Turning tides

Throughout The Innovation Group’s history, we have helped our clients look at numerous gaming development opportunities in the Caribbean. Interestingly, many of these developments have yet to come to fruition and when compared to our work in the domestic US, there is a vast difference in the ratio of that outcome. There are many reasons why gaming-related development in the Caribbean, especially from US-based operators and developers, has remained minimal – everything from natural disasters to funding issues for emerging markets. Perhaps the most common reason is that many of our clients simply had higher priorities in their development pipelines. The tide may be turning, however, as a confluence of trends make us consider whether the Caribbean is the next, great, land-based opportunity for the gaming industry.

Trending Upwards

While few markets were hit harder than the Caribbean from the abrupt halt of tourism during the Covid-19 pandemic, some Caribbean markets are seeing strong recoveries in arrivals and many Caribbean countries are looking for creative ways to grow tourism arrivals to pre-Covid levels and beyond. For example, many countries have enacted “work-from-home” visas to encourage remote workers to travel to the islands and work remotely. Many island nations are hopeful these infrastructure improvements and favorable incentives will attract developers and their investment dollars. It is well documented that major casino developments can generate incremental increases in tourism, which put gaming resort developers in a favorable light for Caribbean governments.

Turning to stateside trends with positive implications for the Caribbean, the first is the growing number of direct flights to Caribbean locales, Covid-19 impacts notwithstanding. Not only is the number of direct flights to the Caribbean growing (with some destinations having 20 or more direct arrival flights per week from the US), the number of domestic airports with direct flights is growing as well. The continued westward expansion of direct flights opens up the Caribbean trip as a realistic, high-value-gamer reward to an increasing number of domestic operators.

As the number of flights to the Caribbean from the US increases, land-based gaming development opportunities stateside continue to dwindle. Where development opportunities do exist, they often result in more competition, leaving existing and new operators to compete for pieces of a pie that is only slightly larger. Offering a Caribbean outpost as a reward for an operator’s highest value players – and being able to own the player experience – could prove to be a key competitive differentiator for increasingly competitive domestic markets like Chicagoland.

Early Adopters

There have been a number of domestic developers and operators diving headfirst into Caribbean waters in recent years. One such company is Wind Creek Hospitality of the Poarch Band of Creek Indians. According to Arthur Mothershed, Executive Vice President of Business Development and Government Relations, and Olena Nall, Director of Business Development, Wind Creek began looking at development and acquisition opportunities outside of its home state of Alabama as early as 2012.

It wasn’t until several years later that the Caribbean market came on their radar. “We had been sending players to the Caribbean for years and were looking for ways to diversify our land-based gaming revenue stream,” explains Mothershed. They were made aware of two casino resorts looking to sell – one in Aruba and the other in Curaçao – and closed on the acquisition of both properties in May 2017. “The properties were making money prior to our acquisitions and we were able to plan renovations around seasonal tourism lows,” says Mothershed. Complimentary trips to Aruba and Curaçao are now published benefits for Wind Creek’s highest player tiers. As far as player behavior at the Caribbean properties, Mothershed offers a straightforward summary, “when the sun shines, they’re in the sand… when the sun goes down, they still go to the casino.”

Key Caribbean Considerations

There are a number of factors developers and operators must consider when assessing Caribbean market opportunities. First, there is a different development equation for Caribbean resorts compared to domestic US properties. While non-gaming amenities can be subsidized by significant gaming revenues at many US resorts, the Caribbean casino is very much an amenity versus the leading development component. Even the highest-grossing Caribbean casinos – the Atlantis and Baha Mar, which generated a combined gross gaming revenue of more than $260m in 2019 – are still not the primary drivers of resort revenue and visitation. It’s worth noting that the US development equation may be transforming to something that’s closer to that of the Caribbean, with more and more of our domestic clients engaging us for non-gaming expansion assessments and more Vegas-like (non-gaming driven) development visions.

Developers and operators must also consider the goals of host nations. Many Caribbean nations do not want casino gaming as their respective face of tourism. A more nuanced development and marketing program, placing less emphasis on gaming is often necessary.

There are other important development options to weigh, such as whether to pursue a greenfield development or enter the market via acquisition, such as Wind Creek’s strategic decision. As for operations, an operator must consider whether to be the sole resort operator or take a specialist’s approach and focus on gaming only. Finally, developers and investors would be wise not to ignore the countries with limited gaming or those that have yet to legalize or implement casino gaming. It may be easy to focus on the proven Caribbean gaming markets of the Bahamas, Dominican Republic and Puerto Rico, with historically high levels of tourist arrivals, numerous casinos and market-leading gaming revenue figures. As this article has touched upon, however, many Caribbean countries are looking for new ways to fuel tourism growth and islands that are less apparent gaming destinations could create equally compelling opportunities. As the world emerges from Covid-19 and travelers reengage with their domestic and international travel habits, tourism will continue to recover and grow beyond pre-pandemic levels, including tourism to the Caribbean. For US land-based gaming developers and operators, the Caribbean market presents opportunities to create a competitive advantage within your home domestic markets, diversify your geographical revenue exposure and drive brand awareness on an international scale. 

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