Tottenham Report: “All that glisters is not gold” — W. Shakespeare, Merchant of Venice

September 12, 2023 11:00 PM
Photo: Shutterstock
  • Andrew Tottenham — Managing Director, Tottenham & Co
September 12, 2023 11:00 PM
  • Andrew Tottenham — Managing Director, Tottenham & Co

In my work as a consultant, I am often asked to either critique a feasibility study for a proposed casino, review an existing casino, or provide a market survey and feasibility study for a new casino. Some are in resorts and others not. 

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All of these clients want to know the prospects of their casino and/or resorts. Many involve additional amenities, such as a restaurant or two, a showroom, a nightclub, a hotel. Most of my time is spent explaining why whatever is being proposed will not perform as expected.  

When it comes to gambling, there is a pervasive idea that “if you build it, they will come.” A piece of land in the middle of nowhere will have enormous value if only permission for a casino is granted. A resort on an island with white beaches and clear blue seas all around will be more successful if it has a casino. But in most cases, it won’t. 

I have reviewed plans and feasibility studies that show revenues that will be off the charts. But the reality is that revenues of the scale projected just will not exist. I cannot tell you how many proposals I have seen for resorts on the Black Sea, the coast of Croatia, or a Greek Island, where the owner is expecting annual casino revenues north of €50 million euro. They do not want to hear that they will be lucky to achieve even €10 million. 

A while ago, a proposal for a casino in Belfast was being promoted by a British gambling group. Belfast was bombed heavily during the last war and suffered desperately during the “Troubles” and the government has been deadlocked over divided politics. The city needed a shot in the arm to aid its regeneration. 

There was an initiative to regenerate the old docks area. Belfast used to be the home to the world’s largest shipbuilding industry; the Titanic was built there. Most shipbuilding moved to Asia, so the docks and the city’s economy degenerated. It also had the largest cigarette factory in the world and that industry declined rapidly too. 

The idea to regenerate the docks was sound and included the Titanic Centre, a museum about the history of Belfast, its industries, and what happened to the Titanic. (If you ever get a chance, go; you will spend a fascinating afternoon.) 

I was asked by a property company to review the proposal for a casino in the docks area, in a hotel near the Titanic Centre. You might think this sounds like a good idea, a casino in a newly regenerated area. But even after the area had been redeveloped, it was missing something critical: people. Very few would be living there and precious few hotel rooms were planned in the area.  

True, the Titanic Centre could become a destination and was expected to drive footfall into the area, which could be good for a casino. But the question was who would be coming and when.  

To make a casino work, it needs to be in an area that is frequented by people, residents as well as tourists. The docks area would get tourists, but it was out of the way for residents and it was not programmed as a destination for nighttime tourism. 

I remember Tom Jenkin, former president of the Western Division of Caesars, commenting on one his casinos vis-a-vis that of a competitor. “They might do well in the day, but we own the night.” Casinos, whether they are dependent on residents, tourists, or both, need to be in areas where people go for their evening entertainment. 

It is no accident that the casinos around Leicester Square in London’s West End do well, apart from the added bonus of being next to Chinatown. The area at night is awash with tourists and residents of the outer boroughs looking for an evening’s entertainment. The operators do not have to spend money making it a destination; London is already a destination and the West End, the area that includes Leicester Square, is at the heart. 

The casinos in the West End compete with one another, so they have developed excellent restaurants, exciting bars, and other nightlife to draw in potential casino customers. The casinos outside London have become fairly moribund businesses with few opportunities for growth.  

A few years ago, I was invited to a discussion on what would be the casino of the future. It started with a presentation of what the casino of the future might look like.  

The presentation had some interesting ideas, but there was one glaring mistake, the idea that by putting in a small showroom you could create more of a destination. A 60-seat theatre is not going to do very much to generate visitation to the casino, no matter what the show. The operator would not be able to afford to create much of a spectacle, so the attraction would be extremely limited. 

The Hippodrome, one of London’s busiest casinos, is a destination within a destination (Leicester Square), but London is the bigger draw. You can put on Magic Mike and a fill the room night after night – London’s theatres draw people from all over the world. Pre-pandemic, more than 21 million visitors overnighted in London. But try putting on the same show in a smaller venue in Leeds or Manchester and you will be struggling to sell many tickets after a few months. The returns are just not there. 

Unless you are able to create a real destination or be situated in an evening-entertainment destination, something with the scale and scope of attractions that will draw people from long distances, the casino, by necessity, will have to be comparatively small. Small casinos will only attract customers from a few miles around and if they are not where the evening’s action takes place will only attract the most motivated customers.  

Like most retail businesses, casinos come down to three things: location, location, location. Something the majority of casino promoters and some casino operators do not understand.