Besides offering the best casino experience, Shangri La Casino Tbilisi is an impressive contributor to the Georgian economy as one of the largest taxpayers in the country. Shangri La’s positive influence on the Georgian economy is not only through paying taxes, but also by bringing money by extension to other businesses, such as suppliers, service providers, transport, hotels and so on.
“We are among the largest taxpayers in Georgia despite being just a single casino and not a huge company with many branches. We pay GEL 5 million every year for our license and almost the same amount of money in gambling tax, which is GEL 40,000 per quarter for every gambling table and GEL 4,000 per quarter for every slot machine. We also pay tax on our lotteries and salaries. Incidentally, we have over 400 employees and our salaries are higher than the average for the market. Therefore we contribute impressively to the development of the Georgian economy,” said the Marketing and PR Director at Shangri La, Lavrentiy Gubin.
As Georgia is about to launch new regulations for the gambling industry, Gubin shared some of his recommendations about how the field should be further regulated in Georgia.
Q. Before discussing how the gambling business should be regulated in Georgia, tell us first why this business is important for our country? Why shouldn’t it be prohibited outright, like some political parties and segments of society are calling for?
A. First of all I want to say that outright prohibition is not a way out, anyway. But some limits should be established, I agree.
The casinos and gambling business contribute a significant amount of money to the Georgian economy, and this is really important for Georgia in particular because it is located in a strategic area surrounded by many well developed countries where gambling is prohibited. Lots of citizens of those countries therefore come to Georgia to gamble. They bring money to Georgia; they gamble here; but their money is spent not only on gambling but also on hotels, transport, restaurants, etc. These people bring a lot of money into Georgia and this is significant for Georgia compared to other countries where gambling is legal. The economies of other countries are so well developed, like for example in the United States, that the impact of gambling is still significant, but not crucial. But for Georgia, where the gambling business is one of the major contributors to the economy, it is crucial.
If you cut the gambling business you not only cut that money that we pay for tax and licenses, but you also cut all of the money spent by those people who come here to gamble: from Turkey, Iran, Azerbaijan, and Russia. So in this case not only would our business suffer, but other related businesses such as those in the hospitality sector would to.
It is important to have the industry in Georgia regulated to a proper level. I can say that it is already quite well-regulated here now. But there are some things that could still be improved.
Q. In your opinion how should the gambling industry be regulated in Georgia so as not to hamper your business but to reduce the negative social impact?
A. First of all, there should be a limit on the amount of licenses handed out. A proper casino, or a proper gambling place, is expensive and requires significantly large investment. This is a big investment for Georgia and therefore any such investor should be protected. Thus the amount of similar properties should be limited. You shouldn’t have slot halls at every corner which are targeting local, financially-deprived people. There are so many slot machine establishments in run-down areas that are targeting locals and those less financially stable. The amount of such places should be limited by decreasing the amount of licenses handed out to them.
I would suggest 5 casino licenses for Tbilisi, not more, for the next 10 years for example, and roughly 20 slot machine licenses. There are currently 5-6 casinos in Tbilisi and we should be assured that there will not be any more as there is simply no room for more casinos here. When you invest such a huge amount of money you should be able to know that there will not be any other casinos on the market that will cause fluctuations. Otherwise what you get will not be a healthy state of competition. Currently there is healthy competition between these 5-6 casinos. However, if another player appears on the market it will cause many problems for us all.
Today, if you have GEL 5 million to buy a license and if you have a relatively clean history, then you can open a casino without a problem. This is good because on the one hand the Government is getting money; another casino means another large amount of money from the license, the gambling tax, etc. However, ultimately it is not good because we have already seen one casino close after just a year of operations. I’m referring to the Aviator casino located in Stamba hotel. It closed down due to the fact that the licenses and tax fees are so high in Georgia. It’s almost USD half a million, regardless of whether you are earning money or not, whether you have guests or not. Profit or no profit – you have to pay it. It is a challenge for our business. Some months we don’t actually make any money.
When there were just three casinos – Adjara, Iberia, and Shangri La – there was something promising about the market because it was still growing. But when the other three casinos opened it became a big problem because the market is not endless. And now one has closed down. What does this mean for the Government? They might have already envisioned spending this income but now it’s stopped – that’s bad planning. How many people have lost their jobs? It is also a bad sign for investors. It’s important not to send bad signals to potential investors. If you look at any developed country in the world they limit the amount of gambling licenses they give out. You don’t give them out to just anyone, only to a proper operator. Unregulated slot clubs and online gambling remain the main social problems.
Q. Besides limiting the amount of licenses they give out, what other regulations should be implemented?
A. Some of the regulations that the Parliament of Georgia is discussing are quite reasonable.
Raising the minimum age from 18 to 21 is absolutely supported. Around the world 21 is the standard age for admission into a gambling establishment. Slot halls in Georgia allow 18 year olds in, while casinos already enforce a minimum age limit of 21.
Also, they are recommending prohibiting gambling advertisements. Our advertising budget in Georgia is the smallest of the land-based casinos here, because we are targeting foreigners mainly and that’s why we’re not spending a lot of money in the city. So prohibiting advertising will not be problem for us. But if they do do it, then I would recommend that they at least allow it in the airports and at border crossings. Advertisements in such places do not bring any harm to the local population. Meanwhile, it would give us the opportunity to promote ourselves to those who are coming in to Georgia.
Q. Are there good quality gambling facilities in Georgia?
A. Some slot halls are good quality, while others are questionable. Online gambling is massively developed here and it’s not bad because some operators like Crystalbet, Adjarabet, and Europebet are so well developed and their operations so well established that the biggest holdings are purchasing their shares for huge amounts of money – a hundred million dollars, two hundred million dollars, or so I’ve heard. It means that these companies are so well developed that huge international companies are interested in investing in their business. They just need to control the local level, so as not to allow kids or those with debts to play.
Q. Do you consider the online gambling segment to be competition for casinos, including Shangri La?
A. In some ways yes, of course. If there were no online casinos at all we would have many more guests here. But nowadays there are people who prefer to gamble online and won’t choose to go out somewhere and physically sit and gamble. But there are people who prefer the atmosphere of a casino, the communication with other people and the real feel of gambling. The niche of online casinos is growing but there will always be people who will prefer the real experience.
Q. Have you considered entering the online gambling segment in Georgia?
A. We are developing the online casino in general and it works perfectly, but we are not entering the Georgian market with this offer at the moment because you need a separate license, with separate payments. The new market requires big investments and the product should be absolutely perfect.