Darren Keane, Storm International CEO, talked about work in Ukraine.
The first year was very difficult. The player winnings tax, which Michael Boettcher’s Storm International were confident would not be introduced, proved to be a huge obstacle to the arrival of foreign players in Ukraine.
In addition, illegal casinos still operate throughout Ukraine, and especially in Kyiv, so players who do not want to register are sent to these clandestine establishments, rather than to the new legal casinos and gambling halls.
The second problem is that the adoption of new tax legislation is constantly being postponed. This means that we are still paying high tax rates. In addition, Kyiv has become a red zone in the fight against the COVID-19 pandemic, which further scared some players.
The number of licenses issued this year is normal for the first year of market activity. Many foreign companies still look at the market in terms of occupancy, estimate revenues and await a final decision on tax law before considering entering the market. The fact that many illegal gambling halls and casinos are still operating has alienated many foreign operators.
Storm International is not profitable this first year. This can happen because it takes time for the business to develop, but in Ukraine, it will take much longer due to the barriers to business mentioned earlier. The company’s biggest achievement was the opening of Shangri La Casino and slot halls under the Slots City brand.
Another major problem is that the Ukrainian public does not seem to know that gambling is legalized and that there are establishments like Shangri La, which are beautiful large casinos with regular concerts and events. This is due to the law on advertising and strict rules for its placement on facades. The gambling business is charged high licensing fees and many taxes, but casinos are not allowed to advertise establishments in which their companies have invested tens of millions. This is clearly unfair and unfounded.
The biggest challenges for operators right now are rental costs and the delay in tax law as it affects the entire budget. In addition, the landlords set too high a price for their property due to the legal restrictions on the placement of gambling establishments. However, Darren Keane expects these costs to decrease as casinos and gambling halls begin to close rather than reopen.
Shangri La has low expectations regarding the expansion of establishments even after the stabilization of the political situation and the situation with COVID-19. Any instability strongly affects the gambling market. Storm International has no further plans to open new establishments in Ukraine. The reason for this is too strict laws that led to the existence of an illegal market, too high taxes and license fees without any benefits from the government.
As for the future of the industry in Ukraine, it does not look positive. After the 2015-2016 financial crisis and the COVID-19 pandemic, the local economy has been hit hard. Therefore, the future should be to attract foreign players, but this is again hindered by the law on tax on winnings.
The outlook is negative and Darren Keane, Storm International CEO, expects more casinos and gambling halls to close rather than re-open unless the government revises its policies and some landlords become less greedy. Otherwise, the “goose that lays the golden eggs” in the form of a dynamic gaming industry will be destroyed in its infancy. Although it could indeed be a major help in attracting foreign investment, tens of thousands of additional tourists a year and even more necessary income for the Ministry of Finance.