It is a thriving, lucrative industry in many parts of the world, but in Ireland, casinos and clubs don’t know where their future lies and neither do the foreign investors who have toyed with the idea of setting up here. John Mulligan looks at the Government dithering that has led to this situation.
While a number of casinos are currently operating in Ireland as private members‘ clubs, those looking to jump into the business in a big way are still waiting for the Government to show its hand over legislation on the market.
And while the plan is that the Government is planning to impose some type of legislative framework on casinos, operators are still not sure if they’re being bluffed, or if this is the real thing.
Earlier this month, the Justice Minister Brian Lenihan said that a report drafted almost a year ago by a committee, headed by barrister Michael McGrath, would likely be presented before a Dail committee for consideration „in the near future“.
But those involved in the gambling industry aren’t holding their breath. Another report, produced in 2000 by an inter-departmental group, recommended the establishment of a regulator to oversee registration and gambling, charitable lotteries and commercial sales promotions. None of its findings were acted upon.
While casino owners now anticipate some type of legislation to be introduced, they’re not sure as of yet what form it will take. Some are even taking outside bets that their casinos could still be completely outlawed.
That scenario is probably unlikely — leaked parts of Mr McGrath’s report have already indicated that a new set of laws to govern the industry will probably be the preferred route.
That’s something that the casino lobby group would welcome, and indeed has been pushing for ever since former Minister for Justice Michael McDowell flip-flopped on the issue — first declaring that casinos should be outlawed, and subsequently commissioning the McGrath report.
Big players have vested interests in the business being legalised. Financier Dermot Desmond spent EUR 5.5m on his Dublin-based Sporting Emporium — a 13,000 square-feet premises that opened in 2005. It lures hundreds of late-night revellers with its promise of free drinks and potential lucky streaks. Punters there have been known to make big money — as much as EUR 100,000 in a night. Most, however, might spend a hundred or so during an evening.
While casinos are illegal under the 1956 Gaming and Lotteries Act, private members‘ clubs can circumvent the rule by ensuring patrons sign up before they can start gambling. And casinos have become big business.
„I’d say we usually have between 200 or 350 people come through the doors on an average night,“ says David Hickson, managing director of the Fitzwilliam Club, based in Dublin.
He is also the director for the Gaming and Leisure Association of Ireland, a coalition of about 14 casinos around the country that has a voluntary code of conduct and which has been lobbying the government to introduce relevant legislation.
Hickson’s father established the private club, having opened his first gambling premises, the Merrion, back in 1985.
The clubs aren’t a licence to print money, according to David Hickson, who points out that high start-up costs are involved before any profit can be turned.
„To open a good quality club you probably need an investment of between EUR 1.5m and EUR 2m,“ he says, adding that his own club’s security camera system cost in the region of EUR 100,000.
„It’s very labour intensive. We employ 110 people, and this year we’ll pay about EUR 1.2m in PRSI and VAT alone.“ That serves to underline just how profitable a properly regulated casino business could be to the exchequer. For the operators, it can ultimately be lucrative too.
Mr Hickson reckons that this year the Fitzwilliam Club will have generate a gross profit of up to EUR 4m, but is still only emerging at break-even. Desmond’s Sporting Emporium is likely to post a gross profit at least equal to the Fitzwilliam.
And while some casinos boast membership running into the tens of thousands, the reality is that most rely on a core number of frequent visitors to keep the croupiers busy and the chips being doled out.
But even as the sector proves increasingly attractive for investors, the lack of clarity puts some off establishing a foothold.
„It’s very difficult from our perspective to properly advise clients on where they stand from a legal point of view,“ explains Deirdre Kilroy, a partner with law firm LK Shields.
„Just recently, one foreign operator sent questionnaires to us regarding Ireland, and to two other jurisdictions where it’s considering basing a business. You can be pretty sure that because of the uncertainty here, that Ireland will be scratched from their list.“
It’s fairly evident that the current Irish legislation — based both on the 1956 Act and the 1931 Betting Act, is painfully outdated to cope with either the current growth in physical casino operations, or the explosion in internet gambling.
A report prepared last year by Swiss Institute of Comparative Law for the European Commission, highlighted a number of apparently archaic legal justifications in member states that rationalise the prohibition of gambling.
A clause it found in Ireland noted that gambling was prohibited to „prevent the evil of tempting poor people to part with their limited resources in the remote expectation of gaining substantial rewards“.
It’s something that the National Lottery, however, does twice a week.
An acrimonious history with the gambling industry does little to instil confidence. The most celebrated rout involved the proposed siting of a massive EUR 476m casino, hotel and conference centre complex in the Phoenix Park. US firm Ogden Leisure saw its plans shot down, with a staggering 20,000 objections received to the development.
JJ Woods, who helped establish Silks Casino in Dublin back in 2003, and who now runs Atlantic Casino Consultants, welcomes legislation for the Irish gambling industry, but thinks that the majority of Irish operations would find themselves out of business if new rules lured major international firms to these shores.
„I think that’s the reality,“ he admits. „I know of very few Irish casinos that are run on par with international standards. There’s a real lack of management experience.“
Woods has been involved in the industry for about 25 years, and was the first person to open a casino in Moscow following the collapse of the Iron Curtain. He reckons there might be as many as 48 casinos operating in the Irish market, although others put the figure much lower, at closer to the 20 mark.
„The Government has an opportunity to do something that was made a mess of in the UK,“ he adds. After deregulating the gambling industry in the UK, the government there hiked gaming taxes, scaring off big players.
„Enabling the expansion of casinos in Ireland under a proper legislative framework could be great for tourism,“ he claims.
But any international players are unlikely to want to come to Ireland unless they can invest in large developments, probably attached to hotels, where they can be guaranteed a revolving footfall.
And it doesn’t seem as though they’ll be able to do that any time soon. The report waiting to go before the Dail is recommending that any large-scale casino operations be prohibited until their economic and social impact can be assessed. It is also proposing that a regulated gambling industry should be subjected to higher taxes than the existing betting sector.
The report also urges that casino operators be forced to pay a substantial licence fee — all of which could lead to a situation where smaller gambling businesses will be forced to shut their doors.
JJ Woods acknowledges that the danger is that the Government will over-legislate, a move that for casino operators at least, might make things very tough for the industry.
Either way, a long wait could still be in store before any decisions are made.