Gaming In The Asia/Pacific --

Joining The International Bandwagon

By: Phil A. Kasselis and Peter D. Landos - Sydney, Fall 1995

As society has continued to accept gambling as a credible form of entertainment, there has been extensive expansion of legalized gambling throughout the world. International gambling operators now view the major markets of the United States and Europe as offering fewer opportunities for future expansion. As a result, world focus has been directed at the Asia/Pacific region, considered the single most important market for future growth in gambling.

During the last few years, international casino operators have discovered the lucrative benefits to be derived from the Asia/Pacific region.

The World Tourism Organization has forecast that the East Asia/Pacific region will be the fastest growing region over the next 15 years.

This report focuses on the casino gambling market in the Asia/Pacific, although not discounting the significance or size of other forms of gambling.

Australia

The gambling market in Australia involves two distinct forms - racing and gaming:

Gambling expenditure in Australia (1994) was distributed as follows:

1994 Australian Gambling Expenditures
Slots 44%
Racing 23%
Lotteries 16%
Casinos 12%
Minor Gaming 5%

Gambling in Australia is increasing at a phenomenal rate, triggered by the improving economy and the state governments¹ realization of the revenue capacity in the industry.

As a result, Australians have been bombarded by new venues and gambling options, with the Governments of Victoria, New South Wales and the ACT deciding to take advantage of the fiscal benefits of casinos and grant casino licenses. Additional casino licenses have also been provided for in Queensland, being Brisbane and Cairns. No further casino licenses are likely to be issued in Australia for the remainder of the decade. Though the exclusivity period for Jupiters, Gold Coast, expires in 1995, the granting of licenses in Brisbane and Cairns indicates no further licenses will be issued in the state of Queensland.

Austrailian Casinos: Size/Scope of Properties

Location Name Machines Tables Exclusivity Period
Adelaide Adelaide 750 93 None
Alice Springs Lasetters 196 21 N/A
Brisbane Treasury 1,224 102 2005
Cairns Reef 450 45 2005
Canberra Canberra 0 39 N/A
Christmas Island Christmas Island 50 27 N/A
Darwin Diamond Beach 386 35 N/A
Gold Coast Jupitors 998 112 1995
Hobart Wrest Point 272 40 Unlimited
Launceston Country Club 188 25 Unlimited
Melbourne-Permanent Crown 2,500 200 2006
Melbourne-Temporary Galleria 1,200 130 N/A
Perth Burswood 1,128 115 2000
Sydney-Permanent Sydney Harbor 1,500 200 2007
Sydney-Temporary 500 150 N/A
Townsville Breakwater 182 34 2000

On completion of the current development program, there will be a casino in every capital city and major tourist destination. The casinos in Melbourne and Sydney, which collectively represent over 40 percent of the national gambling population, will be among the largest in the world.

With New South Wales being the last Australian state to open to casino gaming, its casino in Sydney will face the greatest demand of any casino in Australia. Though New South Wales has had slot machine gaming, lotteries and horse racing for a number of years, like most other Australian states it will now have all forms of gaming. Sydney's demographics include the nation's:

As there has never been a casino or similar entertainment facility in Sydney previously, it is expected that there will be shifts in both gambling and entertainment patterns in the local market.

Melbourne's Crown Casino temporary facility, Galleria,surpassed revenue forecasts during its first six months of operations, and it continues to trade at 70 percent above prospectus forecast casino revenues. The temporary facility currently has approximately 170 tables and 1,200 slot machines. Due to significantly higher demand than expected during its initial opening period, the gaming facilities were expanded by 40 percent for tables and 15 percent for machines. The Melbourne Casino currently ranks as Australia's largest casino property. The most significant weakness identified at Crown is the lack of a recognized and experienced casino operator, an advantage enjoyed by other major Australian casino operations.

Jupiters Ltd. second casino, The Conrad Treasury Casino, opened in Brisbane in April 1995 making Jupiters Ltd. the only listed operator with two casino operations. The Reef Casino in Cairns is expected to open in January, 1996. Reef Casino is operated by Casinos Austria, the operator of Casino Canberra and The Christmas Island Casino.

Australia has some of the most stringent casino regulations covering all operations. Under monopolistic arrangements with their respective state governments, Australian casinos do not compete within their local markets. In return for 'exclusivity arrangements' the industry has agreed to operate under one of the highest tax regimes in the world, paying an up-front casino license fee, annual license fee, state tax on gambling revenue, community benefit levy and the national corporate tax rate. The tax regime confronting Sydney Harbour Casinois such that it is likely to be precluded from actively pursuing a share of the Asian junket market. Given that Sydney receives close to 50 percent of all international visitors to Australia, it is unfortunate for Sydney Harbour Casino that the tax regime is structured in such a way.

New Zealand

New Zealand's first casino opened on the South Island in November. The Christchurch casino is owned and operated by Christchurch Casinos Ltd. which includes London-based casino operator Aspinall, former owner of the Diamond Beach Casino in Australia's Northern Territory. One of the challenges facing Christchurch has been educating local residents on the concept of a casino and how to play the games. This boutique-style European casino is the first in New Zealand and, consequently a large part of the marketing program has been invested in things such as how-to-play guides and staff training for customer service.

Meanwhile, construction is currently in progress for the Auckland Sky City casino, which is due to open in 1996. The venue is to include a Harrah's Casino Hotel, with 60,000 square feet of gaming space (75 tables, 914 slots, VIP room with 12 gaming tables and an 80-seat Keno lounge), 340 hotel rooms, and other retail, food and beverage, and convention facilities. Sky City Limited is 80 percent owned by Brierley Investments Ltd., 20 percent owned by Harrah's.

Christmas Island

The Christmas Island Casino,operated by Casinos Austria, commenced operations in mid-1993, and now houses 27 tables and 50 slot machines. Christmas Island is 360 kilometers south of Java, and is well positioned to penetrate the Indonesian premium player and junket player market which is predominantly serviced by casinos in Malaysia, Macau, and the Philippines.

The Asian Gambling Market

Gambling operations throughout the world view Asia as the single most important market for future growth in gambling. These views are based on:

However, various impediments to expansion do exist. These include:

The emerging markets are Vietnam, Cambodia, Myanmar and the Golden Triangle region, an area formed by the borders of Laos, Myanmar and Thailand.

The following is a summary of the gambling markets in the region:

The Chinese government continues to send mixed signals to international gaming investors. In an attempt to accelerate the process of development, a non-profit group has been formed to offer long-term assistance to China in developing world-class gaming, entertainment and convention projects.

The International Advisory Council to Evaluate Gaming and Entertainment Development in China, which has no representation from any casino owner or operator, has plans to draft gaming legislation, locate appropriate plans for casinos and establish criteria and national standards for potential gaming licenses. The board is devoted to assisting China in its move forward in the development of gaming, entertainment and convention projects. The primary tasks of the board are as follows:

Conclusion

Gaming in the Asia/Pacific is in the midst of its development phase. Once this process concludes, there will be a heated battle between operators in this region for the gaming dollar. Australia is currently best positioned to take advantage of these opportunities due to the willingness of its legislators to legalize gaming in all forms. The only restrictive factor for operators in Australia is the extreme tax regimes imposed by local authorities. The benefits to the community will take the form of tourism infrastructure predominantly funded by gaming activities.

The reluctance of many Asian governments to become strong advocates of legalizing casino gaming, as well as gambling in other forms, remains the most significant hindrance to gaming development and perhaps the genertion of economic reform in these areas. Nevertheless, Asian gaming markets will continue to be of significant appeal for operators pursuing the opportunities in this economically expanding and dynamic regional market.

©Arthur Andersen