KALININGRAD - EUROPE'S FIRST MODERN GAMBLING DESTINATION?

by Kristian Nygaard

In December 2006, President Putin signed a law limiting casinos to specific areas in Russia. Among the areas you can find the Kaliningrad Oblast, a Russian enclave, sandwiched between Lithuania to the north and Poland to the south.
This region, which for some time now has been troubled by unemployment and economic disadvantage, now seems to be handed a golden opportunity to emerge as a real gambling destination.

But can this largely undeveloped part of Europe really make it to the top by developing gambling? As William R. Eadington points out in his article "The Future of Casinos in Europe" from November 2005 analyzing the state of gambling in this continent, then "there are no destination resort casinos to speak out, and there is no real sense that casinos are anything besides gaming rooms that offer table games and slot machines, with the occasional bar and restaurant".

In my opinion, however, all this could change with Kaliningrad that with the right policies very well could be transformed into Europe's first modern gambling destination.

Let us have a closer look at Kaliningrad Oblast...
As mentioned earlier, Kaliningrad is an enclave of Russia located south of Lithuania and north of Poland. Originally it was part of the German Reich under the name of East Prussia, but after World War II it was divided between Russia and Poland. The Northern part, where the city of Königsberg was situated, went to Russia and was renamed Kaliningrad, honouring a Soviet hero of the Revolution.

For a long time, the mainstay of the economy was the Russian military and especially the large naval base, which was positioned here at the outpost of the Soviet empire, but after the demise of the Soviet Union, the region has suffered from hard economic times. The region had difficulties due to the fact that it was located so far from the economic centers of Moscow and St.Petersburg and was at the same time not included in the European Union, which most of the neighboring countries would soon be a part of.

Just like in other Russian provinces, casino and gambling rooms flourished. It went to such a degree, that the Russian authorities decided to limit it to a few peripheral areas. One of these were Kaliningrad...
For the oblast (province in Russian) this could very well spark the beginning of an area where gambling could become a mainstay of the tourism economy.

However, as of now, there are things that Kaliningrad needs to improve...:
1. The natural attractions of the area are few and undeveloped (with the exception of the Kuronian Spit, a wonderful area of pristine dunes at the border with Lithuania).
2. The infrastructure is still not optimal and it is difficult and expensive to reach the enclave from other parts of Northern Europe.
3. The visa requirement for most Western countries furthermore makes it problematic to develop products like weekend-breaks.
4. There are only few employees within the tourism sector that has the formal education needed in order to serve Western tourists.

Nonetheless I fully believe that the area could potentially be developed as a gambling destination due to the advantages mentioned below:
1. The location of the area is quite central in North East Europe. Close by are major cities in Germany, Poland and Scandinavia, among these Copenhagen, Berlin and Warsaw.
2. The area is outside of the European Union. This has the effect that tax-free sales are possible for visitors coming from countries that are part of the Union (most of Western and Eastern Europe).
3. The infrastructure although still somewhat inadequate, is on the verge of drastically improvements due to the introduction of low-cost flights to and from Western Europe, most of these operated by the local airline KD Avia. Also the region has been blessed with proper facilities for both seaborne and railway-traffic.
4. As well as the potential in attracting tourists from neighboring countries, then one should not forget either that a very large home-market exists in Russia. The advantages herein are that no visas are necessary, that Russian is the language spoken and that there are subsidized and competing flights to and from mainland Russia (due to the isolated position of the region).

Despite these advantages the area will have to make a substantial effort in order to succeed as a gambling destination. Among the challenges is that of creating a positive image. So far the region has mostly been known for its unemployment and as having one of the highest AIDS-ratios in Eastern Europe (though this might be more due to the fact that other regions are not so exact in their control and register of AIDS-cases).

In my opinion, Kaliningrad should aim at attracting the large segment of West Europeans that are looking for entertainment. A typical Kaliningrad-break package could consist of:
- Low-cost flight return
- Accommodation
- Ticket for entertainment or show
- Comp chips or other special offer
This segment (which is quite big) has largely been ignored by casinos elsewhere in Europe both due to misconception and due to legislation. An example of the latter is England, which until recently demanded that you had to be a member of the casino before being allowed to gamble there.

Another vital factor in the future fate of Kaliningrad as a gambling destination will be the ability to attract foreign investment to the region, not least in the area of casinos. The desired investors would be those that in turn could attract guests due to their knowledge of marketing and PR and not least in providing more entertainment offers in the areas of gambling, events and conferences.

This should in the future boil down to the presentation of the first European destination, where gambling is a pillar. This should also mean that Kaliningrad would bear more resemblance to places such as Tunica, Laughlin and Macau, than to traditional European tourist destinations, where casinos are seen as nothing more than amenities similar to cinemas and restaurants.

Date Posted: 01-Feb-2007

Kristian Nygaard is a Tourism and Gambling consultant, based in Copenhagen, Denmark. After university studies in Denmark and Portugal, he has been working his whole career within the European travel and tourism sector.
His company International Tourist Consultants (http://www.touristconsultants.com/) has been working with numerous tourism companies, including casinos in Scandinavia and the Baltic Countries.
Specializing in the development of gambling-related tourism and transportation, Kristian Nygaard has published several articles and has advocated for the development of 'popular gambling', a term used by him to describe casinos and other gambling enterprises that cater for the large middleclass segments, also known as low-rollers..