by David J. Wright - London
The European casino gaming industry as a whole is experiencing a phase of significant growth as new licensing jurisdictions and deregulation in countries with existing casino industries emerge as forces for expansion. Governments have been prompted to ease restrictions on casino gaming because of the potential benefits which expansion of the industry may generate, particularly tax revenues, job creation and the enhancement of tourism.
The United Kingdom has been long regarded as one of the most strictly regulated gaming environments in Europe. Nevertheless, the U.K. Government recently cleared the way for the most significant changes to British casino gaming legislation in nearly 30 years. The proposed changes are the result of vigorous lobbying by the gaming industry, coupled with changing social attitudes toward gambling as evidenced by the successful launch of a National Lottery in 1994. A Consultation Paper issued by the Government in February, 1996 sets forth proposals that would allow the industry to begin to respond to changes in the country's social and economic climate, technological advances and competition from the world wide growth in casino gaming. Nevertheless, the Consultation Paper does not digress from the major principle underlying U.K. gaming law that only "unstimulated gaming demand" may be satisfied.
The Consultation Paper represents a discussion document for which comments are invited. The final paper, unlikely to be very different, in all likelihood will go before Parliament for enactrnent later this year. Little opposition is expected.
At stake is Britain's share in the rapidly growing casino gambling markets of Europe. Gaming restrictions have effectively restricted growth in the U.K. industry for decades. In particular, the operation of casinos as private members' clubs - within a legal framework restricting competition, marketing and the range of services provided - has been a major impediment to the profitability and modernisation of the U.K. casino industry. Furthermore, the British Gaming Board has generally been predisposed against foreign ownership of U.K. casino operations.
This article sets out the existing legislative environment governing U.K. casinos and current proposals for deregulation, and considers the extent to which the United Kingdom is positioned to benefit from investment from international gaming groups.
1968 Gaming Act
For nearly three decades, British casino operations have been subject
to highly restrictive measures introduced by the 1968 Gaming Act to control
what was, at the time, a relatively unregulated industry. The Act set forth
broad provisions and principles, which govern the country's 120 casinos:
Proposals for Change
The Government's Consultation Paper presents porposals for updating this legislation and relaxing certain of the existing restrictions on casino operations. The most significant measures proposed, which have been welcomed by the British gaming industry, include the following:
Jackpot machines - Casinos will be permitted to have at least 10 jackpot gaming machines, with a maximum of twice as many machines as gaming tables. Interlinking of machines within casinos (although not between casinos) is to be permitted for the first time.
The maximum stake for jackpot machines is to be increased to £5 it is anticipated that there will also be a substantial increase in the existing voluntary limit on payouts.
Alcohol - Alcohol licensing hours will now be extended to 2 a.m. (3 a.m. in London) for casino premises, although the prohibition on alcohol on the gaming floor remains.
48-hour rule - The waiting period for new casino members prior to gaming is to be reduced from 48 to 24 hours. Members will now be able to join by postal application and may apply for membership of an affiliated group of casinos, rather than just a single club.
Debit cards - Although the general prohibition on credit and the use of credit and charge cards is to be retained, debit cards will now be acceptable as a means of payment.
Permitted areas - The criteria for determining the "permitted areas" in which casinos may operate are to be revised to more faithfully reflect the population distribution. This will have the effect of creating 13 new "permitted areas," including four in the London area.
Advertising - Although the marketing practices which casinos may undertake will continue to be highly restricted, it will now be possible for the name, address and telephone number of casinos to be printed in telephone directories and in publications such as listing magazines, hotel brochures and holiday guides.
Significantly, the Government has stressed its intention to retain certain other restrictions on the gaming industry, notably:
Given the highly restrictive nature of the regulations currently in place, the Government's proposals have been encouraging for the industry, particularly the proposed increases in the number of slot machines. The major operators with a presence throughout the United Kingdom have an average of approximately 13 gaming tables per casino. The opportunity to add slot machines at the rate of two per table may result in an increase in operating profits of between 20 and 30 percent.
The Government remains committed, however, to its principle of permitting
only the number of casinos considered appropriate to meet "unstimulated
demand." Although existing punters may be encouraged to
extend their stay at casino premises and increase their spending on
machine gaming, the proposals for deregulation may not lead to a significant
increase in the total number of players. In particular, the retention of
a 24-hour "cooling-off' period will continue to provide an entry barrier
to both domestic and tourist visitors.
Competing in Europe
As with many other European countries, the historic development of the U.K. gaming industry has occurred very differently than in the United States. More recently, however, other European jurisdictions have endeavoured to introduce modern "Vegas-style" practices into their gaming industries. Gaming operations in Greece and Portugal feature widespread marketing activities; proposals for legalising casino gaming in Ireland have focused on a United States, rather than United Kingdom, style of operation. The ability of the U.K. gaming industry to continue to compete internationally and receive its fair share of investment in the industry may depend on keeping up with the pace of change elsewhere.
The 24 hour rule - Maintaining a waiting period between granting membership of and permitting access to a U.K. casino (albeit reduced to 24 hours) imposes a restriction experienced in no other European jurisdiction.
U.K. casinos, as a result, suffer a potentially significant loss of revenues, particularly from visiting tourists, with the London market arguably losing out the most. Although the restriction is principally aimed at protecting the public from being "impulsive financially," other jurisdictions have used other means to protect the domestic population while maximising the benefit of tourist spend. In Turkey, for example, local players are discouraged from gambling through the requirement to purchase, at significant expense, an authorisation card prior to gaming, while no such restriction applies to foreign players.
In certain non-European jurisdictions, (e.g. Egypt, Tunisia), free access to casinos is permitted for all foreign visitors, while the domestic population is "protected" by being barred from entering casinos.
Continued lobbying from the industry in respect to the 24-hour rule may result in relaxation of this restriction in a future phase of deregulation. To cater to the potential foreign tourist market, particularly in London, a relaxation of the 24-hour restriction for foreign visitors may be an option for the U.K. Government to consider.
Resort developments - The U.K. casino industry is unusual in being significantly city-based. London alone, for example, generates more than 65 percent of the country's gaming revenues for a total of more than $400 million annually. Recent activity in European jurisdictions, such as Greece, Turkey and France has involved casino facilities being established as an integral part of larger leisure developments. In France, where casinos are only permitted in "resort" areas, the trend has been toward the development of resort-congress centres.
Britain has numerous coastal resorts which have suffered from the growth in demand for Mediterranean "package" holidays and which would benefit from the rejuvenation that a major leisure complex might bring. The availability of a casino license would provide an attractive revenue source from developers concerned about the financial commitments associated with larger-scale leisure facilities. As other European governments are recognising, casino developments may provide more than simply tax revenues. Additional benefits may include: infrastructure development, job creation and "knock-on" economic benefits to the local communities.
Alliances with hotel groups - Major players in the world's hotel and casino industries are recognising the potential synergies to be achieved by merging their respective business in certain markets. Potential benefits of combined hotel-casino ventures may include improved revenues through cross-marketing activities and overhead cost savings through a single management team.
It is uncertain to what extent the proposal for de-regulation will enable the United Kingdom to realise such benefits. The framework governing the proposed publication of details of casinos in hotel brochures has yet to be determined. Ultimately this may stimulate interest from major international hotel groups wishing to strike strategic alliances with U.K. casino groups.
In addition to increasing the number of overseas hotel visitors who may wish to visit U.K. casinos, international hotel and casino operators may bring marketing and operational expertise to the casino industry and ultimately generate a better product for casino customers in the United Kingdom. Recognising such synergies to the full will ultimately depend on both the continuing relaxation of restrictions on marketing practices of U.K. casinos and the Gaming Board's attitude to the involvement of overseas groups in U.K. casino operations.
Conclusion
Casino operators in the United Kingdom have greeted the Consultation Paper enthusiastically as it covers many issues which the industry has been urging the Government to address for years. To encourage the continued modernisation of the U.K. gaming legislation in line with international trends, however, the onus will be on the industry to demonstrate that the same quality of control standards and protection of public interests can be maintained in the proposed deregulated environment. These standards have gained respect for the U.K. industry in the recent past and will not be relinquished at any time in the near future. Meanwhile, the Government will need to monitor international developments, particularly in Europe, to ensure that the U.K. gaming industry achieves its fair share of the investment which other jurisdictions are beginning to attract.
(David I. Wright is a Senior Manager in Arthur Andersen 's London
office Casino Gaming Practice.)
©Arthur Andersen
Back to Arthur Andersen Article Index