Integrated Resort Casino Development and its Impact on Tourism in

Integrated Resort Casino Development and its Impact on

Tourism in Slovenia

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

dr. Hugo Zagoršek

Institute for the study of gambling Overview of the presentation

1.What is the relationship between casinos and tourism?

2.What are the specifics of the Slovenian gambling market?

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

Institute for the study of gambling

Border casinos as

tourist attractions?

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-trip tourists

Regular (overnight)

tourists

1. Casino-style gambling has potential for attracting out-of-region visitors

2. It is attractive, because its supply is severely limited.

Primary purpose of visit

Length of stay

Border casinos as

tourist attractions?


Factors that influence the degree of developmental impact of casinos on a tourist destination

Level 1 2 3 4

Relative importance of casino in relation to other tourist attractions on the destination

Casino is the main attraction



Casino is the additional

(secondary) attraction

Category of visitors Gambling Gambling Mostly gambling

General and gambling

Predominant type of visitors

Local visitors

Out of state day-trip visitors

Out of state tourists that

spend at least one night at the

destination

Out of state tourists that

spend at least one night at the

destination

Possible types of venue

Stand alone casino, urban

casino

Stand alone casino, resort-casino, border

casino

Integrated resort-casino

Stand alone casino,

integrated resort-casino

Degree of tourism and developmental impact on the destination

No impact Moderate impact

Significant impact

Moderate impact


Geographic distribution of casinos in Slovenia


Total gambling market in Slovenia

55 72 6081 85 88

1518

19

25 3452

178187 193

207

24023916

21 38

60

77

110

264

298 311

373

435

489

0

50

100

150

200

250

300

350

400

450

500

2001 2002 2003 2004 2005 2006

Year

Gro

ss g

amin

g re

venu

es (m

io €

)

Casino parlors

Regular casinos

Sportrs Lottery (betting)

National Lottery

Gambling parlors and

sports betting

segments exhibit fastest growth

Casino-style

gambling holds 72%

market share


Number of visitors in gambling parlors is increasing; it is stagnating in casinos

Source: Office for Gaming Supervision, 2007.

4.3363.842

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

Num

ber (

in th

ousa

nd)

Domestic visitors in gambling parlorsForeign visitors in gambling parlors

Domestic visitors in regular casinosForeign visitors in regular casinos

Foreign visitors represent 68% of all visitors


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 (Sežana)

C. Portorož (Portorož)

I.S. Princess (Nova Gorica)

I.S. Vrtojba (Šempeter pri Gorici)

I.S. Paquito (Volčja Draga)

I. Kobarid (Kobarid)

I.S. Astraea (Lipica)

I.S. Larix (Kr.Gora)

I.S. Gold (Sežana)

I.S. Karneval (Škofije)

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)

Tržni delež v letu 2006 (v %)

Hit is the largest player with 54%

market share.

Several gambling parlors are bigger

than regular casinos

Two biggest casinos create

45% of all gross gaming revenues


Market shares in 2006


Export versus domestically oriented casinos: spending per visitor


8389

94100

107 110

6459 57 60

54 53

45

5866 62 64 60

37

23 26 3038

44

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

Ave

rate

reve

nue

per v

isito

r (€)

Regular casinos

Gambling parlors


3545

53 5970 73

13

1517

2431

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

rage

gam

blin

g re

late

d sp

endi

ng p

er re

side

nt (i

n €)

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 expenditures are the fastest growing segment


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 services

5-Cultural services

3-Passanger transport services

2-Food and beverage serving services

1-Accomodation services


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 highest value 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


Overview of the proposed Hit-HET project (I)

1999 Hit begins discussing “megacasino” project

2005 Hit begins talks with Harrah’s entertainment

2005 Public announcement of the negotiations

2005 Government cautiously supportive, but not taking the leading 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


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 machines

2. 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

Institute for the study of gambling Benefits of the resort casino

1. Increase in tourism, increase in visibility and attractiveness of Slovenia as a tourist destination

2. Economic development of the region

3. Development of the economy and growth of GDP

1. Increased revenues of companies2. Increased houshold income3. Increase in employment4. Increased value added5. 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-casino’s employees in the country

• Spending of the tourists outside the resort-casino


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

Gambling privilege tax** 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


Costs of the resort-casino

Substitution effects• Cannibalization of Hit• Cannibalization of other casinosIncreased 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 the social costs associated

with gambling

are “exported”

abroad.

Impact of resort-casino on changes in values of local communities and

society as a whole?


Problematic issues1. Who will have majority ownership in the Hit-HET

resort? Legal manipulations?2. Lack of transparency3. 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 2007 letter of

intent was signed

between Hit and HET but was not

revealed to the public.

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 and HET

announced that they are stopping the negotiations

Integrated Resort Casino Development and its Impact on

Tourism in Slovenia

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

dr. Hugo Zagoršek

Institute for the study of gambling Substitution effects

Degree of substitution

0% 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 7.036Net household income 100,0 92,6 85,2 77,8Gambling privilege tax 68,7 56,0 43,3 30,7Other 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 was calculated assuming the 18% total effective tax rate.


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 rate

environment.4. Questionable merits of partnership in the joint venture.5. The project might provoke retaliation from the other side of

the 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).

Institute for the study of gambling What can we learn

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.htm

http://www.ef.uni-lj.si/enote/ipig

Integrated Resort Casino Development and its Impact on Tourism in

Documents

Transcript of Integrated Resort Casino Development and its Impact on Tourism in