Inside Asian Gaming

INSIDE ASIAN GAMING | October 2008 40 Feature the continent, much as the casinos of Las Vegas attract players from all over the globe. The company felt a need for help in two different areas. They had never marketed products to real tourist/destination players before, and as a government- dominated corporation they did not have access to the resources needed to build a property with enough space and amenities to attract those players. In 2004 HIT indicated its desire to work with a major outside operator to develop a Nova Gorica megaresort. Harrah’s Entertainment responded,and talks beganwith theworld’s biggest casino conglomerate. In 2005 HIT and Harrah’s signed an agreement to work together as they set forth the dimensions of the project. The two companies also involved the Slovenian government in discussions that endured for more than two years. Critical to the discussions were requests for changes in the gaming law. Early this year the desired changes seemed to have been endorsed by the policymakers. The tax on win was reduced considerably. It was to be set at 17.5 percent inclusive of all fees. Moreover, the government agreed that any VAT charges against the project would be credited to the 17.5 percent rate. The government also agreed to relax restrictions on foreign ownership to allow the partners a more equal share of control: 51 percent HIT and 49 percent Harrah’s. While on paper these decisions seemed to satisfy both partners, there were concerns about their practical implementation. Particularly vexing was the basic marketing plan to be executed. Harrah’s controls some 40 North American casinos, and most of these are located where drive-in populations constitute the bulk of the players. Harrah’s was especially attracted by the demographics of the immediate Nova Gorica region. They saw 8 million adults within a three-hour drive and 26 million but a few more hours away.They set their sights on using this population as a solid revenue base which could then support operations for growing a tourist/ destination market of players from more than 300 miles away. However,therewasawrenchintheworks. The immediate drive-in market constituted the essential (and current) customer base for both the Perla and Park casinos. Harrah’s marketing plan threatened to directly cannibalize HIT Group’s, and Slovenia’s, two main casinos. HIT countered by advocating a plan to market the new resort exclusively to tourists. Harrah’s felt that such a plan was very risky and would only work partially in the long run. Who would have the final say? There could be no agreement. The differences were too fundamental. Then difficulties arose regarding the parcel of land selected for the project. The land was in an undeveloped rural area approximately five miles north of Nova Gorica. The land was zoned for agricultural use. Local authorities suggested that the process of rezoning for commercial development could be lengthy, and they would not guarantee success at the end of the process. Moreover, the land was home to an endangered and protected species of frog.The partners had not formulated a plan for removal and protection of the creatures, and both partners realized that execution of such a plan would be very expensive. Initially, HIT and Harrah’s believed they had popular support for the project. After all, they were creating thousands of jobs for the region. But popular opposition was soon aroused. The Catholic Church was prominent among the opponents.A petition with 20,000 signatures opposing the casino was presented to Slovenian officials. The petition pointed out traffic problems, pollution concerns and fears that the casino would bring prostitution and other crime to the area. Opponents also pointed out that the employment picture was already good in the area, and the project would bring in many immigrants who would impose new burdens on social services. There were also voices of concern over having a major “Las Vegas”company in control of the casino.The depth of the opposition offered evidence that the project would be stalked even long after it was completed. Finally,there were competitive obstacles. Across the border in Venice, Casino di Venezia also shares much of Nova Gorica’s drive-in market, most of whom are Italians, and was not going to sit idly by and wait for a new competitive giant to gain a foothold in Slovenia.The property went into high gear to pre-empt any designs on its customers.While Carlo Pagan, CEO of Casino di Venezia, firmly stated that their new marketing plans were notaresultoftheproposedSlovenianproject, the new plans certainly could have been.The property came up with a plan to retain its traditional grandeur (the casino dates back to the 17th century) but reconfigure the product to become what will essentially be a slot machine hall with table gaming.Soon,as many as 800 machines will occupy the main floor.The casino is also developing its online capacities, which are aimed mostly at poker players. A satellite facility near the Venice Slovenia is a country of many natural wonders