Russian Gaming Zone, Azov-City :: Interview with Lenar Kashapov

from Gaming & Leisure Magazine

www.gamingandleisuremagazine.com

Spring 2013

In the Fall 2012 G&L issue, we reviewed the general state of affairs for the overall casino gaming industry in the Russian Federation.   With this issue, we’re taking a closer look at one of the four special gambling zones created by Russian Federal Law № 244.  Mr. Lenar Kashapov, Director of Azov-City Gambling & Resort joins us for this discussion.

Gaming & Leisure Magazine
Spring 2013

[G&L]  The non-profit “Association of the Gambling Zone of Azov-City” was created in 2009.  What are the objectives of the Association?

[Lenar Kashapov] According to Russian legislation gambling organizers are required to create a noncommercial organization representing their interests.  Federal Law № 244 contains this provision and further stipulates such organizations could also have part of managing functions at the gambling zones. There is an annual investment forum in Sochi (Krasnodar region) where the cooperation agreement between Azov-City Gambling & Resort and the Administration of Krasnodar region (regional governmental body) was signed in 2009.

The main functions of our Association are:

·         Lobbyism

·         Industry standardization

·         Attracting investments

To meet the first target we negotiated with the government about infrastructure expansion: constructing roads, power lines and treatment facilities.  To meet the target for industry standardization we developed building norms and standards for casino buildings.  At the time we didn't have such norms for gambling facilities, so we discussed legislative and regulatory acts with the parliamentarians and requested changes in legislation. On behalf of the members of the Association we negotiated with the largest consulting firms and also potential partners about investments and operating casino resorts in future.

Russia is a unique country and the experience, contacts and knowledge we have are an invaluable treasure for the development of Russian gambling industry.  Moreover, in the future we are planning to work for development and promotion of all four gambling zones in Russia, so we permanently collect the information and negotiate with the authorities of the regions that have gambling zones – Kaliningrad territory, Altay and Primorski regions. I think there are no people in Russia who have more information and contacts in gambling zones beyond our group.

[G&L]  Located in Krasnodar Territory in Russia’s Southern Federal District, how is Azov-City positioned for in-bound tourism?

[Lenar Kashapov] To have strong position for in-bound tourism we have to continue to expand our facilities.  We have only two casinos at gambling zone Azov-City at present. They are not very attractive for international tourists.  People from Vladivostok, Tyumen, Ulan-Ude, Stavropol,  

Lenar Kashapov
Director of Azov-City Gambling & Resort

Novocherkassk, Moscow, St.-Petersburg visit our casinos.  In whole – about 80 cities in Russia and abroad visit our casinos.  The largest group of visitors come from neighboring Rostov-on-Don and Krasnodar.

We recognize that the Azov-City gambling zone is situated in a distinctive region of Russia, so we have no doubt it will be interesting for foreign tourists.  You could not see such nature and bright expressions of Russian culture in other Russian gambling zones. Kuban (another name of Krasnodar region) is the native land of the famous Cossacks.  

Situated on the Black Sea, the coastal city of Sochi will host the Winter Olympic Games in 2014.  It boasts an  innumerable quantity of ancient historical destinations interspersed with fields of sunflowers and wheat. All these features will be used to breathe the spirit of Russia and the region into the non-gaming facilities in Azov-City.  We already have visitors from China, Turkey, USA, Ukraine, Europe and are sure that soon we will see tourists from Israel and Arabian countries.

When the authorities of Krasnodar region represented the Azov-City gambling zone investment project in 2009 they declared that the airport, seaport, and a high-speed highway would be constructed.  They also planned to construct resort facilities for elite leisure: hotel complexes, yacht-clubs, aqua-parks, marines, golf clubs, horse-racing and other lifestyle facilities for the up-scale leisure and entertainment market. The regional administration estimated a stream of visitors up to 6 million persons per year from the countries located within a two hour flight.

[G&L]  As with Las Vegas, Azov-City has been created in a lightly populated area far from cities of any significant size.  Are there parallels between the two gaming regions?

[Lenar Kashapov] Of course, everybody is trying to find these parallels. But what are they? I cannot answer. There were many other factors which had helped to develop Las Vegas.

I think Russian casinos will have their own identity because Russian gamblers have their own distinct mentality and behavior.  Gambling in Russia has its own history, but it is not very long. For example, if Americans visit Las Vegas for rest, entertainment and fun, for Russians – a trip to casino is a chance to win.  The Russian gaming market was aimed mainly at local guests even when it was at its peak, only a few people here understand it as a tourist activity.

From the point of view of expected profit, Azov-City is a fascinating project.  Azov-City is the first gambling zone in Russia and it seems that it will evolve into the first Russian casino-resort destination with a critical volume of tourists and gamblers.  From the point of view of business organization –independent foreign investors with western technologies and mentality will not be able to develop projects here on a stand-alone basis, it will be necessary to have a local partner.  Authorities wish to avoid the risk that foreign investment would overwhelm the domestic Russian investment.

Gambling industry in Las Vegas was initiated by gangsters, but according to Russian gambling legislation people with criminal records cannot be engaged in business.  Las Vegas was built up chaotically, but Azov-City has committed to a regional development plan through legislation – Land Use and Development Rules. The highway in Las Vegas was built without much ado, but authorities in Krasnodar region are trying to manage with local roads. And at last the gambling industry gives us a head start – there are a lot of professional investment companies and gaming operators all over the world – so we continue to look to them for their experience.

As to location – I cannot say definitely – we are similar to Las Vegas or not. The first part of gambling zone Azov-City is situated at the coast of Azov Sea where the surrounding territory is quite large, and there are many people who wish to live and work here.

[G&L]  Oracul Casino was the first to open in Azov-City.  Is there planned expansion of the Oracul Casino?

[Lenar Kashapov]  Royal Time Group is the owner of Oracul, the first Russian casino.   Oracul was created with the declared intent of significantly boosting this new resort-city in the south of Russia, where gambling is planned to be only a smart part of the region's

Oracul Casino

entertainment offerings.

The first 1500 square-meter gambling facility was opened in 2010, and has since expanded to 4000 square-meters.  The Casino Oracul is presently building a hotel complex which will be the biggest part of resort.  I think the construction will take about 15 more months.  Investors and partners trust Royal Time Group, so I suggest financing would not be a problem.

The most difficult thing in Russia is maintaining a dialogue with authorities.  Gambling is a new industry in our country and we recognize it is very important to have a correct economic calculation. To plan its strategy, Royal Time constantly consults with authorities. 

[G&L]   A mixed-use tourism project “Golden Sands” is being billed as the Leisure Capital of Russia.  What is the status of development, and what offerings are intended within this project?

[Lenar Kashapov] The coordination of such initiative in Russia is very long process.  It is necessary for authorities to make changes to various standard and legal acts.  Moreover it is necessary to find infrastructural capacities, develop and co-ordinate the general plan of land using at the new location. And at last it is necessary to find a lot of money which the regional authorities do not presently have. This project is developing slowly and it has to be changed due to bureaucratic procedures.  Construction processes at the new site could bring more difficulties.

Oracul Casino

We support regional authorities in this initiative; moreover we have ordered and developed the land use concept of the Golden Sands.  We are watching the developments and as soon as a clear light is shed upon the situation, we will immediately publicize the progress along with government authorities.

[G&L]  Some people have considered illegal gambling facilities in the cities as the main competitors of the gambling zones.  How well are the authorities controlling these illegal gambling facilities?

[Lenar Kashapov] That is a shadow business and I cannot answer objectively “How well are the authorities controlling illegal gambling facilities”.  I’m studying gambling in Russia, but even my knowledge is not enough to estimate volumes of illegal market. 

Struggling against illegal gambling is different in different regions of Russia. In some regions government and law enforcement bodies are focused on other important issues, and therefore the struggling against illegal gambling is not prioritized.  In other regions, the fight against illegal gambling is under personal control of the Governor.

According to official data the Office of the Public Prosecutor closed more than 40,000 illegal gambling facilities and more than 450 illegal casinos all over the Russian Federation. But you should consider that law enforcement bodies often close the same gambling facility many times.  There are also some facilities that are difficult to enter since they are under somebody’s protection.

But on the other hand the gambling zone is visited mainly by VIP gamblers who don’t like to be arrested.  If you visit an illegal casino in Russia such arrest and prosecution is very possible. The elite will go to legal casinos to enjoy better service and entertainment programs, complete with an opportunity to win the prizes guaranteed by the government.  I am absolutely sure while illegal gambling is prospering, the development of Russian gambling zones will be extremely slow.

[G&L]  We would like to thank Mr. Lenar Kashapov for his time in discussing the status and future of Russia’s Azov-City Gambling & Resort.