教專研 98P-031 The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau 李瑾玲 觀光與休閒事業管理系 Abstract The purpose of this study is to determine the accurate direction of developing the casino Gaming Industry market in Taiwan, according to the successful experiences from Las Vegas and Macau. With the analysis of the literatures and expert interviews, the results will show the benefiting six factors of gaming business. Geography environment, accessibility, human resource, tourism resource, tourist resource, and the social aspect are the important factors of developing gaming industry in Taiwan. In addition, the results imply that developing casino Gaming Industry market in Taiwan is to build the large scale integrated resort and tourism development. Key Words: Casino, Gaming Industry, Taiwan, Las Vegas, Macau Introduction The Gaming Industry of the USA is prominent for numerous decades; it cannot be denied that the recreational gaming is becoming one of the most popular and fastest-growing apparatus of the USA’s entertainment economy. Since World War II, Las Vegas, Nevada, has been the fastest growing city in the United States. In 2008, the city hosted more than 37 million tourists, making it north America’s favored destination In addition, Las Vegas Strip is ranked top one among the top 20 U.S. casino markets by annual revenue The successful casinos development has brought Nevada as the major revenue-generating state and its status as the world’s premier gaming, resort and entertainment destination. In Asia, the Gaming Industry in Macau was liberalized in 2002. Since then, the gaming business volume has been growing at a rather unexpected and spectacular rate. Moreover, the gaming industry has developed a very close relation with the tourism industry and become a pillar of Macao's economy. In 2008, the gaming industry’s total gross revenue reached a record high figure of 109.83 billion MOP constituting the vast majority of government income. In addition, Macao has only 541,200 residents in population; however, the per capita GDP has been reached to USD 39,377 in 2008 (DSEC, 2009). The success of Macau experience has inspired the interest of developing the Gaming Industry. Besides Macau, there are legal casinos in South Korea and Malaysia. Although, Singapore has strict laws, they have announced they are building two mega casinos and planned to open by the year of 2010. Other Asia countries such as Japan, Thailand, Vietnams, and Dubai also expressed their great interest to get involved the gaming business. It is not necessarily the case to say that for those whom are most passionate about gambling are the Chinese and Southeast Asians. Nonetheless, no one will dispute that you will see groups of Chinese at all the world’s famous gambling casinos. Although there is no legal casino in Taiwan, nevertheless, a number of foreign gambling centers like Las Vegas, Macau, and Korea have set up offices in Taiwan to try to tap into the extravagance of Taiwan tourists who enjoy gambling. The Taiwanese government has revoked a long-standing antigambling law and allowed the building of casinos in remote counties to help stimulate the 98-393 觀休管系-李瑾玲 教專研 98P-031 The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau economies. It would be done by seeking public approval prior opening the market, however, the first residents’ referendum to build Taiwan’s first casino has been rejected. With many Asia countries are planning or undergoing the gaming business; in order for the Taiwan to catch the wave and profit from the market share earlier, its Government still should pay attention to the trend of developing Gaming Industry and set in motion without further ado. Even though, the reward can be great, but so are the risks. The Taiwan Government and communities must be vigilant to plan it, and not to become addicted to it. The Gaming Industry Issues in Las Vegas Casinos are becoming a mainstream industry in the past decade. Casino gaming is a legal, legitimate and highly regulated industry; it has been experiencing tremendous growth. The communities, states and Native American Indian tribes across the country are trying to capitalize on the success of Las Vegas in attracting tourists and new money through gaming in the USA. The potential for windfall profits that increase jobs, tax revenues, real estate investments, general economic and community enhancement makes gaming attractive (Long, 1995). According to the Internet statistics of American Gaming Association, the Gross Gambling Revenue of past ten years is raising stability. In Table 1, the chart shows the growth from 1999 to 2008 in both the commercial casino industry and gaming as a whole, which includes pari-mutuel wagering, lotteries, casinos, legal bookmaking, charitable gaming and bingo, Indian reservations and card rooms (AGA, 2009b). Table 1. The US Gaming Revenue: 10-year Trends (Year1999 to 2008) Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total Commercial Casino Total Gaming($billion) ($billion) 22.2 58.2 24.3* 61.4 25.7* 63.3 26.5* 68.6 27.02* 72.9 28.93 78.8 30.29 84.4 32.42 90.9 34.13 92.3 32.54 N/A * Amount does not include deepwater cruise ships, cruises-to-nowhere or noncasino devises Source: American Gaming Association, Christiansen Capital Advisors LLC. (AGA, 2009b) In 2008, the commercial casino industry employed more than 375,000 people earning more than $13 billion in total wages; more direct employees than the U.S. automobile industry, software manufacturers or wireless phone carriers. Commercial casinos are significant contributors to the U.S.’s economy; in the 12 states with commercial casinos in operation in 2008, casinos contributed $5.66 billion in tax revenue to state and local government (See Table 2). The revenue form those taxes benefits education, public safety, economic development and infrastructure improvements, among other state and local programs (AGA, 2009b). 98-394 觀休管系-李瑾玲 教專研 98P-031 The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau Table 2. 2008 Commercial Casino Tax Revenue Rank State 2008 Tax Revenue (Million US $ ) 1 Nevada $924.5 2 Indiana $838.2 3 Pennsylvania $766.6 4 Louisiana $626.3 5 Illinois $566.8 6 Missouri $442.8 7 New Jersey $426.8 8 Mississippi $326.9 9 Iowa $324.0 10 Michigan $321.6 11 Colorado $88.4 12 South Dakota $15.4 Total $56.6 billion Source:State Gaming Regulatory Agencies (2009,4) According to the data of American Gaming Association, Las Vegas Strip is ranked top one among the top 20 U.S. casino markets by annual revenue(See Table 3). Table 3. 2008 Top 20 U.S. Casino Markets by Annual Revenue Rank Casino Market 2008 Annual Revenues (billion) 1 Las Vegas Strip $61.21 2 Atlantic City, N.J. $45.45 3 Chicagoland, Ind./Ill. $22.51 4 Connecticut $15.71 5 Detroit $13.60 6 Tunica/Lula, Miss. $11.05 7 St. Louis, Mo./Ill. $10.31 8 Biloxi, Miss. $9.5127 9 Shreveport, La. $8.4761 10 Boulder Strip, Nev. $8.3660 11 Reno/Sparks, Nev. $7.7938 12 Kansas City, Mo.(includes St. $7.5622 Joseph) 13 Lawrenceburg/Rising $7.3165 Sun/Belterra, Ind. 14 New Orleans, La. $7.0137 15 Lake Charles, La. $6.5123 16 Downtown Las Vegas, Nev. $5.8246 17 Laughlin, Nev. $5.7118 18 Black Hawk, Colo. $5.0869 19 Yonkers, N.Y. $4.8646 20 Council Bluffs, Iowa $4.6852 Source:The Innovation Group (2009,5) Since World War II, Las Vegas, Nevada, has been the fastest growing city in the United States. The city has the honor of being one of the most geographically isolated major cities in the continental United States. Los Angeles lies more than 270 miles, a 4-hour car ride to the southwest. Salt Lake City lies 420 miles to the north; and the Phoenix is 290 miles to the south. During its slightly more than half a century of existence, the Las Vegas Strip had nine of the world’s ten largest hotels at the end of the year 2000 (Douglass & Raento, 2004). In 98-395 觀休管系-李瑾玲 教專研 98P-031 The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau addition, Las Vegas boasted the largest hotel room inventory of any city in the world, with 140,529 in 2008. Nevertheless, it enjoyed 89.8% hotel room occupancy versus the 60.4% national average. In 2008, the city hosted more than 37 million tourists, making it north America’s favored destination (LVCVA, 2009). It also brought the huge gaming revenues each year (See Table 4). Table 4. The Ten Year Statistics of Las Vegas (Year1998 to 2008) Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Visitor Volume 30,605,128 33,809,134 35,849,691 35,017,317 35,071,504 35,540,126 37,388,781 38,566,717 38,914,889 39,196,761 37,481,552 Clark County Gaming Revenue 6,346,958,000 7,210,700,000 7,671,252,000 7,636,547,000 7,630,562,000 7,830,856,000 8,711,426,000 9,717,322,000 10,630,387,000 10,868,464,000 9,796,970,000 Source:Las Vegas Convention and Visitors Authority (2009,2) The Gaming Industry Issues in Macau In the west, jurisdictions without the Gaming Industry are very much the exception, and in Asia the floodgates of governmental investigation, discussion and debate will only hold for so long (McCartney, 2005). In Asia, the Gaming Industry in Macau was liberalized in 2002. Since then, the gaming business volume has been growing at a rather unexpected and spectacular rate. Macao is part of the territory of China, it is situated at the Pearl River Delta on the southeast coast of Mainland China, 60 km southwest of Hong Kong (DSEC, 2009). Macau has many unique and contrasting cultural characteristics. It was the first port open to the West over 400 years ago. Its people have been living in an environment blended with eastern and western cultures harmoniously for centuries. Macau is in exhibiting the co-existence of gaming and cultural attractions. It tends to attract gamblers and tourists form places all over the world to enjoy the exotic excitement in casinos as well as to visit it many historic relics (Koo, 2006). Table 5. Overview of Principal Indicators: $billion MOP Indicators Total receipts Receipts from gaming and other services Gross value added 2007 85.22 84.98 2008 111.17 111.01 Rate of change(%) 30.5 30.6 51.28 67.18 31.0 Source: The Statistics and Census Service (DSEC, 2009) Gaming industry has a long history in Macao and it was first legalised in mid 19th century. Entering the 21st century, the gaming industry has developed a very close relation with the tourism industry and become a pillar of Macao's economy (MSGP, 2009a). Information from the Statistics and Census Service (See Table 5) indicated that total receipts of the gaming sector reached MOP 111.17 billion in 2008, of which the receipts from gaming services amounted to 98-396 觀休管系-李瑾玲 教專研 98P-031 The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau MOP 111.01 billion, an increase of 30% compared with 2007. Gross value added, a measure of the sector’s contribution to the economy, rose by 31% to MOP 67.18 billion. In 2008, the gaming industry’s total gross revenue reached a record high figure of 109.83 billion MOP constituting the vast majority of government income (DSEC, 2009). After having a gaming monopoly of over 60 years, the Macao Government chose to open one of the world’s most lucrative gaming concessions to international organizations. By liberalizing the industry, the Government has also set in motion for further tourism redevelopment. The Wynn Resorts and The Venetian are particularly bringing in the Las Vegas experience and the massive development plans for Macao and make it become Las Vegas in Asia (McCartney, 2005). Some key indicator of Macau is growing each year (Table 6). Table 6. Macao in Figures (Year 2005 to 2007) Item/Year 2005 2006 Visitor arrivals (1,000) 18,711.2 21,998.1 Hotel occupancy rate% 70.9 72.2 Available guest rooms (no.) 10,832 12,978 Average length of stay of visitors 1.1 1.1 (day) Per-capita spending of visitors 1,523 1,610 (MOP) Casino 17 24 Gaming table 1,388 2,762 Slot machine 3,421 6,546 Gross gaming revenue excluding 47,134 57,521 gratuities (million MOP) 2007 26,993.0 77.2 16,148 1.1 1,637 28 4,375 13,267 83,847 Source: Macau SAR Government Portal (2009b) In the recent year, the gaming revenue of Macau has grown substantially. Although, Macao has merely 541,200 residents in population; nevertheless, the per capita GDP has reached to USD 39,377 in the 2008 (Table 7). Table 7. Key Indicator of Gaming Industry in Macau (Year2001 to 2006) 2004 2005 2006 2007 2008 Item/Year Total Gaming Revenue 44.07 48.14 58.86 85.22 111.17 Gaming Revenue Growth Rate % 43.0 9.25 22.30 44.78 30.50 Per capita GDP (USD) 22,434 24,169 28,463 35,537 39,377 Gaming Tax Revenue 15.20 17.32 20.75 30.95 41.90 Source: The Statistics and Census Service (Unite: $billion MOP)(2009) In 2002, the MSAR Government liberalised the gaming industry, bringing new momentum to Macao’s gaming sector and the entire economy. Through appropriate competition and modern operating and management models, the Government also expected the new arrangements to create more job opportunities. Before the Handover, the gaming industry’s maximum annual gross revenue was 17.78 billion patacas (US$2.22 billion). In 2008, the industry’s total gross revenue increased to 109.83 billion patacas (US$13.73 billion), ranking No. 1 in the world (Table 8). The sector contributed 41.9 billion patacas (US$5.24 billion) in direct tax, representing 73 percent of Macao’s total public finances that year (MSGP, 2009a). 98-397 觀休管系-李瑾玲 教專研 98P-031 Year 2002 2003 2004 2005 2006 2007 2008 2009 (First three quarters) The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau Table 8. Changes in the Scale of the Gaming Industry 2002-2009 Gaming Industry’s No. of Employees in No. of No. of Slot No. of Tables Total Gross the Gaming Industry Casinos Machines (at Year-end) Revenue (MOP (at Year-end) (at Year-end) (at Year-end) billion) 23.5 11 339 808 -30.32 11 424 814 -15 1,092 2,254 43.51 21,264 17 1,388 3,421 47.13 26,118 24 2,762 6,546 57.52 36,412 28 4,375 13,267 83.85 44,743 31 4,017 11,856 109.83 43,835 (End of June 33 4,610 14,175 83.91 2009) 43,975 Source: Macau SAR Government Portal (2009a) After a few years of rapid development, the MSAR Government found it was time to review and evaluate the present and future development of the gaming industry. On 22 April 2008, the Chief Executive announced that no new gaming licences would be granted in the near future, as a means of regulating the operations of the industry. In order to develop a healthy and sustainable gaming industry, the Government continued to monitor and supervise the activities of concessionaires, strictly control the scale of the gaming industry, and promote responsible gaming (MSGP, 2009a). Nonetheless, China has continued to open its outbound tourism market beyond that of initially Macao and Hong Kong; hence, a future tourism development consideration could be on the package products to offer from Macao. Moreover, the success of Macau experience has inspired the interest of developing the Gaming Industry. Besides Macau, there are legal casinos in South Korea and Malaysia. Although, Singapore has strict laws, they have announced they are building two mega casinos and planned to open by the year of 2009. Other Asia countries such as Japan, Thailand, Vietnams, and Dubai also expressed their great interest to get involved the gaming business. How Macao repositioned and be identified to maintain its competitive edge in the long run will be a significant concern. The Global Gaming Industry Trend In 2009, the global casinos and gaming sector is forecast to have a value of $354.9 billion, and increase of 26.4% since 2004 (See Table 9). The compound annual growth rate (CAGR) of the sector in the period 2004-2009 is predicted to be 4.8% (Datamonitor, 2009). Though, as more states in the US legalized casinos to generate tax revenues, casino saturation also slowly set in. Some researchers warned that casinos that fail to build anew, expand, remodel, and diversify the total attractions packages to meet the new industry standards will become no longer worth a visit (McCartney, 2005). The successful story of Las Vegas is unique. Some researchers think Las Vegas experience can not be used in all types of region. For example, Las Vegas has broad hinterland to develop; it makes it a great condition to build the mega resort. In addition, it is an isolate city surrounding by the dessert, all the entertaining programs can be designed inside the building and tourist can enjoy all kinds of services without going outside. Moreover, the purchasing power is higher than certain region. That is, the average income of Las Vegas 98-398 觀休管系-李瑾玲 教專研 98P-031 The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau tourists is much higher than certain area. All these factors indicate that the strategy will be different under different situations and circumstances (Tseng, 2006). Table 9. Global Casinos & Gaming Sector Value Forecast: $billion USD (Year2004 to 2009) Year 2004 2005 2006 2007 2008 2009 CAGR, 2004-2009 $billion 280.8 296.9 312.8 328.3 343.9 354.9 % Growth 6.00% 5.80% 5.30% 4.90% 4.80% 3.20% 4.8% Source: Datamonitor (2009) In the conceptual stages of casino development, it should focus on three major issues: scale of the industry, competition for gaming dollars and who should benefit. Despite the economic gains derived, it has not been easy for local residents. For example, after approval for limited stakes gaming in Central City and Black Hawk of Colorado, there are no grocery stores or gas stations in town (Long, 1995). It has been classified to “The Cannibalization”. We also can not ignore this kind of phenomenon. While the presence most of casinos brings well-pronounced and apparent economic benefits, there is also a need to remain aware of the social and environmental impacts of such developments, which will ultimately influence resident attitudes (McCartney, 2005). Some of the policy issues most frequently discussed in the social and cultural arena center around the prevention and solution of problem gambling, crime rate, bankruptcy, divorce, and destruction of cultural resources (Chang, 2002). To build long-term success it will be important to monitor a community’s ability to handle issues, to focus on the health and integrity of the Gambling Industry and the value of the experience to the visitors (McCartney, 2005). Research Method The main focus of this paper is on the largest and fastest growing segment of the Asia gaming economy—Casino Gaming Industry. It will provide an overview of the various venues where casino gaming takes place, including Las Vegas, Nevada and Macao. The result of analysis will provide a look at the future development of Casino Gaming Industry in Taiwan. The purpose of this study is to explore and determine the accurate direction of developing the casino Gaming Industry market in Taiwan, according to the successful experiences from Las Vegas and Macau. With the analysis of the literatures and expert interviews, the results will show the required six factors of developing gaming business. 98-399 觀休管系-李瑾玲 教專研 98P-031 The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau Table 10. The Important Factors of Developing Gaming Industry in Taiwan Factors Geography Environment Accessibility Human Resource Tourism Resource Tourist Resource Social Aspect Conditions 1. Geography isolation 2. Broad hinterland 3. Development potential 1. Big carrying capacity airport 2. Well-established infrastructure 3. Integrated transportation network 4. Sufficient parking space 1.Well-trained employee 2.Sufficient work force 1.Accommondation and dining 2.Extending scenic spots 1.Consumer spending/ purchasing power 2.Stable tourist source 1.Examine problem gambling trends 2.Public security 3.Societal support Findings From the aspect of geography environment, the geography isolation is derived from the point of view of any negative aspects can be regulated more easily when gambling activity is confined to a restricted geographical location. According to the Taiwan Government plans, the only areas qualifying for casinos are Kinmen, Matsu, Penghu, Green Island and Orchid Island in Taitung County, and Liuchiu in Pington County. Having broad hinterland and development potential are also important factors for developing gaming industry. For example, the Penghu islands covers approximately 130 square kilometers of land area, its rich historical and cultural assets as well as its ecological resources has attracted many US-based or Las Vegas-based magnates’ attention. In the accessibility aspect, big carrying capacity airport, well-established infrastructure, and integrated transportation network are important factors. Questions about Penghu’s ability to convert itself into a major tourist destination always existed. It sits in the Taiwan Strait between Taiwan and China and is about 45 minutes from Taipei by plane. Some of the main challenges relate to transportation facilities, the small size of the airports and harbors, and the limited number of planes and boats serving them. Other problems are the shortage of electrical power, water, waste treatment facilities, and the transportation network. Las Vegas, for instance, is one of the most geographically isolated major cities in the continental United States. However, its convenient transportation network attracts thousands of tourists from everywhere in the world from time to time. In the human resource aspect, well-trained employee and sufficient work force are important. Casino is a labor-intensive industry and demands a large and various work forces. To smoothly run casinos, evaluating the supply and demand of local work force in advance is important. For example, the gaming business volume in Macau has been growing at a rather unexpected rate. It has caused the shortage of qualified labor. This labor shortage problem and trend result inevitably in the deterioration of the quality of new recruits. In the tourism resource aspect, accommodation and dining, and the extending scenic spots 98-400 觀休管系-李瑾玲 教專研 98P-031 The Requirements of Developing Gaming Industry in Taiwan: from the Experience of Las Vegas and Macau are important factors. The nature beauty scene of Penghu, such as azure skies, sandy beaches, magnificent basalt columns, limpid waters filled with diverse sea life, exotic vegetation, and relax atmosphere has become a selected tourism development destination of Taiwan Government. Furthermore, the island is under the impression that the inadequate quality and quantity of the tourist hotels, restaurants, and recreational facilities; some of the private sector including domestic and overseas business groups, has to undertake such major investment projects and built some five-star tourist hotel in Penghu because of the legalization of casinos. In the tourist resource aspect, consumer spending/purchasing power, and stable tourist source are important factors. Penghu was trying to be the next Macao by building a casino town to lure Chinese tourist. However, Macau is just a short boat ride or flight from southern China and Hong Kong, attracting the key gambling customers in the region-Chinese citizens. If Penghu or any parts of Taiwan become casino town some day, it will need to build casinos on a massive scale because of the laggard development and market share. In the social aspect, examine problem gambling trends, public security, and societal support are the important factors. Taiwan already has vast pent-up demand from illegal gambling which would support the casino industry. Clearly, there is a huge amount of unaccounted economic losses from underground gambling; the Taiwan government could turn this around and legalize gambling or make it a formal economic activity. In addition, a successful casino makes its customers feel secure from danger. Hence, prevention of crime, the number of police, and training program for security persons should be assessed and managed. Conclusion It is not necessarily the case to say that for those whom are most passionate about gambling are the Chinese and Southeast Asians. Nonetheless, no one will dispute that you will see groups of Chinese at all the world’s famous gambling casinos. Although there is no legal casino in Taiwan, nevertheless, a number of foreign gambling centers like Las Vegas, Macau, and Korea have set up offices in Taiwan to try to tap into the extravagance of Taiwan tourists who enjoy gambling. The Taiwanese government has revoked a long-standing antigambling law and allowed the building of casinos in remote counties to help stimulate the economies. It would be done by seeking public approval prior opening the market, however, the first residents’ referendum to build Taiwan’s first casino has been rejected With many Asia countries are planning or undergoing the gaming business; in order for the Taiwan to catch the wave and profit from the market share earlier, its Government should continue to pay attention to the trend of developing Gaming Industry and set in motion without further ado. Even though, the reward can be great, but so are the risks. The Taiwan government and communities must be vigilant to plan it, and not to become addicted to it. Even though, the residents of Penghu have voted down to a proposal to build Taiwan’s first casino, the Taiwan government should reconsider if the policy of legalizing casino gambling to boost the economy of remote islands is appropriate. According to the findings of this study, Penghu might not be an appropriate place to develop the gaming business due to too many limits on accessibility, human resource, social aspect, etc., these reasons also apply to other islands and counties. Additionally, the rare human resource of gaming industry in Taiwan is a fact that can’t be disputed; the labor shortage problem and trend are a crucial issue and can’t be ignored. To have people trained after the casino opening would recommit the same error as Macau. 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