Britain to loosen gaming regulations

David Strow

Tuesday, March 26, 2002 | 11:25 a.m.

The British government today unveiled plans for a liberalization of gambling regulations, a move likely to bring glitzy, Las Vegas-style casinos to British seaside resorts.

And it should bring Las Vegas casino companies to the United Kingdom, industry analysts and executives say. Park Place Entertainment Corp. and MGM MIRAGE are expected by observers to lead the charge, and both companies are interested.

"It's an easy place to get to, and you have a dense concentration of people with a demonstrated, high propensity to wager," said Jason Ader, gaming analyst with Bear Stearns. "If you put a big casino in London, it's going to do great, no question."

It also represents a low-risk opportunity for U.S. companies.

"The U.K. is a lot more stable than most areas, and it's a relatively pro-business environment," Ader said.

Britain now has legal, regulated casinos, but they're small by U.S. standards, and operate under tight restrictions. All current U.K. casinos now operate as private members' clubs, and they are not allowed to accept credit cards for purposes of gambling. Casinos are also barred from advertising.

The British proposal, made by the British Department of Culture, would scrap those rules, and would loosen limits on the size of U.K. casino jackpots.

"The modernization of our gambling laws is long overdue," said Tessa Jowell, the government's Culture Secretary.

"We want gambling to be safe, not only for those who take part in it, but also in the way that it impacts on wider society," Jowell said. "Gambling must continue to be conducted fairly, remain free of criminal influence and infiltration, and operate within a regulatory framework that offers protection for children and vulnerable adults."

Jowell said the industry would be overseen by a Gambling Commission, which will license and regulate casinos. It will operate with a light touch, according to the government paper outlining the recommendations.

"Regulation will be confined to what is necessary to keep crime out, protect the vulnerable and ensure that gambling products are fair to the consumer," it said.

Jowell said liberalized regulation -- if approved by Parliament -- would create jobs and could generate an additional $700 million a year in new revenue for the existing British casino industry.

Park Place and MGM MIRAGE both said this morning that the final form of these regulations will determine whether they would get involved in the U.K. But both companies made it clear they are interested.

Robert Stewart, spokesman for Park Place, called the U.K. "a significant opportunity."

"Once authorities there have decided what kind of regulatory and gaming environment they want to create, we would carefully evaluate that and make a decision," Stewart said.

Park Place has ties to the U.K. already. Its chief executive, Tom Gallagher, once lived and worked there. And Peter George, senior vice president of Park Place's international group, is the former chief executive of British sports book operator Ladbroke (now Hilton Group PLC).

"(Gallagher) spent some time personally in the U.K., and he's familiar with that market," said William Lerner, gaming analyst with Prudential Securities. "I would not be surprised if they (Park Place) move aggressively."

MGM MIRAGE appears serious as well. "We think Great Britain would be a marvelous marketplace," said Alan Feldman, company spokesman.

"It has a long-standing history of gaming regulation, and quite possibly one of the world's best tourism infrastructures," Feldman said. "What is going to happen will be totally dependent on what laws get passed, and what the requirements and regulations are. Are we interested? Absolutely."

MGM MIRAGE also has British ties -- the company holds a license to conduct Internet gaming from the Isle of Man, a British dependency off the western coast of Britain.

The list of candidates cannot be confined to just these companies, analysts say. Mandalay Resort Group and Harrah's Entertainment Inc., as well as other American casino operators, must also be expected to at least look at the opportunity, Lerner said.

Lerner estimates that a U.K. gaming market with 40,000 slot machines could generate upwards of $3 billion a year in gaming revenues. That would put it behind the Las Vegas Strip and Atlantic City, but ahead of a market like Mississippi.

With non-gaming revenues thrown in, "it's not unreasonable to assume a $4 billion (per year) revenue opportunity," Lerner said.

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