Britain's casinos play a smart hand

Casinos were the moral panic of the day a couple of years ago. The Government's plans for a Las Vegas-style "super casino" in Manchester generated a storm of controversy as certain elements in the right-wing press warned that it would create hordes of problem gamblers and moral degenerates. The plans were quietly dropped.

But despite some powerful headwinds – notably swinging tax increases – Britain's existing casinos are booming. Figures from the Gambling Commission show that visitor numbers have hit new records every year for the past five years, increasing even through the worst of the economic shock created by the banking crisis. Last year, 16.6m people passed through the doors of Britain's 143 casinos, up from 16.2m the previous year and 15.1m in 2007.

And if yesterday's trading statement from Rank is anything to go by, the trend is not going to be broken any time soon. The gambling group's casino division said like-for-like sales were up 9 per cent in the 16 weeks to 18 April, helped by longer opening hours and strong growth in customer visits, which grew by 7 per cent. What's going on? While the super casino was canned to stem a tide of vitriolic headlines, the Labour government has pushed through a number of reforms to Britain's gambling laws, including the creation of the Gambling Commission and the end of the 24-hour rule – the antiquated requirement for punters to undergo a one-day "cooling-off period" before joining a casino. That, together with the need to produce a briefcase's worth of documents to confirm identity, did an effective job of putting off many casual consumers who could just as easily get their gambling fix from one of more than 8,000 betting shops in the UK that increasingly feel like mini-casinos, given the ubiquitous fixed-odds betting terminals that they all contain.

Now, however, all you need to gain membership of a casino is a credit card. And while Rank, for example, still likes customers to become members of its Grosvenor and "G" outlets, others operate a complete open-door policy.

Ian Burke, the chief executive of Rank, credits "G" as driving the casino divisions' success of recent years. G outlets are restricted to just 20 slot machines (as are all UK casinos) but they tend to be larger than is typical, with the extra floor space used for events such as low buy in poker tournaments, which have proved hugely popular with a generation of players who have graduated from online tables to the real thing.

Poker rooms are absent from many Las Vegas casinos, because despite the game's popularity, it takes up a lot of space while generating only limited revenues – players compete with each other rather than with the "house", which is left with only a smallish "rake" of their winnings. Slots offer 15 to 20 per cent.

With Britain's 20-slot limit (far lower than even on the continent) it means that poker is worth hosting because it gets people through the door, and spending at the bar (drinks in Vegas come free) and on food. G has also pioneered "entertainment" and has attempted to position itself as a mainstream leisure venue. (Rivals have tried out similar ideas). And it seems to have worked. Of Rank's 35 casinos, 10 are G-branded, but they account for just under 40 per cent of revenues.

And they have been instrumental in helping to dispel the slightly sleazy image the old-style British casino had, as a venue for the mad, sad and bad gambler. Says Mr Burke: "We've tried to turn the casino into a mainstream leisure experience, with food and entertainment as well as gambling. The average spend per head is £30-£35. We are still seeing strong growth in admissions and it's worked very well for us." More of these venues are due to be rolled out over the coming months as the group seeks to capitalise on the strength of the concept.

Says the Panmure Gordon analyst Simon French: "We understand customer visits have continued to strengthen over the past eight weeks. The group will convert its Brighton and Newcastle casinos to the G Casino format in H1 and we are hopeful of further conversions in H2." A good thing, too, given the difficulties in the bingo business, which has been grappling with a series of issues, not least the smoking ban. Will the growth in numbers lead to a growth in problem gamblers? That remains to be seen. But, Mr Burke argues: "Policing problem gamblers is a priority. It's not in the industry's interest to have problem gamblers." And at least casinos fall under the scrutiny of the Gambling Commission, by contrast to the bewildering array of online operations that can be accessed at the click of a mouse.