Further relaxation of gambling laws could make casinos an even more attractive outlet for restaurateurs, argues M&C Report columnist Mel Flaherty
Daily Mail readers must not have known whether to breathe a sigh of relief or get hot under their collective collars when the Culture, Media and Sport Select Committee published its report, The Gambling Act 2005: A bet worth taking? at the end of July.
The newspaper’s response to any suggestion of liberalising UK gambling laws has always been headlines screaming about the breakdown of society as we become a nation of gambling addicts, and its 2006 Kill the Bill campaign had a massive impact, particularly on the casino industry.
No Viva Las Vegas
The biggest controversy arising from the initial proposals for the 2005 Act was the introduction of regional ‘super casinos’ which would allow unlimited stake and prize gaming machines in this country for the first time. The original plans to allow eight of these (27 local authorities applied to get one of the licences, which they saw as a great opportunity for major regeneration) got whittled down to one after the barrage of opposition and then there was added drama when East Manchester got chosen as the test bed over Blackpool. Gordon Brown put the final nail in the coffin when he became Prime Minister, stopping the Manchester scheme pending a further review into regional casinos in the UK.
Opponents to these Las Vegas-style complexes got further comfort in the recent Select Committee report which said that wasted expense and time over the regional casino fiasco, together with the high rate of casino duty imposed on UK operators, means the likelihood of regional casinos ever getting off the ground over here is extremely small.
But rest assured, some of the Select Committee’s other recommendations will give the Mail’s leader and letter writers plenty of material for some time to come. The report said that small casinos should be allowed more high stakes gaming machines and, more controversially (but only if you don’t read the small print about all the conditions and safeguards), that betting shops be allowed more of the B2 category maximum £100 stake for maximum £500 payout gaming machines, and that such machines should be allowed in adult gaming arcades for the first time.
Gambling responsibly
For casino companies, however, the report’s findings completely back up what they have been striving to prove to their detractors for years - that they are extremely responsible operators well capable of managing the potential pitfalls that relaxed gambling laws present.
The National Casino Industry Forum (NCIF), which represents 90% of the British casino industry (most of the remaining independent operators belong to the Casino Operators Association), said the Select Committee “recognised the value, integrity and achievements of the British casino industry.”
The 2005 Act allowed casinos not only to advertise for the first time and to do away with the previously obligatory 24-hour ‘cooling off’ period before new members could play, but also allowed them a higher number of gaming machines than before and permitted development of eight new ‘small casinos’ and eight new ‘large casinos’.
These, albeit relatively limited, freedoms have already changed the field for food and beverage operations within UK casinos and the casino operators’ conduct to date within this slightly more relaxed regulatory environment has now been recognised. This means that the prospect of further relaxations allowing more casino developments and hence more f&b opportunities, is good.
Turning tables
Jonathan Segal is CEO of The One Group, the US-based restaurant and hospitality operator that runs Heliot Restaurant, Bar and Lounge at The Hippodrome Casino, the £40m, 24-hour gaming, cabaret, dining and entertainment complex that opened in London’s Leicester Square in July. He believes there are plenty more opportunities for restaurateurs to work with casinos.
“Before [the abolition of the 24-hour membership rule], only those who specifically wanted to go to a casino would come into a casino restaurant but now anyone over the age of 18 can pop in from the street. They can see for themselves that casinos are now hospitality centres with great food and great entertainment,” he says.
Segal adds that there is a lot of crossover business between the gaming floor and restaurant but the fact that Heliot has its own street entrance increases potential custom both for the casino and the restaurant. Average spend per head at Heliot is between £30 to £35 and Segal expects weekly turnover to be between £150,000 to £175,000. The split between food and drink sales is likely to be higher than at the average restaurant, Segal says, and probably similar to the 50:50 ratio typical at his group’s ‘vibe’ venues that have as much emphasis on liquor, music and entertainment as they do on food.
Segal adds that it is taking a while for UK casino operators to maximise the potential of their restaurants, with many still locating them deep within the building in a bid to encourage more expenditure on the gaming floor. He says that it was less than a decade ago that gaming was the main revenue earner for the majority of casinos in Las Vegas, but that income from food, drink and entertainment now typically eclipses money made from the gambling. While true Las Vegas-style and scale casinos are not likely to be coming to the UK, the shift in focus away from purely gambling towards a more comprehensive leisure experience, is already filtering through to casinos over here, helped not only by the changes to the law but also as operators strive to compete with online gambling.
Michael Silberling, president of international operations at London Clubs International (LCI), the operator of 10 casinos and one poker room in the UK plus two casinos in Cairo and Emerald City in South Africa, agrees that the role of restaurants within casinos is changing.
“Over half of our visitors at our Playboy Casino will visit the restaurant and in our larger mainstream clubs the percentage is growing. Some years back, if 15% of our customers ate with us it was unusual - now it is almost universally in excess of 25%.
“Historically f&b was there simply to service private members and high rollers. These days casinos are multi-faceted entertainment destinations with high-end facilities that also attract non-gamers. Restaurants play a huge part and a top f&b offering is vital to the future development of the industry and allowing the acceptance of casinos as mainstream leisure venues in the UK.”
Despite LCI’s experience, a report by market research firm Mintel, Casinos and Bingo - UK - June 2012, says food and drink currently only makes up 7% (£63m) of the casino sector’s £867m annual revenue with gaming machines earning 14% and the remaining 79% from casino games.
Silberling says the company is constantly trying new ways to help improve the dining experience at its clubs with the new Marco Pierre White Steakhouse Bar and Grill at its Alea Nottingham casino and The Leeds Kitchen by James Martin at the Alea Leeds being good examples of how the casinos are using restaurants to up their overall profile.
It seems the opportunities are starting to be recognised by the f&b and broader leisure world too. G1 Group, the Scottish leisure operator, has said it would happily replicate its Corinthian Club format, which opened in Glasgow a year ago featuring a casino with private dining, nightclub, karaoke booths and restaurant. And Spirit Pub Company’s former head of food, Paul Farr joined Genting Casinos UK, the country’s largest operator of casinos with 45 clubs, as head of food and beverage product development early this year. The group opened what it describes as a club featuring a casino and a restaurant (Fahrenheit Grill) late last year, known as Riverlights Derby.
Late developer
Genting also has plans to open one of the eight new large casinos permitted by the 2005Act, Resorts World, a £120m entertainment complex at The NEC in Solihull, in 2014.
Only one new large casino has opened so far, Aspers at the Westfield Stratford City shopping complex in Newham, East London which includes Tanzibar, currently the UK’s only sports betting bar where customers can eat, drink and bet from their seats while watching sports on TV. The venue is well placed to benefit from the influx of Olympic visitors, many of whom will be from overseas and therefore more familiar with this kind of entertainment centre - the location and event together provide a great showcase for the modernisation of the UK casino industry, which could encourage future business elsewhere.
Aspers Casinos, a joint venture between the Aspinall family and Crown Limited Australia, also recently won the licence to open a £10m large casino at the Xscape complex in Milton Keynes. The only other large casino licences granted to date are to Pleasure and Leisure Property Corporation, for a £30m entertainment complex adjacent to its Great Yarmouth Pleasure Beach attraction and to Jomast Developments for a £25m scheme in Middlesbrough. Decisions have yet to be made over the new large casino licences for Kingston-upon-Hull, Leeds and Southampton.
Of the eight new small casino licences, only Scarborough’s has been awarded after a legal fight with rival Apollo Leisure, to Nikolas Shaw, the operator of the town’s existing Opera House Casino, which will now be extended and, as a new licence holder, will be able to benefit from the freedoms introduced by the 2005 Act (although the case also highlighted the 2005 Act’s critics’ concerns over competition issues as 10 of the 16 new casino licences are for areas already permitted for casino development by the 1968 Act).
Decisions are pending for the other small casino licences in Dumfries and Galloway, Bath and North East Somerset, East Lindsey, Luton, Swansea, Torbay and Wolverhampton.
The Select Committee report highlighted how complex, inconsistent and expensive the casino licensing system is and recommended that local authorities be given more power to make decisions rather than the current central diktat, and that the process is simplified. It also called for existing licences granted in any of the 53 ‘permitted areas’ for casino development set out in the 1968 Act, to be portable and for casinos opened under the 1968 Act to be given the same freedoms as the new casinos allowed under the 2005 Act .
It is not only the ongoing results of the 2005 Act and the prospect of less draconian legislation that is changing the UK casino market. Two of the sector’s largest players are set to merge with Rank Group’s 36-strong Grosvenor Casinos division’s conditional £205m acquisition of Gala Coral’s 24 casinos. The Gala sites, 13 of which are in 11 towns where Rank currently has no presence, will be revamped with the Grosvenor and G Casinos branding. Rank had made an earlier, now abandoned, approach for LCI and in May, LCI’s owner Caesars Entertainment announced it was looking to sell the business for £160m. Caesars (formerly Harrah’s Entertainment) originally bought the business, hoping to benefit from the relaxation of the 1968 laws.
While the ‘super casino’ may never come to these shores and UK casino regulations look likely to remain among the strictest in the world, there is still further development of new casinos and investment in existing ones to come as a result of the 2005 Act. And, if the Select Committee’s recommendations are acted upon those can only multiply - the NCIF says modest reforms could generate 4,000 to 5,000 new jobs and generate £70m to £80m in additional taxes.
Either way, the modern, 24-hour, all round entertainment centre casino is shaping up to be an interesting option for restaurant and bar operators looking to open in different and lucrative venues.
