Tinian Hotel & Casino

Tinian Hotel & Casino

Recently I visited Tinian and had an opportunity to see the exterior of the new Tinian Casino, it is huge and dominates the landscape of San Jose Village. There was a flurry of activity with workers and machines busy putting the finishing touches on the beautiful structure. The building is first class and would be a welcome addition to any tourism oriented community.

Unfortunately, I did not have an opportunity to view the interior but I have heard that it is lavish and its opulence would rival any casino in this part of the world. The facility will certainly enhance the Commonwealth’s overall tourist plant when its supporting infrastructure is in place. There can be no question that if it is to be successful Tinian will need all the government support it can get along with additional air schedules and larger terminal facilities, emergency equipment and additional immigration and customs staff. Nothing in my memory has occurred in the Northern Marianas that has the potential of making such a profound impact on a single island’s society as does the successful marketing and operation of this distinctive investment which has been voluntary made by investors with unbridled confidence in the Northern Marianas. The closest thing to it would be the Hyatt, which was originally built by Continental Airlines in the early seventies and was constructed as a result of a veiled threat by the Government of the Trust Territory of the Pacific Islands, (TTPI).

In those days they would have preferred I use the term “requirement” but that would be a play on semantics. At that time the air route through Micronesia was to be awarded to either Pan American or Continental. The High Commissioner of the TTPI, appointed by the President with the rank equivalent to an ambassador or general and exercising great power and influence over the islands, let it be known that a consideration in awarding the route would be the construction of a “substantial” hotel structure in each of the then six districts of Micronesia. In competing for the undeveloped air route, Continental built what is now the Hyatt Regency and in 1973 Pan Am build the Intercontinental Inn, now the Dai Ichi. For years both failed to be profitable but they did eventually “jump start” the tourism sector.

They were built as a result of the “carrot” of the route award dangling before them. I remember, I was there. At any rate Continental got the route and Saipan got two hotels and the rest is history. Both airlines later sold the hotels. Unlike the hotels mention above, the principals of the Tinian hotel were not coerced into investing in the island, their decision was made voluntarily with unrestrained faith in the future of the Northern Marianas. As I peered through the fence I thought I would conduct a cursory analysis of the facility and developed a financial scenario around the following perimeters for the hotel only, (I don’t know anything about casino operations as an empty pocket book following a visit to Las Vegas will testify).

So the following was developed just by standing outside with my nose pressed against a closed gate while looking in. With 400 rooms operating at an average annual occupancy of 80 percent at an average guest room ratio of 1.5 and an estimated single room rate of $110 per night and $165 for a double, the hotel will have 146,000 room nights available with 116,800 room nights occupied by 175,200 guest nights, (annually). The total gross income from room sales would be $16.06 million, food sales about $4.6 million, beverage sales $1.6 million. Add to this space rental and income from recreation facilities other than gambling. Normally a resort hotel requires about 1.5 employees per room, so in this case some 600 people would be required. I conservatively estimated 300 employees with an annual payroll of $2.4 million. Of course, if you double the number of employees to 600 then the payroll would be close to $5 million.

These are people required directly for hotel operations and does not include those required for the casino operation or the “induced” worker requirements for the ancillary business activities outside the hotel. More than 5 million meals would be served annually not counting potato chip snacks. There would be an average of 480 guests on island on any given day at this hotel at the above average annual occupancy. The hotel room tax generated at 80 percent occupancy would be $1.6 million with a business gross revenue tax of about $1 million on room, food and beverage sales alone.

Of course, income from space rental, recreation facilities and gambling would increase this tax obligation. Everyone working in the government must realize that they have a partner and their partner is the private sector. If it does well – you will do well, if it doesn’t – eventually, you won’t. Anyone in government who thinks they are being magnanimous and doing the private sector a favor should forget it – it is actually the other way around. Private enterprise generates the tax that pays government salaries. So when a business owner applies for a business license, vehicle operator’s permit, pays at the tax window or applies for compliance with one or more of the many regulations, thank them for being here and helping pay your salary.

Appreciate the fact that without them you might not have a job. If the hotel is successful in its marketing efforts there will business opportunities for pork, poultry, beef, fruit and vegetable production; fish, including – shark fins for soup; souvenir shops; charter fishing and diving; automobile rental; small restaurants; retail stores and everything else from taxis to pawn shops. The hotel will provide a huge market for a consistent and assured supply of farm and marine products of all kinds. This obviously will require more people involved in fishing and farming. Many more than the 80 individuals revealed as being engaged in these activities in the 1995 census.

These workers will need housing. Houses require power and water, fire and police service. Medical facilities will have to be expanded with more doctors and nurses. Both an “economic and human multiplier effect” will be activated. Tinian demographics at the time of the 1995 census revealed the following. Within a total island population of 2,631, those age 19 years or less totaled 1,067; those age 65 and over accounted for 47 people. United States citizens numbered 1,754. Persons 16 years and over and in the labor force totaled 1,456. There were 877 people who were not U. S. citizens and thus presumed to be nonresident workers. The unemployment rate in 1995 was 5.1 percent. These numbers indicate the need for a substantial number of additional workers once the hotel casino becomes operational. The people of Tinian have waited a long time for this and now their desires are about to come to fruition. The hotel casino would have been easier to market and service had it been situated on Saipan.

For reasons which we are all aware that was not possible. I wish its developers success, however, if something occurs to limit its profitability then everyone will lose, the investors, Tinian and the Commonwealth. If this happens it may turn out that the Commonwealth will be the biggest loser in this game of chance as it could damage our investment climate. This could possibly result from the imposition of the federal minimum wage too soon and, more seriously, U. S. control of immigration. If U. S. Immigration laws are applied in the Commonwealth then charter flights from China, which I understand may be the principal market for the casino, will be difficult since the Chinese may be unable to obtain a U. S. visa in a timely fashion. This is a document required by some nationalities to visit the United States and perhaps in the not too distant future – the Commonwealth as well. As Arnold Leibowitz points out in his book: Defining Status: A Comprehensive Analysis Of United States Territorial Relations, “a number of examples may be recalled of the federal government's modification or change of policy, generally taken in response to domestic pressure from constituents.

Several are: – the establishment of quotas on watch assembly which affected employment in the Virgin Islands for the benefit of manufacturers in the continental U. S. which also influenced similar activities in the western Pacific, (Guam); the establishment of quotas on certain textile items which prevented industry growth in Guam; the 1985 revenue ruling designed to prevent arbitrage bonds from being issued in any U. S associated territory or area; and the possible repeal of section 936 of the U. S. Internal Revenue Code which is vital to Puerto Rico’s economic development and a potential valuable investment incentive to the Commonwealth at some future date.

As Leibowitz observes, all of these actions changed the ground rules at critical times and were damaging to each area’s development efforts.” Lets hope it doesn’t happen to the CNMI. As I have stated before, we live in a very complicated world and it’s essential to be aware of the pitfalls.