Inside Asian Gaming

INSIDE ASIAN GAMING | November 2008 38 additional model for future developments.Alongwith Caesars Palace, it brought about a significant shift in the composition and profile of Las Vegas visitors that has continued over the past four decades. While Caesars and Circus were still principally“casinos,”they were no longer just centred on gambling but also offered much more in the way of non-gaming amenities to their guests. Today’s concept of Integrated Resort has come a long way since those first resort developments. The Mirage in Las Vegas—which Steve Wynn opened in 1989—had capital costs of around US$630 million. Many Wall Street analysts and other industry observers felt that this was far too ambitious a project to succeed and would never provide a reasonable return on investment. Of course, Steve Wynn proved his critics wrong, as The Mirage demonstrated the attractiveness and revenue generating capabilities of non-gaming amenities to diverse audiences who are interested in more than “just gambling.” Integrated Resort developments at the present time might cost US$4 billion or more, and include facilities and amenities that create virtual “cities of entertainment.” These new style resorts also change the landscape around them by spurring complementary developments and even enhancing the interest amongst some to have residences in close proximity to them. Thus they can become substantial hubs of economic activity and catalysts for further development. Defining “Integrated Resorts” The scale and mix of amenities and assets as well as their ability to act as catalysts that can transform a region’s economy are what makes such developments distinct from traditional casinos and casino-hotel complexes.How should one define an Integrated Resort, and what outcomes can typically be expected when such a facility is developed in a region? An Integrated Resort is really a euphemism for a very large scale entertainment development based around a casino. The casino component, while physically small, must still act as the primary economic engine which drives overall returns and facilitates investment in other facilities and amenities.Thus the casino element must be of such magnitude and importance that it can generate over half of the development’s annual cash flow. With capital costs associated with Integrated Resorts at, say, US$4 billion, such a facility would need to generate at least US$500 million in EBITDA (Earnings Before Interest,Taxation,Depreciation and Amortisation) to be viable. Evenwith the casinooccupying less than tenpercent of thegross floor area,it has the capability to generate a disproportionate contribution toEBITDAso that substantial investments canbemade innon-gaming facilities that might not be otherwise sustainable.With the casino as the nucleus, the structure of the rest of the Integrated Resort may be developed. This could include a sizeable hotel development (15 of the 20 largest hotels in the world are affiliated with “mega-casino” projects located within a two mile radius along the Las Vegas Strip) of at least 1,500 rooms and would also likely include significant space for conferences and conventions. As with any development planned for somany visitors,an array of foodandbeverageoutletsandfacilitiesareneededascomplementary amenities.The range and breadth of restaurant and lounge offerings create an even greater magnet effect that can enhance the overall appeal of a venue and allows for even more facilities to be added. Other non-gaming assets that might be considered include cinemas, showrooms, nightclubs, golf courses, spas, wild animal exhibition areas, art galleries, amusement parks, and retail shopping malls. A new trend, yet fully tested, is the integration of mixed-use tourist accommodation units into Integrated Resort complexes, on the belief that a certain proportion of the population will want to live or have second residences in close proximity to such attractions. Thus, many new Integrated Resorts are incorporating apartments, condominiums, time-share units and other residential hybrids to the mixed-use master planning of such developments. However, to create a modern Integrated Resort, it must be developed proportionate to the demand that can be generated in the market where it is located. It is important to note that most gambling markets are local; they rely on the demand created from within a catchment of about one hundred kilometres drive time. There are, of course, some exceptions to this guideline, such as Las Vegas and Macau, but for the great majority of gambling markets in the world, their primary clientele are local or regional residents. Planning an Integrated Resort In planning an Integrated Resort,there is little point in just putting a pin into a map and drawing concentric circles to determine the number of individuals who live within three, four or five hours flying With the opening of The Mirage in Las Vegas, in 1989, Steve Wynn gave birth to the modern day Integrated Resort In Focus