In the U.K., with the ongoing consultation on the Gambling White Paper, there is a great deal of attention directed towards online gambling. Largely eclipsed by this, and the thorny issues involving “affordability,” problem gambling and sustainability, the land-based casino sector, other than issues surrounding license portability, seems comparatively marginalized.
I have been intimately involved with the growth of land-based casinos throughout the U.S. over the last 30 years. I recently returned to the U.K. and was struck by the contrast between the two, and the different policy approaches which have led to very different outcomes.
In the U.S., casino gaming is a mass market pastime. A casino is developed and sized based on demand projections. As the number and variety of amenities (hotels, entertainment venues, F&B outlets, retail, spa, Top Golf Suites, etc.) expands, so does the attractiveness of the casino to a broader market.
Critical to providing this array of amenities is an understanding of the economics of casinos. In the U.S., 70 percent to 80 percent of casino revenue comes from slots (some casinos, or rather “racinos” at racetracks, only have slots). The slot department might have a margin north of 60 percent while for table games this would likely fall between 35 percent and 40 percent.
U.S. casinos feature a modest number of table games, but the majority of the casino floor will be consumed by slot machines, as it is slots that the market demands. It is the slot machine that drives the economic casino model in the U.S., generating the profits that not only allows for the creation of government revenues through taxation (typically with higher tax rates on slots than table games in recognition of the labor intensive nature of table games vis-à-vis slots) but also the development of integrated casino resorts often resulting in facilities costing several hundred million, if not a billion dollars.
These integrated resorts have a significant economic impact in the areas in which they are located. This impact begins with the investment in products and services needed for the construction of the facility. The facility, once open, provides employment in a wide range of roles from employees in the F&B, retail, and hotel sectors to slot technicians, marketing, management, and a host of professional services to support the operation. The economic impact of the ongoing casino operation is substantial.
The casino contracts with local businesses for its supplies and the earnings of its employees are spent on goods and services in the local community. The casino partners with local entertainment venues and restaurants to comp their valuable customers.
At the end of the day these integrated facilities are considered a boon to the local economy, creating visits from outside the area and a facility the community can see, touch and feel, and be proud of. It enriches its host community by providing an array of F&B options and a major venue for entertainment, and other amenities. These non-gaming amenities, subsidized by proceeds from gaming operations, might not otherwise exist in the area.
In the U.K., policy decisions have resulted in a very different outcome. Slots, the economic engine behind U.S. integrated casino resorts, are severely restricted in U.K. land-based casinos to a maximum of 150, with a slot-to-table ratio of 5:1, and maximum payouts of £10,000 to £20,000. The result is that in the U.K. casino floors are dominated by low-margin table games. In comparison, even a small casino in the U.S. would have 1,000 slot machines (several U.S. casinos boast over 5,000 machines) of varying denominations and types, with less than a 100 table games. In the U.S. slot payout maximums are substantially higher (often in the millions for progressive machines) and there is no slot-to-table ratio restriction.
U.K. casino restrictions, driven by policy decisions, handcuff the casino economic engine. U.K. casinos are unable to attract the investment that would allow for the development of an integrated resort as in the U.S. U.K. casinos as a result are generally small affairs with very limited F&B, entertainment and amenities. As a consequence, the economic impact is very much attenuated.
Some U.K. casinos do well, mainly in London where high rollers have provided the margin to develop high-end facilities, albeit of relatively small size. (Though this success may be challenged in the future as more integrated casino resorts are developed in the Mediterranean and Middle East closer to the source of these high value players.)
Outside London, casinos are small and often lack the variety and quality of amenities commonly found in the U.S.. Their appeal is thus limited to a narrow segment of the population. U.K. casinos are often to be found in challenging locations driven by history, local planning restrictions, and “NIMBY’ism,” and are typically bereft of adequate parking.
Policy choices in both countries have created a stark contrast. U.K. policy ensures that casinos cannot make a significant impact on the local economy. They are a shadow of their American counterparts employing relatively few individuals. In the U.S. a modest casino would provide 600-1,000 jobs (or more), an array of high-quality non-gaming amenities (including significant hotels, entertainment venues and F&B outlets) , broad positive economic impacts and substantial government revenue.
The U.S. is tentatively moving forward with iGaming with an eye towards the impact on its land-based casino industry and the substantial government revenues they generate. In contrast in the U.K., pervasive growth in iGaming has occurred with little consideration of the impact on, or potential of, the land-based casino sector. With a different set of policies land-based casinos in the U.K. could yield substantial economic benefits that would dwarf those from iGaming.
In 2008-09 the land-based casino sector yielded £796 million. This peaked at £1.18 billion in 2017-18 and has fallen to £810 million in 2022-23. This represents a 1.8 percent increase over 2008-09. In comparison the online casino sector has increased from £33 million in 2008-09 to £4.038 billion in 2022-23, a whopping 12,000 percent increase! Just prior to the pandemic, land-based casinos generated 31 percent of the revenue of their internet cousins—by 2022-23 this had fallen to 20 percent. This is shown in the chart below.
Overall land-based casino revenue in the U.K. has remained relatively constant since 2008 (not including disruptions associated with the pandemic).
It is however notable that tables are the primary source of GGR. Prior to 2014 table games accounted for over 70 percent of GGR, a reversal of the U.S. situation. Since then, electronic table games and slots have gradually made gains such that by FY 2022, 20 percent of revenues came from electronic table games, and 25 percent from slots, with 55 percent of GGR being derived from live table games. In comparison in Pennsylvania, table games in land-based casinos (inclusive of electronic tables) accounted for only 28 percent of GGR in FY 2022/2023. As can be seen in the chart below the U.S. (as represented by Pennsylvania) is a mirror image of the U.K. in terms of the GGR derived from tables and slots.
In terms of the broader casino ecosystem the U.K. provides a stark contrast with the U.S. A good illustration of this is again Pennsylvania, where there is a highly developed land-based casino industry and which is one of the six U.S. states that has legalized iGaming. Here land-based casinos generated $3.4 billion in FY 2022-2023 compared to $1.5 billion in iGaming revenue.
iGaming accounted for 44 percent of the revenue generated by their land-based cousins, a reversal in comparison to the U.K. (The reason why more states have not legalized iGaming is concern over the potential perceived negative impact on the land-based casinos and the economic viability of these facilities, and not inconsequentially, the tax revenue that they generate.) The result, in Pennsylvania, has been the development of 17 casinos each with an array of F&B options, most with an entertainment venue and several with attached hotels.
These land-based casinos offer 25,000 slot machines and 1,374 table games along with multiple casino hotels, entertainment venues and each offers several F&B options. In the U.K. land-based casinos house approximately 3,200 gaming machines and 1,400 live table games (with an additional 3,265 gaming positions in electronic table games). Pennsylvania casinos are responsible for 33,000 jobs, just under half of which are in gaming, the remainder being associated with casino amenities. In comparison U.K. casinos employed less than 9,000 (FTE’s). Importantly, land-based casinos in Pennsylvania generated $1.4 billion in taxes while land-based casinos in the U.K. generated, from all sources, no more than £300 million. The population of Pennsylvania is approximately 13 million (but with access to significant population centers in surrounding states) while the population of the U.K. is over 68 million. The primary reason for this disparity is government gaming policy.
This brings me to the current concerns over the government review of the gambling industry. The focus as noted above has rightly been on problem gambling and affordability. For the land-based sector, proposals have amounted to tinkering around the margins with a focus on the portability of licenses and leveling the playing field between gaming license iterations, but there is no consideration of the broader land-based gaming sector and its potential to provide a wide range of benefits.
Consider this, if the government adopted the U.S. approach and enacted policy decisions that allowed the land-based casino economic model to thrive (i.e. permitting greater numbers of slot machines in selected land-based casinos) the inevitable result would be larger casinos, more amenities, greater and more varied employment opportunities and a demonstrably larger economic impact, and not inconsequentially greater tax revenues. This would result in a more balanced and healthy gaming industry.
If government policy continues to limit land-based casino development through restrictive policies, the sector will be limited in the economic impact it can deliver. Arguments against liberalizing land-based casinos that revolve around problem gambling seem disingenuous when online gambling has grown by over 12,000 percent since 2008-09 in an ecosystem where, as evidenced by the current review, it is difficult to implement intervention strategies.
Some have asserted that British people would not be attracted to these U.S.-style integrated resorts. However, that is belied by the fact that U.K. visitors to Las Vegas fall only behind visitors from Mexico and Canada. British people in general are more likely to travel to Las Vegas to visit a casino where they can stay in a plush hotel room and enjoy the high-quality restaurants and headliner entertainment made possible by the casino, than they are to visit one of the limited U.K. casinos.
But the truest test of the feasibility of liberalizing the land-based gaming sector is most clearly seen by the level of interest in deploying capital. In 2005 the government floated the idea of super-casinos (though the term from an American perspective is a misnomer) allowing for 1,000 unlimited jackpot slots and a gaming floor of 5,000 square meters. I was among many analysts tasked by major U.S. casino corporations in looking at several potential locations. The interest was real, and the initial facility plans had all the hallmarks of U.S.-style integrated casino resorts. The government eventually abandoned the idea. Nevertheless, there was an appetite to deploy capital to see these facilities developed. What happened?
Initially (May 2006) eight regional super casinos were proposed:
- Wembley Stadium, Brent, London
- The O Greenwich, London
- Cardiff
- Blackpool
- Manchester
- Newcastle
- Sheffield
- Glasgow
By 2008 Gordon Brown, then Prime Minister, under opposition from certain segments of the press, the incumbent casino industry concerned with the arrival of U.S. competitors and church leaders succeeded in having the concept of the poorly named “super casino” scrapped.
If the government had persevered these facilities would now likely be a reality, employing thousands and providing hotel rooms, entertainment venues, multiple F&B outlets and other amenities to these communities. Strong economic impacts would have been generated, tourism would have flourished and tax revenue for national and local governments would have been forthcoming.
While the issues that swirl around online gaming in the U.K. are real and serious, this focus has obscured the huge, missed opportunity in the land-based sector. U.S.-style integrated resorts with a large number of slot machines providing the economic engine for the development of a broad array of amenities are feasible and desirable. The economic benefits generated in terms of spending by the casino and its employees in the economy, the jobs and earnings it creates and the tourism it generates should not be lightly dismissed. This is an economic development tool that, through misguided policy, has been squandered. With the recent economic challenges faced by the U.K. and the faltering efforts at “leveling up” is it not time to revisit the issue of “super casinos?”
The first step in this effort I would suggest is to ditch the term “super casino.” It is not only wildly inaccurate when viewed from a U.S. perspective but has played into the “story telling” of opponents—a better and more accurate term might be “modest integrated resort.” Politically, there is currently no appetite to address this topic, but it is clearly a missed opportunity that has the potential to address regeneration, “leveling up,” and local government funding in needy areas of the country. Opposition based on moralistic arguments is belied by the impressive growth of the online sector, which has been facilitated by favorable government policy decisions.
