High rollers gamble on gaming laws
News
by
Noella Pio Kivlehan
Deregulation The long-awaited modernisation of the gaming legislation is set to cause a goldrush of casino development. Noella Pio Kivlehan reports
It has been a while since the UK’s leisure agents had something to get excited about. But that time has come with the changes proposed by the UK’s gaming legislation which have made the gaming sector “the hottest thing since the cinema market”, according to Rob Howarth of Jones Lang LaSalle.
It is anticipated that the UK’s strict gaming laws will be relaxed by late 2005. If this happens, the hard gaming area will have to be a minimum of 5,000 sq ft, and the amount of gaming tables and slot machines allowed will be increased.
This fact has had British and US companies falling over themselves to acquire as many large sites -60,000 sq ft-plus – as possible. Property agents have gone into a whirl as they hunt for possible locations, primarily in cities such as Manchester, Newcastle and Coventry and Birmingham. Previously there were only 53 designated towns and cities that were allowed casinos. But the freedom to open anywhere is among the proposals before the government.
These are recommendations from the Gaming Review Body, chaired by Sir Alan Budd. Budd also suggests the abolition of restrictions on building size, and the requirement for membership 24 hours prior to play. A joint report into the recommendations by the House of Lords and Commons will be published on 8 April.
If the recommendations are accepted, then all bets are on in this country, as the gaming industry will most certainly increase from the current crop of 126 licensed units. In addition to the existing casinos, it is estimated that the UK could see 10 regional casinos within the M25, 10 to 15 resort casinos, and 30 to 50 regional casinos.
It is a situation the Americans have been gearing up for over two years, giving the British-based companies a run for their money. And it is a race nobody wants to be left out of.
Leading the American pack are the Missouri-based Isle of Capri chain (see case study), MGM Mirage and Harrah’s Entertainment. MGM has already bought part of a small casino in Bristol and plans to develop a larger site in Newcastle. It has also bid £270m for dog track owner Wembley Plc.
On the British side, bingo operator Gala has teamed up with Las Vegas-based Harrah’s to open eight properties, while Stanley Casinos is looking at several large sites around the North East. Independents such as Amaury Taittinger and Damian Aspinall are also looking to expand (see case studies).
However, most of the UK operators have put their acquisitions on hold, although negotiations are still going on, until the report is actually published. Although the operators are confident that most of the proposed changes will go through, they are still exercising caution.
How much tax?
Until the report is published no-one can be sure what level of tax the deputy PM will set. At present, tax on casino revenue runs as high as 40%.
A report from market analysts Martin Info called a Guide to the UK betting and gaming market states: “Industry observers expect that interest in the UK market, from the likes of MGM and Mirage, will fall unless taxes are set below 20%.”
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Case study Amaury Taittinger, owner, Leo Casino, Liverpool
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When Amaury Taittinger opened his Leo Casino in Liverpool two years ago he set new standards within the casino market.
The casino, named after his dog, was partly glass, bright and open – a huge step away from the closed-in operations that are part and parcel of British gambling.
The casino is only 18,000 sq ft, and now Taittinger has set his sights on expansion in order to compete with other operators which are joining the market in the light of the proposed changes in gambling legislation.
Taittinger is planning to add another 22,000 sq ft to double the size of the casino, but he doesn’t see it as a risk. “It’s not really a big jump, because it is very busy. Some nights we have up to 700 people coming in. We were doing a bit of entertainment, but we didn’t really have the room. This extra space will give us that room.”
There are also tentative plans to knock down his hotel – the Dolby – next door to the casino to provide this extra space. “It is a possibility,” says Taittinger. With American operators talking about spending £50m on fit-outs, Taittinger knows he will need extra financial help, especially as he is looking to open other casinos across the country.
“I am talking to joint venture partners. It’s difficult for an independent, because you need a lot of capital. It’s okay for me to operate one casino, but it’s also nice to get others to come in with you.”
Taittinger is reticent to say who these partners are, but he does reveal that he has had dinner with Damian Aspinall, which hints at either a friendship or a possible partnership. He is equally coy about where other premises will be, although agents say he is looking at Covent Garden.
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Case study Allan Solomon, executive vice-president, general counsel and secretary, Isle of Capri, Biloxi, Missouri, USA
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Allan Solomon has a great vision for what his company can do for the British gaming market: it will increase the UK’s tourist visitors, and regenerate rundown areas, while contributing to local communities and charities.
That is a tall order. But Solomon says opening 100,000 sq ft-plus casinos will bring much needed life to tired areas. It will also fall into line with government policy. Isle of Capri also intends to follow its US policy of interacting with the local communities and charities.
Using its loyalty card scheme, Soloman also hopes to boost the UK’s tourism trade. Existing American customers can clock up points allowing them free use of other casinos owned by the firm. Solomon says it is possible that these customers will be able to earn enough points to visit the UK’s Isle of Capri locations.
Such a vision is needed for a company that is prepared to spend millions of pounds in the UK in the hope that the government will change the gaming laws.
But, Isle of Capri – named after a sunken gambling island off the US state of Mississippi – is confident. It has been looking at sites in the UK for the past two years.
Earlier this year it made its first purchase by buying a two-thirds stake in Blue Chips Casinos which owns Castle Hill Casino, Dudley. And last December it bought a 120,000 sq ft site – including back office – at the £120m Arena Coventry Stadium in Coventry.
Around £50m will be spent on the fit-out and half of the floorspace will be dedicated to gambling; the rest will be for entertainment use. It will be the first of the new casinos to open if deregulation goes ahead.
Because of the anticipated sizes of the new casinos – operators are looking at 60,000 sq ft-plus – most of them will have to be sited out-of-town to accommodate both the venue and the need for substantial car parking. As a result, Isle of Capri believes local authorities will look more favourably on operators which go into rundown areas.
“We are looking at rejuvenation. But it’s more than just creating jobs, it’s about taking a place that’s an eyesore and converting it to viable entertainment use,” says Solomon.
Ease of access is also important. Sites next to motorways will be looked at – the Coventry site is by the M6.
As well as the mega-complexes designed by American architects, Isle of Capri is opening “casino bars” to cater for local catchments.
These will be between 10,000 sq ft and 15,000 sq ft, and the first two are going to be in Walsall and Wolverhampton. “We would like to open as many as 15 of these,” says Solomon.
He hopes the British public will be receptive to the casinos here and adds: “We believe the mentality is right in this country, but we won’t know until we open the first casino.”
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Case study Damian Aspinall, owner, Aspinalls, London
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Sipping coffee beside the roaring fire in his Sloane Street offices, Damian Aspinall typifies the refined understatement of the English casino world. And Aspinalls, the central London casino opened by his father in 1962, is emblematic of this ethos.
But Aspinall is set to become much bigger and bolder as he launches his Aspers casino brand with gusto on the casino market.
With the help of his financial backers – the Australian Packer family – he is already steaming ahead with plans to open a 150,000 sq ft establishment at Land Securities’ Newcastle leisure complex, The Gate. A large casino operator had previously rejected the site, but Aspinall sees the premises as a “fantastic project”, made all the more attractive by being on the edge of the city’s Chinatown.
But, says Aspinall, the casino will appeal to all demographics. It is getting a £10m fit-out and will open in November this year. His confidence stems from the fact that the project is not so much a casino as an entertainment complex. “Gambling will only make up 30% of the offer,” he says.
Aspinall, who runs three casinos in Australia and New Zealand with the Packer family, admits that “nobody knows yet what will work here”. Four more entertainment complexes ranging from 50,000 sq ft to 60,000 sq ft are already close to signing, “We have signed the 150,000 sq ft project, and we are close to signing another two or three,” says Aspinall. When asked about the American invasion he shrugs his shoulders and says it is an open market. But, he warns: “If it’s a completely free market, there’s a danger of oversupply.”
As Aspinall says: “There is a possibility that tax rates could be high in which case foreign investors would be unlikely to come to the UK in any great numbers. However I still believe there will be a good demand for casino space and consequently rents may rise.
“There is an equally strong argument that there could be an over supply of casino’s in which case rents would collapse. In dealing with rent reviews my preferred option is a fixed linked annual increase which leaves the landlord certain of rental growth and the operator protected from volatile rental rates.”
Turning to South Africa and Australia, both of which saw deregulation, Aspinall says: “Any country which has seen deregulation has been a great success.”
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Deregulation The long-awaited modernisation of the gaming legislation is set to cause a goldrush of casino development. Noella Pio Kivlehan reports
It has been a while since the UK’s leisure agents had something to get excited about. But that time has come with the changes proposed by the UK’s gaming legislation which have made the gaming sector “the hottest thing since the cinema market”, according to Rob Howarth of Jones Lang LaSalle.
It is anticipated that the UK’s strict gaming laws will be relaxed by late 2005. If this happens, the hard gaming area will have to be a minimum of 5,000 sq ft, and the amount of gaming tables and slot machines allowed will be increased.
This fact has had British and US companies falling over themselves to acquire as many large sites -60,000 sq ft-plus – as possible. Property agents have gone into a whirl as they hunt for possible locations, primarily in cities such as Manchester, Newcastle and Coventry and Birmingham. Previously there were only 53 designated towns and cities that were allowed casinos. But the freedom to open anywhere is among the proposals before the government.
These are recommendations from the Gaming Review Body, chaired by Sir Alan Budd. Budd also suggests the abolition of restrictions on building size, and the requirement for membership 24 hours prior to play. A joint report into the recommendations by the House of Lords and Commons will be published on 8 April.
If the recommendations are accepted, then all bets are on in this country, as the gaming industry will most certainly increase from the current crop of 126 licensed units. In addition to the existing casinos, it is estimated that the UK could see 10 regional casinos within the M25, 10 to 15 resort casinos, and 30 to 50 regional casinos.
It is a situation the Americans have been gearing up for over two years, giving the British-based companies a run for their money. And it is a race nobody wants to be left out of.
Leading the American pack are the Missouri-based Isle of Capri chain (see case study), MGM Mirage and Harrah’s Entertainment. MGM has already bought part of a small casino in Bristol and plans to develop a larger site in Newcastle. It has also bid £270m for dog track owner Wembley Plc.
On the British side, bingo operator Gala has teamed up with Las Vegas-based Harrah’s to open eight properties, while Stanley Casinos is looking at several large sites around the North East. Independents such as Amaury Taittinger and Damian Aspinall are also looking to expand (see case studies).
However, most of the UK operators have put their acquisitions on hold, although negotiations are still going on, until the report is actually published. Although the operators are confident that most of the proposed changes will go through, they are still exercising caution.
How much tax?
Until the report is published no-one can be sure what level of tax the deputy PM will set. At present, tax on casino revenue runs as high as 40%.
A report from market analysts Martin Info called a Guide to the UK betting and gaming market states: “Industry observers expect that interest in the UK market, from the likes of MGM and Mirage, will fall unless taxes are set below 20%.”
Case study Amaury Taittinger, owner, Leo Casino, Liverpool
When Amaury Taittinger opened his Leo Casino in Liverpool two years ago he set new standards within the casino market.
The casino, named after his dog, was partly glass, bright and open – a huge step away from the closed-in operations that are part and parcel of British gambling.
The casino is only 18,000 sq ft, and now Taittinger has set his sights on expansion in order to compete with other operators which are joining the market in the light of the proposed changes in gambling legislation.
Taittinger is planning to add another 22,000 sq ft to double the size of the casino, but he doesn’t see it as a risk. “It’s not really a big jump, because it is very busy. Some nights we have up to 700 people coming in. We were doing a bit of entertainment, but we didn’t really have the room. This extra space will give us that room.”
There are also tentative plans to knock down his hotel – the Dolby – next door to the casino to provide this extra space. “It is a possibility,” says Taittinger. With American operators talking about spending £50m on fit-outs, Taittinger knows he will need extra financial help, especially as he is looking to open other casinos across the country.
“I am talking to joint venture partners. It’s difficult for an independent, because you need a lot of capital. It’s okay for me to operate one casino, but it’s also nice to get others to come in with you.”
Taittinger is reticent to say who these partners are, but he does reveal that he has had dinner with Damian Aspinall, which hints at either a friendship or a possible partnership. He is equally coy about where other premises will be, although agents say he is looking at Covent Garden.
Case study Allan Solomon, executive vice-president, general counsel and secretary, Isle of Capri, Biloxi, Missouri, USA
Allan Solomon has a great vision for what his company can do for the British gaming market: it will increase the UK’s tourist visitors, and regenerate rundown areas, while contributing to local communities and charities.
That is a tall order. But Solomon says opening 100,000 sq ft-plus casinos will bring much needed life to tired areas. It will also fall into line with government policy. Isle of Capri also intends to follow its US policy of interacting with the local communities and charities.
Using its loyalty card scheme, Soloman also hopes to boost the UK’s tourism trade. Existing American customers can clock up points allowing them free use of other casinos owned by the firm. Solomon says it is possible that these customers will be able to earn enough points to visit the UK’s Isle of Capri locations.
Such a vision is needed for a company that is prepared to spend millions of pounds in the UK in the hope that the government will change the gaming laws.
But, Isle of Capri – named after a sunken gambling island off the US state of Mississippi – is confident. It has been looking at sites in the UK for the past two years.
Earlier this year it made its first purchase by buying a two-thirds stake in Blue Chips Casinos which owns Castle Hill Casino, Dudley. And last December it bought a 120,000 sq ft site – including back office – at the £120m Arena Coventry Stadium in Coventry.
Around £50m will be spent on the fit-out and half of the floorspace will be dedicated to gambling; the rest will be for entertainment use. It will be the first of the new casinos to open if deregulation goes ahead.
Because of the anticipated sizes of the new casinos – operators are looking at 60,000 sq ft-plus – most of them will have to be sited out-of-town to accommodate both the venue and the need for substantial car parking. As a result, Isle of Capri believes local authorities will look more favourably on operators which go into rundown areas.
“We are looking at rejuvenation. But it’s more than just creating jobs, it’s about taking a place that’s an eyesore and converting it to viable entertainment use,” says Solomon.
Ease of access is also important. Sites next to motorways will be looked at – the Coventry site is by the M6.
As well as the mega-complexes designed by American architects, Isle of Capri is opening “casino bars” to cater for local catchments.
These will be between 10,000 sq ft and 15,000 sq ft, and the first two are going to be in Walsall and Wolverhampton. “We would like to open as many as 15 of these,” says Solomon.
He hopes the British public will be receptive to the casinos here and adds: “We believe the mentality is right in this country, but we won’t know until we open the first casino.”
Case study Damian Aspinall, owner, Aspinalls, London
Sipping coffee beside the roaring fire in his Sloane Street offices, Damian Aspinall typifies the refined understatement of the English casino world. And Aspinalls, the central London casino opened by his father in 1962, is emblematic of this ethos.
But Aspinall is set to become much bigger and bolder as he launches his Aspers casino brand with gusto on the casino market.
With the help of his financial backers – the Australian Packer family – he is already steaming ahead with plans to open a 150,000 sq ft establishment at Land Securities’ Newcastle leisure complex, The Gate. A large casino operator had previously rejected the site, but Aspinall sees the premises as a “fantastic project”, made all the more attractive by being on the edge of the city’s Chinatown.
But, says Aspinall, the casino will appeal to all demographics. It is getting a £10m fit-out and will open in November this year. His confidence stems from the fact that the project is not so much a casino as an entertainment complex. “Gambling will only make up 30% of the offer,” he says.
Aspinall, who runs three casinos in Australia and New Zealand with the Packer family, admits that “nobody knows yet what will work here”. Four more entertainment complexes ranging from 50,000 sq ft to 60,000 sq ft are already close to signing, “We have signed the 150,000 sq ft project, and we are close to signing another two or three,” says Aspinall. When asked about the American invasion he shrugs his shoulders and says it is an open market. But, he warns: “If it’s a completely free market, there’s a danger of oversupply.”
As Aspinall says: “There is a possibility that tax rates could be high in which case foreign investors would be unlikely to come to the UK in any great numbers. However I still believe there will be a good demand for casino space and consequently rents may rise.
“There is an equally strong argument that there could be an over supply of casino’s in which case rents would collapse. In dealing with rent reviews my preferred option is a fixed linked annual increase which leaves the landlord certain of rental growth and the operator protected from volatile rental rates.”
Turning to South Africa and Australia, both of which saw deregulation, Aspinall says: “Any country which has seen deregulation has been a great success.”
