The ROI Mystery:
Land Based Casino vs. Online Casino

One of the passions investors have had and will always have is to have their own casino.
From the first gambling houses located in the Far East to the nowadays fancy casinos located in Las Vegas, the capital of casinos, betting has been extremely popular ever since ancient times.

Investors keep dreaming about owning a casino ever since the early days of the industry.
Nevertheless, having their own casino is, for most of them, more than an asset in their portfolio, due to the priceless image attained by having this kind of successful business.
It was only a matter of time for one of the world's oldest and richest ways of entertainment to find its way on the Internet.

The fact that casinos represent a profitable business is not new. However, investment specialists prove that there are serious differences when it comes to the profit gained from a land based casino and that of an online casino.

Although the online casino market is still changing, due to the fact that some countries regulate and encourage it while others outlaw it, this is an industry moving at a fast pace.
The following review compares business factors for both types of casinos - online casino and land based casinos - in order to conclude which one is a better opportunity and which one records a better ROI. As in the case of any business plan, we will analyze and compare all the factors: revenues, startup costs, monthly costs, marketing costs and, of course, incomes.

Revenues

The most interesting question. It is not a big mystery that land based casinos make big money! But of course, the issue is how much they also spend.
"The House always wins" - that is a known fact, but where are the higher revenues?
In order to answer this question, some statistics are required as when it comes to an industry so full of mysteries, it is pretty hard to know the truth.

Total land based gaming revenues in the US have increased from $34.7 billion in 1993 to $72.87 billion in 2003. In Canada, figures point to a similar trend: net revenue casinos register have increased from $2.7 billion (dollars) in 1992 to $11.3 billion in 2001. Total gaming revenue in the 11 states which allow commercial casinos reached more than $26.5 billion in the 2003 fiscal year, compared to $16.7 billion from Indian-owned casinos in 29 states. So as we see, there is money in the industry, but one thing must be clarified: not all casinos are located in Las Vegas.

In Eastern Europe, you can find some locations in capital cities such as Prague, Budapest and Bucharest, with a few successful land based casinos. The revenues estimation goes around 250,000€ per weekend for each casino.
Can the online casino compete with these figures? From the business perspective and more realistic points of view, Internet gambling has revenues anticipated to grow at double digit rates. CNN, April 2004: "the online gambling is expected to reach $ 18.4bn by 2010.

There are almost 1,600 online casinos on the Internet. The biggest one can earn hundreds of millions of dollars each year while the smallest can easily come to hundreds of thousands of dollars per month.
It is very surprising to find that the revenues are not so different …now we can review the costs reflecting the incomes an investor might take home at the end of each month.

Investment - Startup Costs
The startup costs can amount to significant figures in opening phase of every company.
In land based casinos, especially the luxury ones, the sky is not at all the limit.
One example is that of Reuters announced , casino Las Vegas Sands corp. spent $744,000,000 in the new Macau stylish casino in May 2004.
Land based casinos costs for set-up may begin from $500,000 only for a very small casino. This amount is needed for renting or buying a hotel or a special place in a good location; for the interior design, equipment (slots, tables, bar… not to mention the legislation fee that can easily get to another 350,000$ for the opening).
Therefore, we have a preliminary result of at least $750,000 - $2,000,000. These costs go very well with whoever has "available money" and is looking for creative and fast ways to spend it.
The costs for opening an online casino might amount to $ 200,000 - 500,000, including the licenses required (the gaming license and the software company license).
These costs usually include full customization of your online brand and a selection of casino games.

Monthly Costs
For online casinos, the situation is very similar to the one of e-commerce.
There are fixed costs for hosting and technical support (around $5,000 - $7,000), and of course your managerial costs (office, personnel, etc.) which normally depend on how successful your site is. You can start with a modest team of 3 to 5 people and grow gradually.

Land based casinos require maintenance and security. The cost of all interior decorations, including equipment (less casino equipment), furniture, fixtures, upholsteries, and the like is estimated to reach $305,000,000. Casino equipment is estimated to cost an additional $60,000,000. A land based casino is actually a restaurant and also a bar, so you should also take these costs into consideration but…without the guest paying for food and drinks!
Do not forget also the rent, the electricity costs or the payrolls for the staff and insurance.
Another significant factor in the land based casino costs is security. The security matter must cover the issue of having one supervisor for every two visitors, not to mention the surveillance cameras.
Online casinos do not require many employees. The hacking matter is as well as possible kept under control (under the support budget). However, it is minor in comparison with the criminal issues which may occur in a land based casino.

Marketing Costs
Marketing supposes flexible costs depending upon how fast you want your ROI.
In land based casinos the other costs are in such a way that if you do not have visitors and players at your tables, you actually lose a lot of money every day.
"I used to spend $100,000 per week on bringing players from the Middle East to my casino" exposed a Hungarian Casino Manager. The payment usually goes to "casino trips dealers" who loan airplanes for casino players from their country. Beside that, there are also the public relations and the offline media advertising that you must create in order to be seen".

A reasonable expectation for online casinos can start from about $100,000 for a quarter.
When you start to see real players on real money, the smartest idea is to invest your profits in more advertising, a model that should bring you to return your investment in approximately 9 to 24 months.
Most Internet casinos/gambling sites that are new spend about $30,000 to 50,000 per month on marketing.
The budget is spent usually on banners, affiliate recruiting, public relations and offline media.

Incomes
In land based casinos you can have hundred of visitors per week. Among them, there will be a few players that will actually spend tens of thousands of US Dollars in gambling. However, many visitors go to a casino, as we all know, for the free food and drinks (see Las Vegas and the seniors' phenomenon).
If you compare the costs for bringing the clients and the maintenance with the revenues, there is not much left. A land based casino is a tough business.
It is a well-known case study when a federal bankruptcy judge issued a restraining order temporarily blocking Donald J. Trump's $63,000,000 bid to buy the debt-ridden Atlantis Casino Hotel in Atlantic City. Creditors holding a $6,500,000 mortgage on three Atlantis parking lots requested the 10-day order, which prevented the transfer of the Boardwalk property pending further court hearings.
In the online area, the matter is different: thousands of people play on small amounts, and therefore there is no need for you to depend on a reduced number of heavy clients.
Having a database of thousands of players who roll the roulettes in your virtual casino every hour, without you having to pay for the drinks…is a pleasant idea. Beside that, the "high rollers" are also known in online casino industry. Every online casino has a 0.5% of people who spend $10.000 to $100.000 on gambling.

So which of the two is the big winner? With the above information, you can decide which of the two, is the better option for you to invest you money in.