Francisco Javier Vidal Caamaño on gambling business development in LatviaLast update: 19 September, 2017
What is specific about operating a gambling business in Latvia?
- The first thing that comes to my attention is the huge number of gaming venues and slot machines compared to the population of the country (a little bit more than 2 million people) and the number of tourist visits (roughly 2 million since 2014). Although the GDP per capita of the country is quite high, the relation between the size of the gaming offer and the amount of potential customers is quite tight and that creates a very competitive environment, so as a result the different players in the market have to be very aggressive on their marketing efforts to bring patrons to their premises. The bigger casinos differentiate themselves by leveraging the depth of their gaming options (more modern slots, table games, poker) and the quality of their venues while the slot parlours have basically the same products in all of them and base their results depending on the quality of their physical locations. Compared to other european land based markets, operating a gambling business in Latvia is much more competitive and stressful, because even the bigger premises do not have enough size to create a real difference with the smaller operators, the slot offer is very similar (everyone has the Novomatics, EGTs, IGTs, etc.) and the range of collateral services (Food and Beverages mainly) is very limited. Most probably, the land based sector will keep concentrating in the next few years, operators like Olympic will keep buying out smaller players, eliminating competitors and closing the market at the same time.
What could be more profitable in this country: land-based or an online casino?
- According to the figures that I have about GGR in 2016 for both land based products (circa 200 million Euros) and online (18.3 million), which line of business is going to be more profitable will depend on its definition (Ebitda/Income, ROIC, ROCE, etc.) and above all, the amount of competition in the foreseeable future on each area. Nowadays there are 7 online gaming licenses in Latvia, as long as this number does not increase or does it in a very limited way, profitability in terms of resources employed/invested is going to be higher on the online side. Once the platforms are up and running, the marginal cost of acquiring a new customer is very low on the online world, the maintenance and operation of physical premises is very expensive and full of inconvenients. In summary, although in terms of gaming revenues, the land based sector will be in the years to come, the one that will bring the lion share; the online sector will be much more efficient in the use of economic resources being more “profitable” as a result.
Are the rights of Latvian businessmen on the gambling market secured on a legislative level?
- I do think that Latvia has nowadays a strong gaming regulation, which is something quite remarkable for such a young country. Although in the 90s the gaming sector was left in Latvia to their own devices, and grew in quite an informal way; overtime the country has been able to control the indiscriminate proliferation of gaming facilities throughout its territory; which is not only necessary to protect gaming customers but at the same time a good guarantee for serious entrepreneurs and corporations of the sector to secure their investments. Since 2005, when the law that regulates gambling and lotteries was passed and after their latest additions/modifications, we can say that Latvia is a country that has made a very good effort to have a gaming sector in which operators know what to expect and their investments are protected on the legislative level. Another thing entirely different is to break into the Latvian market as a new player with so many strong operators already positioned, trying to add value and a differential proposal to the market, but that is the competitive environment, which I find really tough in this case.
How is the land-based and online casino in Latvia different from the other countries?
- In my opinion, one of the most significant differences between the Latvian gaming market and others in Europe is the fact, that all the online license holders have a land based license as well, and as a result; as technology keeps evolving, Latvian operators will be able to take full advantage of the omnichannel strategy, so Latvian casinos will be able to build a single customer view, a unique wallet, a multichannel CRM, and all those magnificent tools that will create a much more engaging customer experience, the only limit is the regulation, but I hope that the Latvian government will allow the gaming sector to benefit of any technological advances applicable to the industry. Another difference that we could mention is the concentration of the industry in a bunch of big size players, taking the biggest slices of the gaming tart, and I see that trend just going forward.
Among all countries you’ve worked in, which one could be considered as the friendliest towards gambling business?
- Most probably, the USA is the most sympathetic country that I have worked towards gambling; and as example of that, I still remember back on the late 90s when I was a dealer in the Luxor (Las Vegas) this situation in which a whole family approached the Black Jack Table and when I asked for the IDs, I saw that the youngest member of the family was turning 21 exactly that very same day, so as you can infer; they went to Las Vegas with that objective in mind, kind you are not a kid anymore; so lets go to Vegas and have fun in the casinos. Apart from that, gaming was first legalized in Nevada in 1931, its being a long time ago, so both legislation and attitude towards gaming have had time to evolve in synch; and the American citizens have seen that gaming when properly regulated and controlled is just another form of entertainment for adults, both socially and culturally acceptable. In the context of Latin America, most probably Panama and Peru are two of the friendliest markets of the region; with a very strong legal framework in place and a long time tradition of gambling in their populations.
What are the benefits of Sortis & Golden Lion Casinos, compared to other gambling venues?
- When talking in the context of Panama City (Panama), the Sortis complex has the most comprehensive offer of gaming and entertainment options in the country, the casino has slot machines, table games, a sport bar, plus the biggest poker room and Bingo hall in the city. Furthermore, the casino and the hotel belongs to the same owners (which is the exception in the city, because most of the other casinos just rent their premises to the big hotel chains, Marriot, Hilton, Trump, etc.), sharing the property gives the casino a great edge at the time of designing commercial incentives and create synergies with the hotel, we behave as one single business, our objectives are aligned, and that is not the case in the other casinos, because the hotels see them mostly as uncomfortable but necessary tenants. In the case of our Golden Lion brand, the properties are catered to the Chinese community of Panama City so its benefits and marketing policies are targeted towards its members. If I had to mention one marketing tool that is clearly differential from our competitors would be our slot club, its math and the quality/degree of customization is unmatched, continuously we are designing new incentives that guide the behavior of our customers in a healthy way, no other casino in the Panamanian market has such a wide assortment of benefits.
You will be able to discover more about Latvia’s gambling potential on October 12 at Riga Gaming Congress 2017. Registration for the event is already available.