- Case Studies of Las Vegas, Macau & Pen-hu County Southern Taiwan University Hospitality management Dept. A Study of Current Gaming Industry Development in Taiwan

Outlines:

1. Successful gaming development experience in Las Vegas 2. The past experience in Macau 3. Singapore development strategies 4. What can Pen-hu can or cant do 5. Both sides for gaming industry toward society 6. Suggestions for future casino hotels development

Las Vegas -Transformation In 1905, the construction of railway and gold miner. In 1931, Hoover Dam construction attracted more people.Las Vegas played as one of the most important role on MICE industry, the annual occupancy rate reported 93.2, USA average 60(Liu, 2007)The concept and operation model of Integrated Resort (IR) has expended to other regions in Asia, such as Macau, Singapore, Vietnam.., Japan In 1991, mileage stone for the opening of Sands Expo Mr. Sheldon Adelson MICE + hotel + casino Venetian Hotel, 2005, Average room rate 225 USD (Liu, 2007)There are 110,000 hotel rooms in place (UNLV, 1996). In 2002, visitors 34 millions, 100 times than residents

Las Vegas Gaming capital of the world The majority casino revenue comes from High price show room, gourmet restaurants, room fees, meeting and conference, shopping centerSlot operations generated higher income than table games (Chao, 2009)Sands Casino Hotel Macau declares 90% revenue derived from table games, and Venetian Macau reported 80% from gaming revenue or 70% came from VIP rooms (Chao, 2009)

FACTORS CONTRIBUTING TO GAMING INDUSTRY GROWTH: ( UNLV, 1996)Increasing productivity gives individuals more leisure timeThe prevalence of double-income households.Spent on services,including leisure and entertainmentA new entertainment and leisure product.

MGM casino & hotel 5000 rooms

Gaming revenueVegas revealed per visitor contributed average 160 USD on gaming, which consisted 7% for tourism gain (Nevada gaming tax 6.5%);However, visitors spent 5 times expenditure (770 USD) on others than gaming expense in 2004, resulted in 83% for state tourism revenue (Chao, 2009) Nevada generated 70% tax revenue from casino related industries State of Nevada indicate that 60+% of all gaming revenue is being generated by slot operations. (UNLV,1996)

Foreigners lose $500 per visit to Korea, and gaming revenues exceed $200 millions a year (Hashimoto, 2008).

Visitors reported 23 millions to Vegas in 1992. 1998 over 30 millions visitors came to this gaming city, or over 500 thousands tourists a weekIn 2002,about 34 millions visitors to Las Vegas1/9 are MICE tourists, 11% children, buffet 10 USD.Las Vegas has transformed into a international tourism mega instead of gambling simply (Hsieh, 2002)Indian reservation => open more city casinos Mississippi riverboat casino => more riverboat gaming

NEVADA: THE BIRTHPLACE OF MODERN GAMING1941 The El Rancho1942 Sahara Hotel & Casino1946 Flamingo Bugsy (Rudd & Marshall, 2000). 1994 MGM, 5000 rooms, arenas seat up to 17,000 for concerts and sporting event (Kilby, Fox, & Lucas, 2005).Las Vegas crime rate 5% lower than NYC & CHICAGO (Hiesh, 2002)

Extremely High Competition at Las Vegas

THE LAS VEGAS STRIP The Most (MGM Grand Hotel) 5000 roomsMirage Casino Hotel Volcano 1999 Bellagio Casino Hotel- Water danceTreasure Island Casino Hotel pirate shipsPyramid Stratosphere Casino Hotel Caesars Palace Hotel- shopping forum Paris Casino Hotel - Eiffel Tower 1998 New York New York- Empire State Build-.. (Rudd & Marshall, 2000).

Paris Casino Hotel - Eiffel Tower

Bellagio Casino Hotel

Excalibur Hotel & Casino

Las Vegas Las Vegas visitors average stayed 2-3 days : - therefore, it would be very important to maintain them stay longer for casino operationsMICEWeekend families vacationers Entertainment: Buffet, bands, shows, shoppingThere is no Oclock inside the casinos if possible so that people keep playing and forgetting about the time, even in the day times. Ventilation system provides more 60% Oxygen than usual this could only energize people maintain exciting condition. (Levez , 2001; Liu, 2007)

Figure1. Nevada Gaming Control Organizational Structure (Kilby, Fox, & Lucas, 2005)

History of Gaming Control in Nevada Gaming Control board: at least 5-7 years experience1. Investigates player disputes2. Reviews surveillance systems3. Inspects and approves gaming tokens4. Arrests anyone attempting to cheat the casino, and 5. Reviews all existing and new work card permits..

Nevada State Gaming Licenses:RestrictedNon-restrictedHotel Room Requirements- have at least 200 rooms before the state will issue the license (Kilby, Fox, & Lucas, 2005)

Gaming Control Board (Rudd & Marshall, 2000)The Nevada Gaming Control Board was formed in 1959. The primary purpose of this board was the enforcement of the regulations for licensing and operation of gaming establishments.

The divisions of the board are: Administration issuing license Audit (the largest division) internal control, cash procedureSpecial Investigation and Intelligence Investigations- -crime, gambling problemsElectronic Services monitoring slotTax and License - tax, license feesEconomic Research - and Enforcement 24 hours inspection, arrest

Typical casino structure (Kilby, Fox, & Lucas, 2005)

Typical casino structureTable Games: Casino Marketing:Games Manager Director of Casino Marketing Shift Manager Marketing HostsPit ManagerFloor personDealer Pit Clerk

Slots: Security and Surveillance : Slot Manager Security Officer Shift Manager (Slots) Director of SurveillanceHead Slot Mechanic Surveillance OfficerFloor personChange attendantsBooth cashiers

REVENUE AND PROFIT PER SQUARE FOOT Department Margin % ----------------------------------------Slots 60-70Table game 15-20Keno 25-30Race and sports 15-25Poker 20-30 (Kilby, Fox, & Lucas, 2005)

REVENUE PER UNIT PER DAY Total Win Win Per Game Total Units (000) Unit/Day ---------------------------------------------------------------Twenty-One 1155 649,906 1542Craps 174 276,027 4346Roulette 192 187,342 2673Slots 47036 2112,799 123 (Kilby, Fox, & Lucas, 2005)

Comps & Rebate PolicyA player who loses $100,000 should have a 19% rebateThat is a a 10% discount plusa $9000 airfare award and RFB (room, food, beverage) awards he/she may haveA player cannot lose $100,000 because the casino will rebate 19% of it for sure and probably award RFB as well. (Kilby, Fox, & Lucas, 2005)

Comps- RFB (room, food, beverage) awards Floorpersons use four criteria when rating player:Buy-in amount to the game Duration of playAverage bet Largest bet (UNLV, 1996)

Entertainment & customer serviceBarbra StreisandFrank SinatraWayne Newton Siegfried and Roy Circus & Magic ActMusicals, boxing (Levez , 2001).

The casino industry has changed its customer focus from high rollers and grind customers to family entertainment.Entertainment is now being used as a catalyst to bring people into the world of gambling and fantasy.The convention and visitors bureau still prefers advertising that establishes the city as an entertainment mecca and not a casino destination (Plume, 1999; Rudd & Marshall, 2000)

Marketing hosts

VIP could expected to have personal aircraft transportation service, limousine, or 24 hours butler service. Personal use gaming room, cigar bar, dining service, includes international cuisines, steak house, spa, tea house for any kind of brand.Casino hotels shared about 1% commission fees to marketing hosts so as to motivate them to bring in more VIP players. (Liu,2007).

The Who of consumers in casinoAverage household income is 16% higher ($53,240) than non-gamblers ($453,781) .The median age is 48Empty nestWhite-collars jobs 44% Vs. national 41% (Hashimoto, 2008)

WHY PEOPLE GAMBLE ? (Brenner, 1988; Rudd & Marshall, 2000)

The traditional slot player was thought to be a wife , girlfriend or retire person.. Fifty percent of them were white collar & equal amount of blue-collar and retired persons.Casino patrons had a median income of $38600, which was higher than the populations average

Major Reasons People Gamble:GreedSnobberyBoredomMasochismIntellectual exerciseDesire to prove ones superiority to the forces of chanceInexplicable excitementHelp in attaining unfulfilled goals

Table 1. Gaming Tax of Selected States State Percentage Gaming Tax-----------------------------------------------------Nevada 6.5 %New Jersey 8.0 %Mississippi 8.0 %Louisiana 18.5 %Illinois 20.2 %Indiana 20.0 % (Rudd & Marshall, 2000)

Security & Surveillance For example, Its 5100 guest rooms, 500 suites, convention facilities, a 36-acre amusement park, parking lots, restaurants, theaters, and a $1.25 billion investment.Surveillance stealBankruptcy management teams were not effective type of theft diminish its lossesSecurity physical securityGrounds security Unauthorized personsEye in the SkyOutside men observe

Nevada experience - ConclusionThe success of the new gaming jurisdictions will depend upon tourism.The Nevada experience is an economy built not just on gaming but on tourism. If these new jurisdictions cannot offer gaming to patrons who come outside the region, economic growth will be illusive at best.Casino-style gaming, focusing on local play, will probably not be the economic panacea that state legislators envision.The introduction of casino- style gaming is no guarantee that tourism will follow ,either.Having something more than gaming and development of a tourism. Infrastructure will be critical for the new gaming jurisdictions to get the economic development they seek. (UNLV, 1996)

Macau Transformation Mileage Stone Macau established casino in 1847, now days about 30 casinos within this region and provided 60 thousands employee opportunities which consisted 11% residence. 1999(Liu, 2007)In 2002, Macau government embraced international Vegas mega style casino implemented instead of 40 years monopoly at MacauIn 2002, gaming revenue exceeds 2290 billion Macau dollars. In 2006, gaming revenue exceeds 5000 billion Macau dollars (equal to 720 billion USD ), more than Las Vegas in that period.In the first half 2008, Macau generated 5926,4 billion Macau dollars (Chiu, 2008). In 2007, gaming revenue reported NTD 30000 billion dollars Macau government declared the average casino visitor contributed 1,600 Macau dollars per day and stay expanded to 3 days (Nin, 2007) ----Singapore attention

Macau Transformation Sands Casino Hotel reported $6100 USD per gaming table, or the average betting per person was $85 UDS at Macau; however , people spent average $25 UDS per play at Vegas.

The major difference is visitors came to Las Vegas for vacation; Nevertheless, Macau visitors were eager for gambling simply and as if they want to be a billionaire within one minute. (Liu, 2007).

Visitors who are they

China allowed people for more opportunities to Macau so that visitors increased to 1.2 billion people in 2003. - and reported 1.67 billion people in 2004 ( 9 million visitors came from Mainland)

- in 2007, visitors up to 2.7 billion people ( 62% were from Mainland as well) (Chao, 2009).

- However, China reduced issuing the amount of visa to Macau since 2008 June, the tourism was totally damaged (Chao, 2009).

Gaming ImpactMainland China contributed about 90% gaming revenue to Macau casino hotels; therefore, people in mainland described Macau as playground for corruption fees (Chiu, 2008). Moreover, Beijing region was not happy most casinos revenue go to the pockets of American investors (Cheng,2009) Beijing forbidden their officials to Macau, however, in Kwang-dong province more than 5000 officials were been investigated by juridical in last 5 years. (Cheng,2009)

UNLV Dean of William Harrah Hotel Administration CollegeDr. Staurt Mann stated visitors spent average 3.6 hours on gaming at Vegas; However, people stayed 1.2 hours only at Macau. Thus, Las Vegas generated 82% revisiting tourists and gained higher customer satisfaction (Cheng, 2007)

Macau conclusionMacau gaming industry relied too much upon China tourists, so that their economy were deeply dominated by China government. Besides casinos, it would be very important for authorities to develop more MICE , entertainment facilities, shopping, family vacation options.. or resort area.

UNLV Dr. William Eadington 2008 presentation at The challenge for casino hotels in Macau 1. majority revenues relied too much on VIP players,2. extremely high taxes and bonus system 3. rigid government regulation, labor constraints, local residence resentment, and inadequate law regulations...

Current issues 1. serious financial problems for major casino hotels. 2. hotel lands owned by government reduced assets activities. 3. high employee cost. 4. unstable visa issuing from Beijing. 5. low revenue from non-gambling jurisdiction. 6. corruption problems

Singapore - garden city Population 4.4 millions, International visitors reported 8.3 millions in 2004, Accordingly, visitors increased up to 10.3 millions in 2007 and 10.8 millions in 2008 (, 2009).

Honk Kong Disney attracted more attention in Asia market.Macau developed new style mega gaming resort.

Singapore enacted in 2006 April.

Singapore tourism development strategiesAnnounced 2015(Tourism 2015)Developed (Marina South) and (Sentosa) two areas as new integrated resort (IR). This would bring economic benefit for $3380 NTD billions provide 30,000 job opportunities in 2009 and 2010.

Visitors average stayed for 3 days in Singapore, hopefully this plan would increase visitors up to 17 millions next year and double their expenditures there (Liu, 2007)

Marina South (, 2009)

Singapore (, 2009)

Sentosa (, 2009)

and

(Marina South) Positioning MICE commercial customers Theme - fashion & stylishTarget customers international commercial visitors Developers - Las Vegas Sands Corp.

(Sentosa) Positioning - More leisure entertainmentTheme - tropical style island resort Target customers - families vacationersDevelopers - Genting Corp. Malaysia (, 2009)

Gaming industry development in Taiwan Due to economic recession, - many local government expected to develop casino hotels so as to benefit its tourism and economic as well.It is not only to bring over tourists but also reduce the amount of gambling fees (200 billions NTD) goes to other neighboring areas (Lin, 2005). Macau reported 29 millions visitors last year, Taiwan revealed less than 4 millions international visitors. in 2008 tends to adapt Singapore model2009 The results of on May?

Pen-Hu County Pen-hu county government expected to develop casino hotels to bring over 5 millions visitors each year or each tourist spend 5 thousand NTD (tax 15%) would generate 375 billions NTD. Accordingly, Pen-hu could share 60% of gaming revenue or 225 billions NTD and 10 thousands job opportunities (Tseng,2008) However, the reasons for Pen-hu to develop casinos would only be front island or economic depression simply

Some restrictions for casinos developmentCurrent inadequate electricity and water supplement in Pen-hu.

Bad weather condition on winter season, thus strong wind or huge wave makes it difficult for tourism activities. Unstable weather results in only half year for tourism. Environmental capacity issues (Huang,2007)

Traffic problems It is much harder to book a airline ticket to Pen-hu on high season than international flight. Difficult access to reach would possibly attract local residences or domestic tourists to Pen-hu casinos rather than foreign visitors (Huang, 2007)Currently there is no international five star resort at this region. Tai-hwa Ferry (4-5 hours) could only bring in several hundreds tourists within a day.

Appropriate locationCEO of Venetian Hotel & Casino at Vegas and Macau - Mr. Sheldon G.Adelson expressed that Taipei or Kaoshiung would be much better location for developing casinos in Taiwan (Lee, 2007)Taipei County governor declared that could be a nice location to an integrated resort for gaming, leisure, MICE Pingtung -Dapenweng

Macau Hotel Lisboa Corp. found Kaoshiung county fitted.

Are we ready yet !1. Domestic flight makes it difficult for international tourists to reach , they do not think it is convenient for them to spend several hours to transfer to Pen-hu either via air or ship way. 2. No MICE industry customers available at that region.3. Social security problems.4. Not appropriate timing to develop gaming industry at this economic recession era especially it is hard to against strong competitors such as Singapore or Macau.5. Casinos are not a panacea to economic booming for all local development.

Are we ready yet !Six major casino hotels stock market price dropped 80 % last year in Macau; Nevertheless, Sands casino & hotel corp. stated declined 95% in economic tsunami (Kan, 2008)MGM Mirage sold its Treasure Island casino hotel as well (Lin,2009)

UNLV Dr. William Eadington highlights: 1. Global gaming industry tends to be more conservative than use before. 2. It is not a good timing for Taiwan to develop gaming industry at this time period. 3. It is indispensible to reconsider again for its personal strength or weakness in detail. 4. It would be much harder to develop gaming industry in Pen-hu. (2008 )

The State of Nevada Legislature declares the Public Policy of the State The gaming industry is vitally important to the economy of the State and the General Welfare of the inhabitants.The continued growth and success of gaming is dependent upon public confidence and trust that licensed gaming is conducted honestly and competitively, that the rights of the creditor of licensees are protected, and that gaming is free from criminal and corruptive elements.Public confidence and trust can only be maintained by strict regulation of persons, locations, practices, associations, and activities related to the operation of licensed gaming establishments and the manufacture or distribution of gambling equipment. (UNLV, 1996)

Final suggestion

What would be the unique positioning strategies for Pen-hu casino development in Taiwan ? How to cope with such strong competitors like Singapore, Malaysia, or Macau..Could it possible to acquire cheapest tickets either for directly international arrivals. Any international cruise, D.F.S. Outlet...available.Adequate facilities for tourismEqual amount feedback for localStrict regulation from governance Casino is only a small part of tourism sustainable development.

End

Q & A

Reference:

2005 2009 2002 200720072007/08/2820072007/08/2820082008/0620082008/04/2420082008/06/0220092009/01/1420082008/10/24 20082008/09/172009The liberty times2009/01/1220092009/01/13200720082007Staurt 2007/08/27

ReferenceHashimoto, K. (2008). Casino management- A strategic approach. Upper Saddle River, NJ: Person Education Inc.Kilby, J., Fox, J., & Lucas, A. F. (2005). Casino operations management. Hoboken, NJ: Johnson Wiley & SonsLevez, B. (2001). The casino handbook. UK: New Holland Publishers.Rudd, D. P., & Marshall, L.H. (2000). Introduction to casino and gaming operations. 2nd(ed.). Upper Saddle River, NJ: Prentice Hall.UNLV (1996). The gaming industry- Introduction and perspectives. University of Nevada, Las Vegas, New York, NY: John Wiley & Sons.

Presenter

UNLV ASTD American Society for Training and DevelopmentHRDAHLACHDT,CHSTTQS