global-gaming-outlook-2011-2015.pdf

8/20/2019 global-gaming-outlook-2011-2015.pdf

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Use of data within this report

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Global Gaming Outlook 1

Contents Introduction: about this study 2

Executive summary: key trends 4

Part I: Casino gaming 6

Global overview 7

United States 8

EMEA 12

Asia Pacic 16

Latin America 20

Canada 22

Part II: Online gaming 24

The elephant in the room 25

Regulating within borders: an interim step 27

Emerging change drivers 34

The global market in 2015—region by region 36

Conclusion 38


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Welcome to PwC’s second annual point-

of-view study focused on current and future trends and revenue growth in the global casino gaming industry and theonline gaming sector over the next ve

years. In publishing this report, we arereecting the increasingly globalizednature of the casino gaming market,while also acknowledging the continuinglocal nature of gaming habits andregulation.

How this point-of-view paper is structured

The industry analysis in this paper is divided into two sections.

The rst part—which makes up the majority of the report—covers traditionalphysical casino gaming. This consists of betting activities conducted within “bricks-and-mortar” casinos, including land-based casinos, riverboats, dockside casinos,

tribal casinos, racinos (slots at racetracks), and cruise ships. Spending totalsrepresent gross gaming revenue, which is the house win, or the amount wageredminus the amount returned to players as winnings. Forecasts for gross gamingrevenue take into account the key performance indicators and drivers for eachregion and marketplace.

The second part covers online gaming activities in each region and the evolution ofthe respective markets. We close the section by describing our vision for each regionin 2015.

Introduction About this study

Caesar’s Palace, Las Vegas, US


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accommodation and other leisurechoices—are built in existing and newgaming centers around the world,

the investment required from thecompanies behind these developmentsis often massive.

While each new casino developmentmay generate new incrementalrevenues, there is inevitably a riskof cannibalization of revenues fromexisting casinos in the same city,country, or region. As a result, inthis most dynamic of industries,there is always a danger that theadditional revenues generated by new

developments or marketplaces may notbe big enough to justify the investmentinvolved.

Wider implications

Clearly, gaming has wider social andeconomic implications. As Singaporehas demonstrated during the past two

years, the prole and tourism revenuesgenerated by casino gaming can bringmajor benets to cities and entireregions. This is why governments

are so keen to encourage and attractthem. The potential for tax revenuesis a further attraction—and thisconsideration represents one of themain drivers behind the growing

willingness of national and stategovernments worldwide to legalizeand license online gaming operators.

Yet the fact remains that in many

countries there are moral and

legal concerns over casino gaming

in general, and online gaming in

particular. These can often be blended with protectionist instincts and

lobbying on the part of the established

operators in a particular marketplace,

combined with concerns over the

difculty of regulating operators

based offshore. Tax structures are

a further contentious issue in many

jurisdictions. All these pros and cons

mean governments face many tough

choices when deciding whether to

Taking the industry’s pulse

Following the success of last year’srst edition of this research report on

the global casino gaming and onlinegaming industries, we have decidedto make it an annual contribution. Asa result, our second edition, brandedthe Global Gaming Outlook, carrieson the tradition of adding to industrythinking, insight, and planning.

When we launched this publicationin 2010, we did so with two mainobjectives in mind. The rst wasto present our perspectives on theopportunities, challenges, and trendsfacing participants in the casinogaming market worldwide, and toanalyze how these factors will play outover the coming years. The second wasto underpin this industry analysis withrevenue forecasts for each segmentand region of the global gamingmarket through the coming ve

years, providing the reader with hardstatistical data against which to planresponses to the trends highlighted inthis report.

As the information panel on theopposite page explains, our analysisand statistical data on the global andregional casino gaming markets arecontained in Section I of this report. InSection II, we give our views on trendsand future developments in the onlineand mobile gaming markets. However,owing to the legal and regulatoryuncertainties that surround theseactivities in many countries across the

world, this analysis does not includehistorical or projected data for onlinegaming revenues.

Returns on investment

As in last year’s study, our nancialforecasts in this publication focussolely on revenue. However, weacknowledge the profound costimplications of various industrydevelopments. As new casinogaming facilities—often including

regulate and/or encourage growthin gaming, and again, online gamingin particular, within and across their

borders.

An ever-richer mix

To a large extent, casino gaming willalways reect a local or regionalatmosphere. Casinos in Macau, Las

Vegas, Singapore or London’s Mayfairall have their own unique and widelydiffering environments and “feel”that represent a key element of theirappeal. The proposed major resortdevelopment in markets such as Spainand Japan could add still further tothis rich global mix. As online gaminggains momentum, it will be interestingto see how much of a competitiveimpact it has on traditional casinos.Possibly, people who start playingonline may want to start playing in aphysical environment, especially withpoker—a trend witnessed by somecasinos in the UK.

Our aim in this publication is to helpall stakeholders in the casino gaming

industry map out their future plans, wherever in the world they may bebased or operating. Whether you arean operator intending to enter a newgaming jurisdiction and wanting tounderstand its revenue potential; aregulator in a newly formed gaming

jurisdiction needing to evaluate thesuitability of potential licensees; amanufacturer or supplier searchingfor perspectives on short- and-longterm growth opportunities; or anonline social network assessing thefuture opportunities in online gaming,

we hope that you nd our GlobalGaming Outlook both informative and

valuable.

Marcel Fenez

Global Leader,Entertainment & Media

Part I: Casino gaming


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Through its long history, casino gaming has always been a unique source of entertainment forits customers, and a focus for government regulation spotlight. As a highly discretionary elementof consumer spending, it is also

exposed to changes in economiccondence and conditions.

Today, all these long-standingattributes are reected in a range

of challenges and opportunities facing both the industry’sestablished players and alsothose contemplating entering themarket.

The most evident of these challenges—at least in markets other than AsiaPacic—is the continuing globaleconomic uncertainty, and theresulting subdued state of consumerspending. While the 9.6 percent surgein total global spending on casinogaming in 2010 appears at rst sight

to be a very buoyant performancecompared to most major industries,this global rise masks a slump of 7.2percent in 2010 in EMEA (Europe,Middle East, Africa), and of 2.9percent in Canada. Revenues in theUS—currently the world’s largestcasino market, but set to be overtakenby Asia Pacic in 2013—were virtuallyat in 2010, rising by just 0.2 percent,the rst increase since 2007.

Asia Pacic: the growth engine

In stark contrast, Asia Pacic—whichpaused for breath in 2009, risingby only 7.1 percent – leapt forwarddramatically in 2010. Spending inthat one year alone rose by a stunning49.7 percent, driven by new capacityin Macau and Singapore, and thelatter’s emergence as a major newresort destination. The fact that we areprojecting a further rise of 37.2 percentin Asian revenues in 2011 underlinesthe momentum behind the region’s

growth. The much smaller Latin American market has also stayed inpositive territory in terms of growth in2010, expanding by 5.5 percent, withfaster growth expected beginning in2011 as new casinos enter that market.

Inevitably, the growth surge in AsiaPacic will ultimately level off, asthe region’s market matures andcapacity moves closer to demand.The big question is how many furtherterritories will seek to create or expandtheir presence in the Asia Pacic casinogaming marketplace, with countries

such as Japan, South Korea, Thailand,and Vietnam eyeing the potentialboost to tax and tourist dollarsdemonstrated by Singapore’s success.On balance, our forecast is that thegrowth in Asian casino revenues willstart to slow down from 2011-2012,and by 2015 will have dropped to 7.9percent—still higher than growth inthe US and EMEA. However, by 2015the Asia Pacic current growth surge

will have fundamentally reshaped the

landscape of the global industry, with Asia Pacic then accounting for 43.4percent of total global revenues, aheadof the US at just over 40.1 percent (seeinformation panel).

Economic and regulatorychallenges—but rising capacity

The rise of Asia Pacic will beemphasized by the continuingchallenges elsewhere, as economictrends in other regions continue to bethe main underlying driver of casino

revenues, through their impact ondisposable income and job growth.These factors will continue to have anadverse effect in the near term, but

will provide a lift to the market duringthe latter part of the forecast period.

As such considerations play themselvesout, Asia Pacic’s higher growthoutlook and scope to absorb risingcapacity reects three main factors.The rst is the role of economicgrowth in driving disposable incomesand the emergence of a prosperousmiddle-class. The second is the deepattachment to casino gaming andother forms of gambling in manysocieties in the region—an attachment

Executive summary Key trends


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that consumers increasingly have theresources to indulge.

The third factor is the growingopportunity to take part in casinogaming, as new centers are establishedand as new facilities are opened upin existing markets. Most obviously,the prime examples of new territoriesentering the market includeSingapore’s dramatic emergence asa casino gaming center, surging fromzero in 2009 to revenues totaling morethan $4 billion in 2011 and more than$7 billion in 2015.

In assessing the outlook for growthacross the world, it is important totake into account the likelihood thatlogistical and regulatory changesmay continue to have a major impact.

Recent examples of this include thenew railway that connects Macau withGuangzhou, which has signicantlyreduced travel time from mainlandChina. This has boosted trafc fromthe People’s Republic of China(PRC)—and the expected completionof the Hong Kong-Zhuhai-Macau roadbridge in 2015–2016 will provide afurther uplift. Less positive externaleffects can be seen in the restrictionson US visitors that have hurt Canadiancasinos near the US border, the near-prohibitive taxation of online gamingstakes in some European countries,and events such as Russia’s mass-closure of casinos that devastated thelegitimate market in that country.

More generally, the global trend in thecurrent post-downturn environmentis toward more investment in capacityby some operators in particularmarkets and segments, while othersare retrenching under the impact ofcompetition and/or sluggish demand.

As new casinos are introduced, the

competitive landscape will continue tochange, and portions of the market willbe siphoned off from existing casinos.

In the US, for example, growth inregional casinos continues to cutinto the Atlantic City market. In AsiaPacic, the suggested introductionof casinos in Japan—which remainsfar from certain—would affect themarkets in South Korea and Macau.The launch of resort casinos inSingapore has adversely affected the

casino market in Australia. Similarly,growth in the casino market in Macauand Singapore may help to dampengrowth in Nevada. The launch—if ithappens—of a proposed integratedresort in Spain, or a “supercasino” inIreland, could change the Europeanlandscape.

Complex issues going forward

To address the market challenges while sustaining and growing their

day-to-day operations, gamingowners and operators must interact with many organizations in both thepublic and private sectors—rangingfrom investment banks, analysts and

commercial lending institutions,to governing bodies and licensingagencies that regulate and monitortheir operations. Complex issues alsoconfront gaming regulators: how tomonitor and safeguard enterprisesthat provide gaming tax revenues,

while also preserving the integrity

of the gaming environment and thereputation of all parties involved.

In the emerging area of online gamingservices, the regulatory complexitiesand sensitivities are even greater.The past year has seen only sporadicprogress toward wider legislation andregulation of online gaming, with littleheadway having been made in 2010or to date in 2011 in markets such asthe US. However, our view remainsthat the currently dominant approach

of in-country or in-state regulationand licensing of online gaming willbe steadily eroded during the nextve years, under the impact of risingdemand for cross-border gamingand liquidity for disciplines such aspoker. In Europe, where the EuropeanCommission is driving progress bytaking legal action against nationalonline gaming monopolies, we arelikely to see continued local countryregulation, but with progress over time

toward countries working together onlicensing and pooling liquidity acrossborders, especially for poker.

Asia Pacic’s ve-year compoundannual growth rate (CAGR) of 18.3percent between 2011 and 2015 willcreate a globally dominant Asianregional marketplace. As the chartsbelow show, Asia Pacic’s share ofthe global market will surge from29.2 percent in 2010 to 43.4 percentin 2015, representing a geographicshift in revenue origination. Thistrend reects the fact that demandin Asian countries currently faroutstrips supply—and that, for thenext few years at least, operatorsand countries that offer furtherhigh-quality capacity in the regioncan be fairly certain that they willsoon see it absorbed. Asia Pacic’s

rise conrms that this fact patterncontinues.

A new global landscape – dominated by Asia

US

48.9%EMEA

13.9%

Latin America

3.2%

Asia Pacific

29.2%

Canada

4.9%

US

40.1%EMEA

10%

Latin America

3.1%

Asia Pacific

43.4%

Canada

3.4%

2010 2015


Breakdown of global gaming market revenues, 2010 versus 2015


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Part I:

Casino gaming


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According to our projections, globalcasino gaming revenue across theUS, EMEA (Europe, Middle East, and

Africa), Asia Pacic, Latin America,and Canada will grow at a 9.2 percentcompound annual rate during the nextve years, rising from $117.6 billion in2010 to $182.8 billion in 2015.

During this period, spending in the US will rise by 5.0 percent compoundedannually, from $57.5 billion in 2010to $73.3 billion in 2015. This growthin the US will be strongly outpaced by

Asia Pacic, which will be the fastest-growing region by a wide margin, with a projected 18.3 percent increasecompounded annually to $79.3 billion

in 2015 from $34.3 billion in 2010.This growth will see Asia Pacicovertake the US in 2013 as the world’slargest regional casino gaming market.

In EMEA, revenues will reach $18.3billion in 2015 from $16.3 billion in2010, an average annual increase of2.4 percent compounded annually.

In the much smaller Latin Americanmarket, annual revenue growth willaverage 8.1 percent compoundedannually from $3.8 billion in 2010,rising to $5.6 billion in 2015. Canada

will advance from $5.7 billion in 2010to $6.2 billion in 2015, a 1.8 percentcompound annual rate.

Asia Pacic’s higher growth ratethroughout the period will see its shareof the total global market increasefrom 29.2 percent in 2010 to 43.4

percent in 2015.

Global casino gaming market by region (US$ millions)

Region 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152010–15

CAGR

United States 57,470 60,440 59,433 57,368 57,488 59,500 62,315 65,497 69,110 73,320

% Change 8.4 5.2 –1.7 –3.5 0.2 3.5 4.7 5.1 5.5 6.1 5.0

EMEA 20,783 20,894 19,959 17,567 16,307 16,175 16,250 16,751 17,350 18,343

% Change 2.8 0.5 –4.5 –12.0 –7.2 –0.8 0.5 3.1 3.6 5.7 2.4

Asia Pacific 13,687 17,714 21,379 22,898 34,280 47,042 58,124 66,961 73,429 79,266

% Change 16.3 29.4 20.7 7.1 49.7 37.2 23.6 15.2 9.7 7.9 18.3

Latin America 2,584 2,959 3,269 3,601 3,800 4,096 4,370 4,757 5,165 5,614

% Change 25.6 14.5 10.5 10.2 5.5 7.8 6.7 8.9 8.6 8.7 8.1

Canada 5,354 5,685 5,694 5,874 5,704 5,597 5,621 5,743 5,986 6,230

% Change 10.7 6.2 0.2 3.2 –2.9 –1.9 0.4 2.2 4.2 4.1 1.8

Total 99,878 107,692 109,734 107,308 117,579 132,410 146,680 159,709 171,040 182,773

% Change 8.7 7.8 1.9 –2.2 9.6 12.6 10.8 8.9 7.1 6.9 9.2

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Global overview



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The casino gaming market in the USregained some degree of stability in2010, following two years of decline,but conditions remain uncertain and

volatile in many industry centers andsectors. While improved economicconditions helped to halt thedecline, many operators still lack thecondence to press ahead with major

developments in centers such as Las Vegas. Yet others are investing stronglyin new capacity.

US casino gaming revenues as a wholeedged up by 0.2 percent in 2010to $57.5 billion, leaving revenues

still 4.9 percent below their levelin 2007. Growth was generatedby an expanding regional casinomarket, fueled principally by thestrong showing of new casinos inPennsylvania. The gains in the regionalcasino market offset a 9.6 percentdecline in Atlantic City. Revenuesin Nevada and tribal casinos were

essentially at in 2010.

Going forward, the introduction oftable games at racetrack casinos andslot parlors, combined with theiraccessibility to large populationcenters, will continue to fuel the

regional casino market. The regionalcasino market also will benet frompossible openings of resort casinosin Florida and Massachusetts. As aresult of these positive factors, weexpect regional casinos to be thefastest-growing category duringthe next ve years. In contrast, weexpect Atlantic City to continue to

decline, as that market loses patronsto more conveniently located regionalcasinos. The Nevada and tribal casinosmarkets will benet from an improvedeconomy during the latter part of theforecast period.

According to our projections, modestbut gradually accelerating growth willsee overall US casino gaming revenuesregain their 2007 level in 2012. Totalrevenues will increase to $73.3 billion

in 2015 from $57.5 billion in 2010, a5.0 percent compound annual increaseover the ve-year forecast period. Only

Atlantic City will have lower revenuesin 2015 than 2010.

United StatesMarket overview

Casino gaming market (US$ millions)

United States 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Nevada 12,783 13,017 11,599 10,393 10,405 10,700 11,135 11,652 12,290 12,955

Atlantic City 5,218 4,920 4,545 3,943 3,565 3,300 3,080 2,945 2,870 2,815

Tribal casinos 24,889 26,143 26,739 26,482 26,503 27,500 28,800 30,200 31,750 33,350

Regional casinos 14,580 16,360 16,550 16,550 17,015 18,000 19,300 20,700 22,200 24,200

Casino gaming total 57,470 60,440 59,433 57,368 57,488 59,500 62,315 65,497 69,110 73,320

Sources: American Gaming Association, National Indian Gaming Commission, Nevada Gaming Commission, New Jersey Casino Control Commission, PricewaterhouseCoopers LLP, Wilkofsky

Gruen Associates

Casino gaming market growth (%)

United States 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152011–15

CAGR

Nevada 8.4 1.8 –10.9 –10.4 0.1 2.8 4.1 4.6 5.5 5.4 4.5

Atlantic City 4.0 –5.7 –7.6 –13.2 –9.6 –7.4 –6.7 –4.4 –2.5 –1.9 –4.6

Tribal casinos 10.6 5.0 2.3 –1.0 0.1 3.8 4.7 4.9 5.1 5.0 4.7

Regional casinos 6.4 12.2 1.2 0.0 2.8 5.8 7.2 7.3 7.2 9.0 7.3

Casino gaming total 8.4 5.2 –1.7 –3.5 0.2 3.5 4.7 5.1 5.5 6.1 5.0

Sources: American Gaming Association, National Indian Gaming Commission, Nevada Gaming Commission, New Jersey Casino Control Commission, PricewaterhouseCoopers LLP, Wilkofsky

Gruen Associates

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In its overall revenue mix, Nevada— which includes Las Vegas, as well assmaller centers such as Laughlin andReno—relies on players from overseasmore than other casinos in the US.For this reason, the improved globaleconomic conditions, in tandem

with those in the US, contributed toNevada’s improved performance in2010.

After slumping by a cumulative 20.2percent between 2007 and 2009, theNevada market steadied in 2010 with

a 0.1 percent increase. Table gamesrebounded with a 6.1 percent rise,the decline in slot revenues slowed to2.7 percent, while card games fell 7.5percent. The momentum generated in2010 is carrying over in 2011 and weproject that the market will increase by2.8 percent for 2011 as a whole.

However, the recovery does notsignal an end to the challengesfacing all operators and segments.The steel skeletons of uncompleted

developments still scar the Las Vegasskyline, and operators are facing theresidual effects of high unemploymentin California. Also, the most recentlyreleased gaming revenue reports show

that baccarat games account for over42 percent of table game revenues onthe Las Vegas strip, indicating a highreliance on volatile revenues from asmall number of high rollers.

However, there are some signs ofresurgent condence in the market.One of the most high prole wasCaesar Entertainment’s conrmationin August 2011 of plans for the $550million Linq project, including a 550-foot observation wheel called “TheLas Vegas High Roller”, as well as a

restaurant-entertainment district.

More generally, having navigatedthrough 2010 in survival mode, manyoperators are facing debt repaymentsin 2014–2015, meaning they remaincompelled to follow the cost-cuttingmeasures of the last several years. Thesearch for revenues is seeing operatorslook at new and innovative games torefresh the Nevada offering.

For example, under new regulations

that went into effect in 2011, casinosare permitted to provide betting onevents and contests other than sports,so long as the events themselvesare regulated and no one has prior

information as to the outcome. Beautypageants, award shows and nancialmarkets are possible candidates for thenew betting activity.

The emergence of major resortcasinos in Asia Pacic—often (asin Macau) operated by US-basedcompanies—will divert some of the

US’s overseas-derived business to thatregion. As the US’s major internationalcasino gaming center, Nevada willbe disproportionately affected.Consequently, even when the economyreturns to healthy growth, we do notexpect Nevada to record increasescomparable to prior gains achievedduring periods of economic expansion.

Accordingly, during the 2012–15period we project annual revenuegains averaging 4.9 percent each

year. For the ve-year forecast periodas a whole, the Nevada market willincrease at a 4.5 percent compoundannual rate to $13 billion in 2015 from$10.4 billion in 2010.

United StatesNevada

Nevada casino gaming revenue (US$ millions)

2006 2007 2008 2009 2010 2011 2012 2013 2014 20152011–15

CAGR

Slots 8,306 8,451 7,736 6,823 6,637 6,750 6,920 7,160 7,520 7,900

% Change 6.9 1.7 –8.5 –11.8 –2.7 1.7 2.5 3.5 5.0 5.1 3.5

Table games 4,316 4,398 3,707 3,424 3,633 3,830 4,100 4,375 4,650 4,930

% Change 11.2 1.9 –15.7 –7.6 6.1 5.4 7.0 6.7 6.3 6.0 6.3

Card games 161 168 156 146 135 120 115 117 120 125

% Change 15.0 4.3 –7.1 –6.4 –7.5 –11.1 –4.2 1.7 2.6 4.2 –1.5

Casino total 12,783 13,017 11,599 10,393 10,405 10,700 11,135 11,652 12,290 12,955

% Change 8.4 1.8 –10.9 –10.4 0.1 2.8 4.1 4.6 5.5 5.4 4.5

Sources: Nevada Gaming Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates



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As we highlighted in last year’s study,of all the segments of the US casinogaming industry, the Atlantic Citymarket is at the greatest risk fromthe combined impacts of economicuncertainty and intensifyingcompetitive pressures from regionalcasinos. These worries are being borneout by our projections, with AtlanticCity set to be the only segment of theUS market whose revenues will belower in 2015 than 2010.

This long-term decline is already

well under way, with the AtlanticCity market having plunged by acumulative 31.7 percent between 2006and 2010. The recession contributedto the downturn—revenues fell by13.2 percent in 2009—but the decline

continued in 2010 as other areas ofthe industry began to recover, with

Atlantic City suffering a further 9.6percent drop despite the rebound inthe economy.

The underlying reason is that AtlanticCity attracts most of its patrons fromPennsylvania, New York, Delaware,and Maryland—and the openingof racetrack casinos and regionalcasinos in those markets has cut into

Atlantic City’s business. At the sametime, the introduction of table games

in Pennsylvania and electronic tablegames and roulette in Yonkers ismaking those venues more like the

Atlantic City casinos, further eroding Atlantic City’s appeal. Meanwhile, highgasoline prices are encouraging day

visitors to stay closer to home.

According to our projections, Atlantic City is on track to declineby an additional 7.4 percent in 2011.Thereafter, improved economicconditions should provide a lift tothe overall casino market, which

will benet Atlantic City to a degree,

limiting its annual declines. AtlanticCity remains an appealing destinationresort and its resort casinos willcontinue to attract overnight visitors.

Nevertheless, we do not believe thatthe improved economy will fully offset

Atlantic City’s loss of revenues toregional casinos. At best, declines willmoderate to low single-digit levels by2014–15. For the forecast period as a

whole, we are projecting a 4.6 percentcompound annual decline from $3.6

billion in 2010 to $2.8 billion in 2015.This means Atlantic City’s revenues in2015 will be 46.1 percent lower thanin 2006.

The Indian Gaming Regulatory Actof 1988 permits states that allowgaming activities to authorize tribesto operate casinos on Native Americanreservations. As of mid-2011, there

were 240 federally recognized gaming

tribes with a total of 460 gamingoperations spread across 28 states.

Through 2006, the opening of newtribal casinos generated double-

digit annual gains. Since then,there have been few new casinosto boost the market. The economyhas also weakened since then, andtribal casinos now face more intensecompetition from regional casinos.

Revenues at tribal casinos have beenrelatively at over the past two years,falling by 1.0 percent in 2009—muchsmaller than the declines in Nevada

and Atlantic City—and then rising

only 0.1 percent in 2010. Despite the weakening economy in 2011 and theintroduction of table games at regionalcasinos, tribal casinos are rebounding.We project a 3.8 percent increase forthe year.

We then look for an improvingeconomy to lead to stronger gainsbeginning in 2012. However,competition from regional casinos

will continue to dampen tribal casinogrowth, limiting gains to mid-single-digit advances. Revenues willincrease from $26.5 billion in 2010 to$33.4 billion in 2015, a 4.7 percentcompound annual increase.

United States Atlantic City

United StatesTribal casinos

Atlantic City casino revenue (US$ millions)

2006 2007 2008 2009 2010 2011 2012 2013 2014 20152011–15

CAGR

Slots 3,804 3,464 3,133 2,722 2,477 2,300 2,150 2,070 2,025 1,990

% Change 3.5 –8.9 –9.6 –13.1 –9.0 –7.1 –6.5 –3.7 –2.2 –1.7 –4.3

Table games 1,414 1,456 1,412 1,221 1,088 1,000 930 875 845 825

% Change 5.2 3.0 –3.0 –13.5 –10.9 –8.1 –7.0 –5.9 –3.4 –2.4 –5.4

Total 5,218 4,920 4,545 3,943 3,565 3,300 3,080 2,945 2,870 2,815

% Change 4.0 –5.7 –7.6 –13.2 –9.6 –7.4 –6.7 –4.4 –2.5 –1.9 –4.6

Sources: New Jersey Casino Control Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates


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In an overall US casino gaming marketthat was essentially at, regionalcasino revenues rose by 2.8 percent in2010, making it the best performingsector of the market as a whole.

This strong performance was led byregional casinos located in majorpopulation centers. Philadelphia hadthe largest regional casino in 2010 atmore than $750 million, followed by

Yonkers at more than $580 million. Ofthe top ten regional casinos in 2010,four were in Pennsylvania.

Table games were introduced in western Pennsylvania in mid-2010and are now available in the restof the state. Table games also wereintroduced in Delaware and West

Virginia and electronic table gamesand roulette were added in Yonkers.The availability of table games along

with slot machines makes the regionalcasinos feel more like destinationcasinos, beneting attendance.

In other developments, the GentingGroup, the Malaysian-basedinternational casino operator thatopened the $4.8 billion Resorts WorldSentosa in 2010, entered the USmarket. Its rst US facility, ResortsWorld New York, will open this fallat the Aqueduct Race Track with4,500 video terminals. The GentingGroup also is planning a $3 billionresort casino on the waterfront indowntown Miami, having purchased13.9 acres from the Miami Herald

for $236 million. For the project tomove forward, legislation needs tobe enacted to permit resort casinos

in Florida. If approval is granted,the Genting Group plans to build theMiami resort within three to ve years.

Another development, in June 2011, was Boyd Gaming Corp’s acquisitionof the Imperial Palace Casino Resort inBiloxi, Mississippi from Mississippi LLCand Key Largo Holdings LLC. This is itssecond resort property in Mississippi,

whose casinos compete with those inFlorida and Alabama.

In Illinois, Midwest Gaming in 2010 was approved as suitable for licensureand began construction of a riverboatcasino, which is expected to becompleted by late 2011. The VideoGaming Act, enacted on July 13, 2009,authorizes up to ve video gamingterminals in licensed establishments

where liquor is served. These terminalsexpand gaming activity outside of theriverboat casinos.

In Massachusetts, legislation wasintroduced in 2011, which would

permit three resort casinos. TheMohegan Sun, which operates aresort casino in Connecticut, islooking to enter Massachusetts witha $600 million casino. Paper CityDevelopment also plans to bid for alicense to create a $450 million resortcasino. Legislation enabling resortcasinos has yet to be enacted.

While Pennsylvania is thriving, Yonkers is growing, and new projectsare being planned, regional casinos

as a whole face their own challenges.Since they rely almost exclusivelyon day visitors, regional casinos

are affected by the weak economicconditions and high gasolineprices. In the Midwest, for example,

where unemployment is high andthe economy is especially weak,regional casinos have struggled. InIllinois, casino revenues fell nearly4 percent in 2010. However, barringsupply disruptions, we do not expect

incremental growth in gasoline pricesto be signicant going forward.

A weak economy in 2011 will partiallyoffset the impact of new casinoopenings and the expansion of tablegames in several states, and we projecta 5.8 percent increase. A strongereconomic expansion during the latterpart of the forecast period will benetthe casino market as a whole as willpossible openings of resort casinos.

We look for regional casinos to growat rates of 7.2 percent or more during2012–14 and project a 9.0 percentincrease in 2015 on the assumptionthat the resort casinos in Miami andFlorida begin to open that year.

In general, because of their closerproximity to population centers, weexpect regional casinos to gain sharefrom Atlantic City and tribal casinos.Regional casino revenues will rise to$24.2 billion in 2015 from $17.0 billion

in 2010, a 7.3 percent compoundannual increase, making this segmentthe fastest of the four categories.

United StatesRegional casinos



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The casino gaming market in EMEAhas been the hardest hit of any regionby the economic downturn, withrevenues slumping by 12.0 percent in2009, followed by a further 7.2 percentin 2010, the third consecutive decline.Between 2007 and 2010, revenues fellby a cumulative 22 percent. In 2008EMEA was overtaken by Asia Pacic as

the second biggest region.

As well as being hurt by the recession,the EMEA market has been impactedby regulations or restrictions thathave curtailed spending in several

countries. Russia, for example, hadthe largest casino gaming market inEMEA in 2006–07, but because thegovernment closed most of the casinos,Russia now has the smallest market inEMEA.

The pain for EMEA is not yet over, and we are projecting a further 0.8 percent

decline in 2011, amid continuing weakeconomic conditions. We then expectthe market to expand as economicconditions improve. A new destinationcenter being proposed in Spainmay boost revenues, although theregulations are not yet in place and thetiming is uncertain.

We project that EMEA’s overall casinogaming revenues will increase ata projected 2.4 percent compoundannual rate to $18.3 billion in 2015

from $16.3 billion in 2010.

Europe, Middle East, Africa (EMEA)Market overview

Casino gaming market† (US$ millions)

EMEA 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2011–15CAGR

Casino gaming 20,783 20,894 19,959 17,567 16,307 16,175 16,250 16,751 17,350 18,343

% Change 2.8 0.5 –4.5 –12.0 –7.2 –0.8 0.5 3.1 3.6 5.7 2.4

†At September 26, 2011 exchange rates.


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EMEAMajor national markets

Several countries have substantialgaming activity that occurs outside ofcasinos. In Italy, for example, gamingmachines throughout the countrygenerated more than $5 billion in2010, but most were located outsideof casinos. The casino market itself in

Italy is tiny, consisting of just a handfulof casinos.

Likewise in the UK, gaming machinesgenerated more than $3 billion in totalrevenues in 2010. The casino market,however, totaled only $1.2 billion.The UK was one of the few countriesto post an increase in revenues in2010, with a 0.6 percent advance, butspending will decline again in 2011.

In terms of casino gaming, France had

the largest casino market in 2010 at$3.8 billion, followed by Germany andSouth Africa at $2.0 and $1.8 billion,respectively. France has declinedduring the past two years, and weexpect a further drop in 2011 withmodest increases projected thereafteras the economy improves.

Germany has one of the strongesteconomies in EMEA, and its marketcontinued to expand during the pastthree years, albeit at annual ratesof less than 1 percent. We look forsomewhat faster increases during thelatter part of the forecast period aseconomic conditions strengthen andas private companies enter the marketas privatization occurs, by taking onexisting licenses.

South Africa had the fastest growingmarket in 2010 with a 3.5 percent

increase. Going forward, casinoupgrades and a new casino license

will enhance the South Africancasino market, but compared withthe prior decade—when a numberof new casinos opened—there willbe relatively little growth from newcasinos during the forecast period.

A new 15 percent tax on winningsof R25,000 ($3,099) or higher,provisionally scheduled to go intoeffect in 2012, is expected to havean adverse impact on the market.However, there is currently no detailavailable on how the proposed tax is tobe calculated or collected.



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EMEA 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2011–15CAGR

Western Europe

Austria 581 619 629 615 608 604 606 629 656 683 2.4

Belgium 365 385 401 397 392 391 399 412 433 453 2.9

Denmark 245 258 262 258 254 253 255 263 272 282 2.1

Finland 838 877 885 880 876 875 879 906 939 973 2.1

France 3,595 3,825 3,898 3,855 3,798 3,785 3,818 3,920 4,055 4,190 2.0

Germany 1,953 2,000 2,014 2,015 2,027 2,048 2,082 2,142 2,217 2,298 2.5

Greece 933 1,048 1,000 845 710 642 608 615 629 649 –1.8

Ireland NA NA NA NA NA NA NA NA NA NA —

Italy 118 119 115 111 108 107 107 105 104 103 –0.9

Netherlands 877 920 852 724 665 651 662 676 696 723 1.7

Norway 708 761 768 818 839 856 882 921 959 1,002 3.6

Portugal 55 59 54 45 41 38 38 39 42 45 1.9

Spain 646 654 588 510 478 460 453 466 493 845 12.1

Sweden 186 198 214 207 205 203 205 211 218 225 1.9

Switzerland 1,056 1,128 1,097 1,035 961 940 964 1,078 1,111 1,139 3.5

United Kingdom 1,245 1,260 1,160 1,202 1,209 1,191 1,198 1,237 1,291 1,353 2.3

Western Europe Total 13,401 14,111 13,937 13,517 13,171 13,044 13,156 13,620 14,115 14,963 2.6

Central and Eastern Europe

Czech Republic 573 527 534 523 488 471 465 468 481 498 0.4

Hungary 449 476 493 466 440 419 410 414 428 442 0.1

Poland 379 503 428 426 417 415 416 424 438 456 1.8

Romania NA NA NA NA NA NA NA NA NA NA —

Russia 4,536 3,645 2,893 935 31 28 30 34 41 50 10.0

Turkey - - - - - - - - - - -

Central andEastern Europe Total 5,937 5,151 4,348 2,350 1,376 1,333 1,321 1,340 1,388 1,446 1.0

Middle East/Africa

Israel NA NA NA NA NA NA NA NA NA NA -

Middle East North Africa

(MENA)‡ - - - - - - - - - - -

South Africa 1,445 1,632 1,674 1,700 1,760 1,798 1,773 1,791 1,847 1,934 1.9

Middle East/Africa Total 1,445 1,632 1,674 1,700 1,760 1,798 1,773 1,791 1,847 1,934 1.9

EMEA Total 20,783 20,894 19,959 17,567 16,307 16,175 16,250 16,751 17,350 18,343 2.4


‡Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria and the United Arab Emirates.

Sources: Casinos Austria, European Gaming Organization, Gaming Board for Great Britain, Gaming Board of Hungary, Holland Casino, Lotteri Inspektionen, Ministry of Finance of the Czech

Republic, National Gambling Board of South Africa, Netherlands Gaming Control Board, Norwegian Gaming Foundation Authority, Spain Ministry of Interior, Swiss Gaming Commission,

PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates


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The 7.2 percent decline in EMEAcasino gaming revenues in 2010 reected a combination

of weak economic conditionsand the impact of adverseregulatory developments in some

countries. In the Netherlands, forexample, casino revenues fell by 27.7 percent between 2007 and 2010, playing a major part in thewider EMEA decline. While therecession contributed to the fall in

the Netherlands, the introductionof a smoking ban and an increasein the gambling tax also hurt themarket.

Going forward, the industry picturein EMEA will brighten gradually, witha small decline of 0.8 percent in 2011turning into a rise of 5.7 percent by2015. Overall EMEA revenues willreach $18.3 billion in 2015 from $16.3billion in 2010, an average annualincrease of 2.4 percent compoundedannually.

In Russia, a law enacted in 2006limited casino activity to four zonesin the remote areas of Krasnodar,Rostov, Kaliningrad, and Siberia. Inthe absence of licensed casinos inpopulated areas, underground casinoshave emerged and are operating,allegedly run by organized crime.In 2011, new legislation mandatessix-year prison terms with manual

labor for operators of illegal casinos.Meanwhile, the legitimate casinomarket has virtually disappeared.

In the UK, it was expected that thecasino market would expand as aresult of the Gambling Act of 2005.But this growth has not yet takenplace, for a variety of reasons—including the smoking ban andchanges in machine regulation, bothintroduced in 2007, and the fact thatthe new licenses envisaged in the 2005

Act are still in the process of beingawarded, with none of the 16 newcasinos actually open yet. Lookingforward, the Asia-based gamingcompany, Genting Malaysia Berhad,is investing in the UK, and this couldprovide a lift to the market. Growthover the period will also be supportedby the opening of the eight large andeight small new casinos permittedunder the 2005 Act, which we expect

will help to generate gains averaging

4.1 percent compounded annuallybetween 2012 and 2015. However,

with the economy weakening in thenear term, we project a decrease incasino revenue in 2011 and a modest0.6 percent advance in 2012.

In general, casino gaming markets inEMEA tend to attract customers on a

local or national basis. So there wouldappear to be a major opportunity for aLas Vegas strip-style destination casinoresort to attract revenues and taxdollars across borders. For this reason,there has been ongoing speculationabout such a development for years,generally focused on SouthernEuropean countries because of theirrelatively warm climate.

One contender, the much-delayedGran Scala project in Spain, is having

difculty in obtaining credit and theproject remains in limbo. In early2011, however, the Las Vegas SandsCorporation proposed a $21 billionproject to build a Las Vegas stylecasino strip with 20,000 hotel rooms,and convention and retail space, butthis proposal remains at a very earlystage. Cataluña and other regions are

vying to be the site for the proposedcasino strip. In Ireland, it has beenreported that Caesars Entertainment

has advised the sponsors of a proposedsupercasino in County Tipperary.

In Switzerland, the government

granted two additional licenses in 2011for land-based casinos in the citiesof Zurich and Neuchâtel. The formeris expected to become the country’s

largest casino, with annual gamingrevenues far in excess of $100 million.

In South Africa, the National Gambling Act permits 40 licensed casinos.

Currently, there are 37 operatingcasinos, which leaves little room forfurther expansion. Nevertheless,

we do expect new investment in thecasino market. The Limpopo GamblingBoard awarded a casino license to thePeermont Global Group. Peermontalso upgraded the Umfolozi Hotel andConvention Resort. Sun Internationalplans to upgrade the BoardwalkCasino in Port Elizabeth and TsogoSun Gaming plans to upgrade theHemingways Casino in East London,having been awarded a new 15-yearlicense by the Eastern Cape GamblingBoard. These upgrades combined withan expanding economy will provide alift to the casino market.

EMEA

Key developments and trends



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Asia Pacic will be the fastest-growingregion for casino gaming spendingover the coming ve years. Havingovertaken EMEA as the second-biggestregion in 2008, Asia Pacic willsurpass the US in 2013 as the biggestregion, and will end the forecastperiod accounting for 43.4 percent ofthe total global market.

Casino gaming revenues in AsiaPacic surged by a remarkable 49.7percent in 2010, boosted by a 57.8percent increase in Macau and the

rapid emergence of casino gaming inSingapore. Except for a small market in

Vietnam, and the 1.2 percent increasein Australia, the four other countriesin this region had spending declinesin 2010.

Going forward, Macau and Singapore will continue to fuel growth in AsiaPacic during the next few years, whileother countries in the region may lookto encourage growth in casino gamingto gain tourism and tax dollars. By2015, the Asia Pacic market willreach $79.3 billion from $34.3 billion

in 2010, an 18.3 percent compoundannual increase.

Asia PacicMarket overview


Asia Pacific 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152011–15

CAGR

Casino gaming 13,687 17,714 21,379 22,898 34,280 47,042 58,124 66,961 73,429 79,266

% Change 16.3 29.4 20.7 7.1 49.7 37.2 23.6 15.2 9.7 7.9 18.3



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The jewel in the crown of Asia Pacic’scasino gaming industry is Macau, thelargest single destination market in the

world at $23.4 billion in 2010, morethan twice the revenue of Nevadain the US. Fueled by new casinos,revenues in Macau will more thandouble during the next ve years to$62.2 billion, representing 34 percentof total global casino revenues in 2015.

Australia was a distant second at $3.4billion in 2010 with Singapore at $2.8billion and South Korea at $2.6 billion.The revenue gures for Australia donot include gaming machines (pokies)in hotels, pubs, and clubs. Australia isfacing increased competition in luring“high rollers” now that Singapore has

become an established market.

This competition is intensifying, asSingapore has already become a majorcasino destination in just its rst yearof operation, with revenues projectedto grow signicantly in 2011, due tothe build-out of facilities, increased

tourist visitors, and the impact of afull year of operation. Revenues willreach nearly $7.2 billion by 2015,

which is impressive, given that onlytwo licenses have been issued. Totalmarket growth forward will be subjectto regulatory constrictions. WhileSingapore’s total market revenueachievement is put into perspectiveby the fact that Macau’s revenues willexceed $62.2 billion by that same time,

it is fair to note that on a property-by-property basis, Singapore casinos have

returned higher margins overall.

South Korea is a well-establishedcasino gaming center, and is expectedto benet from a new gaming center. Itcould be adversely affected however,by competition from Japan if—ascurrently proposed—casinos open inthat country during the latter part ofthe forecast period. Declines projectedfor 2014–15 will leave South Korealower in 2015 than in 2010, the onlycountry in Asia Pacic where that will

be the case.

The Philippines already has a vibrantcasino gaming market, and newcasinos in that country will propelspending at a 16.9 percent compoundannual rate to $1.2 billion in 2015,making that country a major gamingarea as well.

Asia Pacic

Major national and territory markets


Asia Pacific 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152011–15

CAGR

Australia 2,801 3,125 3,316 3,388 3,429 3,429 3,439 3,478 3,576 3,698 1.5

Hong Kong NA NA NA NA NA NA NA NA NA NA —

India NA NA NA NA NA NA NA NA NA NA —

Indonesia NA NA NA NA NA NA NA NA NA NA —

Japan — — — — — — — — 327 784 —

Macau 7,049 10,335 13,541 14,860 23,447 34,608 44,862 52,553 57,680 62,167 21.5

Malaysia 847 885 933 980 948 940 942 964 1,012 1,059 2.2

New Zealand 383 364 373 373 365 350 353 369 388 408 2.3

Pakistan — — — — — — — — — — —

Philippines 515 565 602 593 558 618 719 941 1,102 1,217 16.9

Singapore — — — — 2,827 4,396 5,090 5,784 6,516 7,172 20.5

South Korea 2,044 2,388 2,555 2,639 2,637 2,628 2,641 2,770 2,706 2,620 –0.1

Taiwan — — — — — — — — — — —

Thailand — — — — — — — — — — —

Vietnam 48 52 59 65 69 73 78 102 122 141 15.4

Total 13,687 17,714 21,379 22,898 34,280 47,042 58,124 66,961 73,429 79,266 18.3


Sources: Australian Productivity Commission, Macau Gaming Inspection and Coordination Bureau, New Zealand Department of Internal Affairs, Philippine Amusement and Gaming Corporation,

PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates



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The next ve years will see Asia

Pacic emerge as the world’sleading region for casino gaming. For Asia Pacic as a whole, casino

gaming revenues will expand from$34.3 billion in 2010 to $79.3billion in 2015, an 18.3 percentcompound annual increase.

Macau will remain the largest casino

gaming center in Asia Pacic, growingat a CAGR of 21.5 percent through2015, outpacing Singapore’s growthrate of 20.5 percent compoundedannually. The global recession hadonly a mild impact on Macau in 2009,

with growth slowing to 9.7 percentfrom 31.0 percent in 2008. In 2010,revenues surged by a 57.8 percentincrease as global economic conditionsimproved and as foreign tourismrebounded.

Revenues in Macau in 2011 will growby an estimated 47.6 percent, boostedby increased trafc from the PRCmainland and by new hotels. A newrailway that connects Macau withGuangzhou signicantly reducestravel time from the mainland, andthe Hong Kong-Zhuhai-Macau roadbridge currently under constructionis expected to be completed in 2015–2016. More convenient access fromthe mainland is leading to an increase

in the number of day visitors andcontributing to revenue growth.

Growth is being fueled by newcapacity. Galaxy Macau was openedin Cotai in May 2011 with 450gaming tables, approximately 1,100electronic gaming machines and2,200 hotel rooms. Meanwhile, SandsChina, which halted construction in2008 because of the drop in creditavailability, is now scheduled to openphase I of Sands Cotai Central in 2012

and phase II in early 2013. SandsCotai Central will have approximately300,000 square feet of gaming space

and 5,800 rooms, including hotelsfrom Starwood, Shangri-La, HiltonWorldwide, and IntercontinentalHotels Group.

The structure for legal casinos isbeginning to fall into place in Japan.If regulatory approval is given, the

likelihood is that integrated casinoresorts would be built in threeregions yet to be determined, theCabinet Ofce would oversee casinooperations, and a regulatory body

would be established to approvelicenses. The casinos would fundthe cost of industry regulation. Anentry fee would be levied to pay foreconomic development and to assistin rebuilding areas destroyed by theearthquake and sunami.

If the proposed opening of casinosin Japan takes place, it would havea ripple effect on the region. Japancould be expected to attract visitorsfrom South Korea, which could divertthem from going to Macau. Singaporealso represents a new signicantmarket that will offer an alternativeto Macau, and while the strongChinese economy will continue toboost Macau, we expect fewer visitorsfrom other countries as major resort

casinos become more available in AsiaPacic. As a result, we project thatrevenue growth in Macau will drop tosingle-digit levels in 2014–15, but willstill average 21.5 percent compoundannual growth for the forecast periodas a whole.

In Singapore, Resorts World Sentosaand the Marina Bay Sands opened in2010. With a full year’s operation forboth of the new resorts in Singapore,

we expect revenues to reach $4.4

billion in 2011 and grow to $7.2 billionby 2015 as Singapore becomes a majordestination in Asia.

Asia PacicKey developments and trends


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Increased competition from Singaporeand Macau is adversely affecting the

Australian market as growth slowedto 1.2 percent in 2010 from 2.2percent in 2009. Australia’s casinosare nding it harder to attract highspenders from other countries, asthere are now more resort casinos in

Asia Pacic. We expect the market tobe at in 2011 and to grow by only0.3 percent in 2012. We then look forgrowth to pick up reecting improvingeconomic conditions. We do not expecta return to the double-digit and highsingle-digit gains that characterized2006–08.

One signicant factor in theprotability of operators in AsiaPacic is the widespread use of “junketoperators”. In Macau, these businesses

organize and help to arrange currencyfor “high roller” gamblers and

visitors from other territories such asmainland China. While their use iscommonplace in Macau, they are notcurrently operating in Singapore, norpermitted to operate in Australia, andhave to be licensed in the US. Thereare stringent rules applied to registeras a junket operator in Singapore, andat this stage there are no approved

junket operators in this market. If

junket operators are permitted inSingapore, then they could boostmarket growth. In some jurisdictions,there are concerns over the legality ofsome junket operators’ activities.

In South Korea, except for KangwonLand in the Gangwon province,casinos are only open to foreigners. In2010, 1.7 million tourists from Japan

visited casinos in South Korea. If and when casinos open in Japan, manyof the Japanese gaming tourists will

stay at home, cutting into the SouthKorean casino market. To counter thatpotential loss, the Minister of Culture,Sports, and Tourism announced that

casinos will be open to local citizens.The government also announced itsintention to build several integratedcasino resorts to better compete forforeign tourists.

In New Zealand, the government islooking to gambling as a way to attract

tourists and help rebuild the countryfollowing its earthquake in February

2011. SkyCity Entertainment is building

a new convention center and casino.

In the Philippines, casino gamingrevenues fell 5.9 percent in 2010,but are rebounding in 2011, and weproject a 10.8 percent increase for the

year as a whole. Belle Corp’s plannedcomplex in Manila Bay is expected toopen in 2013, although the projecthas experienced a number of delays.

The Philippine Amusement andGaming Corporation (PAGCOR) is themonopoly provider with the exceptionof the Cagayan Special Economic

Zone, which issues its own casinolicenses. Casinos in the Cagayan regionare only open to foreigners.

The casino gaming market in Malaysiais expected to pass the $1 billion levelin 2014, but it is being impacted bycompetition from Singapore, and

growth will be modest. GentingsHighlands is the major casino operatorin Malaysia.

In Vietnam, the MGM Grand HoTram, the rst Las Vegas-style resort,is scheduled to open in 2013 on theHo Tram Strip. A more modest resortcasino opened in 2010 in Da Nang.Flights from Guangzhou in the PRCbring tourists to the casino. Casinos in

Vietnam are only open to people withforeign visas.


Galaxy Macau


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Argentina is the largest market in Latin America, with revenues of $2.3 billionin 2010, accounting for 61.1 percentof the region’s total casino gamingrevenues. Mexico is next at $639million, followed by Columbia at $526

million and Chile at $310 million.

Casinos in Venezuela generated totalrevenues of $3 million during the

year. Brazil—Latin America’s biggesteconomy—has bingo, lotteries, andbetting parlors, but prohibits casinosand slot machines.

Latin America has the smallestregional casino gaming market by a

wide margin. However, it registeredthe second-fastest growth of anyregion in 2010, when revenues roseby 5.5 percent in 2010, down from the10.2 percent increase in 2009. The rise

in 2009 was driven by a large increasein the number of operating casinos in

Chile, which led to a large increase inthat country

Latin America will also be the secondfastest-growing region—well behind

Asia Pacic—over the next ve years.Revenues will expand at high single-digit rates averaging 8.1 percentcompounded annually, rising to $5.6billion in 2015 from $3.8 billion in2010.

Latin AmericaMarket overview

Latin AmericaMajor national markets


Latin America 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152011–15

CAGR

Casino gaming 2,584 2,959 3,269 3,601 3,800 4,096 4,370 4,757 5,165 5,614

% Change 25.6 14.5 10.5 10.2 5.5 7.8 6.7 8.9 8.6 8.7 8.1



20 PwC


Latin America 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152011–15

CAGR

Argentina 1,796 1,981 2,105 2,198 2,322 2,501 2,632 2,894 3,179 3,501 8.6

Brazil — — — — — — — — — — —

Chile 22 24 26 234 310 478 581 649 707 765 19.8

Colombia 481 521 532 529 526 525 529 548 574 601 2.7

Mexico 284 432 605 638 639 589 624 662 701 743 3.1

Venezuela 1 1 1 2 3 3 4 4 4 4 5.9

Total 2,584 2,959 3,269 3,601 3,800 4,096 4,370 4,757 5,165 5,614 8.1


Sources: Superintendencia de Casinos de Juego, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates


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For Latin America as a whole, growth in per capita income overthe next ve years will help to

drive increased expenditure onentertainment, including casino gaming. As a result, we project

casino gaming revenue in thecountries we track in the regionto increase to $5.6 billion in 2015 from $3.8 billion in 2010, an8.1 percent compound annualincrease.

Argentina, with 45 casinos, is theleading casino gaming market inLatin America. There are no nationallicenses, and all casinos are licensed atthe provincial level. Revenue growthhas dropped to mid-single-digit levelsduring the past three years fromdouble-digit gains in 2006–07, but

we expect a return to double-digitgrowth during the latter part of theforecast period as economic conditionsimprove. Spending will expand at an8.6 percent compound annual rate to$3.5 billion in 2015.

In Mexico, there are approximately300 licensed casinos, not includingan estimated 60 casinos that areoperating without a license. Theissuing of new licenses propelled

the market in 2007 and 2008.More licenses are expected to beissued, which will lead to continuedexpansion in the underlying market.In 2011, however, the industry washit by adverse events, including thedeath in August of over 50 peoplecaused by armed men who set re toone casino in northern Mexico, and anumber of closures by the authorities.

As a result of the closures, casinorevenues are projected to decline by7.8 percent in 2011. The market willbegin to rebound in 2012 and will riseto $743 million by 2015, a 3.1 percentcompound annual increase from 2010.

Colombia has more than 20 casinos ineight cities. The market has declinedduring the past two years under theimpact of the slowdown, and weexpect a further drop in 2011 beforegrowth resumes as the economicconditions improve. We project a 2.7percent compound annual increase to

$601 million in 2015.

In Chile new regulations allowed thenumber of casinos to jump from eight

in 2008 to 25 in 2009, resulting ina large increase in revenues in that

year. Seven of the 25 were existingcasinos supervised by municipalities,and 18 were new licenses regulatedby the new supervisory body, theSuperintendencia de Casinos deJuego. The new licenses were awardedto private and experienced gamingcompanies, and of the 18 non-municipal regulated casinos, three are

yet to be opened. Revenues in 2010rose by 32.5 percent, reecting full-

year operations for the new casinos.New openings will lead to a further54.2 percent increase in 2011 followedby a 21.5 percent advance in 2012. Weexpect growth to drop to single-digitlevels in 2014–15. For the forecastperiod as a whole, growth in Chile willaverage 19.8 percent compoundedannually to $765 million by 2015.

In Venezuela, the opening of newcasinos boosted revenues from $1

million in 2006–08 to $3 million in2010. In addition to two new casinoson Margarita Island, casinos includingCasino El Dorado, Fiesta CasinoGuayana, and Maruma Hotel & Casinoare now open. We do not expect morenew licenses and project that theindustry will remain stable during thenext ve years, rising to $4 millionin 2012 and remaining at that levelthrough 2015.

Latin America

Key developments and trends



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PwC22

Canada has a buoyant casino gamingmarket, which has been hit by thedownturn later than its counterpart inthe US.

Revenues in Canada fell by 2.9 percentin 2010 as the weak economy and newcompetition from regional casinos in

the US near the Canadian border cutinto casino gaming.

We expect the market to fall byan additional 1.9 percent in 2011,stabilize in 2012, and then expand

in 2013–15 as economic conditionsimprove. Revenues will reach $6.2billion in 2015 from $5.7 billion in2010, a 1.8 percent compound annualincrease.

CanadaMarket overview


Canada 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152011–15

CAGR

Casino gaming 5,354 5,685 5,694 5,874 5,704 5,597 5,621 5,743 5,986 6,230

% Change 10.7 6.2 0.2 3.2 –2.9 –1.9 0.4 2.2 4.2 4.1 1.8


Sources: Canadian Gaming Association, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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While casino gaming spending inboth the US and EMEA declinedin 2008 and 2009, Canada tooklonger to be hit by the economicdownturn, with spending falling

in 2010 and 2011. The reasonwas that new casinos that opened

in prior years— such as TsuuT’ina First Nation Casino inCalgary, and a renovated CaesarsWindsor— sustained spending growth through to 2009.

Excluding First Nations casinos, theownership of provincial casinos inCanada is a mix of government andprivate ownership, depending on theprovince in which the casino operates.

In 2010, casinos in Ontarioexperienced revenue declines as newcasinos near the Canadian border,in Michigan and New York, reducedthe number of Americans travelingto Ontario to gamble. The impositionof tighter restrictions on US citizensentering Canada, which were put inplace in 2009, also reduced trafc fromthe US. This trend was exacerbatedby the strengthening of the Canadian

dollar and the continued economic

challenges faced by US consumers. As a result, casinos in other provincesfared better than Ontario in 2010.

Casinos in Canada will benet fromimproving economic conditions duringthe latter part of the forecast period,helping revenues to rise at rates above4 percent in 2014 and 2015.

CanadaKey developments and trends


Casino de Montréal, Canada


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Part II:Online gaming


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In any discussion of the casino industryand its future prospects anywhere inthe world, there is always an “elephantin the room.” Online gaming ishappening across the world, whetherregional, national, and state regulatorsand lawmakers like it or not. The fog

of uncertainty that surrounds the size,scope, and often the legal basis ofonline gaming makes it hard to assessits current and future impacts, or toplan strategies around it.

In this section, we will examinethe forces and trends affecting theregulation, use and growth of onlinegaming, and its potential impacts onthe traditional “bricks-and-mortar”casino gaming industry. We will thengo on to look at the wider dynamics

of the gaming industry as a whole,examining the parallel shift toward

Asia Pacic and toward electronicdelivery of gaming services—withthe ultimate challenge being theindustry’s ability to keep providinga compelling, energizing experiencethat the target consumers will valueabove the expanding array of otherentertainment choices available tothem.

Regulation calls the shots

Across the world, the legitimateexistence, growth and competitivedynamics of the online gaming marketare primarily shaped by the prevailingregulation, which varies widelybetween countries and even betweendifferent states or regions withincountries. The regulations in force alsodiffer markedly between the variousforms of online and mobile gaming,

which can be broadly categorizedinto six disciplines: poker; casino

gaming; betting on horse races; bettingon other sports, such as soccer andbaseball; online bingo; and, onlinelotteries.

Part II: Online gaming

The elephant in theroom

Given the pervasive nature of Internet-based services and their seamless

ability to cross borders, the legal andregulatory position of online gaming,even within a particular jurisdiction,is often unclear and open to differentinterpretations. The rigor with whichregulators and governments applythe rules in practice also differs. Thiscreates uncertainty for consumers andmarket participants alike, and even forshareholders in companies that offeronline gaming. These uncertaintiesare partly due to the fact that much ofthe applicable legislation predates the

Internet, so its application to onlineservices is inevitably open to debateand challenge.

Multiple ambiguities…

One prime example of this is theU.S. Federal Wire Act of 1961, whichoutlaws the placing of sports betsover the telephone, and which is nowsurrounded by multiple ambiguities.Historically, the law has beeninterpreted by some authorities—

including the Department ofJustice—to mean that all forms ofonline gambling are illegal. However,US District Courts have ruled to thecontrary, while the US Fifth CircuitCourt of Appeals has ruled thatthe Wire Act applies only to sportsbetting and not other types of onlinegambling. And the Supreme Courthas yet to rule on the meaning of theFederal Wire Act as it relates to onlinegaming. There is also ambiguity about

whether tribal casinos can operateonline sites, with some tribal casinosleading the campaign to legalize onlinepoker in the US.

…leading to raids, confusion, ora “blind eye”

Similar ambiguities exist across the world, leaving consumers uncertain whether what they are doing isactually legal, and providers listeningnervously for a knock on the door fromthe authorities. On April 15, 2011, that

knock came, when the US Departmentof Justice seized the domains andbank accounts of PokerStars, FullTilt, and Absolute Poker. Even after


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the raids, US consumers continuedto comprise half or more of the

world’s poker market—with privateoffshore operators, unafraid of the USauthorities, continuing to take bets

while public companies stay away forfear of indictment.

In contrast to the US Department

of Justice, the law enforcementauthorities in some other parts ofthe world are turning a blind eyeto unlawful online gaming. In AsiaPacic, online gaming is outlawed inthe PRC and India, but there has beenlittle attempt to tackle the usage bypeople in these countries of gamingsites based in the Philippines, whereit is legal. It is unclear whether thebulk of the money being bet online isgoing through Macau, direct throughoffshore sites, or through illegal

bookmakers: the only certainty is thatthere is a lot of it.

Even in jurisdictions where onlinegaming is legalized and regulated,there are “grey areas” of doubt and

uncertainty. In Europe, online gamingis legal in many countries, but oftenas a monopoly offering from a single

government-approved provider—anapproach that is being challengedby the European Commissionunder European Union law on fair

competition. In France, Internet serviceproviders (ISPs) are opposing thegovernment’s attempts to block access

to gaming sites based in countries suchas Costa Rica. In the Czech Republic,the requirement for online gamingusers to subscribe in person at a shopmeans “pure” Internet providers aretechnically illegal— yet they operateand promote themselves openly.

Protecting consumers whileboosting the tax take

Today’s widespread legal uncertainty

springs largely from the slow andhalting response of legislators andregulators across the world whenonline gaming rst emerged in theearly 2000s. This approach reecteda view in many countries that onlinegaming simply could not be regulatedeffectively. Aside from a handful ofterritories such as the UK, whichlegalized many forms of onlinegaming in the 2005 Gambling Act,most national and state governments

across the world were initially waryof legalizing online gaming withintheir territories. However, with theonset of the global nancial crisisand its resulting negative impact onpublic sector nances, there has been asignicant change in attitude.

With governments now facingsevere scal constraints and eager toreplenish their coffers, their attentionhas been caught by the potential oflegalized and licensed online gaming

services as a valuable source of taxrevenues. There is also a strongargument that, since consumers

will engage in illegal online gaminganyway, it is better to license andtax it than to allow the revenues togo to unlicensed operators. Also, farmore effective technologies are nowavailable than a few years ago tomaintain online security and verify thelocation and age of people taking partin online gaming. These developments

are all encouraging different nationaland state governments to introducetheir own licensing regimes. Yet, thecross-border nature of online gamingmeans attempts to regulate purely

within borders may prove ultimatelyunsustainable.

What is clear is that the elephant inthe room is not going to go away.Governments and regulators have anabsolute need to create certainty andconsumer protection around online

gaming, while ensuring this activity isfairly taxed. This may take years, but itmust eventually happen.

With governments now facing severe scal constraints andeager to replenish their coffers, their attention has been

caught by the potential of legalized and licensed online gaming services as a valuable source of tax revenues. Thereis also a strong argument that, since consumers will engage

in illegal online gaming anyway, it is better to license

and tax it than to allow the revenues to go to unlicensedoperators.


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The twin requirements to protectconsumers and generate dollarsfrom online gaming have seen manygovernments across the world adopta regulatory approach, focused oncontrolling and taxing it within theirown borders. Under this strategy,a particular territory—whether atthe state or national level—seeksto license, regulate, and tax onlinegaming between providers andplayers within their frontiers, withoutallowing cross-border activity.

This involves the regulatoryauthorities introducing a regime thatlegalizes the provision of specic types

of online gaming services in their ownterritory, so long as these are providedby operators licensed within thecountry, or state, and only to peopleresident there. Companies that arelicensed locally are also required to paytax locally on their revenues. The movetoward this type of regulation has beenprevalent to date, both in Europe (on anational basis) and the US (at both thestate and national level).

However, like the efforts in the early2000s by some ISPs to create ring-fenced areas of the Internet for theirsubscribers, we believe this is aninterim stage of development that willultimately be superseded by a moreopen and collaborative approach. Byits nature, one of the main benetsof Internet delivery in terms of bothefciency and effectiveness lies in theeconomies of scale from operatingcross-border. This is especially thecase for online poker, where thecritical mass of players and money

that comes from pooling liquidityacross, for example US state borders,is a prerequisite for a viable businessmodel and exciting user experience.

Given these pressures, our view is thatthe regulatory trend will increasinglyshift toward the licensing of inter-country and interstate online gamingservices, where liquidity is pooledand tax shared on an agreed basisbetween different tax authorities.The European Commission is pushingactively in this direction through itsactions against in-country monopolies,

while in the US the indecision withstates and the federal governmentis impeding progress. Also, it seemsunlikely that countries and states willfully harmonize what forms of onlinegaming are permitted across theirborders; however, poker and sportsbetting look to be the best candidatesfor an open and shared approach.

Regulating withinborders: an interim step



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The US’s UIEGA: targeting thepayments processors

In October 2006, the US Unlawful InternetGambling Enforcement Act (UIGEA) madeit illegal for banks and other institutionsto transfer funds to offshore gaming sites,causing visits to offshore gaming Web sitesby US citizens to plunge.

However, it was not actually individualsusing offshore gaming sites who wereliable under the Act, but the credit cardcompanies and online payment companiesprocessing their deposits or withdrawalsfor use on the sites.

The law made it illegal to process paymentsfor such transactions, but it contains nosanctions against players gambling online,unless they are connected in some way with the casino, or the money exchangecompany. In fact, to date no player hasever been prosecuted in the US for onlinegaming.

Regulatorytrends in the USThere is a popular misconceptionthat all forms of online gaming areoutlawed in the US. This is not thecase. In fact, the prohibition is oninterstate gaming, and the legalposition within states varies widelybetween the ve disciplines of casino,horse betting, other sports betting,poker, and lottery.

For example, online betting on horseracing is legal in several states at

the intrastate level (but not acrossstate borders). Federal legislation tolegalize and regulate online poker hasbeen discussed for many years, andis expected to reach the statute book

within the foreseeable future.

While there is no federal US legislationthat explicitly addresses the legality ofonline gaming, there are two main Actsthat impact it. The Federal Wire Act of1961 (commonly known as the Wire

Act) makes the placing of sports bets

over the telephone illegal. Given itsage, it is hardly surprising that the Wire

Act does not explicitly refer to online

gaming. Also, as discussed earlier,this legislation is open to multipleinterpretations, with the effect of

increasing the general uncertainty.

The other key piece of legislationis the Unlawful Internet Gambling

Enforcement Act (UIGEA) of 2006 (seeinformation panel), which makes it

illegal for banks and other institutionsto transfer funds to offshore gamingsites in support of illegal onlinegaming. Crucially, UIGEA—whicheventually came fully into force in June2010—does not dene illegal onlinegaming, and the Act does not apply toonline gaming that is conducted withinthe boundaries of a state or a tribe.

The UIGEA’s specic targeting of sites

based outside the US puts it at odds

with the World Trade Organization

(WTO), which ruled in 2005 that

because the US permits online horse

betting for operators authorized

by state governments, it cannotdiscriminate against foreign online

gaming operators. The US UIGEA law

was challenged on these grounds at

the WTO by Antigua and Barbuda, andthen by the EU. The WTO ruled in favorof Antigua and Barbuda and the EU, butthe compensation provided by the US

involved sectors other than gaming.

The impact of varying interpretationsof the Wire Act was highlighted onFriday, April 15, 2011, when the US

Department of Justice used it as thebasis for legal action against a numberof online poker sites. Known in theonline gaming world as Black Friday,this was the day when a federal grand

jury in New York indicted PokerStars,Full Tilt Poker, and Absolute Poker /Ultimate Bet (collectively these lattertwo are known as “Absolute Poker)for processing payments that werealleged to involve bank fraud, moneylaundering, and illegal gambling.

At the same time, the Departmentof Justice led a civil suit for theforfeiture of the Internet domainnames used by the indicted companies,and funds held by bettors in thoseaccounts were frozen. Online gamingactivity from the US fell sharply,and international online gamingsites suffered declines in trafc. Thegovernment subsequently reached anagreement to allow the companiesto use their Web sites to enable US

players to withdraw their fundsheld in accounts with them. Thecompanies were also permitted to usetheir domain names to offer poker tonon-US citizens, with an independentmonitor verifying their compliance.

The interconnected nature of theglobal online gaming market wasunderlined by events elsewhere. InEurope, the share prices of the indictedcompanies’ main rivals, including


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Party Poker, soared in response, andEuropean online poker providersintensied their marketing to pick

up players worried by the US action.Signicantly, Party Poker was one ofthe sites that took the approach ofbanning US players when UIGEA waspassed in 2006. At that time PartyPoker was the US’s biggest onlinepoker provider in terms of customers—and Black Friday appeared to vindicatethe painful decision it took to shed itsUS customer base.

Given the shockwaves from eventssuch as Black Friday, it is not surprising

that pressure in the US for claricationof the legal position of online gamingis continuing. In September 2011,the American Gaming Associationstepped up its campaign forlegalization and regulation of onlinepoker, by launching an online videoentitled Online Poker: The Wild West. It accompanied the video with astatement urging Congress to approvelegislation allowing states to licenseand regulate online poker, “so the

millions of Americans who playonline poker can do so safely withresponsible, law-abiding operators.”

For state governments and gamingcompanies alike, the prospect ofregulated online gaming being freelyavailable as a legal and taxable activityis a major attraction. Last year, weexpected to see signicant progressat both state and federal level towardlegalization of interstate poker during2011. Progress has been more limited

than anticipated, for three mainreasons. The rst is the contrasting andsometimes conicting agendas at thestate level, where the desire to retaintax revenues within state boundariescan conict with the need to buildcritical mass and liquidity across stateborders. The second is the embeddedopposition in many quarters to onlinegaming as a social evil. The third is thedifculty of getting legislation onto thebooks at the federal level.


In 2010, Senator Harry Reid drafted aproposal into a tax bill to allow casino

companies to set up their own onlinepoker sites, exempt from UIGEA, fortheir customers to use. In January2011, Senate Republicans John Kyland Spencer Bachus—both of whomoppose the expansion of onlinegambling on moral grounds—wereinstrumental in blocking the measure.

However, there have been growingindications that the logjam maybe broken fairly soon, with newproposed regulation now on the table.

In April 2011, Senator Kyl publiclysoftened his stance against onlinepoker. Two months later, Rep. JoeBarton introduced a bill to legalizeand license online poker, with theprovision that licensees prove they canprevent minors from playing and thatthe games are fair and do not createopportunities for money laundering.Individual states would have theopportunity to either opt out orprohibit online poker. In August 2011,

Senator Reid expressed condencethat online poker regulation “will get

done.” Meanwhile, the Black Fridayswoop and subsequent settlementsare widely seen as having “cleared thedecks” for legalization and regulation.

In comparison with the wranglingat the federal level, there has beensomewhat more progress at the statelevel, with a number of initiatives tolegalize online gaming proposed. TheDistrict of Columbia, for example,legalized online gaming within its

jurisdiction in April 2011. But true to

the entire online gaming debate, it was recently announced that a newhearing for online gaming in DC hasbeen called. Concern was expressedthat the online gaming bill, which

was attached to a supplementarybudget bill, was approved withoutproper consideration. More updateson this particular issue are expectedbefore year end. In Nevada, AssemblyBill 258 passed the legislature and

was signed by the governor and

The impact of varying interpretations of the Wire Actwas highlighted on Friday, April 15, 2011, when the

US Department of Justice used it as the basis for legalaction against a number of online poker sites. Knownin the online gaming world as Black Friday, this was

the day when a federal grand jury in New York indicted PokerStars, Full Tilt Poker, and Absolute Poker /Ultimate Bet (collectively these latter two are knownas “Absolute Poker) for processing payments that were

alleged to involve bank fraud, money laundering, andillegal gambling.

The Black Friday swoop and subsequent settlementsare widely seen as having “cleared the decks” for

legalization and regulation.


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made effective on June 10, 2011. AB258 requires the Nevada GamingCommission to establish certain

provisions authorizing the licensingand operation of interactive gamingunder certain circumstances, whichare: the passage of federal legislationauthorizing interactive gaming, orthe United States Department ofJustice notifying the Nevada GamingCommission or the State GamingControl Board that interactive gamingis permissible under federal law.Through the passage of AB 258, it isclear that Nevada is taking preemptivesteps to prepare for the eventuality ofonline gaming.

Bills have also been introduced inMassachusetts and California tolegalize online gaming, and Iowaand Florida are considering similarlegislation. In New Jersey, thelegislature approved online gaming

within the state, but Governor Christie vetoed the bill. In November, there willbe a referendum in New Jersey that

will amend the state constitution and

permit sports betting.

The chances of these moves helpingto trigger genuine and coordinatedprogress at the state and federal levelhave been boosted by the gamingindustry managing to nd a moreunited voice in 2011. In May, the

American Gaming Association made itsclearest call to date for the legalizationof Internet poker, and commercialas well as Tribal casinos continueto vocally consider th

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