DEVELOPMENT LTD
Third Written Submission
to the Joint Committee on the Draft Gambling Bill.
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$6.5 billion. It
had 2003 revenues of US$3.9 billion and employs approximately
40,000 people. In addition, the company has recently agreed to
acquire Mandalay Resort Group in a transaction with a value of
approximately US$7.9 billion, which will make MGM MIRAGE the largest
hotel and gaming company in the world. Further information about
MGM MIRAGE can be found on the company's website at http://www.mgmmirage.com.
1.2
In anticipation of the possible modernisation of the United Kingdom's
gambling laws, MGM MIRAGE has entered into a series of joint venture
partnerships and strategic alliances with United Kingdom-based
companies to develop entertainment and casino destinations in
the United Kingdom. If these projects are all successfully developed,
they will represent an investment of in excess of one billion
pounds sterling that could create over 30,000 direct and indirect
construction and operational jobs. MGM MIRAGE is continuing to
actively evaluate other development opportunities in the United
Kingdom.
1.3
This Submission is in response to the Joint Committee's invitation
to interested parties to submit written evidence on the June 14,
2004, Government Response to the First Report of the Joint Committee
on the Draft Gambling Bill ("Government Response") to
recommendations 79, 80, 81, 83, 84 and 85 of the First Report,
and on the further statement of Government Policy on Casinos ("Annex
Statement") attached to the Government Response.
1.4
Overall, we welcome the Government Response and, in particular,
its reflecting the Government's frequently stated policy initiative
of seeking to ensure a smaller number of larger casinos rather
than a proliferation of smaller casinos. We believe this strategy
will:
(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-scale gaming
and entertainment destinations; (ii) properly address the Government's
stated intent to ensure strong player protection measures by avoiding
smaller casinos on every street corner that are harder to police;
and (iii) encourage significant inward investment, thereby creating
a substantial number of employment opportunities and increase
tourism.
2. Casino Definitions.
2.1
Subject to our comments in Section 2.4 below, we support the
definitions of "small", "large" and "regional"
casinos stated in the Government Response as a well-considered
and measured approach. We welcome Government's recognition that
significant economic development and regeneration benefits can
be achieved through the development of destination "regional"
casinos and ancillary activities and through the substantial activity
associated with such venues and its knock-on demand for goods
and services both at the "regional" casino and in the
wider local economy. Regional casinos with a wide variety of
non-gaming attractions can provide a unique leisure and entertainment
experience and can contribute significantly to a variety of long-term
benefits whether in terms of jobs, training, social inclusion,
new investment, economic benefits and growth, tourism, or planning
gain under the current planning laws.
2.2
Recognising the size of the potential market and the product
already offered, there is opportunity for only a number of regional
casinos. With this in mind, we believe that it is important to
illustrate the significant differences in both economic benefits
to the region, and business risk to the operator, between the
development of a "regional" casino and the conversion
of an existing casino, bingo hall or other suitable building to
a "large" casino. We estimate that the operator of
a "regional" casino will need to invest between approximately
£150 million and £200 million and, assuming that demand
in the UK is similar to other comparable jurisdictions, may make
an EBITDA return on investment of between 10% and 15%. This size
of investment will create approximately 1,500 permanent operating
jobs, approximately 1,750 temporary construction jobs and a similar
number of indirect jobs locally and throughout the UK economy.
However, the conversion of a bingo hall or similar existing building
would potentially only cost approximately £5 million to £10
million (approximately 30% of which will be equipment-related)
but may deliver an incremental EBITDA return on investment of
over 50%. This investment would create only approximately 150
incremental permanent operating jobs, minimal temporary construction
jobs and will deliver few, if any, regeneration and tourism benefits.
Furthermore these low cost ventures will undoubtedly impact on
the commercial viability of the regional ventures, given the latter's
high capital costs and significant investment in non-gaming activities.
2.3
The proposed restrictions placed on the uncontrolled proliferation
of venues for Category A machines and their limitation to "regional"
casinos alone should promote the Government's long-stated wish
to encourage destination entertainment venues with maximum levels
of investment in non-gaming entertainment and leisure amenities.
We wholeheartedly support this objective.
2.4 We
support the mandatory provision of non-gambling customer areas
as well as gambling areas to create a more complete product offering
with a variety of gaming and non-gaming attractions and in this
regard we note the Government's proposal that "regional"
casinos have a Minimum Table Gaming Area of 1,000 square metres,
a Minimum Additional Gambling Area of 2,500 square metres, a Minimum
Non Gambling Area of 1,500 square metres and a Minimum Total Customer
Area of 5,000 square metres. In order to encourage the maximum
amount of investment and the deliverability of the regeneration
benefits referred to in Section 2.1 above, we suggest that the
proposed Minimum Non Gambling Area of 1,500 square metres be increased
to 3,500 square metres and, accordingly, that the Minimum Total
Customer Area of 5,000 square metres be increased to 7,000 square
metres. These measures will have the desired stated policy effects
of: (i) further limiting the numbers of venues housing Category
A machines; (ii) securing increased regeneration and investment
in return for the permission for Category A machines; and (iii)
encouraging a smaller number of larger venues.
2.5 The
proposed cap of 1,250 Category A machines for "regional"
casinos will limit the size and scale of any "regional"
casino complex that might evolve. Given the risk and magnitude
of the capital expenditure required to build a "regional"
casino, we recommend that there should be no reduction in the
number of Category A machines, the proposed ratio of 25 Machines
to 1 Table Game, nor any limitation on the range of Machines available
to an operator. Any reduction will make the delivery of a "regional"
casino as envisaged by Government potentially unviable. Among
other matters, the United Kingdom is an unproven market, does
not intend to limit the number of casino licences and various
local authorities have already indicated a desire for significant
planning gain. Indeed, we are concerned that the proposed 1,250
machine cap may limit our ability to obtain an adequate return
on our investment and we believe that a 1,500 machine cap would
be more commercially viable.
3. Planning Use Class and Grandfather
Rights.
3.1
We note the Government's recognition of the Joint Committee's
concerns that grandfather rights for casinos could seriously undermine
the licensing objectives and policy objectives on regeneration
but that the Government does not see a viable route for intervening
in that process. At present, buildings being used for cinemas,
sports or bingo could be converted into casinos without the need
for further planning permission, consultation with the applicable
local authority or the delivery of any planning gain, as long
as there is no alteration to the premises. This could have an
impact on the desirability of building a "regional"
casino in any given area should there be a proliferation of "large"
casinos through D2 conversions or the creation of "regional"
casinos that circumvent Government's stated policy objectives.
3.2 We
do not believe that the removal of "casinos" from the
current D2 Use Class into a separate Use Class will aid in this
regard as it will simply push the conversion issue from one land
use sector to another. Instead, we propose that the Use Class
for "casinos" should be made Sui Generis to ensure that
applications are reviewed on their merits and to prevent a change
in leisure use circumventing the intent of the Gambling Bill.
3.3
Further, Section 8 of DCMS Policy Note 7 (Transition to the New
Regime and Grandfather Rights), among other things, obligates
a local authority to grant the application for a new style premises
license to the holder of a gaming license under the 1968 Gaming
Act (and where no operating license has yet been granted). This,
coupled with the ability to achieve D2 conversions under the current
law, may allow the creation of "large" and "regional"
casinos, which circumvent the intent and policy of the Gambling
Bill. Accordingly, we propose that for "regional" casinos,
there be an obligation to obtain a new style "regional"
premises license through a new application rather than an automatic
grant.
4. Other Planning Issues.
4.1
We believe that the direction provided by the Government in the
Annex Statement with regard to the role of Regional Planning Bodies
("RPB") is practical and reasonable. We understand
that local councils will be required to prepare Local Development
Plans that conform generally to the Regional Spatial Strategies
("RSS") prepared by RPBs. The RSS will establish the
locational criteria appropriate to regionally or sub-regionally
significant leisure uses and may identify the broad areas in which
to locate major new leisure developments. We do not believe it
appropriate for the RPBs to be involved in identifying specific
sites as suitable locations for casinos.
4.2
With respect to planning obligations, we agree with the Government
that the existing planning system, which allows local planning
authorities to enter into Section 106 agreements with developers,
provides the most suitable vehicle to deliver appropriate additional
local benefits.
MGM MIRAGE: June 30, 2004.
|
