In the United States, we’ve all been witness to a major shift in the gaming industry from casino win as the primary source of revenue to amenities taking that lead. The development of more diverse resort offerings—luxury hotel rooms, spas, a wide variety of food and beverage outlets, entertainment venues, and retail shopping—reflect this shift. Amenities have gone from simply ancillary to absolutely necessary. But finding the right entertainment complements to gaming can be a struggle for even the most experienced and seasoned operator. This raises a question: Should we start to look at proven recreational and entertainment complements that are already in place, and then try to make gaming fit into their established tourism palette? Could the Caribbean be the next place to look?
In 2007 more than 18 million tourists visited the Caribbean. Yet of the top five most heavily visited Caribbean destinations, only one, the Bahamas, has full-scale, American-style casinos. Gaming in the Caribbean was forever changed in 1994, when Kerzner International Ltd. purchased Paradise Island and the iconic Atlantis opened for business. Atlantis has shown that a resort of this nature can be highly successful in the Caribbean market. While the Atlantis is on Paradise Island, it would likely have been equally successful placed on any Caribbean island with strong access and close proximity to the United States. But, to this day, no other developments have been built that can truly compete with it. This is set to change. Many Caribbean governments have been contemplating opening their doors to large casino developments, and now some are getting close to actually doing so.
More opportunities for casino development are emerging than ever before in the Caribbean. Governments are becoming increasingly aware of the expansion of gaming in major feeder markets such as the United States and Europe, of the widespread demand for it, and of the potential for making themselves more competitive by including gaming in their visitor offerings. Countries such as St. Lucia, Guyana, Turks and Caicos, and Jamaica have either passed pro-casino legislation or are considering opening up to casino development. They are warming to the idea after seeing not only the success of Atlantis, but the ability of hundreds of jurisdictions to operate casinos efficiently and without high levels of corruption or negative effects on their resident populations. The potential for increasing the attractiveness of one’s island destination, and bringing in more tourists and more tourist spending, are making the idea of casinos not only palatable, but desirable as well.
Recent cutbacks in airline capacity are tightening the competitive environment—and alarming island governments as well as the Caribbean Tourism Organization. Those islands that have already or are in the process of making investments in their infrastructure will be better poised to compete for this select air service. And, like we are seeing in the United States with domestic capacity cuts, airfares will surely climb, further increasing the competition for tourist dollars. This situation with U.S.-based air carriers could also have an impact on the makeup of visitation to the islands, as European airlines such as Virgin Atlantic and Iberia Airlines increase their services to the Caribbean.
Put simply, many Caribbean governments are starting to view gaming as a competitive advantage in luring visitors to their tourism-based economies.
Within the past few months, the near decade-long debate regarding casino gambling in Jamaica appears to have been resolved in favor of expanded gaming. Prime Minister Bruce Golding announced in April that the government intended to award two licenses to investors planning comprehensive destination gaming resorts on the island. Since then, the backers of the planned Celebration Jamaica and Harmony Cove projects have been identified as the intended recipients of those licenses and have announced the impressive details of their extensive development intentions. If built out as intended, both projects will easily surpass the size and scale of any other gaming property existing or planned for in the region. The market for gaming in Jamaica could be huge, as the island already receives 300,000 more visitors per year than the Bahamas, which supports four casinos with nearly 2,000 slot machines and well over 150 table games.
With this announcement and aggressive vision, Jamaica is setting itself apart from its many island neighbors that have yet to move past the inevitable debate that always surrounds the “casino question.” As is typically the case, supporters of the expanded gaming efforts in Jamaica cited job growth and tax revenues that would be used to help fund health, education and security investments as justification for approving the casino licenses. Opponents, including religious leaders and other concerned citizens, opposed the measure based upon the perceived social impacts of gaming. The debate is a common one for governments whenever the subject of casinos is raised. In this case, the revenue and employment potential proved too appealing for Jamaica to ignore.
It is easy to understand why the financial expectations of these two gaming resorts have the Jamaican community buzzing. The Palmyra Resort, which will operate Celebration Jamaica, and the Tavistock Group, which will operate the Harmony Cove property upon licensing, have each been tasked to provide a minimum investment of $1.5 billion and the construction of no less than 1,000 hotel rooms. According to the Jamaica Information Service website operated by the government of Jamaica, the Celebration Jamaica project will be a $2.1 billion development comprised of 2,000 rooms, casino, spa, golf courses, fine dining, tennis, and other entertainment and recreational amenities. The government cites 12,000 new jobs in the Montego Bay area and the potential for some $13 million of annual revenue generated as a result of that project alone. The Harmony Cove project will also have a major impact on the local and regional economy, projecting 8,500 rooms as a key component of its mixed-use gaming destination.
The Caribbean nations that are considering casinos are doing so cautiously and deliberately. Legislation is being drafted along the United States model: tightly regulated, with little room for corruption, and responsive to the concerns of religious groups. Tax rates are expected to be low. These governments are also recognizing the importance of getting their casino developments right. In this highly competitive market, new properties will need to make a big splash in order to attract leisure travelers and gamers with so many options. Many are concluding that this would require a U.S.-sized casino, complete with a big-name brand or affiliation with a major casino operator to help boost visitation and insulate the casino from market uncertainties, as well as to provide a degree of validity to the project. This potential has not gone unnoticed by major operators, many of which would relish the ability to send players to a warm-weather location as a comp or to offer their players another location to redeem their players’ club points.
As talk increases of Caribbean gaming expansion and competition for U.S.-based gaming dollars rises, especially in Northeast markets such as Philadelphia, New Jersey and New York, gaming operators are taking note of the possibilities in the islands. And with the recently announced developments, it sounds as if Atlantis could be facing some new competition. Could this new gaming supply also cut into gaming revenues at resorts with only small amenity casinos?
In light of the major hurricanes that have struck the Caribbean and the United States in the last few years, including the devastating effects that Hurricane Katrina wrought on Mississippi Gulf Coast casinos, it is only natural to be concerned about developing large-scale gaming operations on the islands. But this fear may be worse than the reality. According to published reports, Bob Sheets, former director of the National Hurricane Center, has said that the risk of being hit by a hurricane in Miami is “higher than anywhere in the Caribbean.” And while hurricane seasons such as 2004 inflicted significant damage on Grenada, Jamaica and the Cayman Islands, these tourist destinations have largely rebounded from their losses. Further, changes in building codes and advances in designing “hurricane-proof” structures that can channel winds around them to avoid major damage will help mitigate the effects of future hurricanes on the islands.
While great potential exists for those considering entrance to the Caribbean gaming arena, caution should still be taken. The collapse of Harrah’s Baha Mar project this past March due to funding issues and deteriorating debt markets, as well as public land transfer difficulties, was a wake-up call for those setting their sights on the Caribbean. It also opened up opportunities for islands other than the Bahamas to make a big splash with their own gaming developments. Jamaica has recently led this charge, looking internationally for developers and operators to help strengthen its position as a leader in tourism and emerge as a leader in resort-style casino gaming. We will all be watching closely to see how the developments under way in Jamaica help redirect the Caribbean spotlight, and if they will indeed jump start major gaming investment throughout the entire region.
Suzanne Perilloux Leckert is the Director of Gaming and Development Analysis for The Innovation Group. Based in the company’s New Orleans office, she specializes in market assessments and economic analysis for projects throughout the Gulf Coast, the Caribbean and Latin/Central America. She can be reached at (504) 523-0888 or via www.theinnovationgroup.com.
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