Painting the right picture for gaming developments in international jurisdictions.

by Andrew MacDonald and Bill Eadington

August 2005

When considering new gaming developments in a jurisdiction, what are the critical elements that the government and senior officials might be looking for? If there is a strong latent demand for gambling in the region, it is unlikely government would settle for a project that only offered casino gambling. Rather, it is the attractiveness of everything else proposed that would go along with a casino that might ultimately win the day.

This has created increasing discussion on the desirability of Integrated Resorts. If government is going to be allocating only a single gaming license, or only a handful of franchises, how should companies position themselves with their own proposed Integrated Resorts to maximize the chance of winning a license which will be economically viable and attractive for their shareholders?

PAINT is an acronym that is useful when considering attributes that need to be promoted and addressed by a gaming company when developing or considering concepts for a new Integrated Resort with casino in a jurisdiction that is consideringor has recently authorizedcasino gaming. PAINT stands for Partners, Architecture, Investment, Novelty and Tourism.

For many jurisdictions considering gaming legislation for the first time, it is the Tourism element that really makes this worthwhile. If casinos can generate substantial impacts on their regional or national tourism sectors, then the resulting economic benefits will be both direct (new capital investments, job creation, tax revenue generation, spill-over tourism benefits to the rest of the region) and indirect (multiplier effects as higher incomes earned in the casinos and resorts are spent throughout the jurisdiction; increased local affluence.) One can readily point to the experience of Las Vegas, Atlantic City, Biloxi, Connecticut, and Macao to illustrate the strength of these forces.

However, without a significant tourism dimension, the picture might become more one of PAIN, and there may only be limited opportunity for the developers or government to promote the real economic benefits from casinos over the perceived and actual social costs, especially in the face of church opposition or an aggressive anti-gaming constituency. Generally speaking, it is easier to sell the concept of legal casinos when most of the clientele will be coming across state, provincial, or national borders.

If, on the other hand, the great majority of customers are locals, then legalization may still be warranted based on freedom of individual choice and import substitution. But clearly, the economic benefits to the region will be markedly less dramatic. This can be seen with most urban casinos (Detroit, Sydney, Montreal), riverboat casinos (Illinois, Indiana, Missouri, Iowa), and other locally oriented casinos (most tribal operations, Colorado, Manitoba, Alberta, provincial casinos in the U.K., etc.)

So what are the component parts of PAINT?

PARTNERS. Who are the consortium members and content providers? What are their reputations individually and as a group? Do the Partners offer something special or extraordinary? Are they considered visionary? Is there a special skill set that the Partners bring to the table that might be useful? Is there a high profile local partner involved? If the Partners win the right to develop an Integrated Resort, how will they be portrayed in the local, national and international media? Is this a long term integrated partnership or one solely of convenience, created for this particular development? Are there real synergies being delivered by the Partners and other content providers? How important is the groups track record, or can the project be justified solely on its own merits? Do the Partners instill confidence in their ability to deliver on their promises? Have the partners done careful research into the history, culture and aspirations of the jurisdiction?

ARCHITECTURE. Who are the project facility architects, landscape architects, and interior designers? What is their reputation and what other related projects have they completed? Will the plans they are presenting result in iconic, contemporary and world-class facilities? Do they have a history of copy cat or cookie cutter design, whereby their last project too often has been the template for their next? Does the project fit in the context of the culture, ambience, and economy of the jurisdiction? Is the development well integrated, rather than just a mixture of non-cohesive elements?

INVESTMENT. What is the total planned investment for the development? Is the budget realistic? Is financing in place; do the Partners already have access to the necessary financing? How will the projects development be staged? Does it fit together with the jurisdictions long term master plan? How substantial and credible are the projected economic benefits? Will the project disrupt the local economy in negative ways? What are the Partners policies on local procurement (jobs, services and merchandise)? Is there a strategy to develop local management talent over time? How profitable will the investment be for the Partners? Is there an appropriate sharing of Economic Rents among the Partners, the government, and the citizens of the jurisdiction (i.e., through higher incomes and other spill-over economic benefits?) Will there be adequate incentives for significant re-investment in the future to maintain and expand the Integrated Resort in a manner that best exploits the markets potential? What are the risks of failure, and who will bear the brunt of failure if it occurs?

NOVELTY. Is this truly an Integrated Resort, where gaming is only part of the over-all picture? Have the Partners and Architects utilized their full creative powers in approaching this project? How unique are their plans? Does the novelty make sense, or is it just sizzle and not steak? Are there concepts in this project that are clearly more attractive than those of other bidders? Will the development still be impressive in five or ten years? How will people who do not like to gamble look at this project? Is this a development that will make it the place to visit in the region? Can this project be classified as visionary? What are its unique attractions, and will they induce visitors to select this venue over other attractive alternatives in the region? Do the unique attractions include activities that would otherwise not be viable in the region? Is it realistic for these non-gaming elements to draw out-of-region or foreign visitors to the region? How sustainable are the novel elements in a global context? Are the gaming licenses going to be awarded based on the Partners ability to create novelty in the project development? Can this particular project win a beauty contest for a license against partnerships with similar skill sets?

TOURISM. Will this development become the regions post card shot? Will the Integrated Resort be a catalyst that promotes incremental tourism to the region? Is there currently an outflow of residents to other jurisdictions with more competitive offerings? Can the gaming portion of the development support and serve as the economic engine for the non-gaming components of the Integrated Resort? To which segments of the tourism market will the development be most attractive? Is this the target audience for the Integrated Resort? Is the development potentially attractive to business travelers? Can the development integrate well with the Meetings, Incentives, Conventions and Exhibition (MICE) market? Is there a definite brand associated with the development, and does it convey a clear brand idea, brand personality or brand identity? Does the brand resonate with the target audience? What

Date Posted: 17-Jan-2006

Andrew MacDonald and Bill Eadington are comoderators of the annual University of Nevada Reno, Executive Development Program. The EDP is considered the pre-eminent development program for senior casino executives worldwide.