Supplementary memorandum from MGM Mirage
Development Limited (DGB 132)
1. INTRODUCTION
1.1 MGM MIRAGE Development Limited is a
division of MGM MIRAGE, one of the world's leading and most respected
hotel and gaming companies. MGM MIRAGE owns and operates twelve
casino resorts located in the states of Nevada, Mississippi, Michigan
and in Australia, and has investments in two other casino resorts
in the states of Nevada and New Jersey. The company is headquartered
in Las Vegas, Nevada and is traded on the New York Stock Exchange
with a market capitalisation in excess of US$5 billion. It had
2003 revenues of US$3.9 billion and employs approximately 40,000
people.
1.2 In anticipation of the possible modernisation
of the United Kingdom's gambling laws, MGM MIRAGE has been evaluating
the potential United Kingdom casino and leisure market. Subject
to the details of any such modernisation and to prevailing tax
rates, MGM MIRAGE plans to make a significant investment of capital
in the United Kingdom. In the last nine months, MGM MIRAGE has:
(a) acquired a 25 per cent interest in casino developer Metro
Casinos Limited in Bristol; (b) sought and received formal approval
from the Gaming Board for Great Britain for this transaction;
(c) signed a joint venture agreement with the Earls Court and
Olympia Group to develop a gaming and entertainment complex in
the center of London; (d) signed a joint venture agreement with
Newcastle United PLC to build a mixed-use development in Newcastle's
city center; and (e) signed an agreement with The British Land
Company PLC to develop a gaming and entertainment complex adjacent
to the Meadowhall Shopping Centre in Sheffield. MGM MIRAGE is
continuing to actively evaluate other development opportunities
in the United Kingdom. Further information about MGM MIRAGE can
be found on the company's website at http://www.mgmmirage.com.
1.3 On 10 December 2003, we made a written
submission to the Joint Committee in which we welcomed the publication
of the draft Gambling Bill and, in particular, its reflecting
the Government's stated policy initiative of seeking to ensure
a smaller number of large casinos rather than a proliferation
of smaller casinos. We believe this strategy will both: (i) benefit
the interests of consumers (both gamblers and non-gamblers) by
promoting competition in the casino industry and allowing for
the creation of large gaming and entertainment complexes; and
(ii) properly address the Government's stated intent to ensure
strong player protection measures and avoid smaller casinos on
every street corner that are harder to police.
1.4 On 15 January 2004, we were asked to
give oral evidence before the Joint Committee in our capacity
as a company with an interest in developing large-scale casinos
in the United Kingdom. In our previous written submission and
during oral evidence, we noted the potential of the draft Gambling
Bill to encourage significant inward investment, create a large
number of employment opportunities and increase tourism.
1.5 In this second written submission, we
seek to address the issue of preventing the uncontrolled expansion
of gaming machines through a suggested revised formula for the
ratio of slot machines to gaming tables.
2. PROPOSED FORMULA
BACKGROUND
2.1 We have departed from a machine to table
ratio alone (which we support for smaller venues) and, instead,
have endeavoured to incentivise developers by incrementally raising
machine to table ratios only as investment in non-gaming areas
increases. If adopted, we believe the formula will encourage destination
entertainment venues with maximum levels of investment in non-gaming
entertainment and leisure amenities.
2.2 In developing this model, we have utilised
the benchmark of 10,000 square feet and 40 table games as stated
by the Department of Culture Media and Sport as the appropriate
initial formula for the minimum size for a "large" casino.
For casinos with up to 10,000 square feet of table gaming area
or less than 40 tables ("small" casinos), we support
the current proposed ratio of three machines per table.
2.3 We have assumed the following definitions:
— Table game—a gaming table that
is manned and available for use for a minimum of 50 hours per
month.
— Gaming area—the area in which
casino table games and casino machines can be played, including
related circulation and cashier/redemption areas.
— Non-gaming area—all other areas
other than casino gaming areas, including but not limited to food,
beverage, entertainment, back-of-house, bingo and betting areas,
but excluding parking areas both enclosed and open.
3. THE FORMULA
3.1 A "large" casino with a table
gaming area of not less than 10,000 square feet and a minimum
of 40 table games:
— Would be permitted to have a machine
gaming area of up to three times the table gaming area (together
defined as the "gaming area"), provided that the non-gaming
area was not less than 50 per cent of the gaming area.
— Would be permitted to have a machine
gaming area of up to four times the table gaming area, provided
that the non-gaming area was not less than 100 per cent of the
gaming area.
— Would be permitted to have an unlimited
machine gaming area, provided that the non-gaming area was not
less than 300 per cent of the gaming area.
4. EXAMPLE
4.1 The example set out below illustrates
the minimum space allocations for casinos operating under this
formula:
|
| At Three Multiple
Sq. Ft.
| At Four Multiple
Sq. Ft.
| Unlimited
Sq. Ft. |
|
| Table game area | 10,000
| 10,000 | 10,000
|
| Slot ratio | x 3
| x 4 | Unlimited
|
| Slot machine area | 30,000
| 40,000 | Unlimited
|
| Total gaming area | 40,000
| 50,000 | Unlimited
|
| Non-gaming ratio | x 50 per cent
| x 100 per cent | x 300 per cent
|
| Non-gaming area | 20,000
| 50,000 | Unlimited
|
| Total area to be developed | 60,000
| 100,000 | Unlimited
|
|
Based on an area allowance of 250 square feet per table and
30 square feet per slot machine, the formula would give rise to
casinos with the following gaming components:
|
| At Three
Multiple
| At Four
Multiple |
|
| Table games | 40
| 40 |
| Slot machines | 1,000
| 1,333 |
| Slot-to-table ratio | 25.0
| 33.3 |
|
These ratios are similar to those from most existing overseas
jurisdictions where there have been significant levels of investment
(see Section 5 below). Investment in the majority of these casinos
was in excess of US$100 million (and many significantly higher)
and we do not believe that any of these casinos have a non-gaming
area that would not meet the non-gaming ratios proposed above.
We recognise that existing gaming licensees may be disadvantaged
in the future if they are immediately required to comply with
the proposal set out above and we would therefore propose that
licensees in operation at the time that the Gambling Bill is enacted
be grandfathered in and not be initially subject to the proposed
formula.
5. SELECTED LARGE
SCALE CASINO
STATISTICS
5.1 On the following page, we list some relevant statistics
from existing large-scale casino developments.
|
| Property Name | Casino
Space
(sq. ft.)
| Number
Slots | Number Tables
| Slot-to-table Ratio | Total Main Facility Space
(sq. ft.) [1]
|
|
| USA | | |
| | |
Medium-sized Las Vegas Strip
New York-New York
| 84,000 | 1,955
| 80 | 24.4
| >500,000 |
| Treasure Island | 84,000
| 1,949 | 75
| 26.0 | >500,000
|
| Monte Carlo | 102,000
| 1,914 | 74
| 25.9 | >500,000
|
Las Vegas Local Market
Green Valley Ranch
| 110,000 | 2,212
| 49 | 45.1
| 435,000 |
| Sunset Station | 110,000
| 2,847 | 53
| 53.7 | 428,000
|
| Suncoast | 92,000
| 2,350 | 53
| 44.3 | >400,000
|
Detroit
MGM Grand Detroit |
75,000 | 2,694
| 80 | 33.7
| >500,000 |
| Motor City | 75,000
| 2,539 | 106
| 24.0 | >200,000
|
Atlantic City
Sands | 77,000
| 2,043 | 79
| 25.9 | >200,000
|
| Atlantic City Hilton | 60,000
| 2,004 | 85
| 23.6 | >200,000
|
California
Harrah's Rincon Casino, San Diego
| 56,000 | 1,600
| 35 | 45.7
| >150,000 |
| Spa Resort & Casino, Palm Springs | 40,000
| 1,000 | 30
| 33.3 | 131,000
|
Mississippi
Beau Rivage | 80,000
| 2,262 | 90
| 25.1 | >300,000
|
| Casino Magic Biloxi | 49,000
| 1,372 | 31
| 44.3 | >150,000
|
South Africa
Montecasino, Johannesburg
| 91,000 | 1,700
| 70 | 24.3
| >500,000 |
| Caesars Gauteng, Johannesburg | 56,000
| 1,500 | 50
| 30.0 | >200,000
|
| Suncoast, Durban | 75,000
| 1,250 | 50
| 25.0 | >300,000
|
Australia [2]
Star City, Sydney
| 104,000 | 1,500
| 200 | 7.5
| >500,000 |
| Conrad Treasury Casino Hotel, Brisbane | 71,000
| 1,321 | 88
| 15.0 | >150,000
|
France/Switzerland [3]
Casino Le Lyon Vert, La Tour de Salvagny
| 16,000 | 400
| 15 | 26.7
| >50,000 |
| Casino de Divonnes les Bains | 14,000
| 355 | 13
| 27.3 | >100,000
|
| Casino Barriere de Montreaux | 14,000
| 310 | 20
| 15.5 | >100,000
|
|
| February 2004 | |
| | | |
1
Main facility square footages are estimates only and do not include
the additional non-gaming space of hotel towers and parking. The
non-gaming space also typically includes a number of restaurants,
bars, lounges and entertainment theatres. Back
2
Lower slot to table game ratio is due to the proliferation of
machines in small clubs in the Australian market. This is not
a feature of any other market. Back
3
Square footages estimated. Back
|
