such as Tijuana, Ensenada, Acapulco and Cancun would attract an estimated initial investment of US$3bn and generate US$800m in taxes. But the impetus to overhaul gaming legislation in 2008 arose not out of a desire to promote tourism but out of concern for the proliferation of gaming parlours, bingo halls and sports books nationwide.
The outbreak of swine flu in Mexico in 2009 hit the gaming industry in the country in both an operational and legislative way. The Mexican Gaming and Lottery Association (APJS) estimated that gaming halls lost US$29m in 2009 because of their enforced closures to try and prevent the spread of swine flu. Gaming halls, betting centres, and racetracks closed over a month-long period to prevent large gatherings of people in an attempt to combat the flu.
Mexico’s proposed new gaming law was also affected by swine flu. Voting on numerous legislative issues was postponed in May 2009 as the government focused its attention on tackling the flu outbreak. The legislative session was shortened and with elections for the Chamber of Deputies being held on 5 July 2009, it proved a set-back for the prospects of the new law.
As a result of all the delays and changing global economic conditions, Alfonso Perez Lizaur, President of the Mexican gaming organisation APJS, stated in December 2010 that Las Vegas- style casinos are now “impossible” in Mexico. He argues that the level of investment needed to create large scale casino complexes in tourist resorts is simply not available. Lizaur also believes that the political timetable is against the prospects for gaming reform. With presidential elections in 2012, 2011 is the last chance for regulation to be passed before the regulatory uncertainty of a new government and possible change in attitude to gambling. Despite all of the issues involved in operating in Mexico, its gaming sector still attracts international companies. BetStone, which specialises in server based gaming (SBG), opened a new office in Mexico City in June 2009 to serve its customer base in the region. In March 2009 Storm International opened its Hollywood Entertainment centre in Monterrey. Storm invested US$20m in the venture which includes a slot hall (350 machines), restaurant, and sports bar.
One aspect of the Mexican market that has sparked their interest is that Class III slot machines are now permitted in Mexico. Mexico previously permitted
only Class II machines - electronic-based bingo slot machines (EBTs). These slot machines have video screens (which are very similar to ‘modified to comply’ type II slot machines) and numbers not symbols are drawn electronically. There are around 35,000 EBTs in Mexico at present. These gaming machines hold little appeal to tourists who are unaccustomed to playing electronic bingo.
Many of the world’s leading manufacturers of Class III slot machines attended the 2010 Latin American Gaming Fair held in Mexico. This included the likes of: WMS Gaming, Atronic, Aristocrat and Konami. Electronic roulette blackjack and poker could soon be more widely seen in gaming centres throughout Mexico, alongside some of the latest Class III gaming machines. Some Class III slot machines have already been rolled out. These include Atronic’s King Kong Cash which the company reports has proven highly popular in Latin American markets. The approval of Class III slot machines is already having an impact on the industry. In 2010 the number of slot parlours in Mexico increased by 11% with a 6% increase in the number of slot machines. The number of slot machines in Mexico could double over the coming years if the impetus of Class III machines is maintained.
The introduction of Class III machines has been a good thing for the Mexican gaming sector but the prospect of resort casinos in Mexico has been dented further by the increasing violence that has flared in difference parts of the country in recent years. It is reported that the violence has claimed 40,000 lives since 2006. Up until 2010 tourist numbers were resilient in the face of all the news reports of murders and violence. But in 2011 there have been signs that the stories are beginning to influence travellers’ choice of holiday destination. Some cruise lines have cancelled their itineraries to Mazatlán because of the violence, whilst Starwood Hotels and Resorts Worldwide has said business has been hit too. Around the world there has never been as much competition for casino resorts, to which more are being added in the next few years. The combination of an uncertain domestic situation and global competition would make any investor cautious of investing in a Mexican casino, assuming any legislation permitting them is ever passed.
As we went to press news had just come in on the fire in a casino in Monterrey where over 50 people are alleged to have died in one of the Country’s worst cases of Arson. Our thoughts are with the friends and families of those who were affected by the tragedy.
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