In recent months, we have seen a number of gambling concessions being awarded. After a public bidding process, the concessions have been mainly awarded to the incumbent operators. But two have stood out. The first was awarding Allwyn Entertainment the fourth UK national lottery licence; Camelot had won all of the previous bids. The second was in Lower Saxony that awarded the Gauselmann Group up to 10 casino licences for a period of 15 years, defeating the existing operator, Casinos Austria International.
In France, land-based casino concessions are awarded at the end of an RFP process, as they are in Switzerland and Germany. The length of the concession period varies, but is rarely longer than 15 years. In Europe, the European Commission frowns on concession periods longer than this without significant justification.
The reason that it is a term-limited concession in certain countries rather than a licence in perpetuity, as in the UK or Spain, is because for those countries’ national law, providing gambling services is reserved for the state and not public citizens and the state selects an entity to operate it. The concession is considered an asset and therefore must be put out to tender under national and European procurement laws.
Some countries are not bound by EU procurement rules, but chose to use a public tender. They believe it is the best method to get the maximum returns for the state and occasionally to ensure that policy goals are achieved. Singapore and Japan are two examples.
The Singapore bid was fairly straightforward and it was clear what the authorities were seeking. It resulted in two world-class integrated resorts that achieved the government’s aims.
Japan was slightly different. Prefectures went through a detailed information-gathering and selection process, surprisingly before any real suitability investigations were carried out. Once the operators were selected, the prefectures negotiated with them to produce development plans, which were presented to the national government (along with any from other prefectures). The national government interrogated the plans, the operators and the prefecture, then chose which should receive the three licences on offer.
Only one (MGM/Oryx) got through the first stage. A mixture of unrealistic expectations, government bureaucracy, COVID, and cultural differences nixed the other projects.
New York state, however, is in a world of its own. Someone has devised one of the most convoluted processes ever seen in order to award the casino licences. Quite what the state is trying to achieve, apart from a great deal of money from the operators, is very difficult to determine.
Back to Europe. France has a long history of awarding concessions; though the process is not so labyrinthine, it is time-consuming and expensive. But perhaps things are not occurring as expected. When a concession comes up for renewal, rather than multiple parties bidding, usually the incumbent operator is the only bidder.
The larger operators have realised that it is not worth bidding to try to take a licence away from a competitor. This means all of that operator’s businesses are at risk from being poached by rival operators. Sometimes one of the smaller companies or a local entrepreneur who thinks they know better will put in a bid, but it can be difficult to unseat an incumbent. They have the relationship with the local town hall (essential in France) and it is a case of “better the devil you know.”
Last week, the Swiss Federal Casino Commission announced the results of the tender for the 21 existing concessions, which expire at the end of 2024, and two new concessions. Twenty-nine applicants submitted bids for these 23 licences and in all but four, which included the two new licenses, there was only one bidder, the incumbent.
The result was unsurprising. One incumbent did not bid to renew their licence in Schaffhausen, wanting to concentrate on one of the new licenses, which they did not win, and the entity that submitted a bid in their stead was disqualified. At the end of the process, 20 of the 21 existing casinos will be run by the same operators.
Winners, especially for new concessions, frequently regret having won. They bid to win and not what they really wanted and finish up with something that is not what the market demands nor is it as profitable as they hoped.
Given that nearly all incumbents tend to succeed, it does make me wonder if there is a better way to choose an operator for an existing casino. Responding to an RFP process is very expensive and time-consuming. Governments like to think that they get maximum value this way, but I wonder whether this is the case.
I do not have an answer to this question, but it is something that continues to bother me. Maybe I should leave well alone. After all, it keeps me, and my fellow consultants, employed.