Flushed with success

26 November 2002 by
Flushed with success

A scramble behind the scenes is underway. The draft bill liberalising gaming has not even been published yet, but already UK casino operators are hastily researching which sites are suitable for the new mainstream casinos.

Hotel and betting chain Hilton Group has bitten the bullet and set up a division to look into re-entering the casino market less than two years after selling its gaming division to Gala. The company is looking to turn its hotels in Brighton and Blackpool into gaming centres at estimated costs to the company of £30m each.

The UK's casino operators are rushing to get key sites earmarked before the big international players with serious financial muscle come. American ventures like MGM Mirage, Park Place Entertainment, the French operation, Partouch, the South-African Sun International and the Australian PBL are all sniffing around.

The reality is that the UK market offers the one big expansion opportunity on the horizon.

Early positioning
Neil Richmond, head of leisure at CRE Colliers, says: "UK operators are clearly looking to position themselves to take advantage of liberalisation before international players come. They've got a small window of opportunity, and most are already quietly looking to make the most of this."

Richmond believes: "The first priority is to take sublets to allow for the potential expansion of existing casinos. This is to make the most of the relaxation earlier this year of regulations on live entertainment."

He adds: "The next step is to look for new casinos and a number of operators are already doing the preliminary research on that."

Helen Conner, strategic consultant to Jones Lang LaSalle, says: "We are likely to see an increase in the number of casinos, largely in the provinces and an increase in size of casinos as operators require larger premises."

She adds: "A significant amount of expansion may be edge-of-town or out-of-town where we could see the growth in multi-leisure hubs combining casinos with other leisure uses. And there is likely to be the development of resort casinos. They could be important in the regeneration of British seaside towns."

Another theory There is an alternative view. Richmond believes most of the demand will come for city centre locations where people can pop in for a flutter after work or as part of a night out.

The question of where the new provincial casinos will be located comes down to how to evaluate demand.

JLL has been doing pioneering work on researching catchment areas. Property researchers have looked at socio-economic factors like demographics and house values. JLL researcher Brenna O'Riarty said: "We have been working with a behavioural science group to assess behavioural patterns like attitudes to gambling and debt. These are then being used to determine catchment areas." How big the catchment areas are could determine how many new generation casinos the country can support.

But Alka Bali, head of leisure at corporate finance house Close Brothers, cautions against too much optimism. She says: "People always expect deregulation to have a greater impact than it does. It will take time. The real opportunity from deregulation is for operators to make the gaming experience more user-friendly and open it up to a larger audience by making it a less daunting experience to the average person."

Bali does not anticipate the growth of mainstream casinos to eat into the existing casinos, particularly in London. She says: "There will also be a need for the big international punters who take their gambling seriously, and do not want the distractions of live entertainment as well. The live entertainment is more for the mainstream market."

The American experience
The liberalisation of gaming is set to launch the UK into the footsteps of the States. A major expansion of the casino industry into mainstream entertainment and Las-Vegas style all singing-all dancing casinos is expected to follow. This new form of entertainment is expected to create new demands and stimuli that will allow regeneration of towns like Blackpool.

Or so the hype and the sales pitch at local councils by operators will have us believe. The reality of the American experience is far more complex and ambivalent.

No one denies that liberalised gambling helped transform Las Vegas from a one-horse town in the desert into an international entertainment mecca. But Las Vegas had the benefit of a virtual monopoly in the US for 40 years before licensing was liberalised elsewhere - this, coupled with good air service and the enticing desert climate.

Since liberalisation, casino gambling has grown into a $20bn industry operating in 26 states. But, according to a report by Wharton Real Estate, gambling in the States has "expanded largely without planning or careful study of its social and economic effect". The impact on local community development is of particular significance given that the "supposed potential of new casinos to generate tax revenue, create new jobs, enhance night life, and draw visitors is what has made casinosÉattractive to cities wishing to revive economically depressed downtowns".

Bob Bach, director at US-based Grubb & Ellis, argues that the development of casinos has been successful in generating tax revenues for the municipalities, many of whom have reinvested the funds in public works aimed at regenerating areas. But they have had relatively little impact on adjacent private sector development.

Food and drink He says: "Part of the reason is that casino operators and developers want punters to eat and drink in the casino as well. Bach adds: "This means the development of a casino, particularly where it is pitched at daytrippers, rarely leads to largescale private sector development around the gaming facilities. Sometimes these areas are distressed to the point where the facilities become islands, with little beneficial impact on surrounding properties."

Research by Wharton into the impact on local property values of casinos, developed between 1991 and 1994, show there are some wider benefits to casino development. They found counties that had introduced casinos had lower growth rates and so gaming facilities were seen as an economic growth tool.

The report adds: "Post-casino property value growth rates roughly equalise suggesting that casinos may have restored to these communities to a position of relative equalityÉcasino introduction had the greatest impact on commercial and industrial property values, most likely be expanding the community's commercial base. [But] residential values are lower after casino introduction, perhaps reflecting increased traffic, crime, etc associated with gaming."

The significance of a monopoly has attracted the attention of people like Trevor Hemmings and other operators keen to see a casino resort in Blackpool. It is the monopoly factor, which has led them to lobby government to use the planning system or draft the legislation in such a way to ensure that Blackpool is the only casino resort in the UK.

Whether they get their way remains to be seen.

Gaming reforms

  • All gambling legislation is to be consolidated into a new Gambling Act
  • A new regulator, the Gambling Commission, will be responsible for licensing and regulating gambling operators
  • Responsibility for licensing gambling premises, currently shared between councils and local magistrates, will become the sole responsibility of local authorities
  • Casinos will be deregulated and allowed to offer betting and bingo as well as alcohol and live entertainment. Restrictions allowing casinos only in designated parts of Britain; only existing premises which do not meet unstimulated demand will be abolished
  • Existing controls on bingo clubs will be abolished; for instance, on the number and type of gaming machines and maximum permitted prizes
Source: Manches

Licensed and Leisure Property Supplement, September 2002

A joint supplement by Estates Gazette and Caterer & Hotelkeeper magazine

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