Little VegasLittle VegasCasinosCasinosCzech Czech

RepublicRepublic

ECON ProjectECON Project

Dr. Amacher Dr. Amacher

Fall 2004Fall 2004

IntroductionIntroduction Jonathan ScottJonathan Scott Sara Morgan-DykeSara Morgan-Dyke Thy (Kat) NguyenThy (Kat) Nguyen Paige Burns Paige Burns Dolapo OgunsanluDolapo Ogunsanlu Marcus OnvaniMarcus Onvani

IntroductionIntroduction Our Existing CompanyOur Existing Company

• American American • Financially SecureFinancially Secure• Casino Operator in US and Western Casino Operator in US and Western

EuropeEurope• Look to Expand into Central and Eastern Look to Expand into Central and Eastern

EuropeEurope• All Economic Indicators Point to The All Economic Indicators Point to The

Czech RepublicCzech Republic

OutlineOutline I. Political EnvironmentI. Political Environment II. Economy/ DemographicsII. Economy/ Demographics III. TourismIII. Tourism IV. Our ProposalIV. Our Proposal V. Means of DifferentiationV. Means of Differentiation VI. Potential Problem AreasVI. Potential Problem Areas VII. CompetitionVII. CompetitionVIII. ConclusionVIII. Conclusion

II. Political Environment. Political Environment

GeographyGeography

II. Political Environment. Political Environment

GeographyGeography• Westernmost, most affluent of Warsaw Westernmost, most affluent of Warsaw

PactPact• Landlocked: Slovak, Poland, Germany, Landlocked: Slovak, Poland, Germany,

AustriaAustria

II. Political Environment. Political Environment

HistoryHistory• 1948-1989: Czechoslovakia1948-1989: Czechoslovakia• 1989: Velvet Revolution1989: Velvet Revolution• 1993: Czech Republic1993: Czech Republic

Social & Economic system changesSocial & Economic system changes

II. Political Environment. Political Environment

Current StatusCurrent Status• Political StructurePolitical Structure

Parliamentary RepublicParliamentary Republic Multi-party democratic political systemMulti-party democratic political system

• Current status of national/international Current status of national/international relationshipsrelationships

OECD, WTO, NATOOECD, WTO, NATO EU : May 1EU : May 1stst, 2004, 2004

II. II. Economy/Demographics Economy/Demographics

Population Statistics/ DemographicsPopulation Statistics/ Demographics• PopulationPopulation• EducationEducation• Per capita IncomePer capita Income

II. II. Economy/Demographics Economy/Demographics

National Economical ModelsNational Economical Models• Monopoly regulation Monopoly regulation

Financial DataFinancial Data• GDP: $69.9BGDP: $69.9B• Per capita: $5,560Per capita: $5,560

III. III. TourismTourism Government encouragementGovernment encouragement Rising TourismRising Tourism Reasons for IncreaseReasons for Increase

• Historically intact citiesHistorically intact cities• Fall of communism - 1989Fall of communism - 1989• Proximity to wealthy nationsProximity to wealthy nations• Inexpensive country to visit (Low CPI)Inexpensive country to visit (Low CPI)

OutlineOutline I. Political EnvironmentI. Political Environment II. Economy/ DemographicsII. Economy/ Demographics III. TourismIII. Tourism IV. Our ProposalIV. Our Proposal V. Means of DifferentiationV. Means of Differentiation VI. Potential Problem AreasVI. Potential Problem Areas VII. CompetitionVII. CompetitionVIII. ConclusionVIII. Conclusion

IV. IV. Our ProposalOur Proposal Our Existing CompanyOur Existing Company

• Financially StableFinancially Stable• Looks to invest in The Looks to invest in The

Czech RepublicCzech Republic

IV. IV. Our ProposalOur Proposal Business TypeBusiness Type

IV. IV. Our ProposalOur Proposal Entry StrategyEntry Strategy

• Construct NEW Casinos in 3 citiesConstruct NEW Casinos in 3 cities PraguePrague Znojmo (Austrian Border City)Znojmo (Austrian Border City) Karlovy (German Border City)Karlovy (German Border City)

IV. IV. Our ProposalOur Proposal Financing OptionsFinancing Options

1.1. Invest with Internal FundsInvest with Internal Funds Retain ControlRetain Control

2.2. Initial Public offeringInitial Public offering Increased costs of flotationIncreased costs of flotation Deal with Board and ShareholdersDeal with Board and Shareholders Loss of ControlLoss of Control

IV. Our ProposalIV. Our Proposal Exchange Exchange

Rate RiskRate Risk

Source: www.bot.or.th

Dollar to Koruna Exchange Rates

24.00

24.50

25.00

25.50

26.00

26.50

27.00

27.50

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT

•Dominant Currency is the Koruna (K)Dominant Currency is the Koruna (K)•Current Exchange Rate $1=24.27KCurrent Exchange Rate $1=24.27K•Recommendation: Hedge Currency Recommendation: Hedge Currency Risk by purchasing currency optionsRisk by purchasing currency options

IV. IV. Our ProposalOur Proposal Marketing SchemeMarketing Scheme

• Media CoverageMedia Coverage• Free Travel from Germany and Free Travel from Germany and

AustriaAustria• Billboards in those countries, en Billboards in those countries, en

routeroute

IV. IV. Our ProposalOur Proposal Profit ProposalProfit Proposal

• Transworld owns 3 casinos in CzechTransworld owns 3 casinos in Czech

Transworld Corporation(Thousands of $'s)

Q2 Q1 Q4 Q3

Revenues 4,740 4,983 5,067 4,444

Expenses 4,213 4,461 4,484 3,884

Net Income 527 522 583 560

20032004

IV. IV. Our ProposalOur Proposal Amacher Business PlanAmacher Business Plan

• Who are my customers?Who are my customers?• What are their expectations?What are their expectations?• How are we going to exceed their How are we going to exceed their

expectations?expectations?

V.V. Monopolistic Segment Monopolistic Segment of our Businessof our Business

AtmosphereAtmosphere• American StyleAmerican Style• Sports GamblingSports Gambling• Customer Service DrivenCustomer Service Driven• Dining Featuring an Internationally Dining Featuring an Internationally

Diverse SelectionDiverse Selection Shows/ ConcertsShows/ Concerts

• American ThemeAmerican Theme• American Celebrity ActorsAmerican Celebrity Actors

V. V. Other Means of Other Means of DifferentiationDifferentiation

Barriers to EntryBarriers to Entry FoodFood Complimentary Alcoholic BeveragesComplimentary Alcoholic Beverages Hospitality/TrainingHospitality/Training Travel Travel

OutlineOutline I. Political EnvironmentI. Political Environment II. Economy/ DemographicsII. Economy/ Demographics III. TourismIII. Tourism IV. Our ProposalIV. Our Proposal V. Means of DifferentiationV. Means of Differentiation VI. Potential Problem AreasVI. Potential Problem Areas VII. CompetitionVII. CompetitionVIII. ConclusionVIII. Conclusion

VI. Potential Problem VI. Potential Problem AreasAreas

Problem #1Problem #1: Requirements to Obtain : Requirements to Obtain a Casino Operating Licensea Casino Operating License

•Minimum amount of capitalMinimum amount of capital•Clean criminal recordClean criminal record•Monitoring system Monitoring system •Fund public benefit programsFund public benefit programs•CASINO OWNERS MUST BE CZECH CASINO OWNERS MUST BE CZECH CITIZENS!!!!!!!CITIZENS!!!!!!!

American Board of DirectorsAmerican Board of Directors Czech Management and EmployeesCzech Management and Employees Work with a Czech Company who holds the Work with a Czech Company who holds the

Casino License.Casino License. Manage All Operations and Lease Gaming Manage All Operations and Lease Gaming

Equipment to the Czech Company.Equipment to the Czech Company. We receive management fees based on a We receive management fees based on a

percentage of profits and receive equipment percentage of profits and receive equipment lease fees.lease fees.

VI. Potential VI. Potential Problem AreasProblem Areas

Response #1Response #1: Requirements to Obtain : Requirements to Obtain a Casino Operating Licensea Casino Operating License

VI. Potential VI. Potential Problem AreasProblem Areas

Problem #2:Problem #2: Recent casino bombing Recent casino bombing

New legislature making casino licenses New legislature making casino licenses more difficult to obtain more difficult to obtain

This incident was limited to a dispute This incident was limited to a dispute between members of an Israeli organized between members of an Israeli organized crime group, not between rivaling casinos.crime group, not between rivaling casinos.

VI. Potential VI. Potential Problem AreasProblem Areas

Problem #2:Problem #2: Recent casino bombing con’t Recent casino bombing con’t

VI. Potential VI. Potential Problems AreasProblems Areas

Problem #2…..Possibly to our Problem #2…..Possibly to our advantage?advantage?

Act now: Open a casino while gaming Act now: Open a casino while gaming licenses are still easy to obtain. (A future licenses are still easy to obtain. (A future barrier to entry for other companies.)barrier to entry for other companies.)

As a clean and honest company, we have As a clean and honest company, we have nothing to worry about.nothing to worry about.

VII. Competition:VII. Competition:Industry Level:Industry Level:Other Entertainment Competition in Other Entertainment Competition in

Prague:Prague: OperaOpera TheaterTheater ConcertsConcerts GalleriesGalleries MuseumsMuseums ClubsClubs CinemaCinema PlanetariumPlanetarium

VII. Competition:VII. Competition:

Casino Level:Casino Level:Major Competition In Prague:Major Competition In Prague:Casino Admiral: Casino Admiral: Largest Casino in the Czech RepublicLargest Casino in the Czech Republic The most professional managed casino in town.The most professional managed casino in town. Upscale bar.Upscale bar. Prime Location on top of the Palace of CulturePrime Location on top of the Palace of Culture

Casino Palais:Casino Palais: Elegant interior makes it a stop among tourists Elegant interior makes it a stop among tourists

who aren’t even gambling!who aren’t even gambling!

CasinoHours of

Operation Square

Feet # of

Slots# of

Tables

Millennium Casino 3pm-5am 7,000 48 12

Casino de Prague Le Hilton 2pm-6am 3,228 20 16

VIP Club Casino-Ambassador 24/7 2,390 5 11

Banco Casino 24/7 - 15 8

Casino Happy Day 24/7 - 100 5

Henry Casino 24/7 - 6 9

Panorama Hotel VIP Club Casino 8pm-5am - 6 6

Spearmint Rhino Gentlemen's Club &Casino 6pm-4am - 0 4

VII. Competition:VII. Competition:

ServiceVIP-

ForumHenry

CasinoCasino de

Prague PanoramaBabysitting Service no yes no noBar yes no no noBoutique no no no noConvention & Meeting Space no yes no yesHailr Salon no no no yesHandicap Access no no no noEnglish Spoken yes no no noJacuzzi no no no yesLounge no no yes noMassage no no no yesNightclub yes no no noSauna yes no yes yesSwimming yes no yes yesTennis Court yes no yes noValet Parking no no no noWhirlpool no no no yes

Casino

VII. Competition:VII. Competition:

VII. Competition:VII. Competition:

Casino Level:Casino Level:

In Prague: Few large casinosIn Prague: Few large casinos

Proposal: One extra-large casinoProposal: One extra-large casino

In Karlovy: One small casinoIn Karlovy: One small casino

Proposal: One midsize casinoProposal: One midsize casino

In Znojmo: Two small casinosIn Znojmo: Two small casinos

Proposal: One midsize casinoProposal: One midsize casino

VIII. VIII. ConclusionConclusion SummarySummary

• Czech is geographically desirableCzech is geographically desirable• Favorable political environmentFavorable political environment• Increasing tourism, booming industryIncreasing tourism, booming industry• We propose 3 casinos in Czech RepublicWe propose 3 casinos in Czech Republic• Our atmosphere and style is unique, giving us Our atmosphere and style is unique, giving us

a competitive advantagea competitive advantage• We have identified potential problem areas and We have identified potential problem areas and

used them to our advantageused them to our advantage• Internally FinancedInternally Financed• Long-term objective: approach near monopoly Long-term objective: approach near monopoly

statusstatus