Casinos in Mexico
(source: Las Vegas Sun)
LV gambling operators likely pondering casinos in Mexico
By David Strow
<strow@lasvegassun.com>
LAS VEGAS SUN
After an explosion of legalized gambling in the 1990s, there doesn’t appear to be many new markets for the gaming industry in the United States.
But that might not be the case across international borders. There’s growing talk that America’s neighbor to the south, Mexico, will seriously consider legalizing casino gambling when its legislature convenes this fall.
“I think there is a greater prospect for legalized gaming in Mexico in the next few years than there has ever been before,” said former Gov. Bob Miller, now a Las Vegas attorney. Miller is now making regular trips to Mexico to monitor the situation for several undisclosed gaming companies, as well as the American Gaming Association.
Miller described his updates to the AGA as a “courtesy newsletter” sent as part of his role as a consultant for the national gaming lobby.
“I think there’s a curiosity, various levels of interest (among different gaming companies),” Miller said. “Certainly everyone’s paying some attention to it, because if it’s legalized there, it represents a risk or an opportunity or both.”
Clearly, there’s a long road ahead before Las Vegas companies will be able to set up shop south of the border. Mexico has examined bills for years to legalize gaming, but these bills have never made it out of committee. And in a country dominated by the Catholic Church, many Mexicans are stridently opposed to casinos on moral grounds.
“(Mexico is) on the radar screen,” said Bear Stearns gaming analyst Jason Ader. “But I remember New York City was on the radar screen once too. Things on the radar screen can fall off pretty quick.”
Casino-style gambling has been illegal in Mexico since the 1920s. Bills to legalize it have been introduced in the Mexican legislature over the last several years, but have failed to emerge from committee.
But the possibility of legalization took a huge step forward earlier this year when Mexican President Vicente Fox announced in Acapulco that he supported legalized gaming.
The exact locations of the casinos would have to be hashed out by lawmakers, though Fox indicated he was interested in placing casinos in beachfront resort cities such as Acapulco, Puerto Vallarta and Cancun. Other possibilities often discussed are border towns, such as Tijuana and Ciudad Juarez, and the Mexico City area. Also unknown is what percentage of a casino’s stock must be owned by local investors or companies.
As it reads now, a bill legalizing gambling would allow any municipality to apply to the federal government for permission to offer gaming, Miller said.
“Certain border towns would have some interest to existing gaming properties because of their proximity to the American market,” Miller said. “Whether that will occur is just a guessing game. What seems to be the consensus … is that they (business and political insiders in Mexico) all believe that the bill will likely proceed in the next congress. There’s a different attitude and atmosphere in which the next congress will consider this legislation.”
Mexico represents a substantial market for Las Vegas. The Las Vegas Convention and Visitors Authority estimated that 225,000 Mexicans flew into Las Vegas from interior locations in Mexico in 1999. That made Mexico the No. 4 international market for Las Vegas that year.
The number is probably much higher, said LVCVA senior research analyst Kevin Bagger, because it doesn’t account for drive-in traffic or flights from border cities.
Jeff Logsdon, gaming analyst with Gerard Klauer Mattison, believes Park Place Entertainment Corp., MGM MIRAGE and possibly Harrah’s Entertainment Inc. would be interested in Mexico, particularly if Mexico allows gaming in tourist locations and conditions are favorable for investment.
“There’s really only two (gaming companies), MGM and Park Place, that have any foreign exposure,” Logsdon said. “There’s always been an attraction of being an early mover in a country that certainly has a significant economic base at the top end, and a less expensive labor force.”
Few in the gaming industry are willing to talk about the potential of Mexico, though some, including Mirage Resorts Inc., have explored it in the past. An exception is Hollywood Casino Corp. of Dallas, operator of casinos in the Chicago area, Tunica, Miss., and Shreveport, La. That company has indicated it would consider applying for up to three casino licenses in Mexico.
The company’s interest in Mexico derives from its majority owners, the Pratt family. Prior to their involvement in gaming, the Pratts owned a number of major hotels in Mexico, and Hollywood as a result has monitored the situation there for years, said Jim Wise, Hollywood’s corporate marketing director.
“I’m sure everyone will come running if they sense something will break free in this session (of the Mexican legislature),” Wise said. “Trust me, if anyone tells you otherwise, they’re probably not giving you all the information. I think everyone’s taking a look at it in some way, shape or form. You know the major operators are at least taking a look at some effort.”
Wise said a number of prominent gaming companies “are very active there,” but he declined to identify them.
“Some of these destination resorts are very popular, and they draw people in from all over the world,” Wise said. “In many areas, they have large existing population bases. Many (Mexican residents) show a good propensity to play. There’s a number of reasons it makes sense.”
More aggressive steps have been taken by the Oneida Indian Nation of New York, which operates the Turning Stone Casino Resort near Syracuse. Recently the tribe signed “documents of understanding” with the Mexican state of Morelos, located just south of Mexico City. Negotiations are under way with the state of Guerrero, where Acapulco is located. That could clear the way for the tribe to open some of the first casinos in Mexico if gaming is legalized there. Reports have speculated the tribe would build $500 million resorts in Acapulco and Mazatlan if casinos were legalized.
“We are looking at gaming resorts in those areas … but there’s no gaming in Mexico at this point, so it depends on what happens,” said Mark Emery, spokesman for the Oneida Nation. “There are a lot of people putting dollar values on it … but those are just people guestimating what it would cost. (The tribe) is optimistic at this point, but it’s maybe even guarded optimism, because you have to wait until it’s approved down there.”
Viva Gaming & Resorts Inc. and Phoenix Leisure Corp., both small Las Vegas companies, are also trying to penetrate the Mexican market through that nation’s federal lottery. Viva Gaming holds a license to sell lottery tickets in Mexico; Phoenix Leisure will develop and operate up to 10 “Gaming Entertainment Centers,” which contain hundreds of slot machines used to distribute the lottery tickets. The companies intend to open their first gaming center, with 500 slots, at a major mall in Mexico City.
Officials with both companies declined to discuss their Mexican plans further until they had finalized their joint venture.
One of the biggest hurdles for large Las Vegas operators interested in Mexico could be the regulatory structure that country would use to oversee gaming activities.
“You’re not going to want to go down there if you’re not convinced the regulatory structure is up to snuff,” Miller said.
If it isn’t, gaming companies could put their entire American operations at risk by entering Mexico, said Shannon Bybee, executive director of UNLV’s International Gaming Institute and former member of the state Gaming Control Board.
“In Mexico and South American countries, there’s been a history of corruption, so you have to be very careful,” Bybee said. “Whenever a gaming licensee gets into trouble in one jurisdiction, their license is at risk every place else. What kind of people will they let into the industry?
“If (Fox) decides to do it, he must have a much more serious approach to gaming regulation. They’ve got to have the will to govern, to turn people down and to enforce the rules.”
When California’s Indian tribes began offering casino gaming, it was viewed as a serious risk to the Nevada gaming industry. Many analysts blame that state’s burgeoning casino market in part for the slowdown the state’s gaming industry is now experiencing. Would Mexico exacerbate that?
“I think it’s marginal or minimal risk, but certainly it’s enough that people will be interested in ascertaining what will occur, what impact it will have on their markets,” Miller said. “The potential is nowhere near the potential impact of California. If you get (casinos) right there on the border, and you distract some Californians from Las Vegas, that has some effect. But there is no reason to believe at this point that will occur.”
Date Posted: 20-Jun-2001
