According to published accounts, Pacific Entertainment Technology, owned (?) by Juan S. Demapan, Manny Borja and Jack Manglona (and I suspect there are other “hidden” local owners that don’t wish to be seen) intends to import 750 of the units under EXISTING law. IF the national average is correct, the implication is that the gross “take” from these units will approach $75,000,000 per year.
Now, that’s a LOT of money! But before you start smiling too broadly, let’s examine what will probably occur in the CNMI based on demographics and previously published histories from other places.
Other operators have found that there are four important considerations for VLT success: location, location, location and win-per-day! And, as a result, most of them place units with other similar activities: racetracks, casinos, off-track and sports betting parlors and stand-alone facilities designed for the purpose. Only a very small number allow additional units to be located in mom and pop stores, grocery stores, hotels, etc. Why? They do not attract sufficient revenue, but they DO attract “problem” gamblers from the locality and are more subject to security concerns. Has the CNMI considered the placement of these new units?
The “cross-border” effect is a measure of the amount of gambling that takes place from out-of-area gamblers (visitors) versus “local” gamblers. Local poker machines were supposed to have generated visitor players instead of local players. Did they? The answer is obviously no, they did not. How many visitors actually come to the CNMI for the purpose of gambling on local stand-alone slots? Almost none and that is due primarily to distance from home country (and expense of travel), lack of attractive sites, failed gambling “excitement” (incentives or alternative entertainment), and availability of more lucrative gambling activities in their own country or nearby sites. People simply do not travel long distances only for the privilege of single-unit, stand-alone slot or video units. Thus, most units installed in the CNMI have become a “convenience” gambling site for local patrons with significant impact from “social” costs, most of which is not addressed by the CNMI government and certainly none of it by the operators. The hap-hazard handing out of a few scholarships or medical assistances, though important to recipients, simply do not offset social problems attributable directly to gambling. Remember, VISITOR gamblers put money INTO local coffers; LOCAL gamblers take money OUT of local coffers.
The “substitution” effect is the off-setting of other gambling sources of state income through the introduction of a “new” game such as VLT. This phenomenon is well documented in the various states. The result has been widely variable, but generally ranges from 20 to 40 percent or more. That is, revenue generated by existing gambling sources within an area is REDUCED by this much through population shifting their interest from “old” games to “new” ones. For instance, 40 percent or more of those who currently play poker machines in the NMI may shift to playing the new VLT games, thus REDUCING poker revenues by nearly half and resulting in MUCH lower revenue from both existing poker machines and VLTs than initially expected. Will current programs such as scholarships be affected by such a reduction in poker revenue? Has it been considered?
It is clear from historical accounts in various states that people will not travel very far solely to play stand-alone VLT units, but will do so when these units are co-existing with much larger and more attractive facilities. And such facilities cost a LOT of money to develop. The major result is simply that existing local players will shift from game type to game type with little resultant growth in the overall number of players; tourism based on the availability of VLT will not increase (all other facilities remaining the same) and the resultant expected revenue increase will not materialize.
Have the proponents (and operators) considered and researched any of these effects? Has the CNMI legislature or other areas of the CNMI government studied the true nature of the “gambling phenomenon”? In last week’s newspaper, for instance, Mr. Demapan touted the creation of 1,000 new local jobs and hundreds of thousands of dollars in new revenue yet proposes to place these units at “all hotels and airports,” sites historically shown NOT to be very productive unless associated with a larger gambling venue. But are these realistic estimates? Or are they the sales pitch of someone just trying to make a buck by capturing “convenience” traffic?
In short, all we need to do is research the characteristics and effects of VLT gambling in existing locations and then apply that to the demographics of the CNMI. So far, it appears through these comparisons that the CNMI will suffer socially much more than it already is — and anticipated benefits from it will be only for the pockets of the operators.
In the next article of this series, we will take a look at projected revenue estimates and how gamblers “vote.”
DR. THOMAS D. ARKLE JR.
San Jose, Tinian
(temporarily writing
from Winter Haven, FL)
