Bet with the international playboys: Las Vegas is coming to town

Even before gaming regulation passes into law, overseas operators are investing millions in casinos and UK venues can see dollar signs flashing on the one-arm bandits. Abigail Townsend asks if anything can upset the punters

Las Vegas, move over. The Government's long-awaited overhaul of the country's antiquated gambling laws will affect every area of gaming but, as any wannabe Donald Trump will tell you, casinos are where the big money lies.

Las Vegas, move over. The Government's long-awaited overhaul of the country's antiquated gambling laws will affect every area of gaming but, as any wannabe Donald Trump will tell you, casinos are where the big money lies.

Alongside UK operators such as Rank, Gala and Stanley Leisure - owner of the Star Casino in Birmingham, currently the UK's biggest gaming venue - overseas businesses are aiming to cash in. The foreigners have natural advantages: big pockets, experience in more developed markets and a hunger for expansion.

Yet before they can lavish their wares on the new and improved UK market, stumbling blocks remain as the proposed Gambling Bill progresses into law. One of the biggest should be tackled later this month, when the Government publishes its response to the Scrutiny Committee's report on the Bill. The cross-party group has expressed its concern about the development of gaming sheds hous- ing row upon row of slot machines. Members of the Committee travelled to Australia, where they have similar outlets, and were disturbed by what they saw. It all comes down to "problem gambling": people get addicted when they can chance their arm quickly and repeatedly.

Armed with this knowledge, the Committee advised limiting the amount of high-value jackpots. Large casinos, it recommended, should be allowed eight slot machines per gaming table, while at the bigger resort complexes, the total number should be capped at 1,250.

Professor Leighton Vaughan Williams is director of the betting research unit at Nottingham Trent University and gave evidence to the Committee. He says: "If a casino only had gaming machines and no tables, it would make a good profit. If it had tables and no machines, it wouldn't. So it's a balancing act. The more machines you allow the inward investor to have, the happier they are going to be.

"We have got competing issues: the economics of it and the psychology of it. These two issues have always been applied, one against the other."

The Department for Culture, Media and Sport is not, however, expected to take a hardline approach. After all, the Government will be keen not to risk what economists believe could be inward investment of £5bn, up to 117,000 new jobs and a yearly boost to the public coffers of around £3bn. As Professor Vaughan Williams comments: "The DCMS has been looking at this for much longer than the Committee, and my own view is that they will likely get it right."

The other issue, however, is solely down to the Treasury: tax. At the moment the sector pays a 40 per cent rate, but it is hoped this will be bought in line with what bookmakers pay, 15 per cent. Yet the Treasury is giving away no clues, and a decision is not expected until later this year.

What it decides could make or break the whole deal. Peter Bacon, chief executive of the South African casino and resort business Sun International, warns: "If, at the end of the day, the tax regime is unfavourable to a degree that we could not move forward with the investment programme we have in mind, we would have to rethink the strategy." The group is investing more than £300m in the UK.

Then there is the question of what and where. Regeneration is everyone's favourite buzzword, rattled off by every operator at every opportunity. Yet areas up and down the country are clamouring for casinos. Blackpool, used as a case study by the Committee, is keen to house a large resort-style complex, while Manchester and Glasgow have invited bids for "development opportunities". MGM Mirage, Harrah's Entertainment, Isle of Capri, Caesars Entertainment, Sun International and Kerzner International are all understood to be interested. Other areas either highlighted as potential sites or with investment already under way - even though the Bill is not expected to become law until 2006 - include Newcastle, Bristol and London.

Even allowing for the outstanding issues of machine numbers and tax, the UK casino market will be undergoing its most dramatic makeover yet. Broadly speaking, there are two casino experiences open to the UK resident at the moment: small, "seedy" operations and "high-roller" venues frequented by the very rich.

Few average punters would be happy in either, which is why the overseas operators want to offer you an altogether different experience. Be they small urban casinos or in large out-of-town resorts, they aim to provide leisure venues where you go for the food, entertainment and atmosphere just as much as the gambling.

If Britons want the full Hollywood experience of casinos, they would be better off at the moment heading for Las Vegas or Monte Carlo. All our friendly, inward investors want to do is save us the journey.

Ain't going to play Sun City? Then try Glasgow instead

Among the US operators aiming to take advantage of the Gambling Bill, MGM Mirage owns some of the most recognisable destinations in Las Vegas. Of its 14 desert resorts, the MGM Grand (with its 5,034 rooms and 8,000 staff), Mirage and Treasure Island are perhaps the best known. The group believes it offers a better class of gambling, and positions itself as a high-end leisure provider. It has around $10bn (£5.4bn) in assets, and some 50 per cent of revenues come from non-gambling activities.

Now it is looking eastwards. As European managing director Lloyd Nathan explains: "The UK is one of the best opportunities for gambling since Atlantic City legalised gaming in 1976." Last year, MGM secured its UK licence by buying a stake in a Bristol casino and it also agreed a deal with Newcastle United Football Club. Since then it has pulled out the big guns, striking a deal with the new owners of Earl's Court and Olympia to develop an upmarket leisure and gaming facility.

It has also teamed up with property firm Peel Holdings to develop complexes in Liverpool, Manchester and Glasgow for an estimated cost of £650m. The emphasis, though, will be on the high end. As Mr Nathan points out: "If you go to Las Vegas, you are going for the experience, not just to a seedy casino to gamble."

Isle of Capri is a much smaller operator, but it was one of the first into the UK. Last June it announced an agreement to develop a new casino in Coventry and seems to have embraced the Midlands generally. It has bought a majority stake in UK operator Blue Chip Casinos, which has agreed to buy the Castle Casino in Dudley, and a licence application is understood to have been made in Birmingham.

Further north, and it is also looking to develop a complex in Salford, Greater Manchester. Subject to planning and Gaming Board approval, this will include a 20,000-seat rugby stadium and 50,000 sq ft casino.

The group, around half of which is owned by the family of chief executive Bernard Goldstein, owns and operates 17 casinos in the US, although, unlike most of its rivals, it is not in Las Vegas.

Harrah's Entertainment, founded in 1937, currently generates around two-thirds of its revenues from casinos across 13 US states. Its UK plans got off the ground last year, when it announced a 50:50 joint venture with British bingo group Gala. The two plan to develop up to eight regional casinos. At the time, chief executive Gary Loveman suggested that as much as £600m could be invested in the venture. Harrah's is also reported to have its eye on another site in Glasgow.

Sun International is one of the biggest non-US players aiming to take advantage of British deregulation. It owns and operates casinos and hotels across Africa but its flagship complex is Sun City, the South African resort that spawned a protest song during apartheid ("I ain't going to play Sun City"). That, though, is in the past and chief executive Peter Bacon is moving forward. He wants to build three urban resort casinos in the UK and is bidding for proposed developments in both Manchester and Glasgow.

He is concerned about the tax situation - the group pulled out of France because the level became too high - but does not believe in waiting on the sidelines. A dedicated team has been looking at the UK for the past 18 months. "We need to build an understanding of the market and issues now, so we can identify and pursue specific opportunities. Then, when the law is enacted, we can move. It would be difficult to wait and hope to participate in any meaningful way at that point."

PLEA TO TAXMAN FOR A SPORTING CHANCE

The tech boom might have come and gone, but what has emerged is the internet's suitability for specific markets. One is tourism, another book buying and a third is gambling. The explosion of online betting has been phenomenal, be it through exchanges - which allow punters to lay and match bets - or traditional bookmakers. The Gambling Bill is therefore an opportunity for legislation to catch up with this strident growth.

Betting exchanges and "bricks and mortar" bookies have been arguing since the word go and both have lobbied hard. But most believe the Government has no problems with exchanges as they stand.

There are instead bigger issues for the internet. Nigel Payne, chief executive of online gaming group Sportingbet, believes the Bill is a good thing but also argues that it suffers from "a lack of clarity in a number of fundamental areas". He is particularly concerned about tax: "If the rate the UK Government offers the online industry is significantly different to elsewhere, then an awful lot of businesses are going to look at jurisdictions where they are offering between zero and 3 per cent and see that there isn't much point being in the UK."

A clash with the neighbours could also be in the air. The UK may be cleaning up its laws but it is not so clear-cut in the European Union. The Treaty of Rome allows for free trade but e-commerce was not included and no definite decision on the subject has been made.

It could even set the UK up in opposition to the US, which maintains a tough line on online gaming.

Yet most believe the Bill will ultimately prove beneficial. As Mr Payne says: "The UK has stood up and said 'gambling is an established leisure spend, regulating the internet is the only way forward, ignoring it doesn't make any sense. So we will regulate it and control.' " And in his opinion, that can only be a good thing.