Wanted: lots of big-time losers

London Clubs is playing for high stakes as it opens new slots in casinoland. Katherine Hobson reports
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The Independent Online
Alan Goodenough, chief executive of London Clubs International, apologises for the chauffeur-driven Mercedes. He doesn't usually use his clubs' limousines for getting around London.

The luxury cars, driven by chauffeurs who gather outside his upmarket casinos looking like uniformed bouncers, are reserved insteadfor the gamblers. "If you've got someone who's going to lose pounds 100,000, it's churlish not to provide them with a limousine," Mr Goodenough says.

Tonight, though, he's giving a whistle-stop tour of his Golden Nugget, Paris Club and Les Ambassadeurs casinos, and the limo is the best way to zoom between them as quickly as possible.

Hopping from the car clutching a mobile phone, Mr Goodenough is a man on the move. Although he's "disappointed" in the Government's decision that the competition authorities should look at London Clubs' hostile pounds 192m bid for rival Capital Corp, he calls the referral "an irritant" rather than a roadblock. He isn't ruling out a renewal of his bid if the Monopolies and Mergers Commission rules in his favour, but he adds: "I don't think it makes any difference to our strategy. It doesn't stop all the other things we're going to do."

In anticipation of gaming deregulation in the pounds 370m UK market, London Clubs is expanding its domestic casinos. It is also taking its European- style, high-stakes venues abroad.

First stop will be Las Vegas, the global gambling capital where, this summer, London Clubs will invest $50m (pounds 31m) in the redevelopment and expansion of the Aladdin Hotel and Casino.

London Clubs won't try to compete with America's family-oriented and themed casinos, which are as much about entertainment as gambling. Instead, it hopes to use its expertise in running big-stakes salon privee gaming rooms aimed at a wealthy international clientele.

"We are very good at this level of business," says Mr Goodenough, who joined London Clubs in 1993 after stints at Pleasurama, later acquired by Mecca, and Lyric Hotels, where he is still non-executive chairman. "We bring an instinctive European style and ambience."

At its Les Ambassadeurs casino in London, the country house atmosphere, plush furnishings, gourmet restaurant and adjoining garden are just the backdrop to some serious gambling, where members may lose tens of thousands of pounds a night at baccarat or roulette.

Up a winding staircase, through two sets of doors, is one of the salon privees and a separate dining room, which can be reserved for private parties. "This could stay quiet for a week," says Mr Goodenough. But when it's occupied, he adds, a single spin of the roulette wheel could mean a win or loss of up to pounds 400,000.

Even with the appealing milieu, it's hard to lure big spenders to the UK, where regulations prohibit casinos from paying for customers' flights and hotels. That restricts London Clubs' giveaways to meals, theatre tickets and transport via the fleet of Mercedes. It's a far cry from the US, where the perks flow - and so does the cash. High rollers spend about $800m annually in Las Vegas, says Greg Feehely, an analyst with Dresdner Kleinwort Benson.

London Clubs will take a 25 per cent equity stake in the Aladdin Hotel and Casino there, reaping the same proportion of profit from the entire venture. It will also get a management fee to operate a salon privee-style casino with 30 gaming tables and 100 high-stakes slot machines.

Mr Goodenough isn't worried about overcapacity in Las Vegas. Although the market "may take a breath" in a few years, "the city's future is sacrosanct," he says.

The move will also give London Clubs more experience with slots, which make up about 80 per cent of US gaming revenue. The company is hoping that regulators will allow yet more slot machines in UK clubs. The number of machines permitted per casino was recently doubled to six, and the Government is proposing to boost that to three per gaming table.

"If we get the numbers and types of slot machines being proposed, a casino will be a seriously more meaningful animal," says Mr Goodenough, who is even planning to put slot machines in the upmarket venues. Merrill Lynch estimates that London Clubs could gain an extra pounds 7m in profit from slots, based on annual net profit of pounds 20,000 per machine.

To help the UK casino industry - where growth has barely outpaced inflation - the Government has already extended drinking hours to 2am and cut the waiting period for new members from 48 to 24 hours. It is also considering proposals to allow gamblers to use debit cards, to let clubs advertise, to allow applications by mail, and to extend the list of areas permitted to have casinos.

In anticipation of looser rules, London Clubs is moving its Ritz casino licence to new premises on St James Street, renaming it the St James Club. The move will more than double the size of the venue and, according to Merrill Lynch, could do the same to the casino's profit.

The potential outside London lies in lower-market casinos such as London Clubs' Golden Nugget and Sportsman clubs, where, daily, about 1,100 casually dressed customers munch fish and chips, play blackjack and roulette - and lose about pounds 30 a visit.

Between the "grind" casinos and the Ritz are mid-market venues such as the Rendezvous, Palm Beach and Park Tower. Although sandwiches and dishes of olives replace the fish and chips, and oriental rugs cover the floor, the stakes aren't as high as at the Ritz: members lose an average of pounds 100 a night. Those venues, too, stand to gain from slot revenue, Mr Goodenough says.

Casino executives are cautiously optimistic that, if elected, a Labour government would enact the changes currently under consideration by the Conservatives. "Labour would have us believe they're in favour of continued deregulation and would support that process," says John Garrett, managing director of Rank Leisure, which operates 31 casinos.

London Clubs has still more on its agenda. It already operates casinos in France, Egypt and Beirut, where it recently reopened the Casino de Liban, idle for more than 15 years because of the civil war. It is also eyeing ventures in South Africa, Cyprus and Brussels. Merrill Lynch has added pounds 3m to its estimate of 1999 earnings to account for new overseas licences.

Investors think London Clubs' plans will translate to profit. So far this year, its shares have outperformed the FT-SE index of 350 leading companies by about 28 per cent, and outpaced the FT-SE leisure and hotel index by 26 per cent. Merrill Lynch estimates that pre-tax profit, which climbed 13 per cent to pounds 33m in 1996, could double over the next five years.

One note of caution, however: some investors say London Clubs' share price - which has risen 50 per cent in the past year - already sufficiently reflects the company's growth potential. "They've got a lot on their plate," says Job Curtis, fund manager with Henderson Investment Management, which recently sold its small stake in London Clubs.

"I don't think there's anything in there to allow for mistakes."

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