Nikolai Oganezov: "Gambling in Sochi is only for the chosen ones"

Nikolai Oganezov, a Chairman of SRO of bookmakers and simply a well-known personality in the sphere gambling, has shared his ideas with the press service of RGW Sochi regarding the future development of a gambling zone in Sochi.

Interviewer: Russian Gaming Week Sochi (RGW)

Expert: Nikolai Oganezov (NO)

RGW: Nikolai, please tell us how the situation with gambling in Russia will change after the creation of a gambling zone in Sochi?

NO: It depends on the kind of situation we are going to talk about. If it is the legalization of gambling business in Russia, after Sochi casinos will not be opened across the country. On the contrary, we can say that in case of such "gambling development" we are getting farther and farther away from the casino legalization in the usual sense of the process. Gambling business is not becoming a kind of elite business; it is turning into a business for chosen ones, who have relations with the top of business and government. Such business will never belong to ordinary people. On the one hand, it could be a plus: it will be much harder for shadow companies to gain control over the casinos; on the other hand, a large and transparent operator with a history will also have less chances to invest in casinos in Russia.

The main issue lies in understanding the concept of gaming zone by the government. The paradox is that the notion of "gaming zone" in the law and understanding of the format and structure of the "gaming zone" in the actual circumstances are on different planes. Ironically, today the development of a gambling zone depends exclusively on the business interests of several financial groups, instead of interests of the city, territory or country. When the situation changes, we will receive Sochi or Krasnaya Polyana's Las Vegas.

Unfortunately, neither the territorial nor the federal authorities have identified their interests and their expectations regarding this project. Their answer determines a healthy competition between the casinos or a chance to create the second "Azov-City", where only two operators were issued permits and could earn good money; and 1,000 hectares of the territory allocated for the gaming zone remained undeveloped.

Only competition between various operators and emergence of new related directions, from quality restaurants to construction of a theme park and concert halls, can ensure investments in casinos infrastructure development. Let me remind you that the income from gambling in the budget of Las Vegas equals only to 10%, the remaining revenues come from tourism and entertainment infrastructure.

If the government does not ensure competition through expansion of opportunities for operators to enter the gambling zone, there will be two or three casinos in Sochi operating for their own benefit, rather than for the benefit of the city or the territory.

Personally, I have always held the view that the most useful approach to the legalization of gambling is a permission to open casinos subject to construction of four or five-star hotels with 80-100 rooms by the investor. This option would allow us to develop tourism across the country, not only in Sochi.

RGW: Will another gambling zone in Russian bring substantial incomes to the national budget?

NO: It all depends on the number of casinos to be opened in the "Krasnaya Polyana" resort, in particular, the number of gaming tables and slot machines in these establishments.

Tax on gambling business is local and goes to the budget of the Krasnodar Territory. If Sochi has one or two casinos, there will be no significant changes in the terms of revenue as it is not a sizable profit for the regional budget. I remember that in 2006 the revenues of the Krasnodar Territory from gambling tax amounted to over one billion roubles. Due to those revenues, the Territory had the opportunity to cover the salaries of all teachers and medical staff.

It is clear that even developed gaming zone is not able to reach such indicators; however, if it becomes a point of attraction of the federal scale by increasing the volume of tourists and trade turnover, it could easily achieve previous gambling results.

RGW: Do you think that the flow of tourists will increase after the opening of casinos in Sochi?

NO: This summer season, the occupancy rate of hotel rooms in "Krasnaya Polyana" reached 80%. It is an unprecedented result, confirming the increased tourist flow to the winter resort in the summer. It has happened thanks to good infrastructure and beautiful architecture of the Olympic villages, an easy availability of the "Krasnaya Polyana" resort for beach holidaymakers. A popular brand of Sochi also has produced an effect. Therefore, even without casinos the flow of tourists to the "Krasnaya Polyana" resort will continue to grow, unless Sochi residents stop to provide the corresponding level of service.

Theoretically, potential customers of the gambling zone in Sochi are Russians, but players from Turkey, where gambling is prohibited, Iran, Iraq and Israel may also come here. This can be confirmed by the experience of more than 10 casinos in Batumi, where foreigners are the main clients.

RGW: How will this gaming zone co-exist with "Azov-City" until 2019?

NO: I believe that there is no competition between “Azov-City” and “Krasnaya Polyana” in principle. Firstly, there is no transport infrastructure.  “Azov-City” is a dead-end area in the open field, where casinos service clients residing within a radius of 250-300 km. The main visitors come from Rostov-on-Don and Krasnodar. Sochi will have other clients from the social point of view.

Sochi has an extensive transport infrastructure. It is a holiday resort of international importance having a huge flow of tourists both in winter and in summer. Everything is almost ready here to start working. We can only reconstruct the ready facilities to house casinos. At the moment, I do not see competitive points of intersection of these two gambling zones.

More answers to questions on the construction and further development of gambling zone in Sochi can be found at the gambling industry event RGW Sochi 2016.

It will bring together the major industry representatives to talk about future possibilities to be offered to gambling investors in Russia and about opening of the gambling zone.