Inside Asian Gaming

In Focus or driving time of a location. Dropping such a pin almost anywhere in Asia can result in hundreds of millions or even billions of people being located within the area. Market and feasibility studies are essential in creating the appropriate sizing of any IR development under consideration. Such studies should focus on those segments of the population who have the means and interest to participate in the kinds of resort activities being contemplated.As the primary economic engine, it is important that adequate attention is given to the casino segment and the returns likely to be generated from this portion of the operation. Gravity models that take into account the local population may be essential to determine base-line revenue generation potential and income contributions from the casino.This Gravity models also take into account the impact of increasing distance from a location on the number of trips made per capita and also the size of the trip budget. It has been found that as distance increases, the number of annual per capita visits decreases so that when distance above a threshold level is doubled—visitation rates drop by roughly three-quarters, when the distance is quadrupled— visitation rates drop by fifteen-sixteenths, etc. At the same time the gaming budgets of individuals who travel long distances to an IR increase dramatically—as such trips are considered more as special purpose gaming trips, so individual visitors budget accordingly. Defining these models carefully will provide an indication of how many visits a particular location might generate and what level of income the economic engine provided by the casino is capable of producing. If this simple base-line modelling does not result in predictions of a gaming market above US$300 million per annum, then it is unlikely that a true stand-alone Integrated Resort could be developed.On the other hand,once that base-linemodel has satisfied these threshold criteria, then it should be possible to add further business and income streams generated from premium customers and high-rollers. Once the base-line size of the casino engine has been established, it is then possible to design the remainder of the Integrated Resort. That too depends on the appropriate market and feasibility studies being conducted. However, these become far less important to the overall project, as sensitivities will be driven largely by the success or failure of the casino component.That said, one area where this statement may not be true is the development of convention and conference facilities. Such concepts should not be considered in isolation of what already exists in the market and how the location of the IR is perceived by potential convention and conference customers. Conventions of substantial scale require accessibility and ease of movement afforded by such locations as Las Vegas or Orlando. Flight access and location of the airport relative to the convention facilities and hotels are high in importance in determining relative attractiveness, as is the overall appeal of the destination. Convention and conference organisers are usually driven by the potential for a venue to maximize attendance for their events. Consistent with this objective is a desire for environments that can accommodate conference needs in terms of size and mix of amenities, as well as offering a vibrant night life for after-hours networking to take place. Furthermore the stock of hotels at or near the location becomes of critical importance. No single hotel can accommodate all the delegates of many major conferences and conventions held today and thus, while an Integrated Resort itself may be sizeable, it will be important to consider the number and style of hotels within the vicinity of the IR that can cater to business travellers. Overall, this iterative and holistic approach should produce an Integrated Resort model which fits within its location, community and region.While it is important to think of the local catchment area as a critical component of this exercise, contributions to revenues and operating income can also come from more distant visitors, and visitors who are interested in other IR attributes besides the casino. Based on the experience of Las Vegas, when dealing with a true IntegratedResort,it ispossible that onlyabout half of the total revenue generated will come from casino operations. The remainder will be driven largely by people staying in the hotels, attending conferences, conventions, events, or theme park activities. Depending on the general attractiveness of the venue and its supporting infrastructure, much of the non-gaming spend at the IR will be derived from people outside of the local catchment area and will support the direct new investment being made into the project. To illustrate this point, one can note that the major IR mega- casino resort properties on the Las Vegas Strip now derive around sixty percent of their revenues from non-gaming amenities. The Atlantis on Paradise Island in the Bahamas generates over seventy percent of its revenues from non-gaming facilities. At Sun City in South Africa, seventy percent of total revenues also come from non- gaming sources. In other markets, non-gaming contributions as a percentage of total revenues tend to be less significant. However, the ratio is sometimes skewed by casino revenues that are driven by relatively few international high-end customers who are attracted to the Integrated Resort as a consequence of the grandeur and scale, or because of aggressive marketing strategies in combination with high quality facilities. Initially the Singaporean authorities—as part of their bid process for the two IRs in Singapore—stipulated that no more than fifty percent of gross revenues could be derived from gaming. This requirement was later dropped in light of the recognition that The Grand Wailea, in Maui, serves as an example of the difficulties an Integrated Resort without successful casino operations must cope with November 2008 | INSIDE ASIAN GAMING 39