Exec: Illegal slots undercut casino revenues by $170M

Written by  //  July 26, 2012  //  Tourism/Transportation  //  No comments

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Puerto Rico boasts about 15 casinos licensed by the Tourism Company, located inside almost every major resort and smaller hotels throughout the island. (Credit: © Mauricio Pascual)

The proliferation of illegal slot machines affects more than 2,800 casino employees, who are at risk of losing their jobs over the closure of casinos operating in Puerto Rico, Eric Rodríguez, vice president of the casinos division of Empresas Santana warned Wednesday.

The executive expressed his concern over the multi-million losses that the island has experienced due to the closure of casinos and the proliferation of illegal slot machines, as stated by the management of El Conquistador Resort & Golden Door Spa in Fajardo upon announcing this week the closing of its casino effective Sept. 30. About 60 people will lose their jobs.

“The people of Puerto Rico lose more than $170 million annually, according to a study commissioned by the Puerto Rico Tourism Company on the illegal machines, and this is not a problem for the tourism industry, it’s a general problem that affects us all,” he said.

Puerto Rico boasts about 15 casinos licensed by the Tourism Company, located inside almost every major resort and smaller hotels throughout the island. Casino revenues are split between the operator and the government, which gets 50 percent of the profits. In turn, that money is split to benefit three main components: the University of Puerto Rico (which gets 45.45 percent), the Treasury Department (15.15 percent), the Tourism Company, (25.8 percent) and the Tourism Industry Development Fund (13.6 percent).

During the better part of the last six years, the government has been taking legal action against illegal gambling halls, which have eroded profits for the established casinos.

“Sadly, casinos can not continue to assume the economic shocks represented by more than 100,000 illegal slot machines around the island,” Rodríguez said. “Proof of that is the closure of a casino as important as the one at El Conquistador and, a few months ago, the casino at the Hotel Meliá (in Río Grande.)

Illegal gambling halls are taking a bite out of the highly regulated casino industry, an exec says. (Credit: © Mauricio Pascual)

“The casino industry is devastated by this, each casino closing is less money for the government and less money from taxes on hotel stays that the government no longer earns,” he added.

In Puerto Rico, hotels that have no casino charge their guests a 9 percent tax. Meanwhile, hotels that have casinos on their property charge their customers 11 percent tax, money government will no longer get whenever a casino closes inside a hotel still in operation.

He projected that the escalating problem of illegal slot machines could cause the elimination of another 300 casino jobs in the next 24 months, joining the 115 that have been affected by the casino closings in Río Grande and Fajardo.

“The illegal slot machines epidemic has become so extreme that nowadays you can go to buy bread and play on a machine like you’re in a casino,” he said. “This is against the law and against the casinos that have been regulated since 1948 when the Gaming Law was created.”

Puerto Rico’s casino industry is one of the few businesses in the world that earmarks about 50 percent of its proceeds for the government.

“In the case of illegal machines, these contribute nothing to the people of Puerto Rico,” said Rodríguez, a seasoned casino director.

Light at the end of the tunnel
Recently, the Hotels and Casinos Association’s Casinos Division was informed of the signing of an interagency agreement between the Treasury Department, the Justice Department and the Financial Institutions Commissioner to begin confiscating illegal machines islandwide.

“We’re hopeful that once they begin to carry out operations to dismantle these illegal centers, we can safeguard the development of the tourism industry and not only the government’s revenue, but that of all Puerto Ricans,” he said.

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