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Casinos in Spain: Anticipation or Acceptance?

Down-to-earth casinos pave the way for Quixotic dreams.

It has been two and a half years since the announcement that Harrah’s would build a Caesars resort casino as part of a major leisure development south of Madrid, in Spain. Since then, little news has been forthcoming.

Six months ago the mega-project Gran Scala was introduced and hailed as “Las Vegas comes to the Spanish desert.” After that, hard news about the project was hard to come by.

In these days of tight credit and volatile oil prices, it would be easy to assume that both Gran Scala and Caesars Ciudad Real had been consigned to the industry’s current cancelled-or-indefinitely-delayed pile. But Spain is no stranger to the long-term project. Gaudi’s Sagrada Familia cathedral in Barcelona has been under construction since 1882 and is not expected to be completed before 2026. And it took the developer five years to find and buy the land, for the equivalent of just over a thousand euro.

As Gaudi is reported to have said, when asked about the long construction timetable for the church, “My Client is not in a hurry.”

Luckily for Spain’s mortal residents and tourists, they can pass the time in existing casinos while waiting for the future to arrive.

That wasn’t always the case. Under the leadership of General Franco, who served as head of state for almost 40 years, all forms of gambling in Spain were outlawed. But after Franco’s death in 1975, the current casino era began with new legislation in 1978. Mimicking the model that was popular in many Western European countries, the first 18 casino licenses were given to operations located in resort areas and on the outskirts of cities and towns. The rationale was to help promote tourism. National regulations at first governed casinos in the country’s 17 autonomous regions and two autonomous cities, but over time each region has adapted those regulations to fit individual needs.

Modern Europe has been good to Spain. Since joining the European Union in 1986—when that steadily growing body was still small enough to be called the European Community—Spain has seen its per-capita GDP grow from 72 percent of the E.U. average to 98.5 percent. The accompanying rise in personal discretionary spending has helped the Spanish casino industry grow to some 40 properties.

The casino business makes up a small portion of Spain’s gaming industry. Casinos are privately owned and operated, and account for only about 8.5 percent of all money given to games of chance. The public spends 60 percent of its wagering euro in the private sector, comprised of casinos, bingo parlors and those ubiquitous low-stake, low-payout slot machines, designated “B” machines under Spanish law. The other 40 percent is spent on various public-sector lotteries and sports betting organizations.

The Spanish Ministry of the Interior estimates that total wagers for all gaming sectors reached just under €28.9 billion in 2006—about $36.1 billion given the average exchange rate of 1.25 dollars to the euro that year. Casino gambling accounted for less than €2.5 billion of that. Playing the “B” machines was the most popular activity, accounting for €11 billion. Bingo drew €3.7 billion.

Not surprisingly, the busiest casinos are the primary casinos for Barcelona and Madrid. The two metro regions have 12 percent and 14 percent of Spain’s population, respectively. In 2007, Casino Madrid and Casino Barcelona together accounted for 40 percent of the combined gross gaming revenue of the 32 casinos that belong to the Spanish Casino Association. Madrid had the higher table game action, winning €58 million—about $79.5 million. Barcelona’s tables brought in €52.8 million, but Barcelona’s slots—designated “C” machines—took in almost double those of Madrid, €26.6 million to €13.6 million.

The two next highest grossing casinos also draw their guests from the greater Barcelona and Madrid markets. Casino Peralada, which belongs to the same group as Barcelona and serves the region 145 kilometers to the north of the city, took in €6.5 million at the tables and €17.2 million from slots. Casino Aranjuez, located about 50 kilometers to the south of Madrid, won €20.1 million at its tables and another €3 million from slots.

The four properties taken together accounted for 53 percent of all casino gaming revenue.

In 2008, the tourist hotspot of the Canary Islands had the most casinos with seven. Located in the Atlantic Ocean 67 miles off the southern coast of Morocco, this archipelago of seven main islands sees around 10 million tourists from mainly northern European countries spending about €12.3 billion a year.

Another favorite with holiday-makers, Andalucia, in the south of Spain, has the second-highest number of casinos with five, followed by the Mediterranean’s Balearic Islands with three. The mainland regions of Catalonia and Castilla Y Leon each also have three casinos, followed by two each for Aragon, Galicia, Madrid, Valencia, Murcia and the Basque Country. The autonomous areas of Asturias, Cantabria, Extremadura, La Rioja, Ceuta and Melilla each have a sole casino in operation.

According to figures released by industry organization Asociacion Espanola De Casinos De Juego, Spanish casinos saw just over 3.6 million visitors in 2006, a 4.3 percent rise on 2005’s numbers.

In terms of number of properties, Grupo Comar is the largest operator in Spain, with nine sites spread all over the country, plus casinos in Venezuela, the Dominican Republic, the Czech Republic and some cruise ships. The second-largest operator in Spain is Cirsa, with four properties spread over Asturias, Andalucia, Valencia and Galicia. A major player on the world stage, Barcelona-based Cirsa also operates 11 venues outside of its native land, mainly in South America.

Grupo Orenes, an operator linked with Madrid-based machine manufacturer and developer Recreativos Franco, runs one casino each in Murcia, Extremadura and La Rioja, with a fourth due to open later this year in Valencia. There is also Casinos Nervion, with four sites spread over the Basque Country, the Balearic Island of Mallorca and, most recently, in Ceuta.

Also of major importance is Casinos De Catalunya, which runs the Castillo De Peralada, Gran Casino De Barcelona and Casino Tarragona venues in Catalonia, plus two casinos in Argentina. Grupo Gran Madrid operates casinos in Torrelodones, Benalmadena and Murcia under its Casino Madrid brand. Grupo Orenes, Casinos De Catalunya, Grupo Gran Madrid and Casinos Nervion were also founding members of the Asociacion Espanola De Casinos De Juego, which represents the interests of about 70 percent of the market.

Like many industrialized nations, Spain has introduced a smoking ban in public places, including casinos. However, casinos are allowed to have certain zones for smokers on condition that they install costly smoke processing systems. Although the ban has affected results somewhat, Casino Barcelona, which has installed the systems, reports that they have not been too badly hurt. What they have noticed is that their designated smoking zones are showing higher levels of play than the non-smoking areas. Whether the ban will prove to be a significant hindrance to the industry in the long term remains to be seen.

The table game mix inside the casinos is a standard European assortment consisting primarily of French and American roulette, blackjack, punto banco and a variety of games that all come under the heading “poker,” which includes everything from casino stud played against the house to Texas hold’em and Omaha to a local version called poker sintetico.

A few casinos offer more exotic games. Casino Madrid has chemin de fer. Casinos Peralada and Barcelona, being relatively near the French border, offer boule, which is popular with the neighbors. Casino Extremadura has a Portuguese dice game, again because it is on the border with Portugal. Casino Majorca and since recently Barcelona have American craps.

In 2007 about 37 percent of GGR from the 32 Spanish Association casinos came from roulette, which is still the big game in Europe. Blackjack accounted for 15 percent and punto banco 3 percent. The combined poker offering brought in 11 percent of the total revenue.

Slot machines are present in casinos but not in what you would call huge numbers. The largest casinos have only a few hundred machines, and in all of Spain there are only about 2,500 slots in casinos. That is mainly due to the fact the slot market in Spain is primarily a street machine market, and there are about 250,000 of these that pay out small cash prizes. However, casino slots did account for 33 percent of total GGR generated by the associated casinos.

Poker, meaning the game where players compete against each other and the house provides a dealer and rakes the pot, has continued to grow in popularity. In 2006 the Spanish Poker Championship circuit was planned and developed by Casinos de Catalunya together with four other casinos and the Spanish Casino Association.
 
In 2007 the second annual SPC was played in stages at 11 different casinos throughout the year, with the final held at Casino Mallorca in December. Around 1,300 players created a prize pool of €651,000—not exactly WSOP numbers, but not bad for a game that was relatively unknown in the country six years ago. The event is taking place again this year and more entries are expected.

Casino Barcelona has been one of the biggest supporters of poker. The casino was the first to host international, televised championship events, starting with the World Headsup Poker Championship in 2004, then the European Poker Tour in 2005 and ultimately the World Poker Tour in 2007. All three organizations continue to stage their events at Barcelona.

Last year, regional governments were given permission to license land-based sports betting services. Previously, Spanish punters wanting to have a flutter on a horse race or a soccer match needed to do so online at a foreign site, but following a deal between Britain’s William Hill and Madrid’s Codere, bettors can walk into a bookie and wager in person.

The first Victoria betting shop, as the joint brand is known, opened in April and there are plans to establish 70 such venues across the Madrid region, the first of the regions to grant licenses. Madrid has also granted licenses to the partnership between the U.K.’s Ladbrokes and Cirsa along with Greece’s Intralot. In addition, Austrian firms Bwin and Betbull have announced plans to launch a joint franchise while Britain’s Gala Coral has been in talks with potential Spanish partners for months.

Online gaming sites are still in legal limbo, as is the case with many European Union countries. Poker is popular and growing daily, with the boom expected in 2008-09. But the biggest push in advertising has come from online sports betting sites. Last year saw €60 million in advertising from sports betting websites, representing 90 percent of the online gaming spend, according to industry insiders. Not bad considering such advertising is technically illegal.

Luckily, the national government is more interested in developing sensible legislation for the industry than in tracking down the evil-doers. A solution is expected within the next two years that will involve licensing of operators and some taxation, though at lower rates than the U.K.’s current 15 percent.

Meanwhile, the two biggest projects on paper remain Caesars Ciudad Real and Gran Scala.
 
Local developer El Reino De Don Quijote De La Mancha, S.A. and Forest City Enterprises Inc. are developing the Caesars complex, which besides the casino resort will have five hotels, three golf courses and 9,000 apartments, and will cover 1,250 hectares in Ciudad Real.

Regional government permission to proceed was given in February, and depending on the economy and management decisions, it is expected that the complex will be inaugurated in late 2010 or early 2011, and will require investment of €6.5 billion over the next eight years.

For Gran Scala, perhaps the most ambitious casino and entertainment project ever, news came in June that project developer International Leisure Development had increased capitalization to €40 million, was close to agreeing on a location with the Aragon regional government and that all the land for the project—a parcel of 20.25 square kilometers—was expected to be acquired by the end of the summer.

Work on the massive infrastructure needed could begin early in 2009. Unofficially, a person close to the project says the company has enough potential partners to take on all 32 separate casino-hotel packages. However, there has been opposition locally from those concerned about environmental effects.

The gaming industry in Spain appears to have at least an attentive partner in government. Things may not move at lightning speed, but at least they appear to have a direction—in contrast to some European markets.

In any case, Gaudi’s Sagrada Familia is still pulling 2 million visitors a year.

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