Casino & Gaming International: Issue 7

2007 ISSUE 2

WELCOME

EYES ON EUROPE Publishing Director Jamie Kean Email: jamie.kean@casinoandgaming.net Editor Stephen Lawton Email: stephen.lawton@casinoandgaming.net Publishing Services Manager Louisa Bull Email: louisa.bull@casinoandgaming.net Distribution Manager Tracie Birch Email: tracie.birch@casinoandgaming.net Business Development Manager Stuart Jameson Email: stuart.jameson@casinoandgaming.net Advertising Mike McGlynn, Sales Director Email: mike.mcglynn@casinoandgaming.net Ray Blunt, Sales Manager Email: ray.blunt@casinoandgaming.net Daniel Lewis, Sales Executive Email: daniel.lewis@casinoandgaming.net

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specially on Italy: that may now be to some real purpose, irrespective of what occurs in the United States following last year’s anti-online gambling Act (UIGEA) and any efforts ahead to replace it with regulation. Given operators’ caution in Asia – regarded as a long haul investment beyond Macau’s spectacular land-based casino growth - the current period of readjustment could find corporate resolve strengthening if the European Court of Justice Placanica decision is taken forward. The ruling, rebuffing an Italian law that prohibits publicly quoted companies from obtaining betting licenses there, is thought to further clarify the principle that restrictions on gambling pursuits in European Union (EU) states can only be justified where its application realistically contributes to a public interest objective.

Nevertheless, whether this currently suggests positive incremental progress toward a cross-border level playing field for the industry, or a fruitless series of manoeuvres and cases with no light at the end of the tunnel, has still to be fathomed. There are, as ever, contradictory signs at work. The Gambelli judgement (November 2003) was the first to clearly define the scope for establishing services in EU member countries, and that has now been reiterated and reinforced by the Placanica outcome. It adds armour to a growing body of determined commercial opinion that monopoly protectionism stifles competition and fails to recognise the industry’s corporate compliance and social responsibility performance. Today’s Europe, though therefore problematic, has been an essential region for potential online gaming and betting innovation and business growth for sometime.

In the context of Spain’s recent changes and the nascent market share of the EU acceding states, the issue looks more like a question of when, rather than if, Europe will liberalise. But that ‘when’ highlights the difficulty of estimating the short or long term possibilities, since companies either have to take a high risk approach - bearing in mind the arrests in France – or remain very cautious pending further improvements. There was no lack of decisiveness in the UIGEA and subsequent arrests, which served blunt notice leaving companies abrupt, if traumatic, limited-choice strategies in order to set up operations elsewhere. So corporate attention is strongly focused on this Continental endeavour now, and the betting and gaming industry push is central to strengthening liberalisation pressures. Cultural accessibility and technological adaptability certainly represents a highly receptive interplay waiting to seriously kick off in much of Europe’s markets – a compelling factor in its own right.

Amid complex, uneven national interests, there has been a naturally piecemeal and disjointed reaction by EU countries to what intrinsic value there is to be gained from regulating online betting and gaming. Responses are also informed by the perception of whether there can be an expansion of gaming without any undue ‘social fallout’ - problem gambling. This is a tightrope for national interests alone, whether critics inflate the issue or not. Today, the industry has made great strides in meeting preventative and curative needs which, in a Europe-wide sense, adds greatly to establishing professional credibility. The twin track of competitive tax value and a socially aware industry takes time to develop and accept, but the pace of commercial challenge will continue to strengthen the gradual shift toward regulation.

From a global perspective, the online gaming trend has been unstoppable: a fraught opportunity both lucrative and unstable. Predicated on the more immediate and mass-based interconnection of player, technology, company, regulator and government, the balance of interest in online gaming remains a volatile and delicate business. So while South America, for instance, is an attractive region for growth, the UK’s pretensions to be a world-beating commercial centre for online gaming is now being called into question. The implications of Placanica will form a vital thread at the major upcoming industry events – notably IGE and GIGSE. And it will no doubt be a collective spur to prepare for further testing of the restrictive monopoly frontier. CGI

E

Stephen Lawton is editor of Casino & Gaming International Casino & Gaming International ■ 1

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CONTENTS

39

9

25

55

FEATURES 9

MUCH TO SHARE IN A NEW ERA OF GAMING

BY FRANK J. FAHRENKOPF, JR.

17

VIP DENSITY HIGHLIGHTS GROWING MASS MARKET POTENTIAL

BY BEN LEE AND LEANDA LEE

25

CLARIFYING THE CONCESSION CONUNDRUM: WHAT’S MINE IS YOURS… EVENTUALLY

BY DAVID GREEN

33

NEW DESIGN WAVE MASTERY IS KEY TO CLIENT RETENTION

BY JOSH HEITLER

39

COMPELLING, ICONIC & COMPETITIVE: ‘W’ REDEFINES THE CHALLENGE AHEAD

BY MARK BIRTHA

55

WHY ITALY, NOT LONDON OR COSTA RICA?

BY GEORGE MANGION

Casino & Gaming International ■ 3

CONTENTS

85

61

67

73

FEATURES 61

TWO WORLDS – A PERFECT MATCH

BY ROBIN LE PREVOST

67

SECURE DOMAIN, SHARED VALUES & BRAND STRENGTH

BY PAUL MATHEWS

73

HERITAGE AND QUALITY DRIVES ONLINE SUCCESS

BY MALCOLM GRAHAM

77

SURVEY REVEALS VITAL INSIGHT INTO WHAT MAKES PLAYERS TICK

BY ANDREW BEVERIDGE

85

‘AT RISK’ INTERVENTION, COUNSELLING, EDUCATION & CORPORATE RESPONSE

BY GEOFFREY GODBOLD AND ANDREW POOLE

89

DETECTING THE SIGNS: BRINGING GAMBLERS BACK FROM THE BRINK

BY KEVIN FARRELL-ROBERTS AND IAN SEMEL

Casino & Gaming International ■ 5

ASIA & LAS VEGAS

MUCH TO SHARE IN A NEW ERA OF GAMING

BY FRANK J. FAHRENKOPF, JR.

This June marks the debut of G2E Asia and while the new trade show will no doubt garner the greatest attention, it will be the conference and networking opportunities that have the greatest impact on the growth of gaming in that part of the world. Asia is committed to helping attendees realise the incredible potential of the Asian market by providing insights on key gaming issues from an Asian sociocultural perspective. G2E Asia will spark a new level of global information sharing on Asian gaming issues that surely will help the region evolve. The success of Macau is certain to result in the growth of gaming throughout Asia and interest is already clear in Singapore, Japan, India, South Korea, the Philippines, Thailand and Vietnam.

>>

“Macau’s gaming win swells”; “…the Chinese enclave has surpassed the Strip as the world’s largest gaming market.” arlier this year, newspapers around the world carried headlines and articles similar to the one above from the Las Vegas Review-Journal this January. There is no doubt the news of Macau’s ascendance hails a new era of gaming in the world. That it was an Asian market that overtook Vegas comes as no surprise, nor should it be a surprise that U.S. gaming companies are playing a major role in transforming gaming in Asia.

After all, Asia and Las Vegas have always had a special connection. Asians were among the first international patrons to make Vegas a regular stop and I think it’s safe to say that patrons from Asia still make up the largest number of international guests flying into Vegas on any given day. Now Macau and Las Vegas share the mantle of gaming leadership.

My prediction is that Macau and Las Vegas also will share another common experience. Just as the success of gaming in Las Vegas led to, albeit after several decades, the growth of gaming across the United States, the success of Macau is certain to result in the growth of gaming throughout Asia.

Already we are hearing of interest in Singapore, Japan, India, South Korea, the Philippines, Thailand and Vietnam. Financial advisers and their investors are salivating at the prospect, as are many of our American Gaming Association (AGA) members, who see the decades of experience they have had meeting the needs of their Asian clients as a distinct advantage as they enter this booming market.

These are indeed heady times for Macau, but allow me

E

Casino & Gaming International ■ 9

ASIA & LAS VEGAS

>> The biggest single challenge we faced and continue to face in the United States [is] problem gambling.

Clearly, this challenge has also been recognised in Asia where I understand several Asian countries, along with U.S. companies entering the market, are already leading efforts to address problem gambling. For example, Singapore has established a national framework that includes the creation of a National Council on Problem Gambling. In Hong Kong, the Ping Wo Fund, established in 2003, finances research, public education programmes and treatment services >>

the honour of passing along knowledge gained from more than three decades of gaming industry experience. The following is a cautionary note. While I am no expert on how the Asian market will develop, and there certainly will be vast differences in Asia’s experience and ours in the United States, there also may be some important commonalities.

For example, for almost a half century, Nevada was the only state that permitted casino-style gaming. Then, in 1978, the first casinos opened in New Jersey (and only in Atlantic City). It took little more than a decade for the next expansion (riverboats in Iowa and Indiana in 1989). Now, less than two decades later, 35 states have some kind of casino-type gaming. The real burst of casino growth flowed from two sources. One source was a U.S. Supreme Court ruling in 1988 that found that Native American tribes had the right to self-regulate high-stakes versions of all gambling games that were not prohibited by state law. This ruling led to the incredible growth of casinos on Native American land. The second source was falling tax revenues in many states during

10 â– Casino & Gaming International

the early ’90s, which led to legalisation of casino-style gaming (albeit with restrictions in many states, such as location on riverboats and loss limits) in almost a dozen states.

Predictions for the future were rosy, just as they are in Asia today. The future, in fact, turned out to be extraordinary; however, the growth came with a dose of reality in the form of gaming opponents and political opportunists.

The most immediate danger to our industry came from religious leaders and moralists. Of course, the United States may be different from Asia and many other markets in this regard, but the sway of moralists is strong in the United States and their influence is felt throughout the social, civic and political fiber of our country.

Even if the opposition to gaming in Asia is not driven by moralists and religious fervour, it is a safe bet that opponents will use the same arguments as those used by moral opponents in the United States. These opponents, who knew that moral opposition, while strong, would not prevail in a secular political system, developed a laundry list of maladies

ASIA & LAS VEGAS

they attributed to the introduction of casino gaming. And these alleged ills ranged from the reasonable but exaggerated (they claim pathological gambling affects vast numbers of the U.S. population, when the actual prevalence is about one percent), to the ridiculous (claims that casinos actually damage job growth and economic development). Among other false arguments against the industry were the claims that gaming leads to the presence of organised crime; an increase in crime; puts local restaurants and entertainment venues out of business; and causes bankruptcy. Of course, the opposition of the moralists and the friendly hearing they received from much of the media spawned a host of pseudoresearch and junk science that supported these contentions.

The AGA aggressively challenged the data these antigaming zealots used to make their case. Our position was simple, and it echoed an old adage from former U.S. Sen. Pat Moynihan: “Everyone is entitled to their own opinion, but not to their own set of facts.”

The U.S. gaming industry overcame, for the most part, the false ‘facts’ being presented by gaming opponents. We did this with a willingness to be transparent. We challenged any elected official, regulator or reporter to ‘trust, but verify,’ which my old boss Ronald Reagan used to say in regard to the Soviet Union. We challenged them to compare the false ‘facts’ of the opponents with the reality of what was taking place in new gaming communities. We provided them with or pointed them to credible, third-party studies (for example, a U.S. Treasury Department study that concluded the introduction of casinos does not contribute to the increase in bankruptcies) that exposed the shoddy research our opponents cited.

Which brings me to the biggest single challenge we faced and continue to face in the United States — problem gambling. Clearly, this challenge has also been recognised in Asia where I understand several Asian countries, along with U.S. companies entering the market, are already leading efforts to address problem gambling. For example, Singapore has established a national framework that includes the creation of a National Council on Problem Gambling. In Hong Kong, the Ping Wo Fund, established in 2003, finances research, public education programmes and treatment services. The Fund also sponsored the first Asian Pacific Problem Gambling Conference in 2005.

Such actions are wise because it is predictable that, in Asia and other new jurisdictions, opponents will, as they did and continue to do in the United States, shamelessly take advantage of the painful stories told about the evils of gambling by problem gamblers and their families. We do not dispute the existence of men and women who cannot gamble responsibly, but the overwhelming majority of them gamble responsibly. In a free society, we are constantly balancing the good of the majority (in this case, an overwhelming majority) with the good of the minority.

Balancing the two is delicate.

The first step to finding that balance is finding solutions to the problem. Fortunately, when we opened the AGA in 1996, many of our member companies were already doing incredible work on problem gambling, so we developed best practices and worked to promulgate them across the industry. We established an awareness week each year, during which our companies and their employees would emphasise responsible gaming above and beyond what they do on a regular basis, 365 days a year. Furthermore, we

established a Code of Conduct for Responsible Gaming that encompasses all aspects of the gaming business, from employee assistance and training to alcohol service, advertising and marketing.

The code also details the commitment of AGA members to continue support for research initiatives and public awareness activities surrounding responsible gaming and underage gambling. Specific provisions include a commitment to train employees with regard to responsible gaming and responsible alcohol service, as well as a provision to allow patrons who have a gambling problem to selfexclude themselves from gaming activities. According to the code, this self-exclusion also will include opportunities for patrons to request to be removed from promotional mailing lists and to revoke privileges for casino services such as casino-issued markers, player club/card privileges and on-site check-cashing.

All of these actions contributed to addressing the issue; however, the most important single action our industry took was the establishment of the National Center for Responsible Gaming (NCRG). In 1996, several AGA member companies came together to create the NCRG. At that time, a reporter skeptically challenged the notion that the gaming industry would really support such an initiative or that the research would be objective. “I’m not asking you to trust what we say,” I responded. “Just watch what we do.”

What did we do? To date, gaming industry companies have committed more than $15 million to research, making the NCRG the preeminent private source of funding for the study of disordered gambling in the world. The NCRG has provided funding to more than 20 leading research institutes in the United States and Canada and findings have been published in more than 40 peer-reviewed scientific publications and academic journals, including The American Journal of Public Health; Addiction; American Journal of Medical Genetics; Annual Review of Public Health; Biological Psychiatry; and Neuron.

While we were fighting off the anti-gaming opponents, we also were faced with a second, even more threatening long-term danger. As the industry grew, political leaders began to think of the industry as an easy target for solving their budget problems.

One of the prices the industry paid for its expansion into more U.S. states in the early 1990s was the acceptance of high gaming privilege taxes. Those taxes were a challenge from the beginning, but as of late they have become a very real threat. In a recent white paper produced for the AGA, Eugene Christiansen, a leading gambling and entertainment industry analyst, notes that, since 1994, the average privilege tax for commercial casinos in the United States has increased by 60 percent – significantly higher than the rate of increase for gross gaming revenues over the same period.

These tax increases are levied in spite of the overwhelming evidence, as presented by Christiansen, that lower tax rates actually result in better tax returns. For example Nevada, New Jersey and Mississippi, the three highest gaming tax revenue states, have the lowest gaming taxes. No one ever said logic prevails in a political fight. I suspect that is true around the world. A united industry at the national level has helped us prevent a federal tax and the industry is still working at the state level for more equitable taxation. It is an ongoing uphill battle.

My primary message is that along with growth and Casino & Gaming International ■ 11

ASIA & LAS VEGAS

>> No one can say for certain the expansion in Asia will lead to growth in Las Vegas and other U.S. markets, but one thing is certain – the industry is preparing for that growth. The acknowledgement of the importance of the Asian market can be seen from the design features and games in our leading casinos to the establishment of a tourism office in Asia by the Las Vegas Convention Authority >>

expansion come challenges and responsibilities. And along with challenges and responsibilities comes a greater need to share ideas and improve industrywide communications.

This need was a primary reason the AGA was founded in 1995 and why we founded Global Gaming Expo (G2E) in 2001. This trade show and conference gives leaders of our industry from around the world the opportunity to see the latest in gaming products and to meet in one place to share ideas and develop mutually beneficial strategies. As its growth has shown, G2E has become the global gaming “must attend” event of the year.

Even though G2E attracted hundreds of attendees from Asia the leadership of the AGA, many of whom have companies intimately familiar with the market, saw a need for the same type of trade show and conference in Asia - and what better place to hold it than Macau?

This June marks the debut of G2E Asia and while the new trade show will no doubt garner the greatest attention, it will be the conference and networking opportunities that have the greatest impact on the growth of gaming in that part of the world.

The conference at G2E Asia will cover a variety of issues such as: ■ ■ ■

■ ■ ■ ■ ■

the impact the burgeoning Macau market will have on the industry at-large; what casino operating model works best in different situations and how to implement the best model for each situation; how technology will allow gaming operators to more closely track the action at the tables and reward customers more accurately for their play, and help alleviate human resources problems; what drives the Asian culture’s preference for table games instead of slot machines and how slot manufacturers are responding to this innate competition; how manufacturers are addressing the socio-cultural differences in Asian play with new systems technology, server-based gaming, bonus features and video displays; dealing with transportation, housing, training, masterplanning and other infrastructure challenges; protecting and educating patrons as well as employees about problem gambling; and, finding what science exists to help with problem gambling and determining how Asian programmes must differ from those employed in other jurisdictions.

In short, G2E Asia is committed to helping attendees realise the incredible potential of the Asian market by providing insights on key gaming issues from an Asian sociocultural perspective.

Members of the AGA are heavily involved in the Asian 12 ■ Casino & Gaming International

market, and the interest in expanding markets is high. Our members also see the growth in Asia as an opportunity to increase the U.S. market. As I pointed out earlier, those of us who have been in the gaming business awhile have learned that expansion anywhere in the United States is good for business in Las Vegas. When New Jersey legalised casinos in Atlantic City, the naysayers warned of doom to Vegas. The same was true when casinos opened in California. However, that expansion has only helped to strengthen Las Vegas’ position as the centre of the global gaming industry.

No one can say for certain the expansion in Asia will lead to growth in Las Vegas and other U.S. markets, but one thing is certain – the industry is preparing for that growth. The acknowledgement of the importance of the Asian market can be seen from the design features and games in our leading casinos to the establishment of a tourism office in Asia by the Las Vegas Convention Authority.

Some experts estimate that Macau’s gaming revenues will double by 2010. Sounds familiar. Some new U.S. jurisdictions saw similar growth in the decade of the ’90s and other new jurisdictions are expecting that type of growth in this decade. The U.S. industry learned to cope, sometimes the hard way, with the opportunities and the challenges that growth sparked. Of course, many things will be different in Asia, but some things will be the same. G2E Asia will spark a new level of global information sharing on Asian gaming issues that surely will help the region evolve, adapting the lessons of the past to craft an even brighter future for the region and all those involved in it. CGI

FRANK J. FAHRENKOPF, JR. Frank J. Fahrenkopf, Jr. is President and CEO of the American Gaming Association (AGA) in Washington, D.C. In his role as chief executive of the AGA, Fahrenkopf is the national advocate for the commercial casinoentertainment industry and is responsible for positioning the association to address related regulatory, political and educational issues. A lawyer by profession, Fahrenkopf gained prominence during the 1980s, when he served as national chairman of the Republican Party during the presidency of Ronald Reagan.

ON THE CREST OF A WAVE MICROGAMING CONTINUES TO SET THE STANDARDS AND GIVE ITS OPERATORS THE COMPETITIVE EDGE Four months into the New Year and Microgaming is riding on a wave of exciting and groundbreaking announcements. Record numbers of poker and casino operators have joined its ranks since January, continuing where the company left off at the end of 2006 and its development teams have been in overdrive, releasing a new Viper lobby and multi-player Viper software in February and March respectively. On the games front, things have continued apace. Hitman, the eagerly awaited addition to the successful Lara Croft series is sweeping through the playing community. Microgaming continues to maintain the most aggressive new game rollout schedule in the industry. Add to this the arrival of a new head of business development and marketing - Bruce Elliot and it’s clear why Microgaming continues to maintain its position at the head of the gaming software elite.

TM

TM

REVOLUTIONARY HITMAN GAME DELIVERS UNPRECEDENTED NEW PLAYING EXPERIENCE HITMAN, created by Eidos Interactive, is a global gaming phenomenon and continues to break new ground in the so-called ‘thinking shooter’ genre. With the player placed in the role of a retired assassin, Microgaming’s new video slot replicates the exploits, advanced features and thrilling missions that raised the game to the top of the global gaming chart.

The long awaited movie is due for release in October 2007 and plans to feature Timothy Olyphant – star of US hit series, Deadwood, in the lead role.

TM

FUTURISTIC VIPER CASINO LOBBY SETS NEW STANDARDS The new Viper casino lobby, developed with the aid of substantial research and extensive player interviews, transforms the traditional into a fantastic visual display of games, setting the benchmark for online casino fun.

TM

MULTI-PLAYER VIPER - A FAST DRAW FRENZY THAT GETS THE ADRENALIN PUMPING Multi-player is forecast to be one of the most dynamic growth and game development areas over the next few years and Microgaming is leading the pack. Multi-player Viper, currently in Beta, requires no separate download for existing Viper player accounts; players simply register an alias that can be used for multi-play. Once rolled out across all Microgaming’s operators there are plans to create the largest slot tournament community and largest tournament jackpots, providing operators’ players with a new dimension in gaming that they all want to be part of.

www.microgaming.com

ASIA FOCUS: MACAU

VIP DENSITY HIGHLIGHTS GROWING MASS MARKET POTENTIAL

BY BEN LEE AND LEANDA LEE

The market in Macau is presently bullish.

However, the real challenge will appear when the market peaks and the operators have to seek revenue growth from every possible niche. To continue to achieve the growth that Macau is looking for requires mining the relatively undeveloped markets of the farther provinces, most of which are larger than the majority of sovereign countries. That means re-jigging the marketing message to recognise that a far from homogenous country lies before them, where huge untapped potential requires a deeper understanding of their cultural triggers and motivators.

>>

acau’s gaming industry had been driven by a VIP market predominately consisting of Hong Kong players. Now, as the VIP-junket competition intensifies with ever-increasing numbers of VIP rooms opening as each new property is completed, there is greater realisation of the importance of the mass market today.

One reason for the shift has been the influence that heightened competition has had on the junket rates. Macau’s junket commission war has seen an upward trend in these rates towards 1.2-1.3% in 2006 from about 0.6% in 2001. This has cut the profitability of the operators down to around 1011% EBITDA: as the number of VIP rooms increase, the pressure to fill them with the players regardless of quality intensifies, resulting in the driving up of the junket commission rate. The net revenue contribution (after the Government tax and junket commission) to overheads has swung from 40:60 in 2001 to about 70:30 in favour of the main hall market.

These figures may indeed be an underestimation of the full extent of the swing of revenue contribution to the mass market: the definition of VIP has changed over the last few years. There are peculiarities that are unique to the market that should be factored in. The main one is that anybody can walk in and play in the VIP rooms in any of the Sociedade de Jogos de Macau (SJM) and Galaxy casinos as long as they are willing to play the minimum stakes there (starting from HKD$1,000) or with minimum buy-ins of as low as HK$2,000 worth of junket chips. With the lowering of the qualifications it is plain that the VIP rooms are siphoning off the top end of the main hall business. So, although gross revenue estimates (fig.3, p19) from gaming tables in Macau clearly paint a picture of the VIP/junket market growing in size and

M

Casino & Gaming International ■ 17

ASIA FOCUS: MACAU

importance, it may not actually be a true indicator of the growth in that particular segment.

If we look at the figures again once VIP/junket commission has been taken into consideration (fig.4, p19) we will see quite a different picture. The explanation for the deterioration in the net revenue is a direct result of the commission war that has seen junket programmes go from 0.6% in 2001 to as high as 1.2-1.3% currently being offered in Macau. Bear in mind that this is on top of the 40% tax taken by the Macau Government.

This clearly paints a picture of a growing mass market, and if we included the slots component, the picture would be even more favourable towards the mass market. From conversations with some of the operators, there is a growing realisation that the mass market is now critical to growing the bottom line.

But who are these customers of the mass gaming halls?

Where do most of them come from? The answer is the Peoples’ Republic of China (PRC). Most people nod understanding and leave it at that. It is obvious that not too many people are concerned about where the customers going to Macau originate from within China. The gaming marketers in Macau appear to have a blind spot – something that has not been discussed. Targeting these customers is made all the more difficult because the data giving province or regional origin, although apparently collected upon entry into Macau, is not made available to the public.

Digging a bit deeper, however, there is evidence suggesting most visitors are from neighbouring Guangdong and HK. Looking at the 2007 figures, (fig.1 below) of the two million visitors that Macau received in January, 56.7% (54.5% for the whole of 2006) are from China. Of that, 83% came across the land border from Zhuhai, Guangdong province.

Guangdong has the majority of the cities under the Individual Visitor Scheme: 21 cities out of a total of 49 from where mainland residents can apply for an exit endorsement to visit Macau or Hong Kong for up to seven days, travelling as individuals rather than as members of a tour group. A bus from the provincial capital Guangzhou takes only two and a

half hours to get to Macau. Whereas, by comparison, a train journey from Shanghai to Hong Kong takes about 30 hours.

This is an unlikely journey given the average stay per visitor at a flat is for 1.2 nights; a figure that has not changed much over the last few years. The two percent of visitors travelling by air - the expected route from far away provinces like Shanghai or Beijing - also supports the contention that not many visitors are coming from too far away.

It is important to gain an idea of where the visitors come from but Guangdong only accounts for 70 million people, or 5.8% of the national population. So, where are the rest?

The per capita spending of visitors suggests that Chinese, who are further afield, might represent a market worth capturing. To offer a basis for comparison, per-capita spending by visitors was Macau Patacas (MOP) 1,523 in 2005, down 7% on 2004. Per-capita spending of visitors arriving by sea and by land in 2005 was MOP 1,235 (-10% on 2004) and MOP 1,827 (+16%) respectively. Against this the visitors arriving by air, who you would expect to be more affluent, spent on average MOP 4,881 in both years. Three quarters of the visitors arriving by land are from mainland China whereas two-thirds of those arriving by air are from Taiwan. Only 1/6th of the visitors arriving by air are from China, but this has potential to grow as the Chinese economy strengthens and individual wealth continues to increase.

Potential markets other than the immediate Chinese hinterland, it appears, are not on the radar for the Macau casino marketers. Ask casino executives about which Chinese mainland market segments they might be targeting and the responses are invariably quizzical. The visual marketing evidence throughout Macau is still very much of the Cantonese genre, typical of the Hong Kong-centred marketing departments of the various operators in Macau: Canto-popstars, building and facilities focused upon advertising rather than image building and a predominance of Cantonese speakers. Most, if not all, of the signage is in traditional rather than the simplified Chinese used in the mainland. If marketers want to get their message across they need to adapt it to the language of their customers.

It is worthwhile pointing out at this juncture that the

Fig 1

JANUARY 2007 ARRIVALS Total

PRC

HK

Taiwan

S.E Asia

Total

2,038,768

1,155,981 - 56.7%

603,475 - 29.6%

103,977 - 5%

103,977 - 5%

Land

1,275,756

959,369 - 83.0%

228,360

Sea

655,279

171,934 - 14.9%

371,629

Air

107,733

23,594 - 2.0%

Source: Macau DSEC

Image message

Hong Kong traveller

Beijing traveller

Taiwan traveller

Shanghai traveller

N

N

Y

N

Many places of interest to visit

Y

N

Y

N

Political stability

N

Y

N

Y

Value for money

N

Y

N

N

Good quality and easy to find hotels

N

Y

Y

N

Clean and litter free

Y

N

N

N

Fig 2

Safe places to visit

A Cross section of some image messages important in making the travel decision to Macau (Survey by Glenn McCartney, conducted in the departure areas of airports at the various destinations. Random sampling was between 300 to 450 travellers at each airport. The ‘Y’s represent the elements that are important.)

18 ■ Casino & Gaming International

ASIA FOCUS: MACAU

GROSS TABLE GAMING REVENUE COMPARISON 4500 4000

US$ millions

3500 3000 2500 2000

that are important. Looking at the differences between the mainlanders themselves it is interesting to note that the northerners consider good quality hotels a must, while Shanghainese are not so concerned. Likewise, the neighbouring people from Hong Kong do not need hotels, yet that is what is being promoted in the majority of casino ads in Hong Kong. This data would appear to suggest that we have yet to hit the mark even in Hong Kong from where most of our marketing people are sourced. So, based upon what information are we now to target the rest of China?

1500

TARGETING CHINA

0

Fig 3

2001

Main Hall VIP

2002

2003

2004

2005

2006

2001

2002

2003

2004

2005

2006

607 1594

646 1983

723 2692

1325 3615

1945 3503

2157 4464

Source: Macau GI&C Bureau

Macau casino industry may well be marketing precisely to the segment where the best immediate returns are expected.

The utter speed of the development of the Macau gaming industry and the ‘build it and they will come’ mentality may indeed go hand-in-hand with ‘cater to the Cantonese market and that will suffice’. However, to continue to achieve the growth that Macau is looking for requires mining the relatively undeveloped markets of the far-flung provinces.

That will require some re-jigging of the marketing message.

To think that the whole mainland Chinese market is homogenous would be akin to considering that all Asians are the same. Most Chinese provinces are larger than the majority of sovereign countries. In fact, 23 of the 31 municipalities in mainland provinces have populations greater than Australia (which incidentally supports just 13 casinos!).

Needless to say, each province, and sometimes regions within a province, has developed its own culture, social norms and expectations. In fact, most language experts would suggest that the different dialects (which number somewhere between 205 and 8,000) are considered unique languages in their own right as they are often mutually unintelligible; although for unification reasons it is politically somewhat more expedient to call them dialects. This could mean dealing with a range of unique markets, something that may not necessarily be appreciated by Hong Kong-based marketers mentioned earlier.

The first phase in marketing to more mainland Chinese is to determine how they are different. To do this, we will have to not only identify the various market segments that make up the whole of the mainland Chinese market, but also the behavioural triggers and motivators that are common to each unique sub-culture.

Research recently conducted by Macau academic Glenn McCartney, supports the contention that the different provincial cultures have different behaviour patterns. The results of McCartney’s survey reveals interesting differences in the requirements of PRC travellers. The Beijing traveller looks for good quality and hotels which are easy to find. This is not the case for those originating in Hong Kong and, presumably the residents of Guangdong.

In the table (fig.2, p18) the ‘Y’s represent the elements

A ‘one message fits all’ approach is clearly not the optimal one when promoting travel to Macau. Focusing on casinobased tourism solely as a marketing and promotional strategy may also limit the appeal of Macau in the future to wider traveller markets. So, there is the primary demand marketing which is the province of the Macau Tourism Authority, and the marketing of the individual casino properties and peripheral services. The various promoters of Macau ideally will need to present a consistent message.

Firstly, we will need to understand the PRC’s gaming customers; secondly, the supply chain, or pipeline, needs to be put in place with the coordination of more bus package operators while encouraging more low-cost airlines. There were 3.5 million mainland visitors travelling to Macau under China’s facilitated individual travel scheme on Macau-bound tours in 2005. Meanwhile, the number of visitors who came on group tours leaped to 2.5 million, up 67% over 2002.

Macau may need to develop more low-end accommodation, not just the 4- and 5-star hotels that everybody is intent on building right now. There are very few clean and budget - friendly hotels in the 2-3 star range.

Everybody bemoans the fact that average stay is 1.1 nights and that the PRC visitors prefer to spend all their money on gambling and entertainment rather than accommodation. So, give the customers what they want and build 3-star hotels!

Work closely with advertising agencies in the provinces to try and learn some of the behavioural norms unique to each major target province. Macau needs also to cater to different tastes. The Hong Kong punter is well known for wanting authentic HK cuisine when playing at casinos abroad, so most NET REV AFTER TAX & JUNKET COMMISSION

2001

2002

2003

2004

2005

2006

Main Hall

364

387.5

434

794.8

1167

1294.1

VIP

574

713.9

861.3

1012.1

700.6

535.7

Tax = 40%, Commision = variable

Casino & Gaming International ■ 19

Fig 4

500

US$ millions

1000

ASIA FOCUS: MACAU

of the restaurants in Macau are predominantly of the Cantonese variety. This is great if you are from Hong Kong and Guangdong, but there have been rumblings from mainland visitors in mainland-run cafes in Macau that there are not enough restaurants catering to their tastes. Lastly, the cardinal mistake: we must use simplified Chinese writing, not solely the traditional form!

Some of the traditional tools that are used elsewhere such as database marketing and branding may not necessarily work in Macau. Loyalty programmes are problematic when the majority of the higher value customers do not want to give their personal details. It has been pointed out in the media that despite massive branding investments by consumer goods retailers, only a handful at the top, such as Louis Vuitton and Chanel, have managed to operate profitably in China. The rest have just sunk into the clutter of foreign brands clamouring for attention.

The various segments will need to be identified which may well be along the lines of the various provincial dialects and sub-cultures. These will need to be profiled and the triggers and motivators that may influence their behaviour will need to be identified. Go to Beijing and you will see that the northerners are quite unlike the southerners. For one, they consider themselves more civilised and cultured, which is manifest in such mundane everyday events like long leisurely dinners, accompanied by debates over political and social changes. In southern Guangdong, with Hong Kong at the extreme end of the scale, the value system is vastly different with the motto ‘time is money’ reigning supreme.

Leisurely meals are dinners that take over half an hour!

Different triggers are involved here: it is foolish to assume that a person from Zhejiang will have the same triggers as Szechuan. Most of these provinces are bigger than most countries in the world, which means the cultural dynamics and modes of interaction are quite different. Just as the first author’s profiling back in Australia showed that the Chinese from Hong Kong, China and Vietnam have quite different playing behaviour, one should expect the same of the mainland Chinese. In that research in Australia, the Hong Kong Chinese on average had the highest per capita win for the casino. The Vietnamese, on the other hand, lost less per capita, but had a higher turnover due to the longer hours of play. Along came the mainland Chinese and they dominated the VIP scene with both high buy-ins and long hours of play.

It was also found that mainland Chinese were quite community orientated and usually played as a group.

There are other marketing tools that could be of relevance to this broad market. Local restaurants, other than those rated 5-star, might be encouraged. This has become a dilemma for Macau with the squeeze on labour caused by the expansion of the gaming industry and the difficulty in obtaining quotas to hire non-resident employees.

Consequently, there are declining numbers of these restaurants since they cannot hire labour at a reasonable cost causing many to close. Brand marketing: we are yet to determine whether this really works in the mainland markets.

Personal networking appears to be effective at the high end only. Community-style arrangements might, however, capture the regulars. Creative and adaptive advertising will need to be introduced.

Finally, Macau will need more mandarin speakers: an understanding of the different accents and social status implied by each would be an advantage. Strategies to boost 20 ■ Casino & Gaming International

return visits must be considered as, at present, most are transient visitors who visit only once a year. There is no base market of regulars to speak of which makes it even more difficult for loyalty programmes to work but, paradoxically, all the more imperative for them to work.

The market in Macau is presently bullish and the ethos of ‘build it and they will come’ reigns supreme. However, the real challenge will appear when the market peaks and the operators have to seek revenue growth from every possible niche. Within a year or so more enlightened marketers will be expected to bring in segmentation strategies that identify the behavioural triggers and motivators unique to each subculture, rather than the broad, all-encompassing strategies currently deployed. Macau will also need to diversify its service products such as offering more 2- and 3-star accommodation and, perhaps, even more in-house downmarket Chinese fast food with more regional varieties.

There now appears to be a polarisation between those who believe they can re-educate the market towards their products and those who would simply like to cater to their perceived current requirements. Without really knowing who their customers are and what they want, the operators are not really maximising the return on their current massive investments in Macau. CGI

BEN LEE AND LEANDA LEE Ben Lee is the Vice President for Casino Projects and heads the gaming interests of the Hong Kong - listed group, Century Legend (Holdings) Ltd. He is based in Macau and has extensive experience in all levels of the casino marketing mix, from VIP marketing to developing new strategies for targeting the Chinese gaming market. His background includes the Australian, Philippines and Macau gaming industry.

Tel: + 853 6635 8887. Email : s_benl@hotmail.com Leanda Lee is conducting PhD research in the Department of Management, Faculty of Business and Economics at Monash University, Melbourne, Australia. She is presently undertaking data collection in Macau and Hong Kong into the influences on expatriate performance. She has taught International Human Resource Management, International business and Japanese language subjects at Monash University and Swinburne University of Technology at both undergraduate and masters levels. Her current research interests include cross-cultural adjustment, job performance management, and expatriate management.

Leanda is a member of the Academy of Management, the Academy of International Business, Australian Chamber of Commerce Hong Kong and Macau HR Committee and is a founding member of the Macau Quality Initiative.

Tel: +853 2883 7291 Mobile: +853 6658 9869 Email: leanda.lee@buseco.monash.edu.au

LEADING THE WAY

Alfastreet entered the world’s gaming market in 1997 with its first electronic multi-player machine and has stayed focused on the research and development of electronic roulettes ever since with products specifically designed for both the arcade and casino markets.

Matjaz Petek, marketing and sales manager, said: “Both segments are completely different and need specifically designed products and marketing approaches. We are currently producing a fully automated roulette game; a live roulette game and a Dice “Sic Bo” game. All existing models have been updated to host the new games and all can be connected to all Alfastreet lines of electronic gaming terminals. We have also developed a new C Line multi-player, a new concept that can be used with an automated roulette game or dice “Sic Bo” game and is available in configurations from six to 24 players.”

One of the key factors of all Alfastreet products is that they are designed with both players and operators in mind.

Alfastreet is ready to adapt all his products to one customer special requirements and needs. New modular lines of terminals like M line SG or SL line offer unique versatility and allow maximum usage of floor space and maximum revenue per square feet of available space. Table Top terminal is the smallest gaming terminal on the market and allows numerous placements like in special coffee tables or on bar extension stands. Here is also the "queen" of automated roulettes, the R8 roulette, today a state of the art product with GLI certification and all modern features like large touch screen display, TITO system, bill or coin acceptor, SAS and on-line systems.

Multi-players are extremely popular in Europe and for Alfastreet, the UK proved a particularly strong market in 2006. “We haven’t seen a saturation of the market yet,” said Petek. “But we are at a stage where the big manufacturers will strengthen their position and some will fall out. There are more markets where we would like to increase our position, especially within the US and Canada as we feel there are different niches that we can cover with our new products. Other markets important to us include Asia and Latin America.”

The multi-player game’s importance has grown significantly over the last couple of years and according to Petek, the market is set to keep on growing, he said: “We have seen interesting developments in terms of new products and automatized games as multi-players have many advantages over the Live games and now that the technology has improved and we are seeing impressive products around. I think growing automation and the transfer of classic live games to multi-player machines is also a sign of the times.”

ASIA FOCUS: MACAU

CLARIFYING THE CONCESSION CONUNDRUM: WHAT’S MINE IS YOURS… EVENTUALLY

BY DAVID GREEN

Understanding the fundamental premise and implications of the Macau concession system is vital to an informed gaming business judgement. Uniquely Asian, its implications for the legal stability of contracts amid a rapidly evolving, highly culturally diverse region must be carefully absorbed.

>>

acau’s concession system, under which casinos are developed and operated, is often misunderstood.

The terms ‘concession’, and the more widespread ‘licence’, are not inter-changeable; they are in fact entirely different concepts.

The basic precept of Macau’s concession system is that the Special Administrative Region (SAR) is exclusively entitled to operate casino games. It may, however, allow the exploitation of those games by third parties, who bind themselves, under administrative contracts to the SAR, to develop and operate casinos, effectively on behalf of the SAR. In essence, the SAR allows a carve-out of its absolute legal entitlement to establish and operate casinos, but it retains a reversionary interest in the casinos, and the gaming assets used by the concession holders in the course of operating those properties. This is the fundamental difference between a gaming concession and a gaming licence; on termination of a gaming licence, the licensor has no reversionary interest in any of the assets which may have been used for the conduct of gaming.

The reversionary interest of the SAR under a concession contract raises some particularly difficult, but interesting, questions. First, since reversion occurs only at the time of termination of a concession, what happens to assets in the custody of the concessionaire at that time which it does not own? For example, if the concessionaire has leased gaming machines, does the Government’s right to reversion of gaming assets extend to those leased machines?

Secondly, if gaming machines become subject to reversion to the ownership of the SAR, what is the position of the machine manufacturer, who may have intellectual property rights to games installed and operated within those machines?

M

Casino & Gaming International ■ 25

ASIA FOCUS: MACAU

Thirdly, what obligations does a concessionaire have to protect its gaming assets, given that it is a custodian of them for the SAR? Fourthly, what insurance obligations does the concessionaire have, and how are insurance proceeds to be dealt with, in the event that gaming assets in the custody of the concessionaire are damaged or destroyed during the term of the concession?

Finally, there is a question as to whether concessionaires can themselves provide a carve-out of their exploitative rights in favour of third parties, such as may give those third parties independent operating rights and discretions, in return for participation in the concessionaires’ gross gaming revenue.

THE PROBLEM OF PERFECTING TITLE Termination of a concession can occur in a number of ways.

It can simply expire, due to the effluxion of the contracted concession term. With the exception of the concession held

by SJM1, the concession contracts are for a term of 20 years, with a discretion reserved to the Chief Executive to allow further extensions, totaling up to five years. In SJM’s case, its initial concession term is 18 years, having been reduced to reflect the rollover of operations which occurred on 31st March 2002 from the former monopoly concession holder, STDM (Sociedade De Turismo e Diversoes De Macau Sarl), to its subsidiary, SJM (Sociedade de Jogos de Macau).

Expiry is perhaps the most straightforward and predictable method of termination, since a concessionaire can ensure that gaming assets it uses, but does not own, are acquired by it at or prior to the termination date.

The concessions can also terminate in any one of three

26 ■ Casino & Gaming International

other circumstances. First, termination may occur by mutual agreement, an event which should be sufficiently predictable to ensure that legal ownership of gaming assets is vested in the concessionaire at the time that the recission takes effect.

The Macau Government also has a unilateral power to redeem a concession, without fault on the part of the concessionaire. Redemption can occur in two ways. First, the Government may, after the 15th year of a concession, give at least one year’s prior notice to a concessionaire that it intends to redeem the concession. Again, this is predictable, and should allow the perfection of title to any assets held by a concessionaire, in a capacity other than as legal owner.

However, the Government may also terminate a concession at any time, for reasons of public interest. Just what circumstances might give rise to a public interest termination is unclear. It might be expected, however, that the crystallisation of any such circumstance may occur within a timeframe which does not allow the perfection of legal title by the concessionaire to gaming assets it uses, but does not own.

Finally, the Government has a right to unilaterally terminate a concession, if there has been un-remedied default by a concessionaire in observing key contractual requirements. In most cases, termination for cause would be preceded by notice. However, what if a concessionaire becomes insolvent? In that case, the breach of its contract would be irremediable, and the Government would be entitled to immediate termination. The problem to which that could give rise would be the lack of means of the concessionaire to perfect title to any assets it does not own.

Clearly then, there may be circumstances where

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ASIA FOCUS: MACAU

termination can occur without affording the concessionaire sufficient opportunity to perfect title to leased or rented gaming assets. Suppose, for example, a concessionaire has leased gaming machines and it becomes insolvent. That event would trigger a default under the standard casino concession contract and, being irremediable, as noted above, would entitle the Government to immediately terminate the concession. However, it might be expected that the insolvency would also constitute a breach of the lease agreement for the machines, in which case the lease contract would also be cancelled. Even if the insolvency did not cause cancellation of the lease contract, the concessionaire would be financially unable to purchase the leased assets from the lessor. Is the lessor then accountable to the Macau Government to surrender ownership of those leased assets to it?

Macau does not currently have any law which limits or proscribes the terms of any financing arrangements which may be entered into between a concessionaire and third parties, the subject of which is gaming equipment. The third party lessor of the equipment would not be in a contractual relationship with the Macau Government and would be under no legal obligation to transfer title to the Government.

However, in the circumstance where the concessionaire has become insolvent, the Government would, under its concession contract, have acquired the rights to mandatory custody of all of the assets held by the concessionaire at the time of its insolvency. The likely outcome would therefore be interpleader proceedings to determine who should be entitled to take ownership of the assets in question.

28 ■ Casino & Gaming International

THE STATUS OF INTELLECTUAL PROPERTY IN MACHINE GAMES The intellectual property underpinning system and game developments is strenuously protected by manufacturers.

This is commonly done by way of patent, while branding is protected through trademarks. China became a signatory to the Patent Co-operation Treaty in 1994. Macau is bound by the Treaty.

The issue surrounding intellectual property in games has a number of facets, in the context of reversion to the Macau Government. First, there is always a concern that the game itself, or aspects of its functionality, may be unlawfully replicated. In this regard, China’s accession to the World Trade Organisation, and its membership of the World Intellectual Property Organisation, should operate to mitigate the risk posed by any authorised use of the manufacturers’ intellectual property.

Secondly, there is a prospect that if the games themselves are subject to the same reversion as the machine cabinets and other hardware, there may be a strong disincentive for manufacturers to offer concessionaires upgraded games, as the expiry date of the concessions approaches.

Finally, many machine games are themselves licensed from parties unrelated to the machine manufactures – for example, games like Monopoly, Wheel of Fortune and Powerball.

ASSET PROTECTION There are two issues relating to asset protection which

ASIA FOCUS: MACAU

warrant comment. The first of these is that the concession contracts prohibit concessionaires encumbering any assets subject to reversion, other than with the approval of the Government. Even if such approval is forthcoming, the concessionaire is obliged to ensure that any such assets are free from encumbrance at the time of termination of the concession agreements. An example of an encumbrance would be a chattel mortgage or a floating charge over assets of the concessionaire. In both cases, the legal interest in the assets would be with the concessionaire and not with the charge holder.

This prohibition also does not impair the acquisition of assets under lease or hire purchase arrangements, since the assets are not owned until the lease residual has been paid, or title has been transferred to the concessionaire under a hire purchase agreement.

The second issue relates to casino premises themselves.

The concession contracts provide that unless the Government approves otherwise, casinos must be housed within real estate owned by concessionaires. Should the Government approve of a casino occupying, for example, leased premises, the concessionaire is then obliged to purchase the property at least 180 days prior to the scheduled expiry date of the concession, or at the earliest possible opportunity should the concession be terminated early.

Concessionaires must maintain property subject to the Government’s reversionary interest in good condition, normal wear and tear excepted. A failure to maintain the assets in an appropriate condition may result in the Government using

30 ■ Casino & Gaming International

part of the guarantee which it holds (MOP300 million2 per concession from 1st April 2007), as a condition of each concession.

INSURANCE While the concessionaires have an obligation under their respective concession contracts to establish and maintain insurance against a broad spectrum of risks, it is curious that the concession contracts provide a variety of means of determining the required insurable value of each such risk.

What is particularly curious is that the obligation to insure against damage to buildings, furniture, equipment and other property used in the casino business operation must at least equal the book value of the specified property. Arguably, a more appropriate insurable value would be reinstatement value, since it is the underlying asset which is the subject of reversion, rather than the proceeds of any insurance which may be taken over those assets. Book value is unlikely to provide sufficient funds to allow full reinstatement of the assets; indeed, there is no specific obligation imposed on the concessionaires to effect reinstatement.

In regard to some of the other risks which must be insured, the insurable value is required to be at least the “total value” of the underlying project. In this case, value likely equates to cost which, again, will be unlikely to provide sufficient funds to undertake full reinstatement, in the event that the insured risks materialise.

Given the Government’s reversionary interest in the physical gaming assets, it seems somewhat anomalous that a concessionaire is not required to reinstate destroyed or

ASIA FOCUS: MACAU

damaged assets, nor is it required to account to the Government for the proceeds of any relevant insurance, in the event that it declines to reinstate. This evidences the narrowness of the principle of reversion; since the rights granted by the Government relate only to the exploitation of casino games, the assets subject to reversion are only those physical assets actually used in providing an environment for, or enabling the conduct of casino games, at the relevant time, and not the value of those assets.

CARVE-OUTS: SUB-CONCESSIONS AND SERVICE CONTRACTS Much has recently been made by commentators of the decision of the Macau Government to allow the initial three concessionaires to each grant one sub-concession. The concept of the sub-concession can be traced back to the Galaxy consortium, which was awarded a concession in February 2002. The original concession contract entered into with Galaxy was based on a proposed management agreement between Galaxy and Las Vegas Sands. For reasons best known to the parties, a management agreement was considered inappropriate. The Government consented to a carve-out, by way of “sub-concession”, from the Galaxy concession of independent rights for Las Vegas Sands.

The “sub-concession” was developed in response to the limitation imposed under Macau’s gaming law on the number of concessions which could be awarded before 2009, being a maximum of three. To all intents and purposes, a “subconcession” is a separate concession, under which the socalled sub-concessionaire assumes independent contractual obligations to the Government and is freed of any crossdefault or cross-indemnity requirements, as one might expect to see with a true sub-concession. Indeed, the only evidence that a “sub-concession” is derived from a concession lies in the splitting of the investment obligations undertaken by the parties; in the case of the Galaxy consortium, its original investment obligation was MOP8.8 billion; upon the grant of the sub-concession, that figure was apportioned equally between Galaxy and Las Vegas Sands. The principle of reversion applies equally to the gaming assets of a “subconcessionaire”.

What is interesting about the sub-concessions, given their amorphous character, is that two of the three were sold, with PBL reportedly paying USD900million for the subconcession granted to it by Wynn.

Since the Government has indicated that it does not intend to allow further carve-outs from the original concessions3, some creative means have been employed for operators not favored with a concession or sub-concession to nevertheless enter the Macau casino market. The genesis of this can perhaps be traced to an agreement entered into in March 2005 between Mocha Slot, a non wholly-owned subsidiary of Melco International Development and SJM for the establishment and operation of Mocha Slot Lounges.

That agreement, cast as a service contract, provided that Mocha would install and operate machines in Mocha Lounges on behalf of SJM (under the SJM concession), in return for a service fee, calculated as a percentage of the pretax gaming revenue generated by those machines (the percentage was initially fixed at 31%). Since then, there have been a number of reported attempts by operators to replicate the Melco-SJM model.

The lament being heard increasingly is that there is

effectively no limit to the number of operators who can enter the Macau market. What that overlooks is that prior to the grant of the new concessions in 2002, there were upwards of 30 VIP room operators functioning under revenue-sharing agreements with STDM (and now its subsidiary, SJM). Those revenue sharing agreements were struck in consideration of the fact that VIP room operators traditionally have taken the credit risk on players to whom credit has been extended.

While those operators control access to their rooms and some operational aspects, such as bet and table limits, they do not “operate” a casino; staff are employed by SJM and many key management decisions are reserved exclusively to SJM. More importantly, it is SJM which is responsible to the Government to account for the tax on gross gaming revenue generated by those operators, as well as to ensure that they operate in compliance with the law and, especially, in accordance with the Regulation4 governing junkets.

The position of new entrants coming in either under service contracts or limited management agreements is little different; they can only enter the market under the umbrella of an existing concession, and the concessionaire cannot devolve its responsibility to the Government to each individual operator. Moreover, the incoming party has no property interest or contractual agreement with the Macau Government; its rights are strictly those laid down under its contract with the concessionaire. Accordingly, if the concession terminates, so too does their authority to undertake gaming operations. The gaming assets and premises used by those operators are also subject to reversion upon termination of the head concession.

CONCLUSION Macau’s concession scheme for the operation of casinos and games of chance is perhaps unique in Asia. The concept of reversion is fundamental to understanding the nature of a concession and the limitations which gaming assets have as loan security. CGI

REFERENCES 1

Other concessions are held by Wynn Macau and Galaxy Entertainment. Subconcessions, which are virtually identical to concessions, are held by MGM Grand Paradise, PBL/Melco, and Las Vegas Sands. The term “concession”, when used includes these sub-concessions.

2

Approximately US$37.5 million

3

The concessions’ period of limited exclusivity expires on 1st April, 2009

4

Regulation 6/2002

DAVID GREEN David Green is a Director of PricewaterhouseCoopers’ Macau gaming practice.

He is based in Macau, where he has been working since February, 2001 with the SAR Government in relation to the liberalisation and regulation of the casino industry.

David is also an advisor on gaming matters to other regional governments and is a former Chairman of the Independent Gambling Authority of South Australia.

Email: david.j.green@hk.pwc.com

Casino & Gaming International ■ 31

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DESIGN FUTURE & CASINO OPERATION

NEW DESIGN WAVE MASTERY IS KEY TO CLIENT RETENTION

BY JOSH HEITLER

The W Las Vegas, currently expected to be ready in 2009, is considered to be a leading part of a new wave in cuttingedge design and architecture and influential in modern hotel - casino destination resort trends. Today, the emphasis is on cultivating guest aspirations with captivating experiences, quite distinct from purely themed constructions. Such an approach is a significant factor in driving the renewable vitality that the casino experience constantly requires in carefully planned subtle environments. W Las Vegas could well epitomise such an outcome.

>>

C

GI: What comprises W’s design concept and the characteristics you consider to be a unique contribution to Las Vegas?

JH: The overall concept for the W Las Vegas is really modeled after the brand itself. W has built a world wide empire by valuing good design and focusing on the guest experience.

Across the board we are applying those principles to every aspect of the Las Vegas Mega Resort. For us as architects, that is very exciting because where once people would have been drawn to a themed experience, we are charged with bringing them here through great design.

CGI: How do you see the W integrating into this ‘city within a city’ of tomorrow?

JH: I think the W is part of a vanguard new wave of design in Las Vegas today. In the wake of Disney-fied faux castles, European cities, and Tropical Islands, the W looks to be a leader of the new trend toward destinations where cuttingedge design and architecture are the theme.

CGI: Nevertheless, W does have to stand as a distinct entity in itself. In doing so doesn’t that actually mean creating a competitive distance in design terms?

JH: Without distinct themed - based identities, there is certainly a potential challenge to differentiate the property entirely on design terms. With the power of the W brand and the quality of the assembled team, that is certainly a challenge we are embracing.

Casino & Gaming International ■ 33

DESIGN FUTURE & CASINO OPERATION

CGI: The trend toward multi-functional leisure destinations provides a fuller range of ideas to explore. How has this been understood and worked out in practice for W? JH: Certainly, these mega-resorts nowadays are packed with a great variety of functions – basically small cities unto themselves. Architecturally, our strategy was to try and bring these activities into greater contact with each other – creating opportunities for unique overlaps, adjacencies and integrations. While a typical Vegas property tends to have separate and distinct (sometimes architecturally dissonant) tower, podium and feature; we tried to look at the entire complex with a single aesthetic. In addition, we tried to blend some of these boundaries – allowing parts of our tower to land directly on the pool level, our pool to escape and become a feature at the entry, and our restaurants and bars to relate directly to the pool day and night.

CGI: Can you explain the historical background and experience that informs your approach to W? JH: We actually began by looking at the most ubiquitous piece of hotel DNA – the double - loaded corridor. Efficient and cost effective, this is the immutable building block of most hotels – whether curved, linear, L- or Y-shaped. Instead of trying to fight it we accepted it and set out to tweak it.

Conceptually, we treated each component (the two rows of rooms and the central corridor) as individual laminations and allowed them to move independently of one another to create a dynamic building mass.

CGI: Finding new ways to express innovation in design appears to have few limitations. But how do you manage the demands of scale and yet retain quality standards?

JH: One of the things we came to realise early on was that we needed to simultaneously design for multiple scales. The building needed to be equally able to reward views from the air and airport, The Strip and streetscape, as well as from within the property itself. When we designed the building façade, for example, we included elements that responded to each of these demands appropriately – prioritising fine detailing only where it could be closely observed. This puts quality and expense where it matters most within the larger complex.

34 ■ Casino & Gaming International

CGI: In seeking approval for the project what environmental, social and transport factors do you encounter in a project of this magnitude?

JH: These projects are amazingly complex from an approvals and infrastructural point of view. Again, the small city analogy seems apt as the site requires installation of new dedicated power, and traffic is a major concern. Early on, we spent an amazing amount of time studying, analysing and understanding how tourists, locals, hotel guests, residents, and bar, restaurant, casino, and retail patrons would arrive and depart the site via foot, car, bus, limo, taxi and tram. This thinking had a tremendous impact on the design.

CGI: Commercial success is the final barometer of any enterprise. What design issues were affected by this requirement apart from being on time?

JH: This is certainly a commercial enterprise. Budget and schedule are always a part of the discussion. As designers we have a great amount of faith that positive value can be added through good design. At the end of the day, this is the best thing we can do to ensure the commercial success for the project.

CGI: Interior excellence and ambient sensations are increasingly driven by, and reacting to, technology in design - such as LED lighting. What are the challenges in this interaction?

JH: New technologies are constantly informing architecture and design, and it is important—especially in this environment—to actually be thinking ahead about what

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technologies might be available several years from now when you are up and running. For the W, we incorporated long LED walls into the arrival experience of the main Porte Cochere. The concept enables a constant image transformation so that patrons arriving at different times of day, days of the week and seasons, would have a distinct and dynamic experience. Taken with the other elements of the port (light, water, music), it would help to transition guests to the world of the W even before they stepped out of their vehicles.

needs to consider the sequencing of the construction to allow for the most efficient building process.

CGI: How important is it to anticipate, from conception to implementation and beyond, what will be a uniquely attractive thread running through such a design to retain interest?

CGI: What are your thoughts on the need to be receptive to cultural differences and nuances in design matters?

JH: We feel very strongly that a unified sense of design should run through the entire project. Many, many design professionals work on a project of this magnitude from specialist designers for restaurants and clubs to gaming experts. But the end product needs to be held together as a single experience. And that experience, given the crowded and competitive marketplace, needs to be unique and differentiated from what is available now and what will be available when we come online.

CGI: Does such a project give you ample material for spin-off constructions that have completely different functions in other locations? Where would you say that is so?

JH: Most architects evolve themes and ideas continuously throughout their careers. Certainly, our past work has informed our approach to the W. This project has given us extraordinary opportunities to be creative on a large scale. I have no doubt the discoveries and experiences of this project will affect us for a long time to come.

CGI: Given the modernist edge to W is it the case that you regard this as part of a necessary or natural renewal process replacing the ‘old’ Las Vegas?

JH: Vegas is a place with a long tradition of buildings being imploded to make way for the new, and that is just part of the culture. Here in New York, as in other older cities around the world, we do a lot more renovating and reusing of older structures. And the City has a great deal more of old and new living alongside each other. I tend to think that that is a good thing and that Vegas will – partially because of rising construction costs – start to do that. This shouldn’t impede progress—just allow for a sense of history to coexist.

CGI: What unusual construction and engineering considerations do you have to accommodate in the design of W? JH: Most of the construction and engineering challenges for the W are pretty typical for these kinds of projects. There are long span requirements in the casino and ballrooms as well as structural coordination of the tower columns as they pass through the podium base. Fire and life safety design are also, of course, critical with many people potentially in the complex at the same time. On top of everything, the design

CGI: In what way has there been a contribution to the evolution of design ideas through the creation of W? JH: I do think the W will contribute to the evolving notion of what Las Vegas is—demonstrating how it can be modern, urban, and cutting-edge, and still be a destination resort that is an escape from the everyday.

JH: Certainly, we believe that in general design needs to accommodate cultural differences – for sure it should not alienate or exclude anyone who might come there. Having said that, Vegas is a destination with a strong cultural identity.

For the most part people come from all over the world to Vegas precisely because it is different from what they are used to and because they want to experience something different.

CGI: Finally, hypothetically assuming W Las Vegas is now 10 years old, what sort of possible design changes are there in the pipeline?

JH: Vegas is always transforming, and it is hard to anticipate what will be expected 10 years down the line. The only thing we know for sure is that it will constantly evolve. To that end, we have tried to design and plan flexibility into the W. The development plan recognises that things will change even between the time we started designing to when the doors finally open. We will hold some areas open as long as possible before finalising and plan for continuous updates starting the day we open. CGI JOSH HEITLER Josh Heitler, AIA, is Principal at LacinaHeitler Architects. He joined the Lacina Group in 1997 and later advanced as a partner to form Lacina-Heitler Architects in 2003. Oversees all aspects of professional consulting services geared toward corporate, institutional, residential and retail clients. Project highlights include W Hotel Las Vegas, master planning of Qatar Cultural Center, leading renovations for Searle boutiques, and directing high-end residential projects in New York City and Los Angeles. Prior to Lacina Heitler Architects, he worked on several large-scale projects including Rockefeller Center and Grand Central Terminal at Bayer Blinder Belle. Josh received the Master of Architecture with Distinction from Harvard Univerity's Graduate School of Design in 1997 and his BA in Design of the Environment from the University of Pennsylvania in 1993. He is certified by the National Council of Architectural Registration Boards, is licensed in New York and Nevada, and is a member of the American Institute of Architects.

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Lambro Contracts – where excellence comes as standard Lady Luck plays no part in choosing the right Specialist Interior Contractor for your casino – it is good solid experience that wins and Lambro Contracts has 21 years of it. This is just one reason why Lambro Contracts is an emerging force in specialist casino interiors.

Whether it is a new-build project or a major refurbishment, Lambro Contracts offers the high-quality finish which discerning clients appreciate.

Lambro Contracts offers: N On-time completions against challenging time constraints N Quality to the finest detail in casino public areas, restaurants, bars and kitchens

Lambro Contracts has recently been highly praised for its latest success at one of London’s most prestigious casinos – Fifty in St James.

N Flexibility and originality in ornate plasterwork and unusual features

“We are very happy with Lambro’s work. They always produce what they say they will produce and have always done what they said they would do, and done it on time. Unlike a building site, Lambro has been working in a casino which is operational. This is a situation which could have caused delays but Lambro has been extremely flexible, working around restricted hours.”

N Completion of work within cost restraints

David Seton, Project Manager

N Close attention to detail of designers’ and architects’ visions N The ability to source unusual and specialist materials – glass, fabrics, wallpapers, lighting, stone and metalwork

Lambro Contracts Limited, Lambro House, Hurricane Way, Shotgate, Wickford, Essex, SS11 8YB Tel: +44 (0)1268 764612 Fax: +44 (0)1268 764613 Email: info@lambro-contracts.co.uk Web: www.lambro-contracts.co.uk

THE ACE IN THE PACK

Lambro Contracts takes the gamble out of fitting out Britain’s growing number of casinos.

Meeting interior designers’ demands for elegance and ambience, while fulfilling casino operators’ necessity for the latest technology, calls for special abilities that the Lambro workforce has in spades.

A unique blend of traditional and 21st century skills in the Lambro Contracts’ workforce has sealed the company’s reputation for exceptional quality. It is why the Lambro name is high on lists for invitations to tender for casino contracts.

Interiors are a vital area over which casino owners and operators cannot gamble. Atmosphere, glamour and ambience are an essential part of the “casino experience” and have to be perfect for the discerning punter and guests.

This is where using Lambro Contracts on specialist interiors is like playing a winning ace.

Lambro’s latest success is the new Ladbrokes Paddington Casino in London. It is yet another example of Lambro completing a prestige casino contract on time and to the highest degree of client satisfaction.

The four-month Ladbrokes casino contract offered the Lambro team special challenges as the premises were located in an unused basement and a British Airways training area within a Hilton Hotel.

The 1,300 square metres of basement had to be stripped back completely to a skeleton before construction could begin.

A lift was also installed while a complex electrical and electronics system had to take account of the specific requirements a casino has for air conditioning, security and advanced communications. Included in the Paddington project were a reception area, three bars and staff areas.

Paddington Casino Director Gary Andrews said: “There is a quiet professionalism about Lambro Contracts and its staff. They instilled a confidence that the work – complex as it was – would be done on time and on budget. It was, and we now have an

impressive casino that our customers are very pleased with.”

Lambro Contracts’ team embodies a wealth of diverse talents which, unusually in the construction industry, are to be found under the same roof. They work together to achieve high-quality results and, most importantly, bring them in on time. The Lambro team ranges from skilled craftsmen, electronics experts, electricians and project planners.

Lambro is a 24-year success story of delivering high-quality shopfitting and specialist interiors from its purpose-built headquarters but it is only relatively recently that the overall company talents have been recognised by the gaming industry.

Those skills and expertise were honed in the hotel industry and have been used by a number of top hotels and top-end developers for specialist fit-outs of shops, suites and apartments.

Where Lambro excels in interior fit-out is by being in tune with both architectural and design trends. Design visions are correctly interpreted whether in traditional wood or utilising the latest in hightech materials.

Another success for Lambro has been the prestigious Fifty Casino in London’s St James’ area where the skilled team built a champagne bar, restaurant and nightclub.

It had all the ingredients that the Lambro Contracts’ management and crafts people relish. It was complex and challenging and demanded a high-quality finish within tight time constraints.

Intricate features, ornate plasterwork and state-of-the-art materials were all part of a brief for a 16-week construction schedule.

An added demand was that the casino continued to operate while the works were being carried out.

Lambro’s work was highly praised as a true testament to Fifty’s historic and prestigious location.

Keith Shirley, Lambro Contracts’ Business Development Manager, said: “Clients keep on coming back because they know they can depend on us. Much of our growth has come through recommendation.”

The third annual update on the legal and regulatory challenges impacting gambling in Europe Tuesday 8th May – Wednesday 9th May 2007 Le Méridien, Brussels, Belgium

Learn and benefit from the experience and knowledge of key influencers of regulatory change in Europe, including: • Paul Herzfeld, CEO, CASINOS AUSTRIA INTERNATIONAL (Austria) • Jesper Kärrbrink, CEO, SVENSKA SPEL (Sweden) • Andri Avila, Chief Operating Officer, OLYMPIC ENTERTAINMENT GROUP (Estonia) • Eduardo Antoja, Director, Corporate Development, CIRSA (Spain) • Marc Callu, Managing Director, BELGIAN GAMING AUTHORITY (Belgium) • Ron Goudsmit, Chairman, EUROPEAN CASINOS ASSOCIATION (Netherlands) • Fiona Russell, Legal Counsel, Europe, BETFAIR (UK) • Sigrid Ligné, Secretary General, EUROPEAN BETTING ASSOCATION (Belgium) And many more!

REGISTER ONLINE: www.ateonline.co.uk/egb or call +44 (0)20 7370 8578 Gambling Law Debate is a one-stop-shop for current legal and regulatory issues relating to the gambling industry. Gambling Law Debate will become a site for discussion and the sharing of ideas, to improve your understanding of changes in gambling law across the European Union.

Add your voice now. www.gamblinglawdebate.com

DESIGN FUTURE & CASINO OPERATION

COMPELLING, ICONIC & COMPETITIVE: ‘W’ REDEFINES THE CHALLENGE AHEAD

BY MARK BIRTHA

New technology, new customer segments, and a new generation of gamer will all translate into a fresh look at what a gaming experience in Las Vegas truly is and what that will mean for the casino in and out of Las Vegas for years to come. It is in this context that the W Las Vegas will deliver a unique experience raising the bar of design, performance and expectation for years ahead.

>>

GI From the first IR development through to the sophisticated ‘city within a city’ now coming off the drawing boards for Las Vegas, what have been your foremost priorities and concerns as a casino operator in this highly creative and competitive field over this time?

C

MB: The size and scope of the projects being developed in Las Vegas have continued to grow both in terms of size and complexity over the past few decades. From the initial resort projects like the Flamingo, Caesars and Golden Nugget, to the ‘mega-resort’ developments launched by the introduction of the Mirage in 1989, Las Vegas has continued the mantra of bigger is better and raised the bar of what this resort destination experience provided. Now this is being taken a step further with the introduction not only of fully integrated resorts but entire city-like masterplans that incorporate all facets of hospitality amenity and service within its ‘four walls’.

The driving priorities of the business plan though have not changed; they have just grown more complex. In order to be competitive and to offer product that truly caters to multiple business segments, developers have included multiple revenue generating spaces in their design packages. Whether it’s new mega-clubs and ultra lounges, casino privés, meeting space, spas, entertainment venues, and retail destinations, these offerings have become critical in rounding out the overall experience and are now becoming significant profit centers of their own. But with the price of real estate/land, construction, and labour being what they are today, the same critical priority must be achieved for every square foot of a development—return on investment. Bigger is better only Casino & Gaming International ■ 39

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when it achieves financial expectations and creates a unique portfolio of options that create competitive advantages in the marketplace.

CGI: Presumably your core functions had to evolve and adapt quite rapidly to meet the new challenges how did you manage this process?

MB: This evolution has been underway for many years now as the casino and Las Vegas experience reinvents itself and maximises opportunities to target as many consumer segments as possible. Once the expectation shifted from the casino-centric model to a newer integrated resort scope, the respective components were invigorated to pursue a new path and creatively retool their product into a more competitive and appealing amenity. These individual business units can act as a stand alone profit centre or destination driver, but their true power is fully realised as part of the complete Integrated Resort. Having critical mass of design and operational features creates an experience that is differentiated and caters to multiple users strategically identified in the operator’s business plan.

In today’s Las Vegas marketplace, each of these components have become core functions that are almost required when a developer works their way through the programming and design process. The challenge lies not in purely integrating them in the fabric of the concept, but more importantly redefining what each ‘box’ offers and seamlessly operating each of these units to be alluring to the customer, and at the same time friendly to the bottom line. The evolution for each of these core functions will continue, driven by the city’s need to continually refresh itself and raise the bar and by the operator’s need to have the newest and most exciting ‘mousetrap’ to ensure market share growth.

CGI: What do you consider to be the transforming factors over those years and was there a distinct shift of awareness and interest that has shaped your general vision of the future?

MB: There have been many ‘paradigm-shifting’ moments in the history of Las Vegas resort development. From the early days when Bugsy Siegel built the first resort-style property to Steve Wynn opening The Mirage in 1989, Las Vegas has consistently focused on redefining the customer experience and challenging the norm of what was either currently available or readily expected. The overriding principle though in all of these groundbreaking changes was the theory of providing elements that heretofore were never available, thereby creating unique differentiators that were profitable, developed the market, and achieved higher market share.

Good examples of this thinking included Caesar’s opening the Forum Shops and starting the retail wave; Celebrity Chefs like Wolfgang Puck ending the history of the casino restaurant; Spa operators opening Las Vegas venues; and, of course, the Venetian’s convention and hotel room driven business model which quickly transformed Las Vegas into a midweek meetings market coupled with the weekend luxury traveler and casino destination. The success of these transformations resulted in non-gaming revenue now 40 ■ Casino & Gaming International

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representing a larger percentage of overall revenue. So in today’s design and development era, we are reminded of the lessons of the past and challenged by the demands of the future to continually change the norm. We must creatively and astutely look forward to determine what is important to the customer experience while ensuring we can create an operational design that is manageable and cost effective.

CGI: What do you think of the trademark ‘wild side’ of Las Vegas? Is it destined to become iconic history or remain the indelible heart of the Strip given the pressure to accommodate new aspirations and international financial realities?

MB: Are you referring to “What Happens in Vegas, Stays in Vegas”!? Quite a catchphrase, and, quite literally, a return to a side of the Las Vegas experience that was always in the fabric of what the city represented. In the early 90’s the trend was to create an experience that also catered to the family market— all of the amenities just outlined as well as amusement parks, themed hotel activities, and site-seeing options—all in an attempt to further grow the market and, hopefully, tap into consumers who never selected Las Vegas as a place to visit.

This helped support the trend of differentiating the marketplace but was not as successful as a marketable strategy to drive casino revenues and related discretionary spend. So the hotel casinos once again moved back to a sexier and more sinful motif where you could experience things and act in a way you would not if you were back home.

And I believe Las Vegas has really hit its stride in tapping this vein. This is noticeable in the long lines of people waiting to get into energetic mega clubs like Tao or Pure where they will spend thousands of dollars on table and bottle service. This is reflected in newer shows, from MGM’s La Femme to Cirque’s Zumanity, that are tastefully providing a sultry adult entertainment option. The Palms Hotel and Casino continues to take this to another level by marketing this “wild side” into their Fantasy Tower, with uniquely themed suites such as the Crib Suite, the Real World Suite, the Erotic Suite, and the gSuite, and the reintroduction of the iconic Playboy Club where bunnies deal to the adoring masses. This has crossed over into even the meetings business where shows like Adult Video News have their annual awards shows in January, one of the most anticipated and expensive tradeshows to attend each and every year. And the overwhelming result of this marketing and design pysche is a highly profitable, wellmarketed entertainment vehicle that allows anyone to come to Las Vegas and have the type of experience that they are looking to find.

CGI: Is this thought to be a natural maturing where there are two layers - the old and the new - or does this mean there is a ‘mainstream’ commercial dominance in the making pulling away from gambling and reinforcing the non-gaming sector?

MB: You could argue that it is a bit cyclical but it is just a continued reinterpretation of what the customer expects out of Las Vegas. The city has definitely matured from being strictly a gaming destination. With over 130,000 hotel rooms in the market, it was necessary to focus on ways to develop room revenues and other complementary income streams Casino & Gaming International ■ 41

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with the products you already had in-house which previously had been positioned to cater to casino customers. So Las Vegas as a destination has moved more mainstream in the way it is marketed, in who it is marketed to, and in the amenities provided to these customers. As each of these revenue components became independently profitable, the theory that they were merely in place to be support cost centres to the casino also changed.

The result is an increased percentage of non-casino revenues as a piece of the total - more than half these days. The ancillary result is also the increased amount of casino revenue year over year which is generated from a new segment above and beyond the pure casino player: the customer who would have never visited a gaming destination before but now will take advantage of the non-casino amenities and put a small portion of their discretionary budget into gaming. And those who visit the hotel casino and never step foot in the gaming area drive revenues in hotel, F&B, entertainment, retail and elsewhere which maximise the real estate invested in these areas to cater to both casino and non-casino customers alike.

CGI: To what extent are the changing demographics and the searching sophistication of modern, high income disposable generations affecting your role in delivery of the desired results – the interaction impact of advanced technology and personnel in achieving a clients’ loyalty, in impressing longevity of brand definition?

MB: This is the challenge that is at the top of hospitality executives’ minds for the future. The irony is that you actually have multiple generations that represent sophisticated customers with high disposable income. The baby boom population is just beginning to transcend into retirement and tends to be more savvy with higher expectations (and income) than any other generation before it. And then there is a much younger generation that is enjoying the economic boom, has experienced luxury during their business and related travels, and has fewer personal responsibilities and a higher level of disposable cash to put on the table.

An operator today could have an older customer spending thousands of dollars in the retail and rooms portion of the hotel and a young customer dropping thousands on table and bottle service at the ultra lounges, nightclubs and restaurants. Ironically, they both converge on the same gaming table or on a row of slot machines. Today’s operators are faced with designing amenities that cater to each segment of customer throughout the facility, a daunting task when you factor in the direction each of these customerbases is headed and their personal expectations for their experience. Layer that on top of what your brand identity is and the style of service and product you represent and you see that developing a business plan to navigate these waters is a laborious yet critical exercise any developer/operator must undergo to be successful.

The good news is that these operations are large enough and offer a multitude of options that allow you to cater to these multiple business segments concurrently and consistently.

One of the tools that will allow operators to effectively address the needs of various customer classes in a cost 42 ■ Casino & Gaming International

efficient manner will be advanced technology. As much of our society is becoming more sophisticated in the use of technology and its presence is more ingrained in our daily lives, this will also transcend the home environment and find its way into our ‘play’ places. The focus on lifestyle experience will centre on extending the creature comforts of our day-to-day work lives and home spaces into the hospitality environments.

Customer loyalty systems allow us to know as much as possible about our customers including what they enjoy and what they expect during their visit. Customers will not checkin at front desks upon arrival since their GPS phone system

DESIGN FUTURE & CASINO OPERATION

notice is much more possible. The multiple amenities and services will be fine-tuned to provide the right experience no matter who the customer.

CGI: W Las Vegas could be seen as the culmination of this period of change, but you would no doubt argue that such projects represent the start of a new approach, a higher level of experience perhaps. Can you explain your impression of how this is likely to unfold?

MB: The W Las Vegas, in typical W-style, will embrace these challenges, redefine the Las Vegas casino hotel experience, and maximise the sophistication, service, and style our customers have come to expect and may not have found in past visits. Starwood and the W brand have done a tremendous job understanding their customers and creating a lifestyle experience that transcends the day to day world— the brand has mastered the delivery of an experience which represents the best of the hospitality world with the comfort and ease of sitting in your living room with your feet up and robe and slippers on.

This trend of lifestyle marketing and service delivery is on the cusp of where the Las Vegas market is looking to move. The city is conceiving its own version of the ‘boutique hotel’ concept in mid-size and larger properties. This was first executed with the Four Seasons Hotel as part of the Mandalay Bay, and further elaborated upon with Venezia at Venetian, THEhotel at Mandalay Bay, and the Spa Tower at Bellagio. These newer ‘additions’ are being fused together with the services and amenities offered in the larger casino hotels to create a dynamic and differentiated landscape which once again redefines the Las Vegas customer experience. Examples include the Mondrian and Delano as part of the Echelon masterplan; the Harmon Hotel and the Mandarin Oriental as part of the City Center development; Encore at Wynn Las Vegas; Fountainbleu; the Waldorf Astoria and Conrad Hotel as part of the Majestic project; and of course W Las Vegas and the related Edge East development. Hotel brands, which never had a true standalone presence, will address service and amenities from a different vantage point and will enhance the existing experience by heightening the professionalism and sophistication of service options available to consumers.

CGI: How has this immediate past, and the sense almost of having to maintain a perpetual alertness to innovation, informed your current perception and practice as an operator? will check them in automatically when they are in range of the hotel. Biometrics allows them to check in to their room. Their high tech room will personalise their visit—the right temperature and lighting, individual movie and music preferences, pre-determined amenities and activity menu options, and 24/7 service choices personally made available to meet every need, want and expectation. Guests will carry handheld personal concierge devices allowing them to book show or restaurant reservations one minute and play their favourite table game the next. Customer service and the human interaction will not be sacrificed; instead, they will be enhanced because our ability to know what you want in advance and to be available to service you at a moments

MB: It has made the process of being a developer and operator extremely challenging, but more importantly it has kept us in touch with the latest trends in the industry, particularly those that overlap with the delivery of quality customer service. Innovation is a key component for any industry, especially a highly competitive product marketplace which consistenty invests and reinvests billions of dollars to provide products and services to a discerning customer that has lots to choose from. There are many customer segments to target when developing your business plan and related product—the ironic thing is you are providing the same core services with some slightly different levels of packaging and Casino & Gaming International ■ 43

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pricing. Consistently challenging the norm, learning from history, being adept to see what your customers expect today and tomorrow, and formulating a product that fuses together these influences is the framework that today’s developer/operator must incorporate.

Las Vegas is an excellent example of hospitality and innovation molded together to produce a successful outcome. As the world’s largest hotel market, Las Vegas consistently changes the landscape so customers always have a new reason to visit every year. This inevitable change has supported the ‘if you build it they will come’ mentality, but it is that drive to introduce new product and change the experience that truly is critical to the successful execution.

This is a core component of what W stands for as well, which made selecting this brand that much easier when we

undertook this project. Their design criteria for this development would require us to look at architecture, service, and the Las Vegas experience in an entirely new way…

CGI: Do you consider the direction the casino industry is now taking is likely to lock in the future for the Strip in the face of Macau’s rapid gaming growth and therefore provide a ‘guarantee’ of renewing attractions? Perhaps the developments are creating conditions for permanent long-term living?

MB: This is a multi-faceted question. The casino industry historically has grown in spurts, both domestically in the US and internationally. The licensing of new operators in Macau, combined with the most recent granting of licenses in

>> The tremendous growth of non-gaming revenue streams is attributed to the rise of celebrity chefs, ultra lounges and a new breed of nightclubs, spa brands, convention programming, ever changing entertainment options, and retail offerings second to none. All of these amenities have been reconceived and are now their own distinct marketable assets and demand drivers. Casino revenue continues to grow and many of these consumers of non-gaming products drive incremental revenue growth to the casino as well, even if it is not the primary motivator for their visit >> 44 ■ Casino & Gaming International

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Singapore, has shifted the focus of gaming development into international expansion opportunities. But whether it’s Pennsylvania, Rhode Island, and Nebraska in the US, Mexico and other Latin American countries, the UK and additional European locales, and of course Japan, Taiwan and multiple other emerging possibilities in Asia, the casino industry continues to expand. The opportunities are always heightened during times when local governments are looking for new tools to grow their economies and tax revenues, and gaming naturally is an option to consider. Most of these newly emerging gaming jurisdictions have put strong requirements on new operators. The ones who will be most successful partner with the operator to create truly remarkable gaming products integrated into resort or business developments. Imposing high taxes and operational restrictions/requirements will not support either partner.

For the Las Vegas Strip, renewing attractions is guaranteed regardless of what takes place around the world. Las Vegas is one of the most competitive gaming marketplaces in the world, and the challenge alone of attracting new business and maintaining existing customer bases requires operators to continue to refresh their existing offerings or programme in new amenities and services to capture market share. The domestic and global expansion has shown an increased interest in visitation to Las Vegas. New markets have a tendency to introduce new customers to gaming products which, in turn, fuels their interest in visiting what many consider the gaming and entertainment destination in the world—Las Vegas. So Las Vegas in the end reaps the benefit of new casinos being developed in Macau or Pennsylvania or Russia, as these new locations continue to grow the collective gaming market.

Macau may be the first to challenge this scenario. With the infusion of Western-style products (Las Vegas Sands, Wynn, and the soon to open MGM), visitation and gaming revenue there are growing exponentially. This creates the opportunity for those operators to then bring Asian gamers to Las Vegas to play at Venetian, Wynn Las Vegas and MGM or Bellagio respectively. The big question going forward is whether the Cotai Strip, developed by Las Vegas Sands with significant capital and product infusion from operators around the world, can rival the Las Vegas Strip in the short or long term.

The results will be clear over the next few years as the product comes on-line and we can determine the market’s appetite for the Cotai Strip and the related side effects for Las Vegas and other locations.

Finally, with regards to permanent long-term living, Las Vegas is currently entering this new development phase. The ‘Manhattanisation of Las Vegas,’ as it has been commonly called, is in its initial stages. High land costs coupled with customer desires to live vertically in urban-style housing are for the first time creating opportunities for developers to sell pieces of their real estate to individual buyers. Whether these individuals are living in these residences full time or part time, or placing them in condo-hotel rental programmes, the interest and appetite for purchasing these types of products is strong in Las Vegas, and a trend we will see continued for many years to come in projects like City Center, Cosmopolitan, and the W Las Vegas.

CGI: What is the background to W Las Vegas’ construction, the decision to create this casino complex and the factors in the competition that had to be taken into account?

MB: The simplest answer to this is that millions of Starwood Preferred Guests and other sophisticated travelers wanted a W in Las Vegas. The Principals for this project were savvy real estate investors who secured 25 coveted acres one block off of the Las Vegas Strip. When they thought about the current Las Vegas experience they realised the market was shifting towards boutique-style hip and trendy offerings to capture these sophisticated and wealthier buyers.

However, what you saw was the higher-end casino hotels offering a few restaurants or clubs to cater to this crowd, but the environment still felt a bit stuffy or the primary focus was still on a different type of customer. The existing cool and stylish hotels had fun designs and were high energy, yet they sacrificed service levels to cater to the discretionary spend levels of their customer and/or their age and sophistication.

The W brand was the perfect fit since it is world-renowned for offering a blend of iconic design, exciting venues, and chic offerings coupled with sophisticated, personalised, and professional service and amenities. This complete package would draw consumers domestically and internationally and capture the market segment not wholly being served currently in Las Vegas. Knowing this was the blueprint, we then moved forward with determining what elements needed to be incorporated into the overall design to maintain the integrity of W and meet the expectations and attractiveness of Las Vegas. Once all of this was digested and the foundation of the model was determined, we quickly realised that this one-of-a-kind product would be highly competitive in this marketplace.

CGI: Will W Las Vegas find itself under competitive pressure from other ‘city-style’ developments on the Strip in the near future, or has the W’s total plan created a unique niche in the range of customer experiences that will be available?

MB: It was critical that we designed the residential component of our development to be as competitive as possible. We approached this challenge with the goal of raising the bar of what was available and expected in typical W-fashion. We were not going to build a typical hotel room nor were we looking to create a standard condo. The goal was to integrate the best of each world and elevate those design expectations to the next level. We brought together experienced and established hotel resort architects with award winning and renowned residential interior designers.

Although the meetings and discussions were sometimes intense, we welcomed this atmosphere because the fusing of these two worlds and the granular attention to detail in the end produced incomparable results—residential condo-hotel designs that were second to none in Las Vegas and a new benchmark throughout the world.

Running concurrently with the design process, the operations and marketing teams were focused on ‘the other side of the coin’—the services and amenities. Although this was without Casino & Gaming International ■ 45

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a doubt going to be a competitive, integrated resort hotel casino focusing on multiple market segments, we once again made sure to focus on our ‘partners’—the residence owner who would be expecting their lifestyle experience as an extension of their time away from home. So we began to create specific programmes and offerings that you as a resident-owner would like to have when you stay in your unit.

We focused on customising these items so that they were personally appealing to the individual resident. And the final layer we added to the package was a complete owner’s benefits programme that provided each residence purchaser with privileges and benefits to complement their lives and lifestyles wherever and whenever! This exercise allowed us to introduce a total plan that secured our place in the competitive landscape, and the results were quickly apparent as our residential sales pace was extraordinary.

CGI: It is well known that non-gaming business creates greater revenue streams than casinos now generate, but does this mean there is a tendency toward separation or is there a close relationship being maintained, even dependence, between the casinos and the non-gaming experience (entertainment, resort facilities, sport and restaurants)?

MB: Yes, the trend recently has been for non-gaming revenues to be a larger percentage of the total revenue base.

The good news is that casino revenue has continued to increase so it is not the result of diminishing casino numbers.

Instead, this is due to smart operators maximising the value of each non-gaming area as opposed to the past belief of giving this product away to support gaming. Hotel rooms, restaurants, clubs, spas, theatres, and retail outlets can all be self sufficient and profitable. The perfect operation balances each of these revenue centres to provide the best customer experience to multiple market segments, while focusing on always catering to the highest value customer when capacity and demand becomes an issue. Highest value or worth could be a casino customer as easily as it could be a luxury business traveler in today’s Las Vegas.

I strongly believe that these various offerings need to be integrated into the overall fabric of the development and operated that way to ensure the best customer service and experience possible. Entities that are grossly independent of the connected infrastructure tend to not perform as well since they are not part of the customer’s collective experience. Operationally, it is easier to combine these entities into the overall strategic plan to drive business, share marketing expenses, create critical mass and leverage each of your assets to improve your overall product platform.

From a design perspective it is important to have these spaces seamlessly blend together so that they have shared energy and traffic and easy access and use. Spaces should feed each other—restaurants bleed out into the casino space, table games are incorporated into clubs and lounges, and entertainment venues and retail spaces create anchors to drive people through the casino and other programmed areas. And on the flip side, you no longer need to drive your hotel guest looking to go to their room through the casino which was the old design mantra. Today, ease of circulation and smart programming has replaced mousetrapping and 46 ■ Casino & Gaming International

locking in your customer. They will spend time and money where they choose to. If you are a good marketer and operator you will get the right customer in your facility and they will be able to find the products they want to consume resulting in an efficient, enjoyable and profitable outcome for all.

CGI: Some might consider the trend toward a new lived-in style existence on major all-inclusive projects centered on developments like W Las Vegas as a form of social engineering. How would you react to that?

MB: I don’t see this as social engineering; instead, it is a reaction to a common need shared by developers, hospitality customers and real estate investors. Mix together the following ingredients: The booming real estate market created an interest in owning/living and owning/investing residential real estate. Sensitise this situation with specific buyers’ propensity to travel and the power and appeal of Las Vegas as a destination for hospitality and investment. Take this one step further and add in the developer’s rising land and construction costs, the focus on maximising the return on every square foot possible, and the need to secure equity to fund a project. The result—a finished product that is dense in its product offerings and urban driven, with a residential component that hospitality consumers can buy and then livein or rent, and most importantly a project that pencils out and is buildable. So I think it is a combination of timing and the various constituent’s needs and wants that have resulted in a recipe for a new form of residential and lifestyle opportunity.

Not to mention who would not want to live on or near the Las Vegas Strip!

CGI: Deciding the operational strategy for W Las Vegas must mean creating a balance between what experience tells you is tried and tested and what is expected to be uniquely effective for the newly created environment. What do you take into account to maximise on this combination of requirements given that you cannot fully predict how the practicalities will work out until the W Las Vegas is up and running?

MB: The key to successfully developing and operating our project rests on our ability to establish an effective business plan and create the programme elements needed to reach those business objectives. Experience in Las Vegas operations tells us that we can focus on business segments such as the casino, business travelers, luxury weekend traffic, MICE, and the wholesale and Internet segments, as well as a significant locals market. History and the competition prove that you need offerings including the casino, well-appointed rooms and suites, food and beverage outlets, retail venues, meeting space, a spa/salon and pool experience, and entertainment (from lounge act to full showroom and possibly up to events centre).

The initial blueprint is now established telling you who your customers are and what programme components need to be included in the project. The next step is to know your customer as much as possible in order to customise each of these aspects of the development to cater specifically to the market segment and customer demographic/psychographic/

DESIGN FUTURE & CASINO OPERATION

geographic that will be most profitable for your enterprise.

Our Starwood database and CRM tools coupled with historical Las Vegas customer data allow us to hone in deeper as to who will be our target consumer. Then we take it one step further. We realised very early in the process that W has signature architectural and operational attributes that would differentiate our product in this market. These ‘statements’ of design, service and amenities are infused into the W Las Vegas landscape to highlight the unique nuances of W with a truly Las Vegas flavour, thereby allowing us to create an entirely new environment .

MB: Any player in the gaming business today is taking an international approach to how they grow and develop their company. A corporate strategy today must include (or at least contemplate depending on their current situation) development or operations overseas in order to leverage current operations and experience, take advantage of new opportunities, and expand their organisation’s value. Each gaming approved jurisdiction provides different levels of opportunity as well as risk that must be carefully studied in order to find the best potential match for your company’s development goals and capital investment requirements.

Although nobody knows precisely what the future holds with regards to Las Vegas customers, trends, and offerings, layering in each of the aforementioned influences and philosophies ensure our ability to effectively identify our customers and provide them with a product that exceeds their needs, wants and expectations and sets us apart from our competition. Of course, once the doors open wide the learning process begins all over again and you continue to tweak the operation and design continuously to keep the ship on course.

Asia is on just about every gaming operator’s radar these days and everyone is closely watching the ‘Asia Effect’ to see how it plays out for developers. Macau, of course, is the best case study so far with regards to seeing the results of a market infused with a significant level of foreign experience, capital and product. The outcome thus far can hardly be questioned—operators from Las Vegas and from around the world are opening new properties or finding entry points into the market. Visitation and revenues continue to climb as supply continues to be absorbed by overwhelming demand.

But Asia is not the only frontier. There is opportunity in South America and Europe where markets are being introduced to gaming or expanding existing infrastructure. And, of course, North America and particularly the United States will also see the emergence of new gaming jurisdictions and the further

CGI: Has that strengthened the industry’s direction and fuelled the internationalisation of corporate strategy at a time when Asia’s impact is beginning to be felt? How important is this to Las Vegas?

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DESIGN FUTURE & CASINO OPERATION

>> The Las Vegas consumer’s expectations continue to rise as does the quality of the product continually being introduced. Although there is a level of quality that caters to every market segment, the overall value proposition most customers will be anticipating will be more difficult to meet if you churn out the same historical products. The calibre of these developments will logically trend upwards, and the goal will be to provide a better quality at a cost that is consistent with the customer segment being catered to. This is a difficult equation to balance given the rising cost of construction and labour and the competitive nature of the services and amenities available in the marketplace >>

development of current casino destinations. It all comes full circle, as operators from Asia and Europe now look to purchase or develop properties in Las Vegas to further their corporate goals and increase distribution and brand growth for their customers and investors. So the industry is extremely vibrant and, once again, on the brink of exponential expansion.

CGI: The financial strength of the industry is the bottom line. What is the operator’s criteria for maintaining market share?

MB: An effective operator is consistently looking to improve market share and in turn increase the bottom line. Although it is a challenge unto itself, simply maintaining market share is not enough. Operators must continually review their departmental performance metrics and size them up against strategic plans and budgets in order to pinpoint revenue deficiencies and cost inefficiencies. At the same time, as the 48 ■ Casino & Gaming International

flow of new product continues to come online, operators should scan the competitive landscape and identify new product opportunities, differentiated advantages, and productivity and efficiency enhancements that are relevant and usable.

Operators developing new projects have the advantage of creating integrated resorts that have the latest ‘bells and whistles’ to augment their business plan, and cash in on the opening bounce from their ‘must-see’ status. Properties that have been open for a longer period of time must routinely retool their programme in order to remain competitive and more importantly grow their market penetration. In Las Vegas, ‘old’ can be reached in the matter of a few years as newer and newer hotel casinos come online. A savvy operator should review his or her profitability for every square foot of the property—from casino to restaurant to retail, each space in the operation must yield the return required for the entire programme to be successful. The key

DESIGN FUTURE & CASINO OPERATION

is to focus on those areas that are not performing or even slightly underperforming the industry averages and retool them into viable new offerings.

Whether it is following the latest trends of adding mega-clubs or resizing the casino, space has to be evaluated from a highest and best use perspective in order to continue to increase performance. This includes back-of-the-house space as well. Refreshing is critical to staying competitive and improving market share—whether reskinning tired venues or adding missing components, consistently updating will increase revenues per square foot for that venue as well as drive incremental revenue growth in the casino and related areas.

CGI: The W Las Vegas is due to be opened in 2009.

Do you consider that by the time it is ready this level of quality might well need to be the norm rather than the exception in Las Vegas?

MB: The Las Vegas consumer’s expectations continue to rise as does the quality of the product continually being introduced. Although there is a level of quality that caters to every market segment, the overall value proposition most customers will be anticipating will be more difficult to meet if you churn out the same historical products. The calibre of these developments will logically trend upwards, and the goal will be to provide a better quality at a cost that is consistent with the customer segment being catered to. This is a difficult equation to balance given the rising cost of construction and labour and the competitive nature of the services and amenities available in the marketplace.

A prime example of this direction is clearly exhibited with the recent opening of Red Rock Station in Las Vegas. Located off the Strip and constructed by a predominantly locals market operator, Red Rock significantly raised the bar of design and execution in terms of quality and amenities. Station Casinos historically catered to the locals market with very good product that did not rival the mega resorts of the Las Vegas Strip. This hybrid property, however, had an attention to detail, innovative design, level of finish, and product offerings that allow it to cater to both locals and the Las Vegas Strip guest. These are two distinct markets yet they also overlap in many ways. The cost to build this property was over $900 million so this project not only raised their level of quality but also expanded their marketing and business strategy to cater to additional segments in order to validate the cost. The business focus lately, with regards to Strip properties, is the luxury segment and boutique hotel traveler, so the level of quality will consistently be stronger in order to attract and maintain these customers.

CGI: Raising the base level of operations to benchmark quality, standards and performance on a grand scale is surely the epitome of project development that has a vision of its wider implications for Las Vegas as a whole. Is that vision a part of your understanding?

MB: Our goal will also be to create an operation that becomes the new benchmark for all competition with regards to quality and performance. Extending the W vision into this

marketplace allows us to approach this exercise from a different perspective given that we intend to introduce services and amenities that not only are unique and innovative, but tested and proven in countless competitive hospitality markets throughout the world. Las Vegas, typically, has had an inbred philosophy with regards to the products and service standards provided and expected. New operators and the introduction of hotel companies in the Las Vegas area have influenced not only the way developers and operators strategically determine the quality and quantity level of their products, but also what the consumer anticipates when coming to Las Vegas. This vision is now part of the collective DNA used when creating the overall experience and managing the logistics behind it.

These influences are positive for both developer and consumer, yet the operator is challenged with reaching and maintaining these standards especially in a property with 3,000+ rooms and millions of square feet of programming.

This is no easy task and attention to detail, suffice to say, is critical and a requisite for success. Micromanaging not only the guest experience but also the individual spaces and functions is important from a conceptual development phase all the way through pre-opening, opening, and beyond. Las Vegas Strip properties such as Bellagio and Wynn have masterfully stressed the significance and value of service and design and individualised the performance levels needed to the most granular level. This focus thus created the benchmarks for our competitive set and without a doubt ensured their ongoing success and profitability.

CGI: What lies beyond?

MB: The future is full of potential as the industry continues to grow and new product offerings are introduced. Las Vegas currently has close to $20 billion in development projects on the books for the next five years. If you are a student of Las Vegas hotel casino development, you begin to notice a few viable trends that consistently are being executed to increase investment returns. The tremendous growth of non-gaming revenue streams is attributed to the rise of celebrity chefs, ultra lounges and a new breed of nightclubs, spa brands, convention programming, ever changing entertainment options, and retail offerings second to none. All of these amenities have been reconceived and are now their own distinct marketable assets and demand drivers. Casino revenue continues to grow and many of these consumers of non-gaming products drive incremental revenue growth to the casino as well, even if it is not the primary motivator for their visit.

In addition, the returns for each square foot of the facility are managed more closely to improve utilisation and profitability.

You are starting to see spaces that were traditionally ‘dark’ be reinvented to increase revenues. Pool areas tended to have moderate utilisation—they are empty when the sun goes down, during inclement weather, and during the winter months. Today, you are seeing more and more of an infusion of other amenities into the pool environment such as club, retail, and gaming components placed into the pool zones to increase revenue per square foot and mix up the environment. Bungalows and condo-hotel units are being built on or adjacent to the pool area adding a high yield real Casino & Gaming International ■ 49

DESIGN FUTURE & CASINO OPERATION

estate component to this facility. Convention spaces that ran dark at night now schedule evening programming like concerts and special events or tradeshows. Entertainment showrooms are developed to be more flexible to house a headliner or production show at night, and then be used during the day for groups, television shows and even poker camps. Retail venues will begin to infuse new design, lighting and sound, interactive entertainment, and food, beverage and even gaming into their environments and will stay open longer, attract new customers, and increase traffic and spend.

Condo and condo-hotels are definitely going to be a new trend that has legs for the long term. The financial resources it provides, along with the operational and marketing benefits, can be quite substantial and many times will add tremendous value to the overall project from start through finish and beyond. The real estate appeal and the urban lifestyle will be a compelling attraction which changes the complexion of mixed-use development. Over the next few years we will see this new segment become more of a staple of hotel development, as both project developers and hospitality customers look to take advantage of the many popular amenities this type of structure offers.

Through all this period of change, the one staple that has not significantly changed is the casino experience. TITO, multiline games, the booming poker scene, and relatively fresh and efficient table games action have changed the landscape a bit. Seamless integration of the restaurant, club and entertainment environments into the casino is a new trend.

However, the programming and design of the casino proper has not changed as dramatically as the rest of the nongaming space—until now. It is starting with the redefining of Prive’s where enclosed rooms house higher end table games, chic bars, pulsating music, and well-attired servers creating a truly differentiated casino experience. For the first time, the Playboy Club at the Palms charges admission yet has gaming components infused into this nightlife destination. Mobile games, available on PDA’s you can check out from the casino and play on in public, non-casino areas, are just beginning to be rolled out. Server-based games will give casino management the ability to change their slot floor at the press of a button. Games can be changed based on who is in-house, the traffic patterns, and denomination or content requests in order to increase win per unit.

Operators are challenging the paradigm of both what a casino experience is expected to be, and what is acceptable to regulatory agencies like the Gaming Control Board. New technology, new customer segments, and a new generation of gamer will all translate into a fresh look at what a gaming experience in Las Vegas truly is and what that will mean for the casino in and out of Las Vegas for years to come. Food for thought: individualised gaming spaces; new floor layouts with undulating designs; ‘atmosphere’ changes by time of day, game, and audience; lighting, music and technology innovations; and non-gaming outlets seamlessly being integrated with the gaming environments. And yes, the W Las Vegas will deliver a truly unique casino experience that raises the bar of design, performance and expectation for years to come. So the casino design reinvention is happening—this is just the beginning.

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As with most new trends, once they are identified many developers and operators will pursue these opportunities when feasible. Las Vegas will continue to have an impact on the rest of the gaming world. Given the growth of gaming as part of the integrated resort product, it is already clear that innovations in design, operations and the customer experience will be shared routinely and will influence each of us around the world. CGI MARK BIRTHA Mark Birtha is a seasoned hospitality veteran with over 12 years of experience in the Las Vegas Resort Hotel Casino environment. Birtha graduated from the Hotel School at Cornell University with a Bachelor of Science Degree and as a Merrill Presidential Scholar. He began his career in Las Vegas with The Mirage in their management development programme. He quickly rose through the ranks of food and beverage management.

In January of 2000, Birtha joined The Venetian to further diversify his career. He started as Catering and Conference Manager, responsible for overseeing ‘Full House’ conferences, including COMDEX. In 2001, management invited him to participate in a 12-month Executive Development Programme — he was the first Venetian team member ever to be put through this ‘fast track’ training programme. In April 2002, Birtha was promoted to Corporate Development Manager where he focused on the planning of the Sands Macau, Venetian Macau, and Cotai Strip projects. He would later serve as Assistant to the President of Las Vegas Sands, Corp. In July 2003, Birtha moved into a lead Casino Marketing position. As Executive Director of Casino Marketing Administration, Birtha oversaw multiple areas including Slot Marketing, Players Club, Casino Services, Telemarketing, Special Events, and the mid-level of Player Development.

Birtha joined Edge Group, the developer of the recently announced W Las Vegas Hotel, Casino, and Residences with Starwood Hotels & Resorts Worldwide.

As Vice President of Development and Operations, he is responsible for the design and development activities relating to the low-rise buildings, including food and beverage, retail, meeting space, spa, casino and entertainment for the $2.2 billion property. In addition to this, he oversees all business and strategic planning for the project as well as current HR, IT, Residential, Purchasing, and Hotel Sales operations.

Birtha is currently the President of the Cornell Alumni Association of Nevada and a regular lecturer in The Hotel School’s casino operations and marketing classes. He is also the Founder and Chairman of the Millennium Hospitality Summit, an entrepreneurial boutique hospitality conference which took place in 2001 and 2002.

He serves on the Wharton School Gaming Programme Advisory Board and on the Hotel World Expo Conference Committee and is a speaker at gaming and hotel conferences. mbirtha@edgegroup.com; markbirtha@msn.com

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IGE, EUROPE & MALTA

WHY ITALY, NOT LONDON OR COSTA RICA?

BY GEORGE MANGION

Despite the impact of the US UIGEA online gambling ban, Europe is providing a steady focus for new and re-directed interests. The recent Placanica decision may open up new market possibilities, providing the primary issue of the moment at The International Gaming Expo (IGE).

>>

he answer is simple: Italy has recently become a more user-friendly jurisdiction for international gaming and last year it issued an impressive set of new remote gaming licences. Italy stands out as an attractive jurisdiction with a compromise tax burden which at three per cent is well placed to beat competition and start attracting cross-border trade.

Ladbrokes recently announced that it had formed a JointVenture with the Italian betting company Pianeta Scommesse, the first step in a planned €100 million investment by the company to establish high street shops, non-dedicated outlets, and internet and telephone betting operations over the next five years. The announcement was in response to proposals contained within the “Bersani Decree” by which the Italian government is set to reform the Italian betting market, increasing the number of sports betting licences to 7,000, while reducing taxation on sports bets from 17 percent to between two and eight percent, depending on turnover.

All this contrasts with the way how London received shock treatment in Gordon Brown’s recent budget. The chancellor announced in his recent budget that the online gaming tax is to be a high of 15 percent. Previously, industry lobbyists had been predicting that the tax would be hovering around the two per cent and three per cent., which would have been comparable with other low-tax EU jurisdictions.

The chancellor’s decision means that setting up in the UK is now prohibitive.

Furthermore, as a result of the decision by the US Congress last year to outlaw the use of credit card for online gaming transactions, many consider that in the short term Europe is the main area of opportunity for operators.

Thus, Spain is also about to liberalise its markets in

T

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IGE, EUROPE & MALTA

>> As a result of the decision by the US Congress last year to outlaw the use of the credit card for online gaming transactions, many consider that in the short term Europe is the main area of opportunity for operators. Thus, Spain is also about to liberalise its markets in Catalonia, the Basque region and Madrid. This has attracted UK heavyweights such as William Hill which recently entered into a joint venture with Codere, a Spanish gaming company that operates 76 bingo halls across Spain >>

Catalonia, the Basque region and Madrid. This has attracted UK heavyweights such as William Hill which recently entered into a joint venture with Codere, a Spanish gaming company that operates 76 bingo halls across Spain.

The same cannot be said for France. The EU Commissioner for the Internal Market and Services, Charlie McCreevy, recently questioned how France could ban European online operators access to the French sport and horse-race betting market on the pretext that it wants to prevent addiction when the French sport betting market continues to expand and offer more choice and opportunity for consumers to bet.

A ruling by the European Court in the Placanica case, however, opened new horizons for liberalisation in the European gaming markets and one hopes that the French authorities will finally fall in line.

On 6th March the court ruled that Italian criminal 56 â– Casino & Gaming International

penalties imposed on intermediaries for collecting bets on behalf of foreign companies was contrary to community law.

The court said that a member state may not apply a criminal penalty for failure to complete an administrative formality where, in breach of Community law, such completion is refused or rendered impossible by that member state. Furthermore, the court pointed out that legislation which prohibits the pursuit of activities in the betting and gaming sector without a licence or a police authorisation issued by the state, places restrictions on the freedom of establishment and the freedom to provide services.

Following the Placanica ruling the European Union opened infringement proceedings against Italy, warning that its restrictions on ‘legitimate’ operators were disproportionate.

Similar infringement notices were also sent to Hungary, Denmark and Finland.

These developments have been well received by legal

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Through the recent launch of its fully-fledged Public Access Telephony System, Melita has also become the first triple-play operator in Malta servicing over 141,000 customers across the three lines of business.

Melita’s state-of-the-art data centre located in Madliena is the ideal location for customers wishing to co-locate their equipment in a secure and redundant managed environment. A significant number of gaming operators are already making use of this service and more operators are already showing interest in pursuing business relations with Melita. The co-location and bandwidth service ensures customers enjoy the peace of mind knowing that their equipment is being hosted in a facility that offers the following main benefits: ■

Two redundant international connections via different upstream providers with automatic failover should one of the connections fail

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Melita also provides end-to-end networking solutions through its Data Service Division and in fact was the first Cisco Systems Premier Partner on the island. This division caters specifically for the data requirements of the business community. Services include: Internet connections at higher speeds; the formation of Virtual Private Networks (VPNs); network consultancy and design; equipment procurement, installation, configuration and support; security audits; and network management and integration. Top companies in Malta have relied on the services provided by Melita Cable Data Services over the past years.

IGE, EUROPE & MALTA

>> The Placanica ruling could generate more cross-border business; while Britain's decision to raise its taxation on online betting could mean Malta attracting more UK business. But there are other legal issues which all jurisdictions need to discuss, such as restrictions in some countries or regions, notably in Germany on advertising of sports betting >>

experts in Europe who feel that the Placanica judgment makes it clear that where a third country’s gambling laws adhere to the strict guidelines now laid down in EU case law, one cannot prohibit legitimate betting and gaming services provided from that third country.

All these issues are of direct relevance to Malta, which is growing into quite a significant online betting jurisdiction. The Placanica ruling could generate more cross-border business; while Britain's decision to raise its taxation on online betting could mean Malta attracting more UK business. But there are other legal issues which all jurisdictions need to discuss, such as restrictions in some countries or regions, notably in Germany on advertising of sports betting. But there are other legal issues which all jurisdictions need to discuss, such as restrictions in some countries or regions, notably in Germany on advertising of sports betting.

With the whole industry looking to the European market to drive growth and harness competitive advantage, now is the time for operators to ensure that they have a clear and unequivocal understanding of the exact legal situation across Europe, hence the reason for the specialist conference in Como (see details right).

This will be another opportunity for companies involved in the gaming and gambling industry to get on top of the game; hearing from gaming and gambling operators such as Betfair, Ladbrokes, 1128.com (formerly ParadiseBet), bwin, and other industry leading experts such as speakers from AAMS, The Hon Francesco Tolotti, The European Commission, European Parliament, and IMLP. CGI 58 ■ Casino & Gaming International

■

■

See IGE 2007 expo details, p54. Malta-based GMM Business solutions is organising another gaming related conference, namely the Online Gambling Legislation Debate at IGE, Lake Como,Italy at the end of May. And yet, why Italy and not London or Costa Rica?

Further information on the conference is available from Joanne Fenech or Colette Mangion at GMM Business Solutions. Tel 2148 4373, 2748 4373 or 9949 6848 http://www.international-gaming-expo.com/Online Conference.html GEORGE M. MANGION

George Mangion F.C.C.A., C.P.A.A., M.A. (Financial Services), is the senior partner at GMM Business Solutions.

George has over thirty years experience in accounting, taxation, financial and consultancy services. His efforts have seen that GMM Business Solutions has been instrumental in establishing many e-Commerce, online betting and gaming companies in Malta and has developed relationships with market leaders in South Africa, Australia, New Zealand, Ireland, USA, Belgium, Italy and Scandinavian countries. George is a regular contributor to local newspapers on business, i-gaming and e-Commerce. He has also lectured and delivered presentations at numerous seminars and conferences worldwide.

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OFFSHORE GAMING: ALDERNEY

TWO WORLDS – A PERFECT MATCH

BY ROBIN LE PREVOST

Alderney has a quiet reputation befitting an offshore location, but over recent years the island has begun attracting attention with a steady growth in eGaming interests. The prospects, with a rigorous regulatory environment for quality operators, continue to be reinforced by the island's advanced eCommerce business framework. That has provided, for instance, both PKR and WagerWorks domiciled in Alderney with an ideal base of operations (see following 'Offshore Viewpoint').

>>

lderney and eCommerce have come to epitomise the steady, carefully considered fusion of island tradition, finance and tourism with eGaming business. Today, that successfully encompasses a growing number of front rank industry operators with leading-edge technological capabilities. At the apex of this maturing infrastructure of domiciled companies, the States of Alderney have crafted a highly responsive and responsible regulatory environment that both encourages and sustains industry involvement. All of this has been achieved with an island population of just a few thousand. But how and why have these two worlds forged this deep relationship?

A cursory glance at the entry for Alderney on Wikipedia, for instance, revealed the following: “Alderney (French: Aurigny; Auregnais: Aoeur’gny) is the most northerly of the Channel Islands and a British crown dependency. It is 3 miles (5 km) long and 2 miles (3 km) wide making it the third largest island of the Channel Islands. It is around 10 miles (16 km) to the west of La Hague in the Cotentin Peninsula, Normandy, in France, 20 miles (32 km) to the north-east of Guernsey and 60 miles (97 km) from the south coast of England. It is the closest of the Channel Islands to France as well as being the closest to England. It is separated from Cap de la Hague by the dangerous Race of Alderney (Le Raz).”

It went on to describe the character of the island, which “has a population of 2,400 people and they are traditionally nicknamed ‘lapins’ after the number of rabbits seen in the island. The only parish of Alderney is the parish of St Anne, which doubles as the main town and features a pretty church and cobbled high street. There is a primary school, secondary school, post office, hotels, restaurants, banks and shops.

Alderney has a somewhat ageing population, being popular

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with people wanting somewhere quiet to retire.” The island’s recent history is outlined and the fact that it relies on tourism and finance as the chief mainstays of the economy. Finally, it details the political ties within the Bailiwick of Guernsey, its larger sister island.

On the other hand, Online Casino City projected a completely different impression: “Alderney licenses and regulates some of the world’s largest and most prestigious eGaming operators - PartyGaming, SportingBet and Gala Coral among many others that call Alderney home”. A contrast in a sense, but actually there is a complementary and mutual recognition that the island’s governance and society is an environment conducive to new directions in business development. The sure footing for eGaming in this respect was first established as we entered the 21st century.

HISTORICAL INNOVATION PROVIDES FOR THE FUTURE The Alderney Gambling Control Commission (AGCC) was first inaugurated in 2000 and its first responsibilities were to license and regulate telephone betting operations.

Subsequently, it moved into the area of Internet gambling, but due to a number of factors the shape and standing of Alderney’s evolution as a leading licensing jurisdiction proved to be partly fortuitous and partly a matter of intelligent design.

Alderney and Guernsey’s economy have seen many changes over the centuries, from boat building, privateering and smuggling, to quarrying, horticulture and tourism but, quite singularly, whatever it happened to be, it was almost invariably a success. Perhaps the fact that local politicians have historically been drawn from the business-owning classes is a factor; or perhaps it is that special sort of pragmatism that islanders as a breed tend to demonstrate to survive in a world surrounded by larger, more powerful nations.

For the last 40 years or so international finance has been the dominant activity and has provided a lifestyle many others can only dream about. A recent report concluded that by a measure of income Guernsey was the sixth richest country in the world. Scores of banks, hundreds of specialist fiduciary companies providing thousands of jobs, are driving the economy ever onwards, more than replacing traditional activities such as horticulture and especially tourism which went into decline – falling prey to cheaper and more exotic destinations.

Several factors derived from this dominant part of the economy, helping to shape the way Alderney does eGaming business today.

From the outset, it was acknowledged that the eGaming industry could not be allowed to harm or threaten the

reputation of the jurisdiction for the existing finance industry.

Consequently, a clear message emerged: the sector must be regulated. This was actually an easy pill to swallow since the islands had seen the inexorable rise in regulation of the finance industry. By the same token, the pitfalls were also well recognised: the wrong sort of regulation can damage business opportunity, as has been painfully experienced during the early phase of the finance industry and, indeed, in other eGaming jurisdictions.

A second factor was that the infrastructure to support the industry was already in place, lawyers, banking systems and robust telecommunication infrastructure were the building blocks of the existing economy and could and do provide a sophisticated bedrock for the eGaming industry.

An environment used to international business and with an inherent commercial outlook is priceless.

A third factor, and possibly one unique to the islands, is that from the outset it was quite well accepted that the skills required to manage the regulatory side of the industry were not present in the island and would therefore need to be imported. After all, sophisticated financial planning, forensic accounting and running stock markets had never been taught in the local schools so hiring in the experts was a natural way forward.

The result of the strategies outlined earlier led to the creation of the Alderney Gambling Control Commission, with its team of experts from within the Commission itself running right down through the ranks of the staff.

The die was cast and given the context of the huge reliance on the finance industry, it was hardly surprising the high moral ground adopted would provide a maximum degree of security for all sides of the equation. The Government of Alderney passed down these core commandments to the newly-fledged Gambling Commission.

MUTUAL PROTECTION Mission: The mission of the Commission is to ensure and maintain the integrity of the electronic gambling industry in Alderney.

Objectives: The objectives of the Commission are to protect the reputation of Alderney as a first tier eGaming jurisdiction by seeking to ensure that: ■ ■ ■

all electronic gambling on Alderney is conducted honestly and fairly; the funding, management and operation of electronic gambling on Alderney remains free from criminal influence; and electronic gambling is regulated and monitored so as to protect the interests of the public.

>> The AGCC has clearly mastered the balance between stringent regulation and commercial awareness, and has achieved this by adopting what is known in regulatory circles as a risk-based strategy...The question is, of course, does it work? From the quality of the existing operators and the number of blue chip applicants making their way to Alderney in ever increasing numbers, the answer would appear to be a resounding ‘yes >>

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SLOW START BUT LONGER-TERM GAIN From the outset it was recognised that these objectives would not perhaps lead to the fastest establishment of the jurisdiction, but it was strongly felt that this would provide a framework for the industry which, as it matured, would come to share the values of the jurisdiction. In turn, given the experience of the offshore finance industry, it also indicated that these operators would tend to be here for the long term.

In the event, that is actually how it is developing.

AlderneyGambling, the States of Alderney promotional arm for e-commerce, has a three-pronged approach to explain the key elements as to why this little island has become the prestigious home for so many of the world’s leading operators: regulation, technical supremacy and fiscal efficiency.

The development of a strong moral basis to regulation essential for the protection of the existing business environment - has many benefits for the operator. For instance, the robust checks on the suitability of the applicant provides a safe haven for the operator, providing a measure of protection perhaps from reputational risk brought about by less, shall we say, fastidious, ethical or responsible operators.

It is no surprise then that Alderney is increasingly seen as a ‘best practise’ move, precisely because there are thorough checks and investigations involved. Even American operators are confirming that view, which is clear from the establishment of Wagerworks (part of the giant IGT group) and Las Vegas Sands.

regulators share much of the same agenda. The regulators understand the business and the operators want protection from reputational threats and that is why the appointment by the Alderney Government of industry experts was so crucial.

The AGCC has clearly mastered the balance between stringent regulation and commercial awareness, and has achieved this by adopting what is known in regulatory circles as a risk-based strategy. This asks what the real risk areas are and then concentrates all its resources on managing these areas. The question is, of course, does it work? From the quality of the existing operators and the number of blue chip applicants making their way to Alderney in ever increasing numbers, the answer would appear to be a resounding ‘yes’.

A typical example of the way it works can be seen from the use of the ‘traffic light’ system for software changes. Each type of software change is allocated a colour code with, say, visual changes to the games suite allocated ‘green’ and changes to the Random Number Generator (RNG), ‘red’.

Change the roulette playing table baize to any colour you like and when you like, but changes to the RNG are a big ‘no-no’ until that has been checked out thoroughly. It is sensible, it is pragmatic and it allows the operator to get on with their business with the least interference from the regulator and, importantly, while also lowering the cost of regulation.

The trick, as it were, is in the fact that the risk areas for the regulator are inherently the risk areas for the operator too - it is a synergy that works.

TECHNOLOGY IS CRITICAL STRONG REGULATION IN A COMMERCIAL CONTEXT Nevertheless, regulation of this depth and intensity has to cut a critical balance as it is so easy to get it entirely wrong, causing commercial paralysis as the regulator struggles to understand new business models. It is often forgotten just how young this industry is and how fast it continues and needs to evolve. The answer must lie in detailed industry knowledge and shared values. The licensees and the

A second aspect of the picture, which had to be in place if the jurisdiction was to be able to provide a viable home base, was on the technical communication front. Island jurisdictions often have under-developed network capabilities for numerous reasons, not the least being that their indigenous populations do not tend to demand such services of their own volition. Alderney is no exception: the island would have struggled in this respect, which is why in 2005 the laws were changed to allow hosting on Guernsey. Guernsey’s financial

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services required and had resilient communications through multiple fibre optic rings. Bandwidth usage was not particularly high, but the relatively short distances of the fibre optics meant that technical upgrades were easy to deploy and now Alderney licensees can enjoy unlimited bandwidth and the most advanced services.

Fortuitously, competition in telecommunications was introduced in 2003 and Guernsey now has the choice of three distinct operators offering service and facilities. Prices have therefore been driven down with increasing performance emerging across the board. It is, in fact, probably enough simply to point out who is operating from the jurisdiction as clear proof of the Island’s technical capabilities.

However, it would be unwise to ignore the fact that eGaming has, in its own right, given much impetus to the whole issue of telecommunications serving the Islands.

Indeed, the pace of change has been much hastened by the migration of significantly-sized operations to the jurisdiction.

Additionally, as with many offshore jurisdictions, eCommerce was seen as the Holy Grail for the future. The stumbling block was that the infrastructure serving these island states was often not up to task. A by-product of eGaming, which has not gone unnoticed, is that with the growth of the Islands as a base for these substantial eGaming operations their overall attractiveness for eCommerce has also grown bringing another very welcome benefit.

TAX – THE ULTIMATE PRIZE? This point leads on to the last, but perhaps most significant, attribute of the Islands: the tax regime governing the sector.

As was referred to earlier, the islands have a sophisticated and mature finance sector operating from their jurisdictions. The finance sector - in itself a wide ranging palette of services encompassing banking, trusts, reinsurance, international tax planning and investment and hedge fund management, amongst many other specialist areas - established itself in the Islands in the early 1960’s. It is true to say that the reason was not purely geographical.

The islands have one of the most efficient tax regimes available. So, for many international companies, Alderney and the Channel Islands as a whole had become a perfect bridgehead to providing services directed into the vast, economically vibrant, European Union as well as much further afield.

Utilising well-tried and tested methodology, many companies base themselves in Alderney to take advantage of low or, in fact, zero profit taxes. With the complete absence of duties, sales taxes, gambling taxes and the like, this enables companies to sell on into the European Union (EU) and to deploy one or other of the methods to minimise their exposure to EU taxes - all completely legitimately. For eGaming companies the benefits are obvious especially in extinguishing the effect of VAT, which is notorious for its impact on the bottom line.

Tax efficient regimes are essentially just that and taxes will, of course, be paid at the appropriate rate according to the ultimate country of domicile of the parent holding company. Lucky for those companies receiving a low rate of tax there as well, but what they also offer are minimised subsidiary taxes, if not zero rates, thereby increasing remitted value to company shareholders.

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ALDERNEY’S PLACE IN THE MODERN WORLD Alderney’s tiny population has largely been an observer of international affairs, but the Island is certainly adapting and moving with the times. So, while Alderney would hardly plough its own furrow without a care in the world – it takes its responsibilities very seriously - at the same time there is a deep sense of its own presence. At every opportunity, therefore, Alderney naturally exercises its right to selfdetermination.

Among eGaming jurisdictions Alderney takes on board much that there is to learn as part of developing our experience and toward maturing our ability to advance the Island’s interests. In the final analysis its decision-making is rooted in that independent course. The Commission’s approach to the laws and regulations of other countries exemplifies this. While plainly it is not the role of Alderney to uphold the sovereign laws of other countries, Alderney has a responsibility to do more than simply uphold its own laws. It expects and demands that its licensees know their markets, act lawfully and - a particular emphasis is placed on this – that the licensees’ clients’ remain vigilant against the breaking of laws in the country of residence.

CONCLUSION Alderney’s start as a jurisdiction was slower than most, but that is a position everyone has valued: it has the respect of the eGaming industry and even of other jurisdictions with whom Alderney could be said to compete for business. That is important to the Island and to the growing community of operators based here. As the industry matures -and with that inevitably there will be consolidation - more and more business will polarise to larger operators.

It is this second phase, and beyond, that Alderney has always been focussed on. That is why it has invested so much in providing a stable and professional regulatory and technical environment, as well as providing an internationally advanced business framework which makes sense for the industry as it moves into the second decade of its still relatively young existence. CGI

ROBIN LE PREVOST Robin Le Prevost is Head of eCommerce Development for the States of Alderney.

After early work experience in the local finance industry Robin moved into general commerce specialising in Business Development and subsequently joined the local government-owned Guernsey Telecoms in 2000, a company, which was bought out by the global giant Cable and Wireless in 2002.

During Robin’s time with Cable and Wireless he formed and headed up that Company’s eGaming division.

Leaving to found his own eGaming consultancy in 2005 Robin was head hunted by the Government of Alderney to create their promotional e-Commerce arm.

Married with two children Robin enjoys competitive yacht racing in which he has enjoyed success locally, nationally and at a European level.

OFFSHORE VIEWPOINT

SECURE DOMAIN, SHARED VALUES & BRAND STRENGTH

BY PAUL MATHEWS

GI: The proliferation of gaming websites creates increasing demand for ease of use, a sophisticated range of features, transparency and safety. In what way do you consider the sector is measuring up to these developments and how, historically, has this evolved over the years?

C

PM: Most online casino software providers have their primary roots in e-commerce or software technology.

This goes quite far in explaining the wide range of quality of so many online games. So, online casino operators would be well advised to consider the gambling design and operation experience of any potential software supplier.

Unfortunately, unlike land-based operators, very few online casinos have the ability to compare the performance of games from multiple suppliers because they normally receive their content from a single gaming provider. If online operators have sub-standard gaming products, they have no way of knowing the extent of the underperformance they are suffering. Similarly, they have no ability to optimise their casino offerings with a best-of-breed approach to content.

Designing and offering games for optimal online performance requires a different mindset than for landbased casino applications. Some items of great importance in the land-based world, such as bet maximisation and emphasis on stunning visuals to attract players, are not as relevant to an online environment.

Lessons learned from land-based gaming about successful gaming design, user interface, and pacing of game play, are even more important and impactful for optimising online performance. In other words, no matter if the venue is online or on land, the better the gaming content, the more profit the casino enjoys.

CGI: What do you consider to be driving your target market at this moment in time and is that unfolding successfully, presenting new opportunities and directions?

PM: Players are becoming more sophisticated and discerning. They are demanding games with more depth and complexity. For the operator, it is about finding new and more effective customer retention and acquisition tools.

The right brands can bring great value to online gaming.

>> Players are becoming more sophisticated and discerning. They are demanding games with more depth and complexity. For the operator, it is about finding new and more effective customer retention and acquisition tools. The right brands can bring great value to online gaming. When a great brand license meets a great game mechanic, magic can happen. Players are drawn to the product, entertained and rewarded >> Casino & Gaming International â– 67

OFFSHORE VIEWPOINT

When a great brand license meets a great game mechanic, magic can happen. Players are drawn to the product, entertained and rewarded. The developer has the opportunity to create multiple compelling titles that bring new experiences based upon the brand, with operators seeing the benefit on the bottom line, both in terms of initial performance and games that perform well over time. A great license will not only bring its fans to the games but will also bring players interested in trying something new which is still familiar and trustworthy.

There are many brands but just a few great ones.

solutions and product capability in this market.

What is your view of the priorities and prospects?

WagerWorks has built an enviable reputation for providing quality branded content, having capitalised on the tried, tested and proven brands that have a loyal following in the offline world. Licensing brands that have benefited from tens of millions of dollars of promotion and advertising over many years creates that muchneeded loyalty from the consumer. Getting consumers to recognise the game as one they immediately feel comfortable with is paramount in the ethos of game development at WagerWorks.

CGI: What advantages do companies appreciate about being domiciled in Alderney particularly and how has that facilitated company growth and market presence?

CGI: Technology and technical strength provides the major thrust for innovation in software gaming

68 â– Casino & Gaming International

PM: For the player it is all about gaining access to compelling content. Innovations that enhance the entertainment experience for the player will be a priority, and we believe this will come in the form of game delivery and game play (added game depth and interaction as well as community features). For the operator it will be about improving operational efficiencies and maximising existing investments.

PM: Alderney Gambling Control Commission provides the strictest and most comprehensive gaming regulations and is widely recognised as the most reputable online gaming jurisdiction. This provides an excellent fit with WagerWorks’ unrivalled regulatory position.

WagerWorks and Alderney have a long-standing relationship born out of mutual respect for each other’s standards and shared values.

OFFSHORE VIEWPOINT

CGI: The consumer and the tailored content match is paramount. What do you consider to be the features of how to marry the two aspects, or to ensure that the two gain the greatest interest in a particular company’s product?

PM: In order to provide content that meets or exceeds expectation, content creators must have a solid understanding of their consumer. This knowledge can be obtained in many ways, but those that solicit direct feedback from users are the most valid and offer the best opportunities for improvements in product performance. All customers bring their individual needs and desires to your products. If a content provider can identify those needs and design features or methods to meet them, they will be successful in making a product that people will want to use and will return to use again and again. The best content providers use both qualitative and quantitative research to guide the future development of their products.

CGI: The total package when offering online suites includes functional factors ranging from the banking process to verification satisfaction.

How important is this now to the industry and what measures considering regulation and compliance have still to be taken to assist in building confidence in the sector?

PM: WagerWorks has always believed strongly in Regulatory Compliance as one of its strategy ‘pillars’. A quality verification process, with the right software tools and internal controls, is critically important to our industry and we think that others are now realising this.

We believe that it’s very important for this industry to move forward aggressively with investment in verification solutions and we are happy to see companies targeting this as their area of expertise.

CGI: Company partnerships and background experience on the ground are often vital ingredients for market edge in business. How has this assisted your role in the industry especially given the IGT base and land-based casino origins?

PM: WagerWorks benefits from the experience and market knowledge of our parent company, IGT, as well as our own land-based and online history. This pedigree includes game design, the familiarity and reverence of operating in regulated environments, established business practices and unique opportunities for leveraging product and business synergies.

CGI: IGT’s dominance is clearly a major influence in determining commercial development, so would you say this provides significant strength in enabling you to extensively grow and refine your products?

PM: WagerWorks’ strength comes from being able to focus and build upon those differentiators that set us

apart from our competitors. This is what makes us WagerWorks. We are fortunate that we are in a position to pursue and realise our strategic vision with limited distractions. We are also poised to leverage competitive advantage through our business relationship with IGT, as well as through new product initiatives.

CGI: Diversification is never far from the mind in seeking and identifying potential new demand.

What impact does this have on the industry in general and for Alderney-based gaming companies?

PM: From the operator’s perspective, most companies have found success in offering their customer base a broad range of products including casino games, multiplayer poker, betting, bingo, skill and other ‘soft’ games.

This diversification has worked well for them and I expect over time that more and more products will be offered alongside the ones we have today. Software providers think differently, having learned that overdiversification can be a bad thing. With diversification comes distraction and without the necessary resources and expertise in certain product verticals, one runs the risk of losing focus.

WagerWorks believes that software providers should stay focused, doing what they do well, and only through an increase in resource or via acquisitions or partnerships should providers aim to offer increased product verticals.

How does this relate to Alderney-based companies? We don’t believe they are any different from operators elsewhere in this regard, as they still need to offer their customers a wide range of gaming propositions and product verticals.

CGI: What position do you take on social responsibility and corporate governance in the scheme of commercial priorities, in Alderney and on the global scale?

PM: The issue of social responsibility consists of two elements. First, the behaviour, attitude and control that the Gaming Operator chooses to include as part of its proposition to the consumer. Second, the consumers themselves must assume an equal level of responsibility to be able to gamble within their means and be given the ability to control their spending. WagerWorks addresses these issues by implementing a series of systematised controls within the casino and operational procedures to help players avoid getting into difficulties. The WagerWorks platform allows players to set parameters around how much they can deposit, stake and/or lose in a given period, as well as limiting the time they spend on their accounts, where players wish to increase their betting limits.

Further control is made through players’ regular banking facilities, as they are restricted to the funds they have available. Players are only able to use one payment method at a time and the system can track the number

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of payment types a player has registered over a period of time. This gives the operator a further indication of where a potential problem may occur. Second, at the behest of the operators, a number of WagerWorks customer service procedures have been designed to attempt to identify problem gamblers, giving players an opportunity to admit a potential problem, whilst restricting certain high-risk behaviour.

By using fraud and transaction monitoring, players with unusual spending patterns can be contacted to ensure they are aware of their level of activity. By adopting these kinds of policies, procedures and technology, WagerWorks is one of a very small number of GamCare (http://www.gamcare. org.uk/) accredited companies.

GamCare exists to help those who do develop problems and to ensure that organisations that are providing gaming services are acting responsibly. Social responsibility is a cornerstone of WagerWorks’ business philosophy and follows in the corporate values of the parent company, IGT. WagerWorks provides leadership in socially responsible online gaming and believes that other operators in this sector should follow suit.

CGI: What organisations do you work with to ensure the authenticity, effectiveness and fairness of your operations and how does that enhance your position in the market?

PM: WagerWorks is a big believer in regulatory compliance. Gaming supervision engenders consumer trust and creates higher standards that lead to more effective business practices, increased data integrity and true randomness in game outcomes. We have implemented verification processes to determine that players are of legal gambling age and are residents of jurisdictions where online gambling is permitted. The company has a regulatory compliance ethic derived from its land based heritage and experience.

We validate core technologies with two independent testing labs — Technical Systems Testing (TST) and Global Gaming Services (GGS) — as well as certifying systems through the Alderney Gambling Control Commission and Isle of Man Government. Implicit in all of our products is a level of trustworthiness that nonregulated solutions can’t offer.

In addition to the historical performance of the WagerWorks team, we are actively engaged in determining future regulatory advocacy. By helping to craft new legislation, we can ensure that its knowledge remains current and that the emerging legal landscape remains conducive to the industry’s future growth.

WagerWorks’ unsurpassed regulatory position represents a set of very high standards for operational excellence, integrity and accountability. With WagerWorks holding itself to these criteria, we have created secure game engines and site management tools that offer the highest levels of financial accounting, as

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well as a player authentication protocol that has set the standard for online gambling.

CGI: Do you envisage an expansion of eCommerce in Alderney acting as a further catalyst for credibility in the market place and how essential is that to the future of your operation?

PM: Our history as a strong advocate of regulatory compliance was the deciding factor for WagerWorks choosing to operate from Alderney. Alderney has always been at the cutting edge of iGaming regulation and is expected to continue to refine its systems and processes, adjusting to changes that may occur in the marketplace.

Some other jurisdictions are following the lead of Alderney and setting up similar frameworks, and we believe that is essential to attract quality licensees.

CGI: What impact and role do the Asian and European markets have on potential for growth in this sector? Presumably Alderney-based companies are exploring involvement?

PM: There are markets other than the UK and Ireland that are exciting and we assume everyone is looking towards these sectors for increased growth. It still remains to be seen exactly what impact legislation, judicial decisions and regulation will have on Alderneybased operators. The trend appears to be towards a requirement to ‘domicile’ in a given market in order to be granted access, with South Africa being a prime example. However, whatever the future holds, both Asian and European markets are big and potentially lucrative for both operators and suppliers. CGI

PAUL MATHEWS Paul Mathews is President and a founder of the WagerWorks group of companies. Prior to founding WagerWorks, Paul was the Executive Vice President and Chief Operating Officer of Silicon Gaming, Inc., which was acquired

by International Game Technology (IGT) in March 2001. Paul served as Silicon Gaming’s Vice President of Corporate Development and Government Affairs from 1995 -1999. Prior to working at Silicon Gaming, Paul was the Director of Regulatory Compliance at Casino Data Systems, and served over five years with the Nevada Gaming Control Board in both the Investigations and Corporate Securities Divisions.

WagerWorks is a world leading premier iGaming software supplier, offering feature-rich and regulatory compliant casino, poker and game content solutions, enabling gaming and consumer companies to leverage their marketing expertise and brand equity across the Internet and iDTV. Further information: www.wagerworks.com

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OFFSHORE VIEWPOINT

HERITAGE AND QUALITY DRIVES ONLINE SUCCESS

BY MALCOLM GRAHAM

GI: Why is Alderney seen as a preferred location for online business and what has particularly persuaded you of its merits how has that worked out?

C

MG: Alderney has established itself as the world’s preeminent online gaming jurisdiction and for leading brands it is increasingly important that their online businesses operate from a Tier 1 regulatory environment. I have been an Alderney licensee for nearly five years, initially with The Ritz Club London Online and now with PKR Ltd, during that time I’ve seen the number of licensees increase from three to twenty nine at the last count. Alderney has managed to attract a significant number of the leading online operators such as Rank, Sky, Virgin, PartyGaming, Paddy Power and Gala because the Alderney Gambling Control Commission (AGCC) manages to maintain a sensible balance between a strong regulatory framework and the flexibility operators require to compete in this incredibly dynamic industry.

From my perspective, Alderney has built its reputation by ensuring its licensees embrace four key principles. Firstly, that the relevant personnel and the potential licensee itself are ‘fit and proper’ which is achieved by rigorous probity and background checks. Secondly, that the licensees have the economic wherewithal to meet their liabilities particularly with respect to players’ account balances. Thirdly, that the licensees’ operations are well managed and that the games they supply are absolutely fair. Significant testing of the software by independent third parties and annual reviews of the licensees’ operations ensure that these objectives are met.

Fourthly, and very importantly, all the licensees take their

social responsibility obligations very seriously both from an underage and compulsive behaviour perspective. The AGCC has very clear guidelines concerning deposit limits, loss limits, age verification and staff training which provides operators with a strong framework for achieving these obligations.

For the AGCC, maintaining the integrity of these four pillars is crucial to safeguarding its reputation and that reputation is central to many licensees desire to be based in Alderney.

CGI: Given that Alderney’s Government is not alone in seeing egaming as a driver for ecommerce growth, is there a particular strategy that you regard as paramount in creating an international egaming hub?

MG: I think Alderney needs to focus on five issues if it is to secure its position as the dominant Tier 1 jurisdiction.

Most importantly, it must maintain its reputation as having a robust regulatory environment commensurate with any of the leading land-based jurisdictions.

Secondly, the regulations themselves will require ongoing amendment to meet the needs of this fluid industry. Thirdly, the local suppliers of hosting and bandwidth services will need to invest to ensure they meet the demands of the industry as it grows. Fourthly, when the ‘White List’ is published in the middle of this year, Alderney’s name is on it. And finally, limited, if any, changes to its tax and VAT status.

CGI: What are your views on the effects of the current US Internet gambling prohibition and how that might be resolved?

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MG: The UIGEA has had a dramatic impact on the online gaming sector since its passing in September 2006 and few in the industry would argue that any of these effects have been beneficial. I think the most important effect has been the emergence of ‘clear blue water’ between those operators still accepting US-based players and those operators which do not. Those operators who chose to dispose of or shut down their US facing operations have experienced a huge amount of operational upheaval in the immediate aftermath and will therefore aggressively defend their remaining markets (particularly Europe) from the operators who, whilst continuing to take US nationals, are looking to new markets as the transaction processing options for US players disappear. This is likely to cause increased tension within the industry, the consequences of which won’t enhance our reputation in the media or the minds of the general public.

The UIGEA has also been a catalyst for a ‘flight to quality’, whereby the bigger brands are increasing their dominance at the expense of the less well known or trusted brands. Svenskas Spel’s growth in Sweden and the recent upswing in PartyGaming’s results would seem to support this conclusion.

CGI: Does the island therefore offer a market stability advantage in the current environment of international uncertainty and could that strengthen the future for developing incoming business?

MG: One of Alderney’s great advantages is that its regulatory framework is very stable. Whilst the specific regulations are adapted on an ongoing basis, the overall framework has been very consistent for the last five years. From an operator’s perspective this is highly reassuring given the inherent instability of the online gaming industry. Other jurisdictions have made what appear to be dramatic changes in their approach to regulation and this has had a huge impact on their reputation and their ability to attract licensees.

As I said earlier, the AGCC has been very skilful in marrying a robust regulatory framework with a pragmatic approach to the changing needs of the industry. It is this reputation that is largely behind the significant growth in the number of licensees during the past couple of years.

CGI: In a highly technology-rich sector it is to be expected that quality and standards become a competitive factor for company success. How central is this and how do you see this unfolding?

MG: The online gaming industry has historically offered reasonably reliable and technically proficient games and services which provide users with an adequate customer experience. Until recently the only points of differentiation between operators was the size of the signup bonus, the number of concurrent users and the amount of rakeback. The industry has argued that consumers were more interested in the outcome of the game rather than the game itself. At PKR we have taken a rather contrarian view which emanates from our heritage in the console gaming sector where the quality of the game and the graphics it employs are the key driver of product differentiation. There is no doubt in my mind that consumers who are used to playing on an XBox or a Playstation will, over time, demand a similar experience when they game online.

Apple’s iPod transformed the MP3 industry and mobile phone development is increasingly being driven by aesthetics rather than basic utility - with LG/Prada phone leading the pack. It is our firm belief that a similar evolution will take place in the online gaming space.

CGI: Asia has a major gravitational pull. How significant is this immense regional potential to you and how do you see industry advancing where do Alderney-based companies fit in?

MG: At the end of 2006, Asia was heralded as the replacement for the US but, as anyone who has actively pursued the Asian online gaming market knows, this is

>> The industry has argued that consumers were more interested in the outcome of the game rather than the game itself. At PKR we have taken a rather contrarian view which emanates from our heritage in the console gaming sector where the quality of the game and the graphics it employs are the key driver of product differentiation. There is no doubt in my mind that consumers who are used to playing on an X-Box or a Playstation will, over time, demand a similar experience when they game online. Apple’s iPod transformed the MP3 industry and mobile phone development is increasingly being driven by aesthetics rather than basic utility - with LG/Prada phone leading the pack. It is our firm belief that a similar evolution will take place in the online gaming space >> 74 ■ Casino & Gaming International

OFFSHORE VIEWPOINT

going to be a ‘slow burn’. At one level Asia represents a huge opportunity given the consumers’ propensity to gamble throughout the region. However, if it was that easy the leading operators would have been targeting the region well before the passing of the UIGEA. Asia presents operators with an array of challenges which are hard to solve and can, as some have discovered, prove to be very costly.

Firstly, most West European consumers see gambling as a mixture of business and pleasure whereas for Asian consumers it’s all business. The margins embedded in European sportsbook operators’ prices would not be tolerated by Asian consumers who are used to operator margins of two percent rather than the 6-10 percent experienced by UK bookmakers.

Secondly, gaming in Asia is still predominantly a cashbased business, certainly at the mass market level.

Whilst credit card penetration is rising throughout the region there is still a significant reluctance to use them online unless the operator has a strong international reputation such as Crowne Casinos. The dominance of cash presents operators with two major challenges with respect to addressing their regulator’s concerns about money laundering, and the need to partner with one of the local gambling networks who have the infrastructure to manage the transaction processing piece.

clear to me why the local operator wouldn’t develop their own online business. We are already seeing a number of Asian operators securing licenses from Alderney directly which suggests that the role for Western operators in the region may be limited.

CGI: Retaining a leading position in online poker especially requires careful attention to content and performance and how that meets the increasingly knowledgeable interaction of players.

How do you handle this constant demand?

MG: The biggest challenge for all online poker operators has been ensuring that their infrastructure can cope with the number of concurrent players. I can’t think of a major operator that hasn’t struggled with this issue at some point in their history. At PKR we are working hard to upgrade much of our hardware to facilitate 20,000 concurrent users in the very near term and in the medium term this number will rise to 50,000, which will put us on a level with the biggest online poker rooms.

Thirdly, the Asian market is driven by sports gambling and casinos. Poker is not widely played or understood and the investment in education required to develop this business will be substantial. My hypothesis is that operators will not establish separate liquidity pools to prevent the Asian fish from being eaten by the European sharks and this will have a detrimental effect on the growth in poker in the long run.

The entire organisation is focused on doing whatever is needed to ensure we offer our customers the best online poker experience on the Internet. For the customer care team that means dealing with customer enquiries in a friendly and professional manner; for the technology team that means deploying the relevant hardware in Guernsey to meet our needs. For the software team that means enhancing the product to ensure we maintain our lead over our competitors and give our customers an even richer and more engaging experience. For our transaction processing team it means processing withdrawals as fast as possible whilst mitigating the risk of chargebacks or fraud. For our card room manager it means ensuring our range of tournaments and weekly events is compelling for our players.

I believe that for a European online gaming company to develop a material business in Asia it will need to partner with one of the local incumbents and it’s not

CGI: The growth of remote, interactive and online technology continues to present new opportunities for market share. What do you see

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as the key trends emerging and will that be to Alderney’s egaming benefit?

MG: When Alderney started regulating online gaming companies online poker was in its infancy and the regulations focused on sportsbooks and online casinos.

As online poker and bingo has developed so Alderney has adapted its regulatory framework to allow these operators, such as PKR Ltd, to be licensed in Alderney. I have every confidence that as new platforms, products and technologies become important to one or more licensees, the AGCC will accommodate those opportunities so long as there is no risk to the reputation of the jurisdiction.

My expectation is that most operators will seek to offer a wide range of products and services to minimise the likelihood of their customers gaming elsewhere.

Moreover, the broad product portfolio is likely to be accompanied by the emergence of sub-brands in much the same way as PartyGaming has done via its acquisition of Empire.

I also suspect we will see further localisation to meet the needs of specific markets both in terms of language, but also the development of country or region specific products if there is a reasonable market opportunity.

CGI: Mobile gaming take-off, promised over the last few years, seems to be in the offing again. Do you observe any particular move here and to what extent are you planning for the sector?

MG: Personally, I think mobile gaming is most suited to sportsbooks, online casinos and soft gaming rather than poker. From my perspective, even if we build a mobile poker client which reflects the PKR positioning, its unclear how we distribute it without a partnership with one of the main network operators. Without a distribution partnership, consumer adoption will be very slow. Furthermore, it is our understanding that pooling mobile and online liquidity is hard because online players are reluctant to play poker against mobile devices, because of the heightened risk of collusion. Technically, I believe we can address that concern but educating our customers will take some time.

There is the added problem of sustaining a reliable connection for mobile poker players during the middle of a hand, which means players run the risk of losing their bets or being declared ‘all-in’ when their handsets have patchy reception. Not a problem when surfing the net or having a phone conversation but when a lost signal means lost money, managing the customer experience becomes much more challenging.

CGI: What approach do you take to growing concerns to implement industry standards and to adopt a socially responsible code of practise?

MG: As I have said earlier, all the Alderney licensees take

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their social responsibility obligations extremely seriously.

Obviously, we employ the most sophisticated age verification software which is mandatory for all credit/debit cards which can be owned by under-18s..

All my customer care team have been trained by Gamcare and PKR is in the process of becoming fully accredited by Gamcare. PKR is about providing an entertaining leisure experience - it is not about customers losing money they cannot afford. We have a huge number of 2 and 4 cent tables where the average pot size is 50 cents ensuring that a deposit of $20 can give a customer many hours of entertainment.

Furthermore, PKR sets strict deposit limits for all its customers to ensure that no-one can ‘chase their losses’.

This is a requirement of the AGCC and is, of course, fully supported by PRK. CGI

MALCOLM GRAHAM Malcolm is the CEO of PKR.com, a company which has developed a uniquely customisable 3D online poker software. The company was founded by Jez San, who was the creative force behind Argonaut Games, one of the UKs most successful games developers. PKR launched in August 2006 based in Alderney, the premier online gaming regulatory environment.

Previously, Malcolm was the Managing Director of The Ritz Club London Online, operating an online casino and poker room under The Ritz brand. He was also a Director of The Ritz Club, the land-based casino located in the Ritz Hotel. Malcolm was responsible for all aspects of The Ritz Club’s online gaming operations including the following: Negotiating contracts with all suppliers, overseeing all marketing activities, co-ordinating all customer care and retention activities, managing The Ritz’s move from Curacao to Alderney, full P&L responsibility, selecting and negotiating potential marketing and technology partnerships.

Malcolm was Chairman of the Alderney Gaming Licensees Forum and Treasurer of the Interactive Gaming, Gambling and Betting Association in 2003.

Prior to Malcolm’s role at The Ritz Club Online he worked for one of the UKs leading Internet investment vehicles called the Antfactory. He was responsible for their £2 m investment in Whittards of Chelsea. Prior to the Antfactory, Malcolm was a management consultant with Mercer Management Consulting where he specialised in the telecommunications and Internet industries.

Malcolm has a BA from Southampton University and an MBA from INSEAD.

PLAYERS AND STANDARDS

SURVEY REVEALS VITAL INSIGHT INTO WHAT MAKES PLAYERS TICK

BY ANDREW BEVERIDGE

The much vaunted eCOGRA Global Online Gambler Survey has established a new benchmark in understanding player conditions and motivations. The longer term feedback, coupled with the rapid global evolution of the online industry providing new insights, will ensure the validity of this data and, especially, establish future parameters for investigation.

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he Global Online Gambler Survey commissioned by eCOGRA last year presents, for the first time, a unique insight into the nature and motivation of online gamblers, providing a solid foundation for a better understanding of player needs and requirements. That was our primary objective as a player protection and standards body, and the results have surpassed our expectations in the diversity and sheer value of new information uncovered.

The value of this fascinating study was not confined to that however. Following the publication of the results at the International Casino Exhibition (ICE) early this year, it has become a document much in demand by players, licensing jurisdictions, gambling site operators, software providers, problem gambling bodies and even governments.

If this extended value helps to improve the manner in which online gamblers are understood, safeguarded and generally respected, it is a very significant bonus.

With almost 11,000 global respondents the study is the largest and most player-centric online gambling survey yet carried out. The Global Online Gambler Survey has had the additional but unplanned impact of attracting international publicity to both the needs of the player and eCOGRA’s goal of making the industry a better, more efficient and respected place.

Many media requests from around the globe for the survey’s findings have been serviced, with the resultant factual press coverage making a welcome change to the more usual mainstream media diet of sensational but tragic problem gambling stories.

Carrying out such an undertaking across international and cultural borders whilst maintaining impeccable scientific integrity is no mean feat, and credit is due to the Nottingham

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Trent University research team headed by Jonathan Parke, which eCOGRA commissioned in the second quarter of last year to plan and execute this formidable task.

96 COUNTRIES Using the latest research tools and techniques, embracing both quantitative and qualitative research, the team traveled widely and spent countless hours analysing and assembling the huge amount of data flowing from 85 carefully designed questions answered by thousands of players in 96 countries, as well as from professionally-led focus groups in principal gambling nations that included the United States.

The industry - both those operators regulated by eCOGRA and others not - gave outstanding assistance in contacting the thousands of players approached. One hundred and fifty different venues, including some of the most established and respected online gambling firms and information portals on the Internet, helped to bring forward genuine online players with original and very informative views.

In some areas the Nottingham team’s findings confirmed that of other, smaller studies carried out by the American Gaming Association, the UK government and other bodies, but in others completely new and in some cases surprising information came to light.

For example, the use of Internet message boards and fora is far more widespread and powerful than was previously believed; players overwhelmingly said their main motivation in online gambling was relaxation and entertainment rather than profit and there are marked distinctions between online casino player and online poker room player profiles.

From a scientific and academic perspective, the Global

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Online Gambler initiative has proved invaluable as a thoroughly proved base for continued academic research and as a comprehensive and accurate database for the industry.

Team leader Parke observes that there is less stigma attached to gaming, and that the gender gap has closed more significantly than was previously thought. He believes that this “value-neutral” survey will serve to generate closer communication between operators, policymakers and academics, setting a new horizon beyond the traditional focus on problem gamblers and embracing a wider spectrum centred on the real and scientifically defined characteristics of the majority of online gamblers.

Those characteristics were defined by responses from almost 11,000 players, a significantly greater sampling than the usual surveys where respondents number around 22,500. Aged 18 to 65 years old and resident in 96 countries, the gender split in responses was 58% male and 42% female.

The largest group of respondents was in the 35-55 year age bracket.

IMPORTANCE OF TRUST The importance of trust in the online environment was a very strong signal from respondents that should be carefully noted by anyone involved in offering online gambling related services to the player community. Such companies ignore at their peril the importance of a solid reputation for honesty, upfront information, fairness, efficiency and player respect all of which are regarded as critical.

Kite marks that link to genuine certifications are important guides for many players who as they become more experienced will seek these out as part of pre-playing research.

PLAYERS AND STANDARDS

76.2% regarded a reputable payment system logo as most important, but the eCOGRA “Play It Safe” seal indicating defined standards of conduct and monitoring was a prime choice for 41.4% of respondents and a good software provider logo was sought by 39.1%.

Overall, 69% of respondents acknowledged the importance of a “genuine symbol of trustworthiness.”

Trust regarding gambling software was a concern for many players, with only 50% satisfied with the overall integrity across the industry, and a significant 37% holding the perception that online gambling sites have an ‘on/off’ switch to change software performance. This is perhaps an area where software providers need to focus more closely, especially in providing independent assurances.

The brand of software in use is important to many players - 42.6% said that the software in use was a key decider for them in choosing a gambling venue, and this applied more to online casino choice than poker room selection.

MESSAGE BOARDS A MAJOR PLAYER RESOURCE One of the biggest surprises of the study was the revelation that far more players regularly use Internet message boards than was previously believed. Conventional (and unproved) wisdom has hitherto suggested that between three and seven percent of online gamblers regularly use the Internet message boards to find information, check out venues, seek help on disputes and exchange information, but the Global Online Gambler study shows that daily use of this highly influential player resource is almost 40%.

Parke reported: “We were surprised at the number of people who regularly use Internet message boards,” adding that 40% visit at least one message board daily, some players two to three times a day and others on a weekly basis.

The top four message boards listed by respondents were 2+2, Casinomeister, Casino-Crush and Gone Gambling, and players said that their main reasons for using this resource were to find out about promos and bonuses (64.6%) or research online gambling venues before risking their money (53.4%) The controversial topic of expert vs. casual gamblers was also explored, with a majority of respondents expressing the opinion that the most successful gamblers are those who do not use probability strategies.

Parke comments: “There is definitely a trend, the gambler’s fallacy of ‘representativeness’ whereby players think that in the short term bets will even out. It’s about applying long-term probability in the short-term and it doesn’t work. That is what we call heuristics and it is not successful with taking bets. People who rely on luck generally do better. Those who do worst of all are those who think they can use skill where they cannot.”

Veteran, occasionally arrogant, gamblers who scorn players who gamble for entertainment rather than profit face correction in the study, too. A definite majority of Internet gamblers view the pastime as entertainment and as a leisure activity, with monetary gain as a secondary incentive. The rationale is that without the possibility of winning money, Internet gambling would not hold the same level of excitement, but that making money is in itself not the principal reason for playing. This finding was consistent with previous studies going back to 2001.

So what is the typical profile of an online gambler? There are distinct gender and age differences between online casino and online poker players with the two main profiles looking like this:

ONLINE CASINO GAMBLER PROFILE Online casino players are predominantly female (54.8%) aged 35-55 (55.9%) and play two to three times a week. They have visited more than six online casino venues over the past three months (25%) and have two to three years playing experience (22.4%) The typical online casino player will spend one to two hours per session (26.5%) during which $30 to $60 will be wagered.

An overwhelming majority (91.5%) of female respondents said they would gamble at online casinos in preference to online poker rooms, whilst 56% of males said they preferred poker rooms.

The most common playing frequency is two to three times a week, but 75.8% play regularly and at least once a week, with women and older players more likely to play more often.

Women players tend to be more mobile, taking their action to a greater variety of online casino sites but overall one-in-four players will take their business to six or more venues on a regular basis.

Male respondents claimed to wager more than females at over $500, with most women wagering below that level.

Bonuses, whilst generating the highest levels of disputes, tend to be the top “pull” for online casino players, with 76.6% of respondents selecting this factor as an important attraction, followed by game selection (62.1%) and reputation (56.8%) Prompt payouts, hitherto always regarded as a top priority was only flagged by 54.4%.

Online casino players (69%) have three top reasons for playing - escape from everyday concerns and relieving boredom; excitement and relaxation.

ONLINE POKER PLAYERS ARE DIFFERENT The profile of the typical online poker player is markedly different, with males more likely to play (73.8%) and over 50% likely to be in the 26-45 age group. Poker players usually play two to three times a week.

Many have between two and three years of experience and will play for up to two hours in a session and on one or more tables at a time and in both cash games and tournaments. Monthly bonuses or rake backs are important to them.

Most poker players bet between 50 cents and $2 a hand and play with between 6% and 10% of their bankroll at any one time. American players are more likely to use the chat facility, but most players do so infrequently, preferring to concentrate on their play. A significant number (31.9%) believe that there is more skill than luck in winning.

Male poker players tend to play for longer and for higher stakes than women and, like casino players, the motivation is principally one of entertainment and excitement with money a means rather than the end.

One of the interesting aspects of player behaviour on poker sites is the tendency of some players to pretend to be of the opposite gender - this subterfuge was admitted by 12% of respondents and was resorted to more by women, citing a desire to avoid sexual harassment and patronising attitudes.

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When males pretend to be women, however, the motive is more cynical and is primarily to secure a tactical playing advantage. However, it appears that players in this category tend to win less and lose more!

Most popular time of the day for online casino and online poker room players alike is in the evening (71.9%) or late at night (53.4%) with home being the overwhelmingly favoured location. Some respondents admitted to sneaking some gambling in at work, but the percentages were small: women players 9.1% and men 7.6%.

DISPUTE RESOLUTION CHANNELS In an industry that handles millions of transactions a day from millions of players all over the planet, it is inevitable that disputes will arise. Just under a thousand of the respondents claimed to have had problems - more often with online casino sites than with poker rooms.

The pattern of disputes was interesting, with bonus issues the main cause for strife and older players more likely to be involved in altercations than their younger counterparts.

Alarmingly, only half felt that their dispute had been fairly resolved.

Where do gamblers go when they have a dispute? It varies, with most going first to eCOGRA which had the highest “satisfaction” rating and was ranked as the best resolution channel by 49.7% of respondents, followed by licensing jurisdictions (47.1%) trade bodies (41.4%) others (39.4%) and watchdogs/portals/affiliates (37.1%) where the Casinomeister site was most frequently mentioned.

When it comes to responsible gambling matters, most online gamblers have great sympathy for players who have trouble controlling their gambling, but there is a firm underlying belief that gamblers should be responsible for their own discipline and conduct.

RESPONSIBLE GAMBLING LIMITS Nevertheless, respondents suggested that information on responsible gambling and where to get help should be displayed on all Internet gambling sites, together with selfexclusionary facilities.

Some players went so far as to suggest limits on how often players can deposit in a particular timeframe; how much can be wagered over a set period and how much time should be spent in a single session.

Despite the very practical problems of integration in a diverse and competitive industry, it was suggested that such limits be applied across the industry to prevent circumvention.

All respondents were strongly against underage gambling, which they urged should be combated vigorously.

Focus group comments were many and varied, generally supporting the results from the quantitative responses outlined in this article, but one universal dislike came through in many of the groups, and it has to do with frustrating delays on payouts.

Players generally voiced the opinion that withdrawals should be processed as quickly as deposits, if necessary with pre-qualifying measures that could eliminate long delays over identification documents and other obstacles to fast payment. Many players have a perception that online casinos in particular make payout procedures as slow and difficult as possible in order to encourage impatient players to reverse their withdrawals and instead play the credits away.

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A REASON TO CARE Close attention to the perceptions and needs of online gamblers has become even more important since U.S. legislators introduced financial restrictions on transactions with online gambling operations in October last year, causing many companies to reverse out of that key market, thus increasing the level of commercial competition in other regions.

Although many American online gamblers remain determined to continue with their pastime of choice, it has been difficult for them and there can be little doubt that the Unlawful Internet Gambling Enforcement Act has had an adverse effect on the levels of business in a region which has traditionally provided more than half of all industry revenues.

More than any other, this is a reason for closer attention and sensitivity to player perspectives and the needs of customers in the Asian and European markets where many companies are now regrouping, heightening competition for operators and developing considerably more choices for players.

Operators who remain in the US market face a similar imperative to look after and retain their American clientele, as it is unlikely that a market that was worth some $6 billion and growing fast will long be left to lie fallow. Power politics and the influence of big money can bring about remarkable changes in relatively short timeframes, especially in the Land of the Free!

But whether the focus is on Europe and Asia, or America or both, the Global Online Gambler Survey results will provide a valuable insight for the industry at large on what makes online gamblers tick now and for the foreseeable future. CGI

ANDREW BEVERIDGE Andrew’s online experience started in 1996 with MultiChoice, an international supplier of pay-television and interactive services. He played a major role in the start-up of MWeb, South Africa’s largest ISP, and then joined the management team of International Gaming Networks, the MultiChoice division created to develop interactive gaming technology across Internet and digital television platforms.

Other responsibilities included the implementation of the SuperBet’s (South Africa’s largest sports betting operation) risk management controls and procedures, and business development for the sports betting operation.

Andrew then assumed responsibility for a company called LiveBet Online (Pty) Ltd, which, together with eCompany Ltd, was then able to develop a successful online and telephone lottery and sports betting platform that has been successfully implemented at various UK, European and South African sports betting operations.

Andrew qualified as a Chartered Accountant after completing articles at Coopers & Lybrand in Johannesburg. He spent six years abroad, working for major international banks in London and Hong Kong, including HSBC and ING Barings, and then completed a full-time MBA at Edinburgh University.

Octubre | October

GAMBLING BEHAVIOURS

‘AT RISK’ INTERVENTION, COUNSELLING,EDUCATION & CORPORATE RESPONSE

BY GEOFFREY GODBOLD AND ANDREW POOLE

The need to continually uprate counselling support as a leading international provider of industry training, consultancy and accreditation services, combined with the more localised challenge of running a charitable organisation in an ever more commercial environment, led GamCare to develop new approaches. On 5th March this year GamCare realised over two years of preparation by launching NetLine. This is an Internet-based equivalent of the national telephone helpline and, as such, operates to provide confidential one-toone counselling advice, support and information. Initially soft-launched on limited opening hours, NetLine is expected to be fully operational by September 2007 in line with the arrival of the new legislation in the UK.

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he last few years have seen significant progress and development for the global gambling industry, although this has not been without its challenges, most notably perhaps for the online sector with the passing of the Unlawful Internet Gaming Enforcement Act (UIGEA) in October last year and, of course, the imminent implementation of the 2005 Gambling Act in the UK. GamCare, too, has faced challenges with the need to continually expand and improve counselling support; to maintain our status as a leading international provider of industry training, consultancy and accreditation services; and that is combined with the more localised challenge of running a charitable organisation in an ever more commercial environment.

We feel strongly that the foundations have been laid for the continued legitimate, responsible and positive expansion of both the industry itself and of the relevant and necessary support services. The moment now approaches, of course, when significant regulatory change in the UK is due, something GamCare welcomes as both timely and mature.

The UK Government has long held the respect of the international community for the proper regulation of gaming and gambling. The 1968 Act continues to be a sound body of regulations, but the Act had to be modernised to reflect the progression of such a dynamic, creative and technologically advanced industry. Furthermore, we cannot fail to be encouraged by the move to require licence holders to formally demonstrate their commitment to safe and fair gaming and gambling.

Goodwill has been extended to GamCare by its stakeholders who believe in the importance of our services and cumulative expertise; so it is only right that, with

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increasing financial support, that GamCare achieves greater transparency and accountability. For too long many in the charitable sector have got by on generosity alone with little more than a few questions asked of real and tangible success.

It is only right, therefore, that this should change and as far as GamCare is concerned, like many other similar organisations, it has undertaken a period of ‘catch-up’.

Charitable practice has had to be replaced by more business-like practice. Our organisational planning and reporting is vital to ensuring the ongoing provision of support, at the right level and at the right time. In 2006 GamCare received the support of the Responsibility in Gambling Trust (RIGT), under the able control of John Greenway MP and Malcolm Bruce, for a new three-year rolling business plan. With the September ’07 arrival of the Gambling Act this simply could not have arrived any later.

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launch a comprehensive client-tracking system, enhancing our ability to monitor the volume and outcomes of counselling delivery;

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achieve a national provision of face-to-face counselling services by September 2007, including the expansion of services at GamCare’s London HQ enabling a greater number of group therapy sessions and women-only groups;

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develop and launch a new Internet-based service, ‘NetLine’ for the provision of online counselling advice, support and information;

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follow the NetLine launch with the availability of a formal online counselling service; and

FINANCIAL CONFIDENCE TO ACHIEVE OBJECTIVES

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work in partnership with RIGT and other relevant bodies to improve public awareness and understanding of responsible gambling

This financial confidence enables us to commit to meeting the objectives we have laid down for ourselves in response to demand for our services. These objectives are to: ■

ensure the continued promotion and development of the GamCare telephone helpline as the, ‘front door’ to UK treatment services;

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Additionally, through the formation of a limited company, GamCare will continue to deliver best practice in industry staff training, consultancy, auditing and accreditation services.

GamCare treatment outcomes and improving cost

GAMBLING BEHAVIOURS

>> Is it fair or even reasonable to suggest that increases in the provision and uptake of our services reflect a growth in problematic gambling? Likely not: until we have the findings from the long-awaited prevalence study we will not know for sure or to what extent gambling problems have, if at all, increased. What we can assert with reasonable confidence is that more people in need know that we exist. And this, almost in its entirety, is the result of the growing number of gambling operators recognising the need for robust corporate responsibility programmes >> efficiencies are perhaps the best measures of our development.

The helpline, the foundations of GamCare’s treatment provision, received over 30,000 calls in 2006 - an increase of 33%. The cost per call reduced, however, from approximately £18 to £14 and we anticipate this will decrease again this year. 2006 saw the delivery of 2,334 counselling sessions and 73% of clients completing counselling services stopped gambling entirely, and the majority of the remainder had reduced their gambling significantly. These fantastic outcomes, whilst reflecting the continued commitment and dedication of the staff team, additionally serve to drive our own expectation higher. We will not rest on best practice; we must and will passionately continue to improve.

However, can it rightly be suggested that increases in the provision and uptake of our services reflect a growth in problematic gambling? Likely not: until we have the findings from the long-awaited prevalence study we will not know for sure or to what extent gambling problems have, if at all, increased. What we can assert with reasonable confidence is that more people in need know that we exist. And this, almost in its entirety, is the result of the growing number of gambling operators recognising the need for robust corporate responsibility programmes.

Whilst many operators have for some time been adopting voluntary codes of best practice - perhaps those drawn up by GamCare for the various sectors - the rest, wishing to continue to offer gambling services in the UK, must now follow suite. The Gambling Commission in implementing the new legislation should be congratulated and encouraged for the progress they have made to date, but they too face their own unique challenges.

Public perception of the legislation has improved; we no longer have the media furiously foretelling the imminent arrival of ‘Las Vegas-on-sea’ with supercasinos on every street corner. This is not and never has been simply a casino Bill. However, we remain sure that more must be done to address the negative image of gambling. The Commission has a role to ensure that gambling remains a form of entertainment and that people participate accordingly. Our concern lies in the belief that those few who do develop a problem will be less inclined to access support services if the stigma attached to doing so continues to be inflated.

Perhaps the solution will lie in the application of the legislation. Regulation must remain practical; operators must understand what is required of them and how they may ensure appropriate compliance. September is, after all, just around the corner. Imminent as this may be, GamCare is

confident that all involved can and will rise to the challenge.

Never before has GamCare experienced or witnessed a desire to co-operate and share responsibility for minimising the potential of harm through gambling. We regularly attend consultation meetings, public interest groups and maintain direct dialogue with operators. Our aims really can be achieved in harmony. Responsible practitioners in the industry should be thoroughly commended and at the same time motivated to continue to drive standards higher.

This industry changes daily, it innovates, it progresses and it is creative. The approach to player protection should be no different. For a moment, if you set aside regulation and licence requirements, it is clear that responsible industry recognises as never before that good corporate responsibility is not about legislative need, it simply makes good marketing sense, at the end of the day, to be responsible.

ONLINE SERVICES, PLAYER EDUCATION AND EARLY INTERVENTION On 5th March this year GamCare realised over two years of preparation and development by launching NetLine. This is an Internet-based equivalent of the national telephone helpline and, as such, operates to provide confidential oneto-one counselling advice, support and information. Initially soft-launched on limited opening hours, NetLine is expected to be fully operational by September 2007 in line with the arrival of the new legislation in the UK. While not the representing the end of development of online services at GamCare, NetLine is borne of significant learning. Our message forum and chatrooms have been available for over 18 months and have been incredibly well received. Perhaps most exciting has been to see that women, considered under-represented in traditional services, account for nearly twice as many of our members in percentage terms as those who call the HelpLine. Many of these are themselves problem gamblers, while frequently female callers to the helpline will be supporting a partner or spouse in difficulty. Later this year GamCare will launch online counselling as a direct referral opportunity for those who do not wish, or are unable to access, ongoing face-toface support.

The NetLine has plugged a very natural gap in our service provision, enhancing the ability for industry to promote GamCare as the entry point to treatment and support services in the UK. Furthermore, we believe that in time the service can operate as a truly cost-effective channel for support. A link to GamCare can be found on more than a hundred gambling sites, including those that account for the Casino & Gaming International ■ 87

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vast majority of the market in the UK and Europe. That said it is clear from early experience that this service is not exclusively being used by those developing a problem with Internet gambling. It really is the case that in this day and age communicating online is a very natural and comfortable, perhaps even preferred way to talk for a growing number of people.

GamCare has regular dialogue with an increasing number of remote gambling operators, not least those who wish to develop their policy around player protection. We have a greater number of companies than ever before undertaking staff training and working towards achieving our accreditation. This can only be described as hugely encouraging. Initially, a few years back, our approach to working with operators was quite prescriptive – this was understandable given that most had little experience or background as to what good policy should include. But we have moved on from there. More often now dialogue is twoway based on experience from both sides of the fence. And it works. With continued good dialogue between operators, regulators and social responsibility organisations best practice can only improve.

The Gambling Commission is moving towards requiring operators to ‘interact’ with players who appear to be in distress, gambling beyond their means or for whom gambling appears no longer to be a source of recreational pleasure. Unsurprisingly, this has caused some anxiety, not least as it is a sensitive communication based very much on the interpretation of a given situation. Remote gambling operators perhaps, whilst facing the challenge of being exactly that - remote - may be ideally placed to deliver messages advising players of sources of advice when/if the fun stops.

Regular communications go out to online players, often by email, essentially talking to the whole customer base.

Such a communication could be used in an attempt to guide the potentially problematic player to consider their behaviour and to review their level of participation. It could also serve as the ideal opportunity to signpost to an external support body like GamCare and the NetLine. The more advanced and proactive operators have already started to discuss with GamCare how they may seek to identify ‘at risk’ players and how they should make contact.

This kind of interaction is rather like closing the gate after the horse has bolted (no sports betting pun intended).

Player education is of paramount importance, especially when a player is new to a product. The online environment affords many clear opportunities to deliver clear messages, to demonstrate openly payout ratios and the chances of winning as well as more direct interventions to those players whose gambling appears to be escalating. The trick - and we are some way off from finding the answer as yet - is to know just at what point an operator should step in.

Perhaps what is most important of all for the online sector is achieving consistency in policy and practice. The level of demonstrable player protection and licence conditions varies widely throughout the many licensing jurisdictions. The player seeking to find a site where minimal age verification checks take place probably wouldn’t have to look too hard. Not to misunderstand the position: things have greatly improved, but despite the ever-decreasing numbers of those acting less responsibly, it is still possible to tarnish the reputation of the sector as a whole.

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I don’t hold the potentially misguided belief that we could ever seek to see Internet gambling and gaming fully regulated on a global level; but we can do a lot to move in that direction. If we can do enough and team it with the right player education, then few will fall foul of the remaining irresponsible operators. I don’t go out of my way to participate in recreation where I don’t feel my welfare is taken seriously. Given sufficient choice, I don’t think many others would either.

A problematic side to gambling participation will remain an inevitable occurrence and it is something we must continue to work together to minimise and then manage. I truly believe this is within our reach and is of shared interest to all parties involved. Gambling as a form of entertainment needs to remain exactly that. Players, current and prospective, should not be enticed to gamble in the hope of improving their life chances, financially or otherwise – the likelihood of being the next lottery jackpot winner of world poker champion is slimmer than slim, yet the belief remains for some.

Engaging a player in gambling responsibly, within his or her means, should be the aim of every operator. In the online gambling world, where players are spoilt for choice as to where they should spend their money, loyalty comes at a premium. Players on the receiving end of a bad experience, or who are not being looked after or not treated well, will inevitably be forced to move on. Protecting that player from potential harm through gambling is just one way, one great way, to work to increase the longevity and health of their custom in a way that is not to their detriment. CGI

GEOFFREY GODBOLD AND ANDREW POOLE Geoffrey Godbold OBE, who joined GamCare as Chief Executive in February 2006, comes from a background in business management.

He ran his own business development and communications consultancy for 25 years working on such accounts as the Motor Show and Yves Saint Laurent Perfumes. He then specialised in the management and development of third sector organisations – Harefield Hospital, The Treloar Trust School and College and numerous other charities introducing business disciplines and structures. He has also held senior appointments in the Reserve Forces for the last 20 years and various sporting organisations, mainly in the equestrian world, as well as several honorary civic appointments. He was awarded the OBE in 1987.

Andrew has over four years experience with GamCare, leading a range of projects including youth education and online communications. For the last two years Andrew has focussed both on the development of GamCare Internet based treatment services and being lead contact for the remote gambling industry, assisting operators wishing to implement social responsibility and player protection policy and practice.

GAMBLING BEHAVIOURS

DETECTING THE SIGNS: BRINGING GAMBLERS BACK FROM THE BRINK

BY KEVIN FARRELL-ROBERTS AND IAN SEMEL

Gambling addiction, in those severely affected, invariably drags at least 15 other people into the net of social turmoil and disruption. Gordon House, the only organisation to provide residential therapeutic treatment on a free basis, is preparing for potential increases in problem gambling with new strategies as events unfold.

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hy a specialist provider of residential treatment for addicted gamblers? The Gordon House Association (GHA) - a British charitable organisation set up in 1976 - provides the only therapeutic residential treatment that is free to both male and female gamblers recovering from addiction. The Association was founded by the Reverend Gordon Moody who also introduced Gamblers Anonymous to the UK. GHA believes that a severe addiction to gambling, while suggesting some parallels with a substance-based form, needs an inherently different approach as far as treatment is concerned. This is not so much due to differences in the various addictions as to the resulting associated behaviours.

Living the life of an addicted gambler means most of the waking day is centred on avoiding creditors. Wheeling and dealing to manipulate others, in order to acquire the cash needed to pursue gambling, is the primary focus. Unlike those dependent on a substance-based addiction, such as drugs or alcohol, there are no limits to which the gambling addict will go to subject themselves or others to their demands. When an alcoholic’s body eventually reaches a limit of alcohol ingestion, there will naturally be physical signs to indicate their state, much of which is commonly recognised: staggering, falling down, slurring their speech and generally smelling of alcohol.

Others will be able to recognise the addict’s problem without the assistance of that addict.

A gambling addict, however, can carry on indefinitely with no outward sign that they are in any way addicted. It is a hidden addiction - others may never know that an addict even has a problem, let alone what the problem is. Therefore, the addiction can continue and develop to an extreme state without being detected.

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GAMBLING BEHAVIOURS

If a drug addict steals money from his or her mother’s purse with which to buy drugs, they know it is a one-way street: the money will have gone and will be missed. If a drug addict takes the day’s takings from their place of work, they know they will never be able to replace it. But addicted gamblers, having stolen money and lost it, will persuade themselves that they need to steal again in order to win back their losses and replace the money they stole. They will convince themselves that it is the only way to avoid being detected. They are even able to excuse, for instance, gambling with the money needed to buy food for their child by claiming, paradoxically, that this is the only way they can put food on the table for that child. It is self-delusion, of course, but it allows an addicted gambler to go much further in abusing the trust of others than substance-based addicts are normally capable of, or willing to do.

An addicted gambler’s life is not based on reality but on avoiding reality. Therefore, those who started gambling heavily at an early age sometimes lack some key social and survival skills; they may never have cooked or cleaned; they may never have had a significant relationship or taken the time to fully mature. Once they no longer have their gambling activities to concentrate on and hide behind, we find that commonly faced for the first time with the actual reality of their situation and the issues they need to address, clients can experience severe anxiety and panic attacks.

Some cannot deal with this reality on their own, seeing the route to recovery as far too daunting, if not impossible.

Being with others who have ‘been there’, but have moved through the stabilisation process, is of particular value at this stage to a new resident who is struggling to come to terms with their situation. However, we frequently find ourselves working with clients ‘rejecting’ treatment, or those working with them, in a misguided attempt to protect themselves from reality by finding an excuse to hide, yet again, within their gambling behaviours.

Gordon House works only with the most severe gambling addicts, so new clients will almost certainly have been severely abusing the trust of others to support their habit. They will have been living in a fantasy world divorcing themselves from many of their day-to-day responsibilities.

Research suggests that every one of them will have severely affected the lives of at least 15 others in order to support their gambling.

It is calculated that around 80 percent of the waking day of a severe gambling addict is spent planning how, when and with what to gamble, or actually gambling. The removal of this activity naturally leaves a great deal of time for reflection and thought. This often gives rise to an acceptance of the reality of what they have done to others in order to support their gambling which, in turn, often results in severe bouts of depression brought on by guilt. The ‘cold turkey’ for an addicted gambler is effectively this boredom and depression.

Therefore, GHA provides an extremely high level of support to clients early in the recovery stage.

Those in residential treatment are provided with ‘minders’ or support workers who help them to budget and avoid those places and situations that led to their gambling in the past. During the time they remain in treatment, they are ‘weaned’ off this high level of assistance with the help of others receiving treatment and in their therapy sessions, they build their own support networks and develop their own personal relapse prevention strategies.

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GHA provides outreach support and Internet counseling services for those awaiting residential treatment, including in cases where residential treatment is not an option, and where others need transitional support as they leave one of our residential centres and move back into the community. It also runs an online support service through its e-helpline Gambling Therapy (www.gamblingtherapy.org) which has been operational since November 2004. The e-helpline offers users various forums, as well as virtual group therapy workrooms.

The outreach support service provides an individual face-to-face service in the home of the client and group support sessions at each of the residential centres for those able to travel. The Internet counseling service is hosted on the Gambling Therapy website, providing confidential, individual face-to-face counseling for those with access to the necessary computer equipment and voice or text service to those without such access or for those requiring total anonymity. There are also ‘support rooms’ where trained counselors can answer questions and membership groups, e.g. ex-residents, where they can seek and give support.

Why then Gordon House? Firstly, there is no other specialist provider of residential treatment to severely addicted gamblers in the UK. Secondly, Gordon House has over 31 years of experience providing specialised support and treatment to acutely addicted gamblers. This has allowed us to develop treatment interventions that are purely gambling focused and address the extremes of associated behaviours.

Our specialisation in gambling addictions enabled us to create therapeutic communities that consist entirely of addicted gamblers, with unique ‘forums’ wherein clients can discuss and learn to deal with the reasons why they compulsively gambled, and the extremes to which they have gone to support their gambling, without it being ‘sensationalised’ or misunderstood. This consists of various stages culminating in the outreach programme mentioned earlier.

TREATMENT Phase 1: Coping with Today Establishing a pattern of gambling-free days while settling into the Gordon House community and learning to occupy time constructively. It is also important that at this time the individual comes to the realisation that, to overcome their gambling addiction, they need to make some fundamental personal changes and deal with the ‘cold turkey’ of giving up their addiction. Namely, the depression caused by the guilt stemming from an understanding that they cannot make restitution for the harm they have caused others.

Phase 2: Coping with Yesterday A phase consisting mainly of individual counseling sessions from a specialist counselor to address those issues identified in the ‘Life Audit’ that it would be difficult or inappropriate to address through the group work sessions.

Phase 3: Coping with Tomorrow This phase of the programme includes a series of relapse prevention and resettlement group work and one-to-one sessions. Employment issues are considered and plans for moving on are made. Moving out of the high support

GAMBLING BEHAVIOURS

environment of Gordon House accommodation leaves clients vulnerable to the stresses, temptations and problems that led them to gamble in the first place.

Phase 4: Weaning clients off that high support and providing support networks for ongoing relapse prevention.

GAMBLING THERAPY As an extension to the outreach service being offered to its ex-residents, Gordon House quickly realised that online help and support for problem gamblers was something that was desperately needed in the field. With this in mind, on 5th November 2005 Gambling Therapy was launched as the first online helproom in the world. Between then and now various tools have been added to its functionality and a website has been used extensively by problem gamblers that gamble on the Internet and via other methods too.

By the end of 2006 the following figures were released that show just how much Gambling Therapy has been accessed: ■ ■ ■ ■

Over 630,000 visits to date Over 16,000 visits during December 2006 Interactive, supervised, secure advice screens used by over 17,000 clients Over 2,200 secure onsite emails received

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Forum - over 34,000 messages and personal stories - 1,685 registered users to date - visited by over 1,000 clients daily

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Group work rooms - 12 rooms - used by over 600 clients a month

It has become obvious to Gordon House that Gambling Therapy has needed to keep up with the ever-changing face of gambling both in this country and worldwide. In years gone by, to develop a problem with gambling, one had to go and look for it! Now, gambling finds you via constant pop-ups on the Internet and a stringent advertising campaign by operators. Gambling is available 24/7 in one form or another and is attracting previously untouched members of society.

To combat this Gambling Therapy is constantly looking at what the industry is offering and then finds a way to offer the help and support to those who need it, whether they be the gambler or anyone affected by problem gambling.

Gambling Therapy offers one-to-one live online advice, various support rooms, an extremely active forum and recently, it began a ‘Multi-Lingual Pilot’ offering help and support in 23 different languages. The languages being deployed mirror what the operators offer on their online gambling sites and also covers the ethnic minorities and most commonly spoken languages in the world.

With the explosion in the number of people gambling online, Gambling Therapy Gordon House quickly realised the need for a more universal approach to help those who seek it. It was ascertained that help was being accessed by people from all over the globe so the ‘Multi Lingual Pilot’ was launched on 12th March 2007 as a response to the diversity of people accessing our site.

With the US online gaming ban, this country is now attempting to be the market leader in online gambling while attempting to set the standards for responsible and problemfree gambling. However, while it may be that there is a minority with problems right now this could actually reach much larger numbers. Gambling Therapy is available to meet the needs that arise from that development. In the same way that new and innovative forms of gambling are offered, so too will Gambling Therapy and Gordon House continue to explore treatment responses that are able to help and support those affected by problem gambling.

Gambling Therapy has also been seen to help overcome the barriers to ‘Women’ accessing help and treatment as the number of women who use it is far above the normal percentage of more traditional forms of help and support currently being utilised by women.

Gordon House continues to research and explore the best means for dealing with the ever-changing face of problem gambling. It has recently seen a sharp increase in its intake of women into the residential treatment arena and the feeling is that the woman-to-woman approach is extremely important in this respect. Gordon House has a number of exresidents employed within its residential and online services and this would appear to bear testimony to the programmes and services that it offers. CGI

KEVIN FARRELL-ROBERTS AND IAN SEMEL Kevin Farrell-Roberts - a qualified and registered social worker - has worked in addiction treatment for over 37 years, starting his career as a substance abuse social worker in London. He went on to manage residential centres for the probation service. He left the probation service 12 years ago to take over the Gordon House Association. During this time he has been responsible for several new treatment initiatives including the cognitive behavioural treatment programme, used in all the Gordon House residential projects, and Gambling Therapy, the international Internet problem gambling helpline. Recently he also joined the Board of G4 to help promote internationally recognised accreditation to ensure gambling companies act in a socially responsible way.

Ian Semel has over 30 years experience in the gambling field. BACP accreditted Counsellor and Psychotherapist, he was at the forefront of helping introduce online counselling and the various therapeutic tools deployed by Gambling Therapy. Outreach director of the Gordon House Association; Media representative of Gordon House association.

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FORTHCOMING ISSUES

FORTHCOMING ISSUES 2007 ISSUE 3 - JULY European Casino Perspectives will examine, amid the complex legislative environment and pressure for expansion, how the rich history and evolution of these establishments have contributed to the gambling scene; Mobile Market Dynamics, expected to rapidly advance over the next two years, dissects the innovative, electronic, marketing, economic and social shaping expected from an infectiously in-demand range of devices; and Regional Financial Analysis, assesses the specific ramifications of the industry for hot-spot gaming and gambling business development according to market

2007 ISSUE 4 - OCTOBER Economic & Social Responsibility identifies key impact models, examining policy, development and implementation issues; comparative positions exploring gaming expansion priorities; cross-sector interconnections and corporate responses; while highlighting the role of companies, associations and regulation in developing viable and sustainable employment and community input, problem gaming solutions and player protection. Human Interaction and Remote Technologies tackles, in the context of the wider societytechnology debate, effects and prospects of gaming innovation and its evolution, analysing the specific relationship with established systems, ideas and products.

2008 ISSUE 1 - JANUARY Education, Management & Training: Past, Present & Future asseses the historical development of the land-based casino industry HR practices and the emergence of high level qualifying requirements to meet modern demands. The interplay of technology, operational techniques, human interaction and standard setting; contrasts and similarities between online/offline; the impact of regional variations and international co-operation in global gaming development. Product Design Leadership looks at the characteristics that have determined some of the most successful and enduring products across the range of gaming interests.

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MOVE IN ACTION MOVE INTO THE NEW GAMES 2007