FOCUS

Asia Gaming Brief is once again providing content for the seminar series of the event and our focus section for this magazine is dedicated to all things Australian.

The country tackled the first wave of the epidemic with relative success, with far fewer cases and deaths than many other developed nations. However, the damage to the economy and to the tourism industry has been significant, with the gross domestic product shrinking 7 percent in the second quarter, the fastest pace in history. The budget deficit this year will be the biggest since the Second World War as the government spends billions to mitigate the impact of the pandemic.

The Tourism Transport Forum estimates the industry has been losing $10 billion a month, with the country’s borders closed to international travellers.

Pubs and clubs have now reopened in much of the country, though Victoria was forced to close down again due to a second wave. Our first article in this section takes a look at the reopening experience, which at the first blush has been more positive than expected. However, as government subsidies wind down, venues are expecting business to slow.

In our second piece, Julian Hoskins, a principal at law firm Senet airs the view that it may be time for Australia to rethink its online gaming ban. Statistics show a sharp increase in Aussie punters gambling online anyway during the pandemic, so allowing some form of regulated access may help protect consumers from illegal offshore operators. It would also make it easier for the government to monitor the situation and mitigate any possible gambling harm.

Also in this section, Sudhir Kale, founder and principal of GamePlan Consults runs through his ideas on how to successfully restart the casino motors. After such a prolonged break, he argues that it’s best to treat the process like a start-up. Managers will need to be nimble and reactive and shouldn’t just rely on previous practices when navigating the choppy Covid waters.

Lastly in this section, we study the impact of the pandemic on problem gambling rates.

Leading gambling harm researchers Sally Gainsbury and Alex Blaszczynski assess whether the stress from the current situation is leading to a spike in gambling addiction, or whether lack of access to pokies is helping to press the reset button amongst some gamblers with risky behaviour.

Over the last month, Australians have been returning to their favorite gaming venues with gusto. New South Wales, which opened up their gaming floors (partially) in June, saw average daily player loss/expenditure per unit almost doubling in the first three weeks, according to data from IGT’s Queensland head Craig Harley.

Northern Territory and Queensland, which opened in early June and early July respectively, have also shown strong signs of recovery, according to anecdotal evidence.

“Gaming demand has remained consistently high throughout the first three weeks of our opening and Canterbury League Club and associated venues,” said Jonathan Brain, chief operating officer of NSW-based Canterbury League Club. But a steep cliff in demand is approaching. “We believe that due to a variety of factors, there is a significant pent up demand for gaming activity. We expect this to be a temporary and reducing effect over the next quarter,” warned Brain.

Industry observers believe this drop will be caused by the end of Australia’s financial assistance program for those suffering from financial hardship, known as “Job Keeper.” This $70 billion government assistance program will send its last cheque in September. After that, Australians will be left to their own devices if the program doesn’t continue.

“Will the high levels of demand continue? Probably not,” said Geoff Wohlsen, an Australian club consultant.

“The Job Keeper allowance will either totally stop or reduce substantially at the end of September. Unemployment is growing, the construction pipeline is under question and retiree incomes have been badly affected. These indicators all point to reduced demand for land-based slot operations.”

Wohlsen said the Covid-19 economic crisis is comparable to the Australian resources crash and global financial crisis in 2007 and 2009 respectively. Last month during a press conference, Australian Shadow Treasurer Jim Chalmers said that economic growth had fallen to its lowest level since the global financial crisis.

“Those events quelled gaming growth in Australia, initially bringing about a drop of 4 percent in 2008 and then another fall of 3.5 percent in 2010. No one really knows the potential long term impacts of Covid-19 on our sector. Gaming demand in the sector will almost certainly decline for a period but venue growth might not. If we have some venue closures, those that open strongly might actually see some growth,” said Wohlsen.

However, a recent second-wave outbreak in Australia has not helped to drive any additional optimism. Just this week, Victoria introduced fresh lockdown restrictions after recording its highest growth in active coronavirus cases in a single day. The New South Wales government is contemplating following a similar path after a few outbreaks across the state.

Industry experts believe that now more than ever, it will be vital for customers to feel safe playing in their local gaming venues. Stringent hygiene protocols and communication will continue to form an integral part of a property’s ramp-up efforts over the next year.

“Social media, emails, and SMS have been the primary communication vehicles to our customers. A focus on modern, spacious premises with effective controls have been key to our early success,” said Brain.

“Gaming machines have been spaced, and more ordered entry and exit arrangements have been put in place. Accurate, automated, and discreet temperature checks and patron count technologies have greatly assisted in this regard.”

Sudhir Kale, CEO of GamePlan Consultants, and an expert in customer experience said that operators will need to invest more, not less in player reinvestment and customer experience.

“Organizations should double down on their efforts to establish a strong consumer franchise so that new customer relationships can be forged and old ones reinforced.”

“Will my pre-pandemic loyal customers return and remain loyal to me?” Based on early results from other parts of the world where gaming providers have re-opened, the answer is “no,” notes Kale.

“All departments will have to be extremely agile, adapting and quickly responding to changes in the macroenvironment (number of Covid-19 cases) as well as drastically altered customer expectations,” he added.

“Basically, in the first few months of reopening, every gaming provider needs to act like a start-up,” said Kale. Departments will need to be extremely agile, adapting, and quickly responding to changes in the macro-environment as well as customer expectations.

Wohlsen, however, notes that most operators have deployed a spartan approach to their rampup. He expects rewards aimed at grind/mass market will be pared back and aimed instead at the premium market.

“Most of the programmed daily, weekly, and monthly promotional activities are gone. Why generate large crowds when your capacity is reduced? Free courtesy buses have been mothballed. Some venues have suspended rewards programs, F&B discounting is now very low and menus have been reduced. Bingo and free live entertainment are almost non-existent.”

Overall venue operations will also undergo drastic changes. Food menus will be reduced and repriced. Traditional buffets may not return. Operators will rework marketing plans, while TAB and separate sports bars will struggle to be part of the business moving forward.

Wohlsen believes that the trend of increasing space between slots that have been in place before the pandemic will be accelerated as a result of social distancing rules.

“When I started advisory in the sector back in 1994, venues were at between 1.7m2 to 2.0m2 per slot. Then smaller banking increased that to 2.5m2. We might be moving to a new benchmark of 4.0m2 per slot and that might stick,” he said.

Finally, cash will move into a more marginalized position over time, he says.

“I heard some managers say that they ordered large quantities of cash to re-stock machines and floats and neither banks nor cash security services could deliver on time. So, cash is becoming a bit harder to access for businesses”

Whatever the hurdle, operators will need to be ready to adapt to the rapidly changing environment or face being swept under the wreckage.

Julian Hoskins*

For licensees operating poker machines and other casino games, this resulted in a significant source of revenue disappearing. It also potentially drove patrons who would otherwise have visited landbased venues to illegal online operators.

Venues in Australia have been gradually starting to open up, with Victoria originally scheduled to permit poker machines to be switched back on from July 20. Unfortunately, another wave of Covid-19 infections has once again resulted in lockdown in Victoria, but this time for six weeks (or possibly longer) starting on July 9. As a result, venues in Victoria have not re-opened and are back to where they started!

This may well happen in other parts of Australia until such time as a vaccine is developed, threatening the financial viability of the industry and also potentially increasing the risk to vulnerable members of the community of gambling-related harm.

Interactive Gambling Act 2001

The Commonwealth Interactive Gambling Act (IGA) was introduced in 2001 to protect the Australian public from online gambling, with a focus on harm minimization and general consumer protection. Included in the current prohibitions is online casino style games, which includes (amongst others) slots, poker, blackjack and roulette.

In recent years there has been an explosion in illegal online casino gaming sites accessible in Australia, with unscrupulous offshore operators illegally targeting Australian residents. Often these sites refuse to pay winnings, unexpectedly close down their sites or continue to withdraw funds from customer’s bank accounts after the customer ceases to use the site.

The Australia regulator responsible for enforcing the IGA, the Australian Communications and Media Authority (ACMA), has recently been ordering internet service providers to block illegal sites, with blocking having commenced in November 2019.

In May 2020 ACMA announced that ten overseas casino sites had been blocked following a string of complaints from consumers and noted that more than 100 illegal services (which includes online casinos) have pulled out of the Australian market since ACMA started enforcing new illegal offshore gambling rules in 2017.

The difficulty with these measures is that as soon as a site is blocked it often re-surfaces under another name and domain, which is not blocked, and the situation continues. The actual size of this illegal market in Australia and the migration of patrons from venues to these sites during the Covid-19 lockdowns is difficult to determine. However, recent statistics pointing to the sharp rise in legal online gambling during Covid-19 would suggest that it could be sizable.

Covid-19 and its impact on online gambling

The strategy and economics consultancy Alphabeta Australia (part of Accenture), in conjunction with credit bureau Illion, have developed a real-time tracker of economic activity through Covid-19, by analyzing consumer spending on a weekly basis using data available in respect of around 250,000 Australians. This provides valuable insights into the state of the Australian economy and the impact of government interventions.

The most recent weekly statistics (June 28 to July 5) show that consumer spending by category in pubs and clubs (which would include those operating poker machines) is down 57 percent compared to a normal week. By comparison, for the same period online gambling is up 34 percent compared to a normal week. The weekly figures for online gambling (compared to a normal week) from May 3 to June 7 were up 242 percent, 214 percent, 232 percent, 164 percent, and 167 percent respectively.

In the United Kingdom, figures released by the Gambling Commission on July 6 show the impact of Covid-19 on gambling behavior in May 2020, which reflects two months of full lockdown in the UK in April and May 2020, as collected from the largest online operators and the YouGov Covid-19 tracker. Whilst the report stated that the incidence of switching from land-based to online gambling in the UK appears relatively low (only 1.6 percent over a four week period), the key differentiator with the Australian market is that online casino gaming is illegal in Australia and the UK market is therefore not directly comparable to Australia in relation to migration to online gaming.

What is worth noting, however, from the Gambling Commission data is that whilst the active number of players for online slots was down 2 percent and other gaming (including casino) was up 5 percent from March to April 2020, the number of bets placed increased for slots by 15 percent and other gaming (including casino) by 25 percent, with gross gambling yield for slots down 9 percent but other gaming (including casino) up a substantial 33 percent from March to April.

What does this mean for Australian Venues and also consumers accessing illegal online product? There is likely to be some correlation between the Alphabeta Australia data and the UK Gambling Commission statistics, and consumers accessing illegal casino sites from Australia. The exact statistics are, however, unable to be accurately quantified (which should of itself be a concern for government).

Key arguments for and against relaxing IGA prohibitions for a limited duration

The key arguments which support relaxing the IGA prohibitions and permitting online casino gaming during lockdown include:

• revenue derived from the online activities would help offset (but would be unlikely to fully replace) lost revenue from landbased poker machines; and

• Australian residents currently using illegal offshore casino sites (or those who use them just during lockdown) would have a legal alternative, delivered in a responsible manner complying with Australian consumer law.

Any possible offering of online product could perhaps occur in a “regulatory sandbox” environment over a short period of time involving, say, a small number of venues, with data collected (including in relation to gambling-related harm) then being used by government to determine whether to extend the permission to all venues during times of lockdown, either under Covid-19 or any other future pandemic.

The key counter-argument is that any online offering would increase gamblingrelated harm for vulnerable members of the community. However, relevant to this is that account-based activity has the benefit of being able to highlight “red flag” indicators and, in some respects, may provide operators with an increased ability to detect harmful behavior.

In weighing up the arguments for and against the restrictions, now appears to be the ideal time for the government to consider the issue more broadly in respect of periods of great uncertainty, for the benefit of both venues and the customer, but at the same time being mindful of not increasing the risk of gambling-related harm.

* Julian Hoskins is a Principal at Senet, a leading multi-disciplinary law firm in Australia specialising in gambling law and regulation, related advisory services and compliance training. He is ranked by Chambers and Partners Global and Asia Pacific as a leading expert in gambling and gaming. www.senetlegal.com

Sudhir H. Kalé* | Founder, GamePlan

Just like a traumatic crash, COVID-19 happened unexpectedly, and left a long trail of misery, uncertainty and anxiety in its path. In jurisdictions such as Macau, integrated resort casinos that once pulled in more than tens of thousands of patrons every single day had to contend with customer numbers in their teens in the weeks following reopening.

And Macau is not the only casualty; according to H2 Data Consultancy, the gambling industry around the globe has been hit hard and its share of global GDP is set to fall from 0.50 percent 2019 to c0.38 percent this year. This compares with 0.60-0.65 percent mid- 2000s and a high of 0.54 percent in 2016.

How to act toward customers when you reopen?

What should be your stance toward employees? What happens to fiercely loyal pre-pandemic customers? These are a few of the unsettling questions that every casino and club operator is asking. Answers to these vexing questions are far from comforting. History offers little guidance as the last major epidemic to rock the world at comparable magnitude was the Spanish flu a hundred years ago. In this column, I am proposing my take on the thinking needed to steer through the early phases of the post-pandemic scenario.

Essentially, in the first few months of reopening, every gaming provider needs to act like a startup. Acting like a startup means letting go of past conditioning, having to navigate through uncharted waters, experiencing and reacting to the new business reality with an open-ended outlook.

Acting like a startup means behaving with utmost agility. “No plan survives contact with the enemy.” This admonition from German Field Marshal Helmuth von Moltke could not be more true in the COVID-19

era. We will not know— for a long, long time—if and when we have left the havoc of COVID-19 behind. Leaders of gaming businesses, therefore, need to be flexible and be able to alter (or even throw out) plans as their business rolls forward.

Observant and responsive, senior leaders should make sure they meet the rapidly changing desires and attitudes of their customers. They need to experiment with new operating models—just as a startup would—refining them as they learn, while constantly providing evidence of their commitment to safety to employees and customers.

Acting like a startup means not taking your customers for granted. Synergy Blue, a manufacturer of arcadestyle casino games, recently published results of a surveyof 1,000 adult U.S. gamblers. The survey, conducted in late April 2020, uncovered preferences and expectations of casino gamblers if they are to return to casinos when they reopen.

Statistics presented in this survey are sobering. Only 51 percent of those surveyed said that they will gamble in casinos again upon reopening. Of those planning to return, only 35 percent said they will go back to their usual casinos. In effect, these statistics suggest that at best, only 17.85 percent of the pre-pandemic customer base could be counted upon to return. For a gaming establishment to break-even, it has to have 50-60 percent occupancy. With less than one in five customers intending to return to their previously patronized gambling venues, gaming operators will have a very tough time running a viable business. Social distancing and other regulatory safeguards, likely to remain in place for the foreseeable future, will only make matters more difficult.

Acting like a startup requires CEOs of gaming businesses to be what Chip Conley calls the Chief Emotion Officers for their employees. In the volatile COVID climate, employees are anxious; concerned for their physical safety and their job security. Under this yoke of uncertainty, they have to interact with customers who may be equally anxious and unsure of their physical and financial well-being. CEOs of gaming companies need to create a new psychological contract with their employees, a contract grounded in trust, authenticity, and reciprocity. The contract needs to be renewed each day with face time with employees and with honest, transparent communication. For most gaming operators, a massive cultural inflection will be needed for such psychological contracts to take root.

In effect, gaming businesses the world over will have to learn to walk again. This is where the determination and the dogged drive of startups are needed. New strategic plans need to be put in place to guide organizations after pressing the “reset” button. These plans should reflect the present-day realities about the macroenvironment (i.e. economic situation, competition and legal stipulations), newly reconstituted market segments, and a re-formed revenue mix. In face of the monumental crisis, acting like a startup will equip gaming op-erators to emerge with improved capabilities and enhanced offerings. If operators do post-opening what they were doing before they were forced to shut their doors, they will seriously falter or even perish.

* Sudhir H. Kalé, Ph.D., is founder and principal of GamePlan Consultants, a company that helps gaming businesses all over the world in planning and executing their strategy. Sudhir has consulted for casino clients on five continents and has published more than 100 articles on the management and marketing of casinos. You can get advice on reopening your casino by contacting Sudhir at skale@gameplanconsultants.com.

Sally Gainsbury* and Alex Blaszczynski*

As venues begin to reopen and sporting events resume, governments and stakeholders need to enact strategies to assist people to take control of their gambling now, to avoid severe harms in the future.

For several months Australia’s 4,995 gambling venues housing around a total of 196,177 EGMs were shut, along keno and retail betting with few sporting matches to bet on in response to the coronavirus shutdown measures. This resulted in an unprecedented and unique reduction in accessibility of gambling in Australian history.

Gambling problems are often driven by a desire to escape stress and unpleasant emotions. Gambling problems are high among people experiencing depression and anxiety and those socially isolated. Financial hardship is strongly related to gambling problems and psychological distress. Past financial crises such as the Icelandic banking collapse and major recessions show that gambling is highest among those who are experiencing the greatest financial hardship. Gambling offers hope for a change in lifestyle; however, for most the change is associated with greater difficulties caused by unaffordable expenditure.

Stimulus packages, although important and well-intended, can add to the risk of excessive gambling. The 2008-2009 Australian economic stimulus packages designed to maintain consumer spending were subsequently colloquially referred to as the “Pokies and Plasma payouts”. Similarly, claims have been made that early withdrawals of superannuation intended to allow financial relief during Covid-19 were related to increased gambling.

There is evidence that Australians have increased their online gambling during the shutdown. One estimate using banking data found that online gambling increased 5 percent in April 2020 (along with other Internet activity such as Netflix). Another spend tracker reported that online gambling was 71 percent higher than normal at the beginning of April, but dropped to 60 percent higher towards the end, suggesting that initial engagement waned. Despite fewer races, racing turnover significantly increased.

Tracking offshore gambling is difficult so there is currently limited evidence on whether this has increased. Despite concerns that pokies players would all turn to online gambling, this has not materialised in the two decades of online gambling availability. Gambling on offshores sites is associated with higher rates of gambling problems, but occurs very infrequently. It is relatively unlikely that regular pokies gamblers who are more likely to be older (24 percent >65 years) are suddenly shifting to gamble on online casino sites.

Overall changes in gambling are not as important to monitor as understanding which population cohorts are gambling. Research from Canada and Sweden suggests that, unsurprisingly, increases in gambling are more common among regular gamblers and those with problems. Gambling to cope with negative experiences is likely to be highly problematic and if sustained over time can lead to severe harms for individuals, and those around them.

Fortunately, gambling treatment services have remained in operation. For example, at the University of Sydney Gambling Treatment and Research Clinic, demand for services from clients remains high and clinicians are treating clients using videoconferencing. The experience reported by many clients seen seeking treatment at the Clinic is that the shutdown has brought much relief and provided opportunities to take back control over their gambling. Treatment attendance rates are the highest they have ever been, demonstrating the strong demand for video-therapy and need for expanded funding for this.

However, intake from new clients initially declined, which is consistent with a 50 percent reduction in calls to the national gambling telephone. Unfortunately, for many with gambling problems, taking a break is not sufficient to resolve these. Without active efforts to address the underlying issues, it is highly likely that when society reopens, new ‘habits’ developed during shutdown will make way for a resumption of behavioural patterns including gambling, that have been entrenched over much longer time frames.

This is now a critical time as state governments deprived of gambling revenue may look to expand opportunities for gambling where possible – this is the ideal time to conduct research to understand the relative influence of environmental vs. personal factors on gambling and harms. If the restriction on gambling persists over the longer-term or permanently, it remains to be determined if there will be a transition to online gambling on local regulated and international regulated and unregulated sites. Unintended consequences may include exposure to greater levels of risk for community members engaged in unregulated sites, or illegal gambling on pokies as occurred in New South Wales in the 1950’s.

It is essential that governments and stakeholders, including the gambling industry, act to reduce gambling harms. Thousands of gambling-venue employees have been stood down. During this period of suspension, steps could be taken utilise this downtime to retrain and upskill staff in learning more about gambling problems and how individuals atrisk of harm can be identified and appropriate staff-customer interactions can be affected. Venue responsible gambling managers and machine manufacturers could be working with researchers and policy makers to design, test, and have new practices implemented as venues reopen to offer a safer gambling environment. Executives, often too busy to fit consumer protection training into their schedules, could be attending interactive online learning sessions with experts to enhance their understanding of gambling harms, enabling consumer protection strategies going forward to be driven from the top down.

Initial reports from NSW, one of the first states to open gambling venues, saw an increase in gaming machine turnover compared to the same period the year before. It will be critical to closely examine whether people resume gambling habits and for those with gambling problems, whether the enforced break has provided enough momentum towards a sustainable recovery. Understanding the factors and motivation that enable some gamblers to regain control compared to those that lead others to resume past habitual behaviours can contribute to the development of more effective interventions and safer gambling environments.

* Associate Professor Sally Gainsbury and Professor Alex Blaszczynski are Co-Directors of the University of Sydney Gambling Treatment and Research Clinic within the Brain and Mind Centre and School of Psychology and members of the Technology Addiction Team.