UK Hotels Roll the Dice

31st August 2005 (Last Updated August 31st, 2005 18:30)

The Gambling Act 2005 should be a jackpot winner for the UK hotel industry. Rebecca Burgess looks at the industry’s plans to cash in on the prospect of 24-hour access to casinos and a surge in demand for hotel accommodation.

UK Hotels Roll the Dice

On 7 April 2005, the Gambling Act received Royal Assent after consideration in the House of Commons and the House of Lords and became law.

It was intended to allow for a controlled increase in the number of casinos in the UK, which has long lagged behind Europe and the USA in the lucrative world of gambling.

While Las Vegas and Atlantic City in the USA are the best-known resorts to generate income from casino hotels and complexes, Europe has enjoyed its fair share of success in resorts in Monaco, Austria, Finland and Switzerland.

Las Vegas took the lead in the 1980s, with Atlantic City following suit a few years later, and both have maintained their market with a mix of casinos, feature hotels and lavish entertainment, such as Elton John performing at Caesars Palace.

The UK, however, is home to just 122 casinos around the country and, until the new law comes into effect in 2007, is governed by strict membership and marketing rules.

“The new act acknowledges society’s acceptance of gambling as a social pastime and leisure activity.”

Regulations requiring customers to be members of a casino, with a 24-hour cooling off period before they can enter, have prevented hotels from benefiting from weekend tourists and passing trade.

The new act acknowledges society’s acceptance of gambling as a social pastime and leisure activity and allows unrestricted access to casinos for non-members.

It also allowed for the creation of the Gambling Commission in 2005, which is independent of the UK Government and is responsible for licensing gambling operators.

For casino empires such as the Gala Group, which runs independent casinos around the UK, it is good news indeed.

Chief executive Neil Goulden comments:”I am delighted that the much-needed modernisation of the gaming sector in the UK has been secured. The bill will deliver significant benefits to both our casino and bingo businesses. The bingo business will benefit from the relaxation on membership rules, new products and prize rollovers.”

Hotels located near casinos in cities such as Brighton, Sheffield and Nottingham will enjoy the benefits of additional easy-access entertainment on their doorstep.

However, there are a few hotels in the UK, such as the Ritz Hotel in London, that house a casino. Located in the former ballroom, it forms part of the Ritz Club entertainment complex and is run as an independent company.

A spokesman for the Ritz Hotel, 100 years old in 2006, says that, although regular guests were used to having the facility available, the non-member rule limited its convenience:

“Under the current law there is little room for marketing, so it is not really promoted, but when the law comes into effect in 2007 it will open up lots of new marketing opportunities.”

SURFEIT OF PROPOSALS

But while the relaxation of the rules will help existing casinos, it is the proposals to build the larger leisure complexes that have been more contentious.

In early 2005, the Department of Culture, Media and Sport announced that there would be a maximum of 17 new-style casinos, with the locations to be determined by an independent panel.

A spokesman said: “These new casinos will be significant leisure developments that will bring jobs and improved leisure facilities where they are needed.” These supercasinos would also offer other leisure activities and allow up to 1250 slot machines, again with unrestricted access to non-members.

In preparation for the act coming into effect in 2007, developers and entertainment conglomerates have put forward a multitude of proposals for the UK.

“These new casinos will bring jobs and improved leisure facilities where they are needed.”

MGM Mirage, in partnership with UK-based Peel Holdings, unveiled plans to spend £1bn on casinos and entertainment complexes in the UK. These included a mixed-use development of 125 acres known as Glasgow Harbour, owned by Peel Holdings, which incorporates a casino operated by MGM Mirage as well as leisure facilities. It is expected to generate at least 2,000 jobs in the leisure industry.

Also in the portfolio was an outline planning application to Salford City Council to develop a 20,000-seat sports stadium, casino and hotel in Salford, adjacent to the M60 motorway and the Manchester Ship Canal.

Formal expressions of interest were also lodged to construct a major multi-purpose leisure and gaming development at Sportcity in Manchester.

In addition, Liverpool City Council was approached with a view to developing land at King’s Waterfront, creating 1,000 direct leisure-related jobs.

In the south of England, Caesar’s Entertainment had plans to invest £335m in a huge gambling and entertainment resort in Wembley in west London. With the UK casino industry set to generate billions of revenue in the future, there was no shortage of proposals to take the act forward.

Local authorities, who would make the final decision on which proposal would go ahead in their area, were also excited about the regeneration opportunities.

AN UNCERTAIN FUTURE

However, fierce opposition to the pace of change in the run up to the 2005 General Election meant the act had to be watered down.

The original plans were shelved after church groups, opposition parties and many Labour MPs voiced their concerns, and a deal was struck between the Labour and Conservative parties to limit the developments to one supercasino. This has halted the industry-led growth of the resorts, and the region is yet to be decided.

Eight large and eight small casinos will be permitted. DCMS spokesman Anthony Wright insists: “This wasn’t a U-turn; it’s just slowing down the pace of reform to assess its impact.”

The DCMS says it is now going to draw up an independent advisory panel in October 2005, headed by Culture Secretary Tessa Jowell, to decide where to locate the one regional casino and the 16 large and small casinos.

Then it will be up to the local authority to consider applications from prospective developers. “This has obvious regeneration potential for the successful site,” says Wright.

“Local authorities can determine the facilities on site by running competitions for the licence among developers and accepting the bid that offers most in terms of jobs and regeneration for the local economy.”

“The casino industry is going to grow significantly over the next decade and demand a higher level of skill from its workforce.”

Wright expects this to include substantial hotel developments on some large casino sites and possibly a number of hotels on the regional casino site. However, the siting will not be announced until 2007 and the developers have all put their plans on hold while they take a gamble on which region to focus their plans.

The Millennium Dome and Blackpool have been mentioned in connection with the regional casino, but the DCMS insists that no decisions will be made until the panel sits in early 2006.

According to Brian Wisdom, chief executive of People 1st, the Sector Skills Council for Hospitality, Leisure, Travel and Tourism, the future looks promising: “Despite the original legislation being watered down, the casino industry is going to grow significantly over the next decade and demand a higher level of skill from its workforce.

“We can expect to see high expectations in terms of service and quality if we are to compete with Las Vegas-style casinos and the hospitality proposition that surrounds them. The combination of the deregulation of gambling and the growth resulting from the London Olympics in 2012 will create opportunities and challenges for the hotel industry, which we will address over the next six months.”

Wilson says the organisation intends to work with the industry, and will hold events to determine what resources and skills would be needed in the future.

Dr Jim Twomey of Pion Economics Research has carried out research on the impact of the new casinos. He tips Blackpool as a top contender for supercasino status because of its history as an entertainment centre and readiness for redevelopment.

“Clearly, Blackpool is at the forefront of the proposals, but there are other major competitors like Wembley and Salford.”

Blackpool was initially rejected by MGM Mirage in favour of Manchester, but Blackpool Council chief executive Steve Weaver says he is “hopeful of a good outcome for the future regeneration of Blackpool as a major seaside resort”.

According to Twomey, the regional casinos will undoubtedly include new hotels integrated into the development and will also spark a surge in the market for existing hotels, requiring extra staff and skills.

“Only one application will be successful,” adds Twomey, “and it’s going to be worth a lot of money, so everyone is hoping to back the right region and competition is hotting up.”

With some uncertainty ahead, many developers are having to take a gamble on which city will be host to the most lucrative pot yet.