The UK gambling industry is at a crossroads. While casinos and bingo halls will benefit from a relaxation of advertising and product rules as a result of the 2005 Gambling Act, the pending smoking ban in England and Wales looms large.
As Warwick Bartlett, founder of Global Betting and Gaming Consultants, says: "The smoking ban is without doubt the biggest challenge facing both bingo halls and casinos."
Consumer demand – particularly for casinos – has remained static while rival forms of gambling such as online betting have grown. Casinos and bingo halls, say industry experts, must change. They must embrace their position in the mainstream leisure industry and sell themselves and their products more like retailers.
Last week, Gala announced a partnership with loyalty scheme Nectar and said it was overhauling its marketing strategy ahead of the smoking ban (MW last week). The bingo brand, part of the Gala Coral empire, believes it must attract more younger members and encourage them to visit more often as it fears it may lose regular players once the smoking ban comes into force.
Group marketing director Kate Howe says the tie-up with Nectar is indicative of this focus, adding: "We are seriously thinking about what our brand stands for in the next three to five years, when we believe the market will have to attract a lot of new members in order to survive the smoking ban and double taxation."
The double taxation issue is one that affects all bingo operators, with the game being the only form of gambling to pay VAT. Despite lobbying from industry body the Bingo Association, Gala and Rank – which owns the Mecca Bingo brand – the treasury declined to drop the VAT in last week’s budget. That, along with the effects of the smoking ban, could lead to the closure of 200 clubs, according to the association.
The shadow of the smoking ban
Rank says like-for-like sales at its Mecca Bingo clubs in Scotland have fallen 15% since smoking was banned in public places. Announcing its results earlier this month, Rank said that although it has no Scottish casinos, industry data showed sites north of the border had been ""adversely"" affected by the ban.
It says it has a "broad strategy" in place to combat the ban but warned that changes to gambling regulation would also hit its bottom line. While it believes it will benefit from the relaxation of limits on advertising, it faces higher charges for casino licences and will have to remove certain types of slot machines, both of which will affect revenues.
Yet Bingo Association marketing manager Steve Baldwin thinks the legislation favours casinos over bingo halls. He says: "You have to ask the question: Is this industry being legislated out of existence? The legislation was supposed to be an equal opportunity for all aspects of the gaming industry."
He says the gambling sector is increasingly becoming a mainstream part of the leisure industry, adding: "Leisure brands are vying for our attention and wallets constantly – be it in the home or an outside venue such as gambling or film. Increasingly consumers are spoilt for choice. It is all about establishing brand and reputation."
Establishing its brand is a key focus for Gala Coral for both its casino and bingo operations, according to Howe, a former account manager at advertising agency Leo Burnett. The group is also considering advertising on TV for its chain of casinos following the relaxation in advertising rules in September and is testing a Fortune loyalty card at three of its five casinos.
Former Gala marketing director Richard Sowerby says it is vital that such brand building continues in order to attract new audiences – particularly as it has traditionally been an area of weakness for the leisure industry as a whole.
"Bingo has become expensive and it is probably time for it to adopt a more value for money stance,"" he adds. ""It should be about an evening out, not just about bingo. The gaming industry needs to ask what we can put inside bingo clubs."
The answer, he believes, is to try to emulate the success of supermarkets, which have diversified from being merely food retailers. "Many years ago all supermarkets like Tesco and Sainsbury’s sold was food but they have gradually had to build a broader and broader offer making certain they were catering for all different kinds of clients," says Sowerby. "Gaming has to be the same. It has to be a true retail business. It has to trial and test concept stores."
Bartlett adds: "The key for operators is to market to non-smokers who may have found the cloudy atmosphere inhibiting." However, he points out that smokers tend to gamble more than non-smokers so the take-up rate would have to be "significant" to recover the lost business.
It is not just leisure brands that casinos and bingo halls are competing against. The overall growth in gambling has been due to the prominence of betting shops and particularly online bookmakers. Research company Mintel says the 140 existing casinos in the UK accounted for only 8% of the £715m total net expenditure (stakes minus prizes) in the gambling market in 2005.
Betting at high street bookmakers and over the internet accounts for 38% of the market, while the National Lottery, despite a 5.6% fall in value since 2001, still accounts for another 25% of gambling expenditure and has been important in kick-starting mainstream interest in gambling in the UK.
Other issues include the introduction of a 50% tax on the profits of larger casinos announced by Gordon Brown last week, a move that could bring in as much as £100m in taxes over three years. Analysts say that the move effectively puts a cap on capital investment in casinos, while the much-mooted super-casino and 16 regional operators face a backlash in the House of Commons this week. The Liberal Democrats have said they will vote against the casinos today (Wednesday) and the Conservative Party wants the super-casino planned for Manchester to be reviewed by a cross-party committee of MPs and peers.
While the relaxation of gambling laws – which could bring as much as £250m in advertising and lead to the introduction of rollover bingo games and higher jackpots – creates a host of opportunities for the sector, there are also plenty of challenges ahead. It seems the major players must take a gamble of their own to lure new punters in.