Will Alberta be the next gold rush?

July 1, 2024 11:54 AM
Photo: CDC Gaming Reports
  • Mark Keast, CDC Gaming Reports
July 1, 2024 11:54 AM

The big news that came out of the Canadian Gaming Summit in Toronto was the confirmation by Hon. Dale Nally, Alberta’s Minister of Service and Red Tape Reduction, that his province is working toward an Ontario-style open, regulated, igaming model. A political decision has been made that this is the course Albertans will be taking. It’s a matter of when, not if.

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SBC and the Canadian Gaming Association, organizers of the three-day show, focused the panel discussions on the future of igaming across the country, not just Ontario.

So after Nally’s presentation about opening Alberta’s door, the conversation switched to what’s next for the province. How will it roll out? What will the tax rate be (Ontario is at 20 percent)? How will it impact First Nations in Alberta? How will they handle sports-betting advertising? What’s the market potential and the plan to deal with the gray market?

A few weeks ago, Dan Keene, VP, Gaming, AGLC, told CDC Gaming Reports AGLC estimated that 45 percent of the market in Alberta has been captured by the legal Play Alberta platform. That leaves a large chunk of the pie for the gray-market operators.

At the summit, a panel discussion including Amanda Brewer, Senior Executive, Canadian Gaming Association, Rob Scarpelli, Managing Director, HLT Advisory, Brett Jackman, VP of Finance & Strategy, Pointsbet, Geoff Smith, Senior Vice President, Century Casinos, and Michael Scida, VP, Retail and Restaurant Business Development, Environics Analytics, dove into the topic.

What’s next up for Alberta? Scida brought some interesting data on the size of the Alberta market, while Brewer got into lessons from the Ontario launch that need to be applied to the Alberta rollout.

According to what came out of the panel, Alberta’s gaming industry generated over $2.9 billion last year. That number is expected to jump by a billion and a half in 2024.

“It’s one of the most penetrated gaming jurisdictions in North America,” said Alon Segev, Managing Partner, Segev LLP, the panel moderator, referencing the 29 land-based casinos in the province, offering around 15,000 slot machines, 800 VLT, 500 table games, plus online casinos, VLT around the province and commercial lotteries, and the charitable gaming activity.

“I guess the easy part is done. The Minister announced they’re going to open the market and copy Ontario,” Scarpelli said. “Now they’re going to talk to stakeholders. So they’ll look at those North American jurisdictions that have implemented similar models — Ontario, Delaware, New Jersey, Pennsylvania, West Virginia, Connecticut, Michigan, and Rhode Island.”

One of the objectives is consumer protection, eliminating the illegal side of the market. Another is government revenue. A third is protecting land-based casinos: Will that be in the legislation, considering how extensive the land-based casino industry is in the province? Will there be respect for the investment that industries like land-based casinos have already made in the province?

“I don’t know an open model that has eliminated illegal gaming. That will be dealt with through enforcement. The tax rate is up to almost 50% in Pennsylvania. It’ll be interesting where Alberta settles on the tax rate, combined with what’s going on with the existing operators,” he added.

According to Scida, Alberta is “very different” than the rest of Canada and took a specific look at discretionary income.

“How much of my paycheck was left after I paid my taxes, rent, all of life’s necessities? On average, Alberta is typically anywhere between 22 and 25 percent higher than the rest of Canada,” he said. “We’re not near the numbers we saw in 2015, when Alberta was about 40 percent higher, but it’s still a very significant number.”

When you add that with inter-provincial migration (60,000 in 2023 that left mostly Ontario to move to Alberta), people new to Canada (another 60,000 who went to Alberta last year), and temporary migration, it all totaled 250,000 last year alone.

“It’s the fastest growing province in Canada,” Scida said. “That presents new opportunities to attract business to your igaming sites. Then when you look at the spend and discretionary incomes, the total pie is so much larger than anywhere in the country.”

Scida said Albertans spend anywhere between 30 and 35 percent more on games of chance than anywhere else in the country. “When you combine that with the population growth, Alberta has a tremendous opportunity for success.”

From an operator perspective, Brewer said, “it’s quite possible that this is a market that could open very quickly. I know there are lots of rumors floating around.”

Brewer called on Alberta to implement a “reasonable bar of entry, a reasonable tax rate. You want operators to be able to come in without a lot of incumbrances and do what they need to do to grow their businesses and help Alberta achieve their channelization goals.”

Lessons from Ontario?

“The hope would be that Alberta has a bit of a freer and more open attitude toward letting those land-based casinos do what they need to do to take advantage of this opportunity and to grow their businesses,” she said. “Things like partnering with operators to build sports books, getting licenses, and launching their own skins. You think about that true omnichannel experience. That would be possible between a Century Casino and a sportsbook, an online offering that they may choose to offer.

“What I do know of Alberta and how they like freedom, the freedom to go and do what they need to do to be successful, I think that they will probably have … an even better model for some of the existing land-based industries that are there now.

“Alberta is going to be fabulous. Alberta has the same challenges that every other province in Canada has right now. They have a gray market. And they have operators who are operating without any player protections, no revenue generation back to the province, and all the rest of the safeguards that Ontario has implemented. I hope any operator who’s already in Ontario will look at that as the next logical destination for them in Canada. For operators that are still questioning whether they want to get licensed, I hope they make the right decision. And if they don’t want to get licensed, I hope they leave.”

From the perspective of the land-based casinos, Smith pointed to potential opportunities: increasing live table game hours, currently capped at 17, while there are facilities, including Century casinos, that could operate 24 hours; and cross-merchandising with A-class racetracks in the province with Play Alberta and future expansion of igaming and sports wagering

“We want to make sure the horse racing industry is on the front end of expansion,” he said.

Licensed operators in Ontario are also active in other provinces, so the hope would be those operators will be invited to jump into a compliance model, Brewer added. “You can’t restrict the number of operators you are going to bring in, then expect the rest of them to just voluntarily exit the market. They won’t do that. Some are still digging their heels in in Ontario as well.”

One way to get entrenched operators into the compliant market would be to have reasonable tax rates; 50 percent would not be reasonable in any province, she said. That’s a non-starter. However, if they lower the tax rate, that will mean less money to combat the gray market that will remain post-rollout.

“Don’t screw up what you’ve built in the past 20 years, which is a well-developed, well-penetrated market,” Scarpelli said.