re in all kinds of places from East Timor to Kazakhstan – these are markets where they are delighted that anyone is coming to do anything at all,” he says.
The company has signed memorandums of understanding for multiple projects in Kazakhstan, South Korea and Vietnam, with negotiations under way for similar projects in Romania and Cambodia. In March, the company announced completion of a concession agreement with the South Korean government to build one of the largest gaming zones in Asia, across a 250 hectare site at Incheon International Airport near Seoul. “It’s a monster,” says Mr Vlassopulos.
The airport receives 50 million passengers a year. “We love proximity to airports for obvious reasons as we’re repeating the idea of the Las Vegas model in this way,” he says.
Eighth Wonder’s partner on the project is one-third government-owned – government links are essential for ‘smart casino development’, says Mr Vlassopulos, as governments will always be involved in the negotiations.
Strong governance and clarity of regulation is key. A new market with no casino law might appear attractive, but, according to Mr Vlassopulos, a strongly regulated environment is ultimately easier to operate in.
South Korea’s regulation is established. Apart from one location in the country’s mountains, gaming is outlawed, which makes the airport location critical. The law might change in time but in the short term the development will benefit from its proximity to the target markets of Japan and China, neither of which have gambling (except for Macau). As for being recession-proof, only time will tell.
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