Prospects for the development of gambling industry in Crimea

History

Crimea has been known since ancient times as a health resort. Thus, there are documents, which show that in the third century BC Greek healers and physicians highly appreciated the healing properties of mineral springs, salt and mud baths of Crimea, and recommended that their high-ranking patients had to visit them. And in the 19th century Crimea became an all-Russian resort for high society. Members of the royal family and court nobility, Russian elite - artists and musicians, writers and patrons, merchants and officers were treated there.

In other words, in holiday time high life flourished there. In clubs dancing evenings were organized, and gambling rooms were offered for an extra fee, where visitors could play cards or billiards. The most enterprising owners of the Crimean restaurants tried to organize real casinos, but in those days such entertainment was considered to be "immoral" and official permission to open a casino was not given. At the same time a fine for organization of gambling games was three thousand rubles, and the repeated violation was punished by imprisonment.

Because of these reasons, the first official casino in Crimea was opened only in 1909, in Yalta. It was organized by the Society of Resort Entertainment. This casino was located in a two-story building next to the City Council, and included a restaurant, a theater hall and a small gambling room, which could not accommodate all visitors. Therefore, the Society of Resort Entertainment planned to construct a large casino on Quay Street. The project of the new casino building was already approved, but these ambitious plans of the Society were interrupted by the war, which began in 1914.

At the same time two more casinos were operating in Crimea. One of them was located in an exclusive resort Suuk-Su, located near Gurzuf. Suuk-Su competed for luxury and popularity with the leading resorts in Europe: terracotta doors and windows, tiled halls, marble stairs and window sills, ceiling molding, antique mahogany furniture and Bohemian chandeliers. The highlight of the casino was a huge picture of Surikov "Sadko visiting Sea King", five to eight meters, which was drawn by the great artist in 1911, being in Suuk-Su. Luxury went through the roof, and the Russian elite left huge money there.

The second casino was located at the Gurzuf restaurant "Venice", where gamblers could play roulette, blackjack or bridge. The casino was so famous that the owner of the restaurant Praskofya Tikunova wanted to connect her restaurant with Genoese rock via an aerial lift. But plans remained plans due to the First World War.

After the Bolsheviks came to power in 1917, casinos and gambling games were completely prohibited under penalty of criminal liability. Casinos in Crimea reappeared only in 1941, after the occupation of the peninsula by Nazi Germany. At large restaurants gambling halls were opened, where visitors could play blackjack, poker and bridge. The casino in the mansion of Dintzer was considered to be the largest one. Previously chess and checkers club had been located in this building.

After the war, gambling games in the Soviet Union were also banned. But let us recall that Crimea was the "all-union health resort", where millions of holiday-makers rushed every year? Because it was quite difficult at that time to go abroad... Therefore, officials and artists from Moscow, gold-miners and oilmen from Siberia, black-marketeers from Leningrad and tangerine traders from Georgia visited Crimea. And they wanted not only to swim in the warm and gentle waters of the sea, but at least once a year to buck up after exhausting monotonous work, "catch the adrenaline." Lying on the sand the whole day was boring, so cardsharps were waited for such "suckers". They firstly offered bored travelers to play durak, fueling excitement, and then offered to play preferans on small bets or play blackjack or seca. In the evening, the game continued at gambling dens called "catrans". Of course, there were no roulette or slot machines, but anyway such a gambling den was a prototype for future casinos. This period in the history of gambling is depicted very well in the books of the journalist Anatoly Barbakaru, who was a professional gambler in the 80s.

Then came the 90th and the Soviet Union collapsed. In Crimea, as well as in Russia, dozens of casinos were opened. Many of them were controlled by bandits. The level of the gambling houses was different. The bulk of casinos had 5 - 6 tables for roulette, blackjack and poker. For example, the biggest casino in Yalta called "Oreanda" had 8 tables in the main hall and 3 tables in the VIP-hall.

Ukraine has banned gambling activities since the summer of 2009. At that time there were 283 casinos in Crimea. But three years later it became clear that due to the ban of gambling the country was losing huge sums of contributions to the budget. Therefore, the Ukrainian authorities thought about the legalization of casinos. The plans to create a gambling zone in Crimea had existed even before it became Russian. After a record season in 2012 a project called "Crimean Antalya" was developing in the government of Ukraine. It was planned to build modern entertainment centers like a Casino Resort in the west of Crimea, between Saky and Eupatoria. It was talked about $8 billion of foreign investment that had to be attracted up to 2020. And in the south of the Kerch Peninsula it was planned to build luxurious resort complex called "Cimmeric City". The government was going to allocate 500 ha near Opuksky Nature Reserve.

However these plans were not realized - in the spring of 2014 Crimea became a part of the Russian Federation.

The fifth gambling zone in Russia

July 23, 2014 was a memorable day for the gambling industry in Russia: President of the Russian Federation Vladimir Putin signed a law on the establishment of the gambling zone in Crimea. The boundaries and location of the gambling zone will be determined by the executive authorities of the Republic of Crimea according to this law. The Russian Government suggests solving the problem of filling the budget of Crimea using the newly created gambling zone.

"According to estimates of experts, the budget of Crimea can receive from the gambling zone up to 25 billion rubles (about $727 million) per year. In addition, an increase in the flow of tourists to the region, development of hotel business and catering industry can be expected", - said the First Deputy Chairman of the Russian State Duma Committee Anatoly Karpov.

Experts of the Russian tourist market also believe that the opening of Crimea-Vegas will have a positive influence on other factors. Prices and demand for real estate will increase significantly; the holiday season will extend for several months, or even become a year-round.

The decision to create a gambling zone in Crimea aroused great interest among everyone who has something to do with the gambling market, and therefore Crimea Gaming Congress was held in Yalta on the August 22, 2014, which brought together representatives of the Russian and Crimean authorities, leading experts of gambling and tourist industry, investors, international experts, developers, owners, bookmakers, delegates of other gambling zones of Russia.

Exactly Crimea Gaming Congress started the real work on the creation of a gambling zone. The issues of licensing and taxation of the gambling activities in Crimea, possible investments in infrastructure of the gambling zone and attraction of investors with a worldwide reputation were discussed during this Congress. Various options for the location of the gambling cluster were considered. Representatives of the bookmakers shared their plans about the number of betting offices. The speech of the Chief Executive of JSC "Shambhala" Maxim Smolentcev was very interesting. He spoke about the specifics of the gambling area in Russia on the example of Azov-City.

Where to build casinos?

The territory of the gambling cluster is one of the key issues of the gambling zone. Currently, the Crimean authorities are working on a project of creation of the gambling zone in Crimea. They promise to finish the project before the New Year. So now it is still unclear where exactly the gambling cluster will be located. There are several variants of Crimea-Vegas.

So, the governor of Crimea Sergey Aksenov reported in July that experts from Macau, Las Vegas and Monaco, working on the project of the gambling area, insist on placing a gambling zone in Greater Yalta. However the public immediately became to oppose this location, arguing that many sanatoria, children's health centers and Young Pioneer camps are located on the southern coast of Crimea. The member of the Public Chamber on the Safety of Citizens Georgy Fyodorov said: "I don't support the creation of gambling zones in Crimea. Crimea is not just a resort. There are many Young Pioneer camps for children there".

Some specialists offered to build a casino in the undeveloped areas of Crimea, where there are no tourists, for example, in the Northern Crimea or in the territory of the Kerch Peninsula. They come from the practice of construction of Las Vegas in the desert and count on the fact that the construction of a gambling zone should give an impetus for the development of these areas. However the experience with other gambling zones showed that Russia was not America, and the remoteness of the casino from the big tourist centers and traffic had a fatal significance. Therefore, such "extravagant" offers were rejected.

Parliament Vladimir Konstantinov told reporters on November 12 that the gambling cluster might be located on the west coast of Crimea, as the region of Saky and Eupatoria conforms to generally accepted global standards concerning the accessibility of the airport: "The question for Greater Yalta is not yet closed, but there are many nuances that do not conform to the generally accepted rules of gambling industry. International standards require quick connections to the airport - up to half an hour. An hour to Greater Yalta is unacceptable".

However this option is also not so perfect: for example, Eupatoria is a recognized health resort for children, where there are more pensions for children than in Greater Yalta. The Head of Administration of Eupatoria Andrei Filonov said the following when he recognized about the plans of accommodation of the gambling cluster there: "Eupatoria as a future All-Russian children's health resort is not a place for gambling. I think that all authorities understand this."

The possibility of construction of a gambling cluster in Feodosia is considered. The Head of Administration of Feodosia Dmitry Schepetkov fully supports this choice: "Is it appropriate? In my opinion, yes, because our city really does not such a resource as health resorts on the southern coast of Crimea or in Eupatoria. A gambling zone would solve this problem, making Feodsia a year-round resort. This would surely beneficial. We support the development of such a zone..."

There are also other options, and it is possible that there will be several gambling clusters. Alexey Cherniak, who is the Chairman of the Standing Committee of the State Council on Sanatorium and Resort Complex and Tourism, confirms this: "We consider three areas, and the major one is in Greater Yalta. The areas in Razdolnensky district and under Koktebel are also being studied. All these options are discussed. It is possible that several areas where gambling is allowed will be created in Crimea".

In general, there are a lot of options, and we will see in the near future which one is chosen.

Investors

Potential investors, who want to conduct gambling business in Crimea, will be obliged to invest in the development at least 500 million rubles. This sum is mentioned in the bill, which is designed in the Ministry of Economic Development of the Russian Federation. This is a very, very modest financial threshold for gambling tycoons, and seemingly now investors have to stand in line for licenses. But everything is not like that. "Excitement in the investment offers is not observed" - the speaker of the Crimean Parliament Vladimir Konstantinov described the present situation with investments in such words. Let's discuss why.

The Minister of Crimean Affairs of the Russian Federation Oleg Saveliev told reporters: "The interest of investors in Crimea is huge, and the major deterrent is, of course, not the presence of the international sanctions, but the confusion in these sanctions, because the investor can not understand what he can do and what he can not". According to the Minister, "the first investors with whom we spoke were European investors and almost all of them mention the pressure of their Ministries of Foreign Affairs, and in case of a number of countries - the US embassies".

So, sanctions. Investment in gambling is actually considered to be a risky thing, and now it is necessary to invest in the territory that is considered to be occupied worldwide.

Although, there are also courageous investors. Thus, the Deputy Prime Minister of Crimea and Plenipotentiary Representative of Crimea to the President of the Russian Federation Georgi Muradov said: "We are visited by Chinese, Indian, Turkish, Israeli partners. Even brotherly Catalonia, which is fighting for its independence, is willing to make an agreement at the level of the Government of Catalonia. And they are not afraid of possible sanctions".

Among European and Asian investors, the most motivated and active are Chinese investors who are willing to invest their money in gambling and hotel business, as well as housing management and infrastructure of their projects. "They are interested in infrastructure - roads, communications, housing management, disposal of MSW. They are very interested in Crimea as a transit corridor for the supply of goods to Europe. It is calculated that the distance for transportation decreases at 2,000 kilometers", - explains the President of the Crimea's Chamber of Commerce Alexander Basov.

The Crimean authorities are trying to do everything possible to attract investors by offering them various benefits. So, currently y the regional law on gambling business in Crimea is being developed, which will provide investors with benefits. This was reported by the Chairman of the Standing Committee of the State Council on Sanatorium and Resort Complex and Tourism Alexey Chernyak, "We can register additional benefits for investors in the regional laws on gambling to enable them to develop their business faster. These questions we have already discussed".

And, of course, the federal authorities are also doing everything they can. The Federal Law No 377-FZ "About development of the Crimean federal district and the bonded economic area in the territories of the Republic of Crimea and the city of federal value of Sevastopol" was adopted in order to attract investment to the Crimean region on November 29. The law provides the establishment of the bonded economic area for a period of 25 years. The representatives of the Administration of the President report: "The federal law is aimed at ensuring sustainable social and economic development of the Crimean federal district by attraction of investments in the development of existing and creation of new industries, the development of transport and other infrastructure, tourism, agriculture and health resort areas, as well as increasing the level and quality of life of citizens".

Bookmakers

Currently, six bookmakers have received licenses in Crimea. They have already started operating and have opened 18 betting offices. Looking at such a high activity of bookmakers, local authorities decided to make amendments to the scheme of taxation, which provided the minimum tax rate for gambling. In this regard, the Crimean parliament adopted a law on the maximum tax rates permitted by the Tax Code of the Russian Federation on November 12. From 1 January 2015 the bookmakers will have to pay each month 125 thousand rubles per one processing center and 7,000 rubles for each betting office.

What was the reason for this decision? The Chairman of the Crimean Parliament Vladimir Konstantinov said that the decision was made taking into consideration the high profitability of gambling: "Taking into account that gambling is a highly profitable activity and in order to prevent the minimization of tax the bill on the establishment of the maximum tax rates on gambling in the territory of Republic was developed".

But the First Deputy Minister of Finance of Crimea Irina Kiviko was more frank and clarified: "All business entities entered the Crimea market from the Moscow region and they are accustomed to high tax rates. Therefore, by adopting the law, we will be able to tax them at the high, but not at the minimum rate from January 1".

Long-term prospects

Many specialists believe that it is useful to count on offers from major investors in the next few years, because the risks are too high. The current geopolitical situation around Crimea does not give an impulse to investment. "The creation of gambling zones will be an extra advantage for resorts, but results will not be seen immediately. It takes time to develop all that. The time is required to start building casinos, to make an advertisement of them and to attract visitors. In any case, this will last two or three years", - explained the president of the company "Multitur" Alex Vysokanov.

According to preliminary estimates, the complete construction of the gambling cluster in Crimea will cost at least three billion dollars. The maximum amount the Russian Federation is willing to invest comprises 1 billion. It was assumed that the bulk of the necessary funds would be obtained from selling licenses for gambling, but in such a situation their price was supposed to be extremely high.

Investors know how to count money and will not work without profit. Therefore, most likely, we'll have to wait a few years for the opening of the gambling zone in Crimea, despite all the efforts of the federal and regional authorities to create a favorable investment climate.

Sochi

After the State Duma introduced a bill on creation of the gambling zone in Crimea, an unexpected decision was made to make amendments to it in order to establish a similar gambling zone in Sochi. Why is it unexpected? - Because such offers have already existed - after all in Sochi there is infrastructure that is necessary for the conduction of gambling activities and it is idle after the Olympic Games. Forty nine four-star and five-star hotels, as well as a variety of restaurants, shopping centers and clubs were built there. Everything that tourists need for their entertainment is present. Frankly speaking, sports facilities can also be attributed to the gambling industry, because sport is a great reason to bet.

But in February 2014, the President of the Russian Federation Vladimir Putin does not support this idea: "We have invested a lot of money not for the elite who may spend hundreds of thousands of dollars playing in casinos". Now, however, Crimea and Sochi resorts that compete with each other, so it was decided not to provide Crimea with an advantage in the form of a gambling zone. It was also taken into account that Sochi will host matches of the 2018 FIFA World Cup. Therefore, the large influx of tourists is expected, and casinos will be additional advantages in the structure of entertainment.

In any case, a law that allowed gambling in Sochi was adopted in July 2014. And if the development of the gambling industry in t Crimea looks more promising in the long-term period, the first casino in Sochi can be opened in the spring of 2015, at the beginning of the season.

Most likely the gambling cluster will be available in Krasnaya Polyana, in the complex "Mountain Carousel" where the "Gorky Gorod" is located that includes residential and commercial real estate with a total area of over 600,000 square meters where the "Olympic Village" for media was situated. "Develop these areas for the gambling establishments will be cheaper than the area for the restaurant, - says the Deputy Director for CBRE hospitality industry development Stanislav Ivashkevich. - So the idea of the construction of the gambling zone seems appropriate to me".

Sochi hosted the exhibition-forum Russian Gaming Week Sochi on November 5-6, which was attended by leading operators of the gambling industry, such as Casexe, Belatra, Login Casino, Casinopool and Octavian. A new line of games, gambling equipment, slot machines were shown at the exhibition. The gaming network "Paris Match" presented self-service terminal that is its new product.

The Forum with the participation of specialists of the gambling industry allowed discussing several pressing issues: a gambling zone Sochi from the point of view of the authorities; bookmakers - changes in legislation; the experience of real casinos and operating gambling zones; forecasts of experts about the development of the gambling zone in Sochi; innovations in online gambling.

Speakers of the event share an opinion that Sochi has great potential as a gambling zone and will be able to win many tourists from neighboring countries, in particular Turkey, Azerbaijan and Iran, which now visit the Georgian Batumi to gamble. The Vice President of the Russian Tourist Industry Union Barzykin said that opening of the first casino in the Sochi gambling cluster could be held in the spring of 2015.

Making a summary, we can draw the following conclusions. There is no doubt that gambling and tourism in Crimea have a very high potential. However it is too early to say that the gambling zone on the peninsula is about to start operating. It will take a lot of time and financial investments to create high-quality infrastructure and services that meet international requirements. Only then we can expect a massive influx of tourists and thus filling the budget of Crimea. The short-term prospects of the gambling zone in Sochi are more attractive. Sochi has all chances to become the first full-fledged gambling zone in Russia.