The Ontario Lottery and Gaming Corp. (OLG) is currently conducting a bidding process, seeking to turn over control of the Greater Toronto Area’s (GTA) gambling venues to a private operator. According to the Globe & Mail, Canada’s most read weekly newspaper, the selection should be made within the next few weeks.
The three locations whose operations would be transferred to the chosen company are the Woodbine Racetrack, Ajax Downs, and the Great Blue Heron Casino. As one might be able to tell by their names, Woodbine and Ajax are primarily horse racetracks, but both do have sections operated by OLG that contain slot machines and electronic table games. Great Blue Heron is more of a traditional casino.
The OLG believes the GTA is an underserved gambling market, according to the Globe & Mail, and it believes outsourcing the three venues would allow them to grow and operate more efficiently than if OLG continued operating them itself. The private operator could build out the three locations as larger, more all-encompassing casinos, as well as build a fourth casino, all provided local approval.
It looks like the OLG will pay the winning company for operating the casinos a minimum of $72 million per year for the 22-year duration of the contract. The company will also get to keep as much as 70 percent of the gambling revenue. The company would still have to work with the OLG and show that it has solid plans to increase revenue.
Essentially, what the OLG is trying to do here is very much like a classic client/consultant business deal. The OLG, the client, is outsourcing part of its business that it is not its core strength to a consultant, the private company. The client will receive a long-term monetary benefit from the improvement of the business (the casinos) while not having to spend time and money tackling the problem itself. The consultant gets paid (and in this case, gets paid long term via multiple revenue streams) and provides its expertise to the client.
A source close to the RFP process told the Globe & Mail that three of the companies that have gotten involved in the bidding include Caesars Entertainment, Brookfield Asset Management (Canada), and the Genting Group (Malaysia). Our readers are likely familiar with Caesars, but not the other two. Brookfield is a massive company that owns assets in the real estate, energy, and infrastructure areas. Through subsidaries, it owns Atlantis Paradise Island in the Bahamas and the Hard Rock Hotel & Casino in Las Vegas. The Genting Group owns the Resorts World properties as well as more than 40 UK casinos, including Crockfords Casino in London.
As the Globe & Mail writes, Woodbine is potentially the most important of the three gambling sites, located right by the Toronto airport on busy stretch of highway. If it could be built up as a Las Vegas-style casino, rather than a race track with a bunch of slot machines, it could be a boon to the local economy.
“The OLG’s modernization plan is the catalyst for Woodbine Entertainment to unlock the value of the Woodbine lands to sustain horse racing on our 680-acre site and bring real economic development to Rexdale,” Woodbine spokesman John Siscos told the Globe & Mail.