SOCHI GAMING ZONE
Investment and ROI – Challenges and Opportunities
Storm International
• We are a global developer and operator of casinos, integrated casino
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resorts and slot machine complexes.
Established in 1992.
Wide geography of operations: Russia, Germany, Mexico, Romania,
Byelorussia, Georgia, Armenia and future potential development
opportunities including Batumi, on-line casinos, The Philippines,
Kazakhstan and Dushanbe, Tajikistan.
Before the gaming law change in 2009 Storm International had, in
cooperation with our Russian partners 5 casinos; Shangri La, Jazz
Town, Udarnik, New York and Carnival, plus Super Slots which
operated 25 slot halls in Moscow and Nizhny Novgorod.
Storm International today has:
• Shangri La casinos in Minsk, Tbilisi and Yerevan,
• Storm Casinos slot-clubs in Germany,
• Two Hollywood Entertainment centers with a total of 1,000 slot-machines in
Monterrey, Mexico, (expanding to 2,000 machines in 2015).
• Three Shalimar slot-clubs in Romania and one in Byelorussia.
Storm International
Storm International
The Idea of Gaming Zones
• There are very few examples of the successful implementation
of gaming zones; in fact, there are only two – Las Vegas and
Macao; and Las Vegas gaming revenues are in minus, while
non-gaming revenues are profitable.
• Other projects either do not work at all, or reach the level of
development far below that initially planned.
• Five years since the adoption of the current gaming law in
Russia, out of the four gaming zones:
• Only one has two small casinos (Azov), which do make a small profit;
• Two will have casinos opened only this year – one each in Vladivostok
and Altai, where Vladivostok project is $500m+ investment;
• The fourth is still at the stage of project development (Kaliningrad).
Successful Casino Business
• Proximity to the centers of population (big cities);
• Stable regional economy;
• Stable and predictable legal base;
• Developed infrastructure – transport, energy, housing,
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etc.;
Developed and attractive tourism infrastructure;
Proper and controlled gaming legislation;
Marketing and advertising;
Easy visa requirements;
Realistic amount of gaming licenses.
Sochi Gaming Zone Location
2nd Possible Location
City center
~40 km
~25 km
1st Possible Location
Possible Location #1
• Olympic Park Media Center:
• Building size – 158 000 sq.m;
• Latest engineering solutions;
• Close to airport, roads, railroad, own parking;
• Surrounded only by Olympic buildings.
Possible Location #2
• Gornaya Karusel Ski-Resort (Krasnaya Polyana):
• 600 000 sq.m of residential and commercial buildings (Gorky Gorod);
• 5* hotels including international chains (Marriott, Rixos);
• Road, railroad;
• 15 km of ski tracks (planned to be expanded to 30 km);
• “After the Olympic Games Gorky Gorod turned into a deser. For
Sberbank, which owns 92% of the property, a successful gaming zone
is the only potential chance to save the project” (Vedomosti, 04-072014).
Sochi Gaming Zone Pros
• Developed infrastructure, including:
• International airport, international port, railroad, roads, power
supply;
• 5* hotels and about 50 thousand hotel rooms in total, (all Sochi
region);
• Sport and convention facilities;
• Variety of tourist attractions;
• One of Russia’s top tourist destinations;
• Internationally famous due to Winter Olympics and F1
Grand Prix;
• Located close to Turkey, Iran and UAE;
• Turkish citizens do not need visa to stay up to 30 days.
Sochi Gaming Zone Cons
• Massive illegal gaming business all over Russia;
• Proposed locations are remote from city center and major
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tourist areas;
Undeveloped legal base – no defined gaming law;
Competition with neighboring countries with developed
gaming business (European Union, Byelorussia,
Georgia);
Visa requirements for some countries, which don’t have
legal gaming business (Iran, UAE);
Climate – seasonable business;
Despite all the investment in Sochi, 2014 had far from the
expected level of tourism (officially 2.5m tourists for the
first 8 months compared to an expected 4m).
Risks and Challenges
• Lack of quality players (you would have to fly them all in,
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or at least most of them);
Unstable legal base and possible tax rate changes;
Downturn in the Russian economy;
Rent costs;
Unworkable regulations;
Seasonal business;
Corruption.
Best Case Scenario
• Casinos are allowed in Sochi center;
• Casinos in Sochi center are located only in 5* hotels;
• Reduced amount of licenses (not more than 4/5 for the
next 10 years);
• In this case prognosis for ROI is positive:
• One casino (1500-2000 sq.m) preliminary initial investment:
• Construction and equipment: $3m;
• Cash reserve: $2m;
• Promotion: $1m;
• 1 year of non-profit operation: $2-3m;
• Total initial investment: $8-9m.
• ROI – 2-3 years.
Conclusion
• The gaming business (especially casinos) have their own
specific requirements:
• 24 hours, 7 days a week, all year round operation;
• Experienced, specialized and highly paid management;
• Non-traditional marketing with understanding of players’ needs;
• Relatively small target audience (2-5% of population) which is
mainly represented by a middle to wealthy class.
• Thus, properly established world-level casinos:
• Target middle to high income people;
• Only work effectively if located close to population and tourist
centers.
Conclusion
• If Sochi wants to become the Russian “Monaco”, then the
only way is to have casinos in the city center in 5* hotels.
This will result in:
• Better business development;
• Tourism growth;
• Higher city budget income;
• Stable and long-term employment for gaming employees
• Additional benefits to non-gaming citizens (taxi drivers, uniform
makers, F&B suppliers etc., entertainment etc.).
• Locating a gaming zone in an area outside the city center
will result in markedly less business (and therefore less
taxes), lower employment and quite possibly an
unprofitable enterprise, especially in the mountains, which
is seasonally based.
Thank you!
www.storminternational.com
info@stormbv.com