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Gaming Guru

Howard Stutz

What is the Russian for 'Sin City'?

6 May 2014

Somehow, “What happens in Crimea, stays in Crimea,” doesn’t seem like an appropriate catchphrase.

In April, a month after Russia forcibly annexed the Black Sea peninsula away from Ukraine, President Valdimir Putin said he wants to turn the territory into his own version of Las Vegas.

He wasn’t talking about replacing “Thunder From Down Under” with the “Shirtless Putin Dancers.”

Putin crusaded against gambling in 2006, leading to the closure of most Russian casinos and slot machine parlors. He called gambling a “dangerous addiction and a magnet for organized crime.”

Now, he wants to create a gambling zone in Crimea, complete with Las Vegas-style hotel-casinos.

The announcement was met with silence from gaming developers. In fact, most casino experts found the idea laughable.

Andrew Gellatly, who heads London-based editorial and gaming research firm, told Bloomberg News the plan will fail. Russian high rollers favor more luxurious gaming destinations such as London or Monaco. A former Soviet republic doesn’t fit the bill.

Also, infrastructure connecting Crimea to the Russian mainland is lacking.

Steve Gallaway, a partner of U.S.-based Gambling Market Advisors, told The Wall Street Journal that Crimea “has no value” as a casino destination. “Russians don’t go there on vacation.”

Russia in 2009 created four so-called “gaming zones” across the country where casinos could operate as a way to promote tourism. The idea was to attract Russian gamblers and international visitors. Crimea would be a fifth zone.

The first zone under development is in Vladivostok, an area best known for fish processing and heavy industry. The location, in Russia’s Pacific Coast Primorye region, didn’t initially attract the interest of U.S.-based casino companies.

Global Gaming Asset Management, a company headed by former Las Vegas Sands Corp. President Bill Weidner, had some initial talks with the government-run development group concerning Vladivostok. His team since has been hired to oversee the centerpiece hotel-casino complex of the $3.5 billion Baha Mar development in the Bahamas, which is scheduled to open in December.

Nassau weather is better at any time of year than the climate of eastern Russia.

Gaming in Russia has other issues as well.

During a talk at the downtown Las Vegas Mob Museum in 2012, an expert on Russian organized crime said Vladivostok is overrun by gangsters posing as legitimate business operators. Casino operators need to be cautious.

Still, Vladivostok drew interest. Cambodia-based NagaCorp began developing a casino there last year.

And Hong Kong businessman Lawrence Ho said last summer he would head a consortium planning to invest $630 million to build two hotel-casinos in Vladivostok.

In April, Ho’s Hong Kong-listed Summit Ascent Co. increased its consortium share to 60 percent, and the group as a whole increased its investment in Vladivostok to 85 percent of total cost.

The initial phase is expected to open by the end of the year with 120 hotel rooms and a casino with 65 table games and 800 slot machines.

Ho, who is ranked No. 657 on the world’s billionaire list by Forbes with a net worth of $2.7 billion, and Australian billionaire James Packer head Melco Crown Entertainment. The company operates casinos in Macau and is building a resort in the Philippines. Melco Crown is expected to bid on a casino project in Japan this year, if gaming is legalized.

Ho, 37, is the son of Hong Kong billionaire Stanley Ho, who held a monopoly on Macau’s casino market until the region was returned to China by Portugal. International law enforcement authorities have alleged for years that Stanley Ho’s casinos were influenced by Chinese organized crime triads.

Analysts say Lawrence Ho was simply looking to expand beyond Asia.

Vladivostok is adjacent to Northern China and is just a 2½-hour flight from Beijing.

Gaming Market Advisors told the Wall Street Journal that Vladivostok could collect as much as $1 billion annually in gaming revenue, a figure they still believe possible.

Political problems because of the Crimea situation could hurt the developing market.

Putin’s interest in turning Crimea into Las Vegas surfaced after the Russian leader nixed the idea of casinos in Sochi, the Black Sea resort that hosted the recent Winter Olympic Games.

Russia spent $50 billion to create Sochi’s sports venues, and government officials said gaming might be a way to keep the region financially viable following the Olympics.

Putin shot down the idea, saying that gaming would drive away Sochi’s traditional tourist base of middle-class Russian families with children.

He has no such fears over Crimea. Plus, the move would make the newly annexed region less dependent on Moscow for financial subsidies.

According to draft legislation submitted to the Russian Duma, a Crimea gambling zone wouldn’t require additional money from the federal budget.

Crimea’s new government would be allowed to have input over the location and size of the zone.

Still, Crimea has a way to go before we can call it “????? ??????.”

That’s Russian for Sin City.