Inside Asian Gaming

May 2013 | INSIDE ASIAN GAMING 39 The Tinian Dynasty Hotel & Casino has failed to make a profit since it was opened in 1998, recently fell behind in paying its employees, has not been able to pay all its local taxes and was raided by the IRS in April this year for possible reporting violations. Others have posed similar questions during public hearings in the past (the current bill is the third regarding casinos in recent years). Historically, the public has failed to support the introduction of gaming. A casino law was passed in 1979 but defeated by referendum. The 2007 Saipan Casino Act was also voted down by the people, while a petition last year to have the issue of legalized gambling placed on the ballot failed to get enough signatures. Many people point to the casino on Tinian, a CNMI island near Saipan, when making the case against gaming on the main island. The Tinian Dynasty Hotel & Casino has failed to make a profit since it was opened in 1998, recently fell behind in paying its employees, has not been able to pay all its local taxes and was raided by the IRS in April this year for possible reporting violations. Two arrest warrants were issued. While there are many extenuating circumstances that help explain why that operation has failed to gain traction, such as limited and expensive transportation to the island, it is seen by some as a test case for gaming on Saipan. Meanwhile, a casino on Rota, another island in the group, closed last year. Mr Lee says that gaming is still possible on Saipan. He believes it just needs to be priced correctly and targeted at the right market. Casinos catering to people who have had their time on the beach and want something else to do, or to those waiting for their flights home, might work and could generate some revenue for the government. Most of all, the upfront costs need to be reasonable. Other jurisdictions, such as Cambodia, have realized that this is the way to earn the most over the long term. If the operators are attracted, money can be made through salaries and taxes paid. If the cover charge is too high, operators may simply choose not to come at all. from the peak to the trough was probably as much as one-third. The government’s fiscal position has deteriorated along with the overall contraction. Its budget peaked at US$237 million and fell to $102 million in 2012. The biggest problem, and the one most relevant to gaming, is the fact that the Northern Mariana Retirement Fund is near insolvent—it is expected to run out of money in 2014—and desperately needs a series of hefty cash infusions. While tourism has started to recover, revenues are not going to grow fast enough to make up for the shortfall. Gaming is seen as one way to bridge the gap. But the plan as currently envisioned may not be successful. While many believe that gaming would bolt on nicely to the CNMI economy, the way the industry is set to be structured may not make business sense. Under a recent bill sent to the CNMI House of Representatives, operators will be required to pay a sizable upfront fee. A 40-year monopoly would cost US$80 million, the first $40 million payable in year 1 and the rest after 20 years. Three licenses would go for $30 million apiece and be sold under similar payment terms. A full 80% of the government proceeds from gaming would go straight to the pension fund. But operators might not be interested. The island is probably asking for too much up front to make it worth anyone’s while. “There has always been good potential for gaming in Saipan,” says Ben Lee, managing partner, gaming developments and marketing, IGamiX Management & Consulting Ltd. “The problem is the pension issue plays a big role.” The idea of casinos on Saipan is also generating a measure of skepticism and resistance from stakeholders and the public. Travel agencies in Japan have said that casinos probably wouldn’t draw tourists and could even deter some from visiting the commonwealth. Many people go to the island because of its unspoiled beauty and gaming could negatively affect the image of the place. Anthony Pellegrino, a leading businessman on the island, has asked on the pages of the Saipan Tribune whether gaming is right for the CNMI and whether it will deliver strong and sustainable growth for the commonwealth. Gaming floor at the Tinian Dynasty Hotel & Casino In FOCUS