Tourism and casinos: Can we gamble our way to prosperity?

Tourism and casinos: Can we gamble our way to prosperity?
Jacob RobinsonDecember 7, 2020

Last month Queensland Premier Campbell Newman called for expressions of interest to develop a major integrated resort casino precinct within the Brisbane CBD. The vision is for a new casino surrounded by six star hotels and upmarket retail, restaurant, convention and entertainment facilities.

This will potentially be one of up to three integrated resort casino projects planned for Queensland. Deputy Premier Jeff Seeney suggested the developments would provide a significant boost to the state’s economy through the construction and future tourism that would flow.

The initiative comes on the back of plans by NSW for a AU$1.5 billion integrated resort casino project at Barangaroo in Sydney.

This project was awarded to James Packer’s Crown Limited and is to include a 60-storey tower, a six-star hotel and associated facilities. Writing in the Sydney Morning Herald, Michael Pascoe described the bidding process for the Barangaroo project as “flawed” and far from best practice stating that:

Crown successfully manipulated the system from the outset to avoid going to tender against the world’s top casino operators for Sydney’s second ‘VIP gaming facility’ licence.”

Rather than seek an outcome that would represent international best practice in integrated resort casinos, the NSW government has opted for a duopoly that favours local incumbents who influence large sections of the media.

So why the sudden rush into casino projects?

The key factor is the desire to achieve economic benefits. A study undertaken by the Allen Consulting Group in 2009 for the Australasian Casino Association painted a highly positive view of casinos. According to this report casinos are a major provider of tourism infrastructure and play a key role in the rejuvenation of urban environments.

Casinos are also major employers and they attract over one million international tourists to Australia each year. These same tourists spend around AU$5 billion during their visits. Individually each international casino visitor spends about twice as much as those who don’t visit casinos. In addition to these benefits, casinos provide substantial gaming taxes and licensing revenues to state governments.

A further report was undertaken by the Allen Consulting Group in 2012 into Crown’s proposal for the Barangaroo casino. This pointed to the need for such developments to help salvage the tourism sector.

Over the past 10 years Australia’s tourism sector has suffered due to the high dollar exchange rate. From a peak in 2000 at the time of the Sydney Olympics, Australia’s inbound tourism trade has steadily declined. While the number of Australians travelling overseas grew from 3.6 million to 7.4 million between 2001 and 2011, inbound tourism grew from 5 million to only 5.9 million in the same period.

Competing with Asia’s casino precincts

For many Australian state governments and their local casino operators the role model is Singapore. Two major integrated resort casinos have been developed at Marina Bay adjacent to the city’s CBD, and at Sentosa Island. At a cost of around AU$13 billion, these casinos opened their doors in 2010 and have been experiencing steady growth. Tourism revenues have reportedly grown by around 49% over the past three years. In 2011 tourism was contributing US$14.8 billion, or about 4% of Singapore’s GDP.

The Marina Bay Sands resort complex covers 15.5 hectares and has 581,400 square metres of floor space. Only 3% of this is devoted to the casino. There is a 55 storey triple tower luxury hotel surrounded by retail, restaurants, plus convention and entertainment facilities, operated by the Las Vegas Sands Corporation.

Other major integrated resort casino developments are planned for Macau, Vietnam and the Philippines. All of these will seek to take advantage of the rapidly expanding flow of tourists from China.

According to the Allen Consulting Group the number of outbound Chinese tourists has grown from 10.5 million people in 2000 to 57.4 million in 2010. It is expected to grow to around 100 million and be worth US$838 billion by 2020. However, combine the growth in Chinese tourists travelling to Australia with this heightened interest in casino projects and there may well be some trade-offs to consider.

Casinos demand a holistic approach to integrated tourism

Not surprisingly as a stand-alone concept, casinos attract a fair share of adverse commentary on their social, political and economic impacts. However, there is a growing literature on the economic benefits of casinos to national economies.

Research has shown a significant rise in the number of problem gamblers in Singapore since 2010, and police have noticed a sharp rise in crime relating to the presence of the casinos. Amongst these criminal activities are petty theft, cheating and prostitution.

Rosalind Stefanac writing in the Financial Post Magazine critically poses two questions. First, are the economic benefits from casinos sufficient reason to offset the potential for detrimental social impact? Second, is the casino a viable source of ongoing revenue for a community?

For Australia the economic development potential of integrated resort casino developments is significant. As Deloitte has reported, tourism is one of five “super growth” industries that Australia can potentially develop as part of a “post-resources boom” economy.

However, the success of developments such as Singapore’s casinos is due to the strategic vision that lies behind their design. As “integrated resorts” these casinos must emphasise more than just a venue for gambling.

The purpose of the integrated resort within an economic plan is to advance the economy, generate employment and attract export earnings. This means integrated resorts must have an appeal for hosting many types of tourism and be attractive to a great many gatherings, conventions and exhibitions of a scale that generates ongoing attraction.

According to Andrew McEvoy, Tourism Australia’s Managing Director:

… for success and long-term sustainability Australian tourism requires more than just effective marketing campaigns. It requires physical investment in tourism infrastructure, particularly hotel stock, as well as improved air links and increases in aviation capacity.

Infrastructure and planning are critical

For some the inclusion of a casino within the resort complex becomes problematic due to the concerns over problem gambling and crime. However, any major tourism development must involve the building of significant infrastructure and this must be paid for either by the government or industry.

Research has suggested a large scale systems engineering (LSSE) approach was critical to the development of that Singapore’s highly successful integrated resorts.

The focus of a successful tourist destination should be on the word “integrated” in an integrated resort casino. Singapore’s approach to its casino development was strategic and built upon a foundation that sought to deliver a strong economic benefit to the island state’s overall economy. Its vision was to “develop Singapore as a regional tourism hub”.

It is still too early to pass judgment on the nature of the casino developments being planned for Queensland. To date no Australian casino development has reached the same standards as that of Singapore, and none can be truly classified as representing integrated resort models. This is the case for Sydney’s Barangaroo development which does not appear to have been subject to the same level of scrutiny and global competitiveness that took place in Singapore.

Major casino developments of the type proposed for Queensland will attract significant international investment and have the potential to generate substantial returns to the local economy. However, they will also attract many critics and may have socially undesirable impacts if poorly managed.

Get things right and their impact on the economy, tourism and transport sectors and the enhancement of urban environments can be highly positive. Get things wrong and the outcome can be profoundly undesirable. Let’s hope the Queensland government gets it right.


Tim Mazzarol is Winthrop Professor, Entrepreneurship, Innovation, Marketing and Strategy at University of Western Australia

Tim Mazzarol receives funding from the Australian Research Council, CBH Ltd, Capricorn Society, Ravensdown, Co-operatives WA and the WA state government. He is also President of the Small Enterprise Association of Australia and New Zealand (SEAANZ), a not-for-profit organisation dedicated to the advancement of research, education, policy and practice for small to medium enterprises.

 Antoine Musu is DBA Candidate at University of Western Australia.

This article was originally published at The Conversation.

 


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