Alexandra Hoskins & Julian Hoskins
Casinos are no different to any other business and have continued to evolve over time, adapting to new business and economic conditions, customer preferences and unexpected challenges. If anything, the current global pandemic will accelerate some of the changes that had already started occurring pre-Covid-19, as well as bring about other changes that were not on the cards, pardon the pun.
The evolution of casinos over time
The literal meaning of the word casino is “small house”, which describes the earliest casinos quite perfectly. The oldest casino in the world, the Casino di Venezia, sits on the Grand Canal in Venice. Opened in 1638, it was originally a theatre called the Theatre Saint Moses, which had a wing for gambling during the intermissions of performances. Since this time casinos around the world have continued to reinvent themselves and have gone through many transformations and are no longer the small house they once were.
The Las Vegas Strip emerged in 1941 with the opening of the El Rancho Vegas resort and many other hotel-casinos that followed, offering simple gambling halls with little or no amenities. The 1950’s and 60’s were periods of immense industry and population growth. By the 1980’s Las Vegas went through a “family” focused era with Steve Wynn building the Mirage, the world’s first mega-resort and casino. The Excalibur followed in the early 1990’s resembling a fairy-tale chateau brilliantly out of all proportion to its surroundings.
However, during this family focused era in Vegas, casino operators realised that families who travel with their children actually don’t spend as much as when they travel without their children. From 1990 to 2000 Las Vegas evolved again bringing extravagant luxury and became electrified with the development of the MGM Grand, Bellagio and Mandalay Bay complexes, all offering far more extensive entertainment options than had ever been seen before.
By contrast, in Macau Sociedade de Turismo e Diversões de Macau, SA (STDM) was the only company licensed to operate casinos, having a monopoly for around four decades. From 2002, casino licences were awarded to several foreign multinational firms and joint ventures, with recognisable names from the US, Hong Kong and Australia. Locations such as Macau and Las Vegas evolved, giving rise to the Integrated Resort model and becoming destination locations, where there have been substantial investments in non-gaming and often non-revenue-producing amenities. This is the future of successful casino models but at the same time they have been severely challenged as a result of Covid-19 lock downs, which in many instances have completely decimated their revenue.
The rise of the Integrated Resort model
Excellent examples of Integrated Resorts, which are venues with a wide variety of offerings, can undoubtedly be found in Las Vegas, Macau and Singapore, amongst others. In Macau, Wynn offers extensive high end shopping with designer labels and in Singapore, Marina Bay Sands, the second most expensive integrated resort to have been built, the SkyPark on the 57th floor boasts a 500-foot infinity pool.
In relation to casinos that were established in the 20th century, especially in Las Vegas, the majority of revenues were generated from the casino and any associated convention centre. However, as the resorts and consumer preferences have evolved over time and become more integrated with other offerings, there is now a more balanced contribution of revenue between non-gaming and gaming, with some resorts having a larger contribution of non-gaming revenue than casino revenue.
What changes can we expect to see as casinos begin to reopen around the world?
With the Covid-19 pandemic, casino operators have been forced to rethink their operating models and strategies that they will need to implement in order to re-build consumer confidence and help patrons feel safe to enter through their doors.
Casinos have started to slowly open up in different jurisdictions including Las Vegas and Macau but remain closed in other jurisdictions such as Victoria in Australia, with this jurisdiction still grappling with a second Covid-19 wave. In Nevada, gaming authorities recently released a set of social distancing rules before Las Vegas Strip properties reopened, setting out new operating requirements.
What types of changes can we expect to see in Australia and elsewhere? Firstly, casino operators will be developing their own comprehensive health and safety plans and utilising the subject matter expertise of health professionals. Patrons will be encouraged to wear masks and subject to temperature checks before entry. Inside, all staff are likely to be wearing masks as well. At the tables, the classic casino scene of a crowd cheering on players on a winning streak will be a thing of the past for at least the immediate future. The number of player seats will be reduced and space between players will be increased. Dealers and players are likely to be separated by Perspex screens. Partitions will also separate blackjack, poker and other tables. Dice will be doused in sanitiser after every throw. Tables will have placards saying: "This table has been sanitised."
At the slot machines, you can expect that every second machine will be disabled therefore operators may seek (or lobby for) legislative approvals or amendments for "bring your own device" for casino gaming, geo-fenced within the casino boundary. Hand-washing stations will be wedged next to slot machines on the casino floor and masks and gloves will be available to patrons for free. Properties will be regularly disinfecting gaming machines, chairs and other equipment and there will be plenty of social distancing related signage. Hotels and casinos will restrict the total number of players and occupants at any one time, likely to be around 30-35% of total capacity. And say goodbye to buffet dining for the foreseeable future.
In Australia, in line with recent amendments by The New South Wales government to the Public Health Order, new capacity restrictions for The Star Sydney are now in effect. Due to these restrictions, gaming areas are now restricted to members and guests of The Star Club only. All patrons are required to provide contact details upon entry and access is at management’s discretion based on capacity.
For the time being, this virus will change things for a while and the industry will need to adjust to the new normal. Unfortunately, the result of this is a continued under-utilisation of capital and personnel, with adverse impacts to return on investment and economic contributions in the form of government taxes and the like.
The future is diversified and more digital offerings
Shifts in the way that people choose to gamble are not new and the casino sector has proven its ability to be resilient and reinvent itself, adapting to economic conditions and changing consumer preferences. The result of Covid-19 in many countries has been a dramatic surge in online gaming and gambling as a result of the physical shut down of casinos and wagering venues. It is yet unclear how many customers will have permanently changed their gambling habits and converted to digital platforms. The focus in the immediate term will be casinos making customers feel confident that they can come back onto the casino floor and be safe and protected from Covid-19.
Operators will need to continue to adapt their operating models accordingly to the generational shifts and future proof their strategies, which will be needed in the event of another major pandemic. Operators should focus on repositioning by:
Government and regulators will be placed under increased pressure as licensees adjust their models, potentially seeking regulatory concessions and approvals. Operators will need to continue to work closely with legal and other strategic advisers to help navigate the complex web of casino regulation.
Alexandra Hoskins leads the Advisory practice and Compliance Academy at Senet. Alexandra has extensive experience in strategy and business development working with government, top tier advisory firms and clients in the gambling industry. Alexandra can be reached at +61 423726904 or at firstname.lastname@example.org
Julian Hoskins is Principal at Senet and is ranked in Chambers & Partners Global and Asia Pacific as a leading expert in gambling and gaming law and regulation. Julian has worked at executive level at Australia’s largest gambling services company as well as at various top tier law firms prior to establishing Senet. Julian can be reached at +61 448467824 or at email@example.com