Companies Can’t Wait for New UK Gaming Regulations

Anheuser-Busch Cos. brought its Budweiser beer, then McDonald’s Corp. brought its hamburgers to the British Isles. Now U.S. casino operators are hoping to export another American institution — the Vegas-style casino — to the United Kingdom.

The impetus is a bill, in draft stage with British officials, that would loosen laws governing British gambling, a prospect that has some U.S. operators looking to the U.K. as their next jackpot.

The regulatory overhaul would expand the size of casinos while increasing the variety of games and adding amenities such as restaurants and entertainment. The U.K. Department for Culture, Media and Sport, which oversees gambling laws, is expected to present the first part of the gambling bill to the public Tuesday, with the full draft to be released in October. If it passes, the change would be nothing short of “cataclysmic” in its potential to change the U.K. industry, Las Vegas gambling mogul Steve Wynn says.

Small, clublike and dominated by table games and few slot machines, current British casinos have the atmosphere of Vegas’s posh, private gambling rooms. Before would-be U.K. punters see the top of a baccarat table, or place a chip on the bingo board, they must register each time at a gambling establishment and then “cool off” for 24 hours before they can play. Until recently, they couldn’t drink while gambling, and live entertainment was prohibited on casino grounds.

“You can come to see us in Vegas wearing flip-flops and a halter,” says Gary Loveman, chief executive of Las Vegas-based Harrah’s Entertainment Inc. “You walk into one of these places in London and gentlemen will be in suits and ties, the ladies will be in evening gowns. It’s very formal.”

While U.K. casinos have been more tightly regulated than in the U.S., gambling flourishes there. Gamblers place bets on everything from soccer and golf tournaments to the winner of an Academy Award. The national lottery is also popular, drawing more than 70 percent of people in the U.K. “It doesn’t matter who you are. Everybody loves a flutter,” says John Kelly, president of British bingo operator Gala Group, using a Britishism for placing a small bet. “They love to put a couple dollars on a horse or put a little money into the machine.”

Under the new laws, casinos would be able to increase total floor space and the number and variety of slot machines. Casino operators could advertise in areas like shopping malls and membership laws — such as the cooling off period — would be scrapped. A gambling commission also would be created to regulate the industry.

Some U.S. casino companies are rushing to exploit the opportunities even before the new laws are a sure thing. Harrah’s announced a $1 billion joint venture with Nottingham-based Gala Group to build eight regional casinos in such areas as Sheffield, an industrial town in northern England. The deal would bring a total of 8,000 jobs to the areas and an estimated GBP 500 million ($806.5 million) in revenue, the companies said. Harrah’s would also independently develop destination casinos in such seaside tourist spots as Bristol and Blackpool. Earlier this month, Las Vegas-based MGM Mirage bought a 25 percent stake in the U.K.’s Metro Casinos Ltd., of Barnet, and an MGM spokesman stressed the buy is “nowhere near the endgame for us.”

International Game Technology, a leading Reno, Nev., maker and developer of slot machines, recently acquired British gambling company Barcrest Games, of Lancashire. Deregulation will have a huge impact on the slot machine industry, says Goldman Sachs analyst Steven Kent, who says relaxed laws will create a $1 billion opportunity in the U.K. for companies like IGT and its Las Vegas competitor Alliance Gaming Corp.

“We didn’t necessarily buy Barcrest with the bill in mind, but we think it’s a big plus that we’re already there,” IGT President Tom Baker says.

Some Las Vegas casino operators, including Park Place Entertainment Corp., Mandalay Resort Group and Wynn Resorts Ltd., are waiting to see how it all shakes out. Mr. Wynn sees bigger gambling opportunities in such places as China’s Macau, where he is building a casino. He cites the British government’s “strange silence around the tax rate” and lack of a definitive parliamentary deadline as reasons to keep a low profile.

“Deregulation is going to happen,” Mr. Wynn says. “We just don’t know when.”

Merrill Lynch analyst Andrew Burnett in Britain is less optimistic about the bill’s quick success. A general election in 2005 could disrupt the parliamentary process, pushing all nonessential legislation back as far as 2007.

“I think at the moment British deregulation will remain frozen in time,” Mr. Burnett says.

A few British communities are hoping for its swift passage, fearing their livelihood as tourist destinations may be at stake. Blackpool, long ago a tourism favorite for its roller coaster and promenade, is suffering from decline. Alan Cavill, the town’s head of economic development, met earlier this month with MGM Mirage, Harrah’s and Park Place in Nevada to spur interest in bringing U.S.-style casinos to the seaside town. “If Blackpool doesn’t turn around, in five years we wouldn’t be a resort anyway,” he says.

Not everyone is excited at the prospect of megacasinos in Britain. Blackpool official Steven Bate worries that “deregulation could open a Pandora’s Box of problems that the public and the government have not yet acknowledged.”

The town already has its share of gambling. Blackpool, population 142,300, currently has 36 betting shops, 5,000 to 6,000 slot machines on the promenade, and two small casinos.

“I can already get rid of my hard-earned cash now,” Mr. Cavill says. “What I can’t do is do it in a nice atmosphere surrounded by all sorts of amenities.”

Still, Mr. Cavill says Blackpool has no aspirations of becoming the next Las Vegas or Atlantic City, N.J. “We want to be the Blackpool of Europe,” Mr. Cavill says. “I don’t think anywhere else can be the Las Vegas of anywhere else.”