When Borders Matter

July 15, 2021

Europe has more than eight hundred land based casinos employing some seventy thousand people, this excludes slot arcades, which in some countries meet the legal classification of casino. You might think that these casinos would be evenly distributed around the population centres but that would be wrong. Europe´s patchwork quilt of casinos has some threadbare parts to it and some where there are an overabundance.

France and the UK account for over 40 percent of the total number of casinos and yet these two countries represent only seventeen percent of the total population of Europe. So why is this the case?

Each country in Europe has the ability to set its own gambling policy, and where Europe is concerned each country has made this decision in isolation of what is going on in surrounding countries.

There are two basic models for issuing licenses or concessions. One is a free for all, where anyone who meets the criteria can receive a license and the market will ultimately determine the number of casinos that can be operational. The other is to restrict the number of licenses, and in some cases the maximum size and location of the casino. In this case, under European law, the operator has to be selected through a public tender process.

France restricts casinos to certain towns and cities, originally spa towns where the rich used to congregate and then later to those that were tourist destinations In recent years the criteria  has become increasingly blurred, with cities successfully arguing that they meet the criteria and should be allowed to have a casino.

Each municipality that is allowed to have a casino can issue a ten to fifteen year casino concession to a qualified operator through a public tender. Longer concession periods are frowned upon by the European Commission and must be justified.

Germany is a mix of Lande (Federal State) owned casinos and private operators, the model (i.e. private or public), number and location of casinos dependent upon the policy in each Lande, although there is some level of cooperation between each Lande to ensure one doesn´t cannibalise the gambling revenues of their neighbour.  There are sixty-six casinos currently operational in Germany, with thirty-five operated by the states and thirty-one operated by private operators.

Most countries that were behind the “iron curtain” have a legal system whereby if an activity is not specifically illegal it is allowed. The consequence for casinos being that there has, until recently, been no control over the number or location of casinos. Nor for that matter, slot arcades with casino machines, vlt parlours and casino machines in bars.

Hungary is an outlier, having determined early on in its post-Soviet dominated history to control the number of casinos and issue licenses through public tenders. There are ten casinos currently operational in the country.

The UK is slightly different,  it has a hybrid model. Licenses under the 1968 Gaming Act were originally issued on a first come first served basis in certain permitted areas; towns and cities with a population of more than 200,000. Applicants not only had to prove they were “fit and proper” to hold a license but also that “a substantial demand already exists on the part of

prospective players for gaming facilities of the kind proposed to be provided on the relevant premises”.

The demand test led to operators sending “secret shoppers” to the would be competition to count the number of tables and empty seats on different days and at different times of the day and night. Proving demand was almost impossible and the then Gaming Board would always oppose a new application in court. It was only when a legal challenge to the Gambling Board´s opposition was proposed, on the basis that the Gaming Board´s interpretation of substantial demand was flawed, that the Board stopped automatically opposing these new applications.

The 2005 Gambling Act came to the Board´s rescue and by creating three different types of casino license, resort, large and small, although limiting them to only eight large and eight small casino licenses. The process was similar to the Japanese system in that towns and cities that wanted a casino had to bid for them on the basis of economic regeneration and those that won the right to issue a license then held a public tender.  It may be that the current review of the 2005 Act leads to changes to the different types of casino allowed.

This patchwork quilt of gambling policy, which has been made in silos has led to entrepreneurs taking advantage of restrictions on one side of a land border by opening casinos on the other side in a country where there are few or no restrictions.

Czechia is a case in point. Czechia does not control where casinos area allowed or the number. However, recently the municipalities have been given the rights to say no to gambling in their locality when the licenses come up for renewal. Czechia sits next to Austria and Germany, both countries that control the number and locations of casinos. Now, nearly every single border crossing between Czechia and Germany or Austria has a number of casinos nearby. The market for this casinos are not the Czech nationals but the people on the other side of the border.

The Iron Curtain was not very permeable to people or commerce with the result that the number of people living and working and the economic activity near the border was quite low. With the removal of the Iron Curtain and the implementation of the Schengen Agreement, whereby borders between countries in the Schengen area were removed and people and goods could travel freely without checks, the economies of the border areas have been lifted.

In 2019 and in a rather cheeky move Holland Casino opened a casino in Venlo. The casino sits on the main road to the border with Germany about five kilometres away. In my opinion, the Venlo casino was not intended to cater to the Dutch market but only to attract those living across the border in the nearby German cities of Duisburg, Essen and Dortmund.

When the privatisation of Holland Casino was being discussed, the Dutch government proposed that the company should be split up into packages of casinos, and new licenses issued based entirely on the Dutch population in each area with no account made of the population beyond its borders. I thought the best opportunity would be to win one of the new licenses and locate it in a border area near to Germany.

Liechtenstein is a tiny country, a small sliver, only one hundred and sixty square kilometres and with a population less than forty thousand, that sits between Austria and Switzerland. All three countries are party to the Schengen Agreement. To date there are six casinos operating in the country. The market is almost entirely Swiss and Austrian nationals. The government decided not to limit the number of licenses and it is entirely possible that more will open, although the local population is starting to get upset about the number.

The Schengen Agreement means that people can move freely across the border without having to show any documentation. Sometimes the only way you can tell you have crossed the border is that the language of the road signs has changed. For operators in Chechia or Liechtenstein things could not be better.

It seems ludicrous to me that some European governments still shape casino policy based entirely on what is or will be available in their own country without considering what is or is very likely to become available immediately on the other side of the border. Countries that restrict gambling supply and that sit next to those that do not will see their citizens cross the border to seek out gambling on the other side and meanwhile filling the tax coffers of their more liberal neighbour.

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