It’s all eyes on a full house as the US raises its game

As the UK proposes to relax its gambling laws, the US revels in a love affair with poker.

Never mind the Presidential race, the contest that has more Americans gripped these days is poker, “Texas Hold’em” style. As the debate rages on in the UK about new gambling laws, the US market is at a very different stage of its evolution. Following changes in legislation, expansion into new markets and further exploitation of existing ones, the US gambling industry saw its revenues more than double in a decade – from $35bn (&£19bn) in 1993 to $73bn (&£40bn) in 2003, according to the American Gaming Association.

Once considered a vice by most in the US, gambling has been sanitised – more often referred to as “gaming” than gambling – repackaged and is being marketed as a typical American pastime. Some form of legal gambling is now available in 48 states, with only Hawaii and Utah abstaining. It has become more mainstream than going to church, while the internet has opened gambling up to a new army of thrill-seekers.

Tourism and gambling are closely linked in the US in a way that is likely to emerge in the UK if laws are changed and Las Vegas-style destination resorts become a reality. The low-cost food (usually all-you-can-eat buffets), inexpensive hotel rooms and free alcohol on offer at the gaming tables in destinations like Las Vegas and Atlantic City provide an attractive proposition for tourists. Yet leaving your cheap but luxurious hotel room always involves a long walk past the slot machines and tables, and only the strongest of wills can walk away without at least having a quick flutter.

Nevertheless, Vegas has successfully rebranded itself as a family holiday destination. It is no longer simply a desert town based around gambling, and millions of families head there each year to sample the high life.

Last year, 53 million adult Americans visited a casino and for those who don’t make it to Vegas there are plenty of other options, with 443 commercial casinos in 11 states. Native American Indian Reserves are not subject to the same licensing restrictions as the rest of the state they operate in and casinos on these reserves have become a crucial part of their economy. And to overcome restrictions on the number of casino licences a state can issue within its borders, Gambling Riverboats have become big business on rivers such as the Mississippi and the Great Lakes, as well as cruises “to nowhere”, which are simply offshore gambling vehicles.

Creating an “entertainment complex” around gambling has certainly fuelled further growth in the industry, with hotels, restaurants and shops all being integral to the offering. There has also been a significant merging of gambling genres, with the creation of so-called “racinos”, horseracing tracks that were permitted to add casino facilities to their offering.

Racinos have grown rapidly and card table revenues are beating those placed on the track. While much more money is wagered at Indian and Vegas-style casinos, racino revenues rose nearly 52 per cent from 1994 to 2003, outpacing other forms of casino-based gambling. Overall, $2.3bn (&£1.25bn) was wagered at racinos last year, up eight per cent from 2002. Revenues at commercial casinos exceeded $26bn (&£14bn) last year, growing by just over one per cent.

Poker has seen a huge rise in popularity, with Las Vegas reports showing that poker revenue has jumped 33 per cent in the past year, while the traditional earners – slot machines and blackjack – saw hardly any rise. This can be attributed, in part, to the surprise success of the televised 2003 World Poker Tour during which the winner of the $2.5m (&£1.4m) pot managed to beat all of the professionals taking part, despite having only ever played online before. The 2004 winner also came via the Net to scoop the top prize, which had doubled to $5m (&£2.8m) after the high viewing figures and sponsorship interest the 2003 event garnered.

The Travel Channel earned one of its biggest hits with its weekly World Poker Tour shows, which were quickly copied by Bravo (Celebrity Poker Showdown) and Walt Disney (World Series of Poker). In January, NBC even put poker up against the Super Bowl pre-game show. “Poker is all the rage,” says Phil Gordon, a player who commentates on one of four major poker shows on US television. “TV helped demystify it and bring a lot of new players to the game. They see how it’s done on TV and envision themselves playing.”

Retailers are expecting huge sales this Christmas for all things poker-related, from custom-made chips to upscale tables, while in casinos across the US, blackjack tables are being rapidly converted to accommodate the poker craze. And this month, Foxwoods Resort Casinos announced its first ad campaign in six years. In a departure for the casino it will not feature its usual catchy jingle, but will instead aim to capitalise on the growing popularity and younger demographic of poker, which it describes as “culturally hot”.

It’s the stuff the American dream is made of – turn a $40 internet stake into millions of dollars, then become a celebrity and give up your day job. While the legality of online gambling remains a grey area in the US, with most states outlawing it, meaning offshore sites are cashing in, the Net has levelled the playing field. The result is that gambling, both on- and offline, is attracting younger players and the sector is revelling in its newly glamorous image, as seen in films such as Ocean’s Eleven and the network TV show Las Vegas.

Online sites are estimated to generate $1bn (&£550m) a year in the US and are competing for brand awareness and clicks alongside even the most visible industries of retail, financial services and travel. Just a few years ago online casinos advertised only on niche websites, but there has been a significant shift towards mainstream portals and gambling sites are now among the biggest spenders in online advertising.

Another popular sector is state lotteries, which are run in 40 states, with the New York State lottery being the third-biggest gaming company by turnover. The US states rely heavily on the local tax revenue from gambling – but some estimates have shown that for every dollar a state receives in tax revenue, it has to spend more than double that providing social care for the ill effects of gambling.

Debate about the moral and legal issues around gambling continues in the US as it will in the UK. “Problem gambling”, defined by the US National Council on Problem Gambling as, “gambling behaviour which causes disruptions in any major area of life: psychological, physical, social or vocational”, is estimated to affect up to 8 million adult Americans. It is a widely accepted notion that companies operating gambling ventures have a responsibility to develop policies and programmes to address underage and problem gambling. But this notion does not always translate into reality.

Some flamboyant characters have been attracted to the gambling sector, but behind the glitzy brands such as MGM Mirage, Caesars and Trump Hotels & Casino Resorts, are the same business issues and marketing challenges facing every sector. And just like their customers, not everyone’s a winner. Caesar’s Entertainments recently posted a third-quarter rise in profits of 21 per cent while Trump has filed for Chapter 11 bankruptcy – again.

Gambling is a highly lucrative and less regulated market, but it remains one of the most heavily taxed industries in the US. Some people may console themselves that a large portion of gambling revenue goes to good causes, but the reality may be less comforting. Instead of being directed to funds for the elderly or education, it is said that gambling taxes simply end up in the bottomless pot of public sector funding, never reaching the intended recipients. As the moral, ethical and legal debate about gambling rages, one thing is certain: unlike the race for The White House, this is one contest in which all bets will never be off.

Polly Devaney is a former Unilever executive now working as a freelance business editor

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