Integrated resorts in Europe, take two – Part I

My previous two part commentary, Why don’t integrated resorts seem to work in Europe?, focused on the problems with financing. This two part commentary will look at the political and administrative dimension in developing large-scale projects.

On the political and administrative dimension, the reason for the absence of integrated resorts is quite obvious: it is very, very difficult to get permission to build them. With so many component parts that have to be achieved to enable a resort, it is a wonder that any have been built at all, anywhere in the world.

A large integrated resort, which includes a casino, will usually require a change of law and often a reduction to the gambling tax rate. Changing laws are fraught with difficulty. It is particularly hard to get politicians behind gambling initiatives; there is very little upside for them. Politicians respond to voters, or at least to what the media is telling them voters think. In today’s economies, the arguments of more jobs and taxes do not resonate so well, with the general public becoming blasé about the promises of better times ahead. Businesses and politicians make promises that are too often not kept. Trust in our political institutions is at an all-time low.

It is not surprising that it took a pair of leaders like the father of Singapore, Lee Kuan Yew, and his son, Lee Hsien Loong, to push through the legislation to allow for two of the most successful integrated resorts in the world.

When it comes to public opinion about gambling, there are, and I generalise here, three broad, roughly equal-sized groups of the public at large. The first group, the “Opposers,” are completely against gambling in all its forms, although I suspect some buy lottery tickets or have the occasionally bet on big races like the Grand National, the Arc de Triomphe, or the Kentucky Derby. The second group, the “Neutrals,” don´t really have any opinion about gambling one way or the other. The third group, the “Gamblers,” like to gamble and do so. The challenge is that the Opposers are motivated and very vocal in their opposition, are highly organised, and can be quite media-savvy. They run very good campaigns, know how to use social media, get airtime and column inches, and are adept at getting their messages across.

By contrast, the Neutrals and Gamblers groups are not very motivated and so mobilising any support for a new gambling initiative is practically impossible. Using media campaigns is not going to convert anyone in any of the groups to suddenly become an evangelist for gambling. It is therefore left to the promoter to argue the case for an expansion, change of law, or whatever. This is what is being seen in some of the cities in Japan. Polls show that only about 30% of the population support gambling, with 30% opposed, and yet it is those that are against gambling that get all the media attention.

While work is going on to gain the political support necessary to get the law changed, the promoter will have to find a location and then option the land for the resort. Integrated resorts require large and, if possible, flattish sites, which presents a challenge if the promoter wants to be close to an urban population.

In Europe, land ownership near urban centres is fragmented, so accumulation is the name of the game. What was last week a turnip field selling for €10 a square metre, which the owner would have been happy to get rid of for a 20% premium, will become a figurative gold mine that the owner will not sell for ten times the value, should it get out that the potential buyer is a casino operator. Hold outs are not uncommon.

Gambling tax rates in Europe are high and mitigate against large-scale casino developments. But casinos are the engines of integrated resorts, where the exceptional return on investment is made that supports the other elements of the resort. Those other elements may barely make any money, but are a must-have if the resort is to have the scale and quality to attract people from large distances.