Probability of implementation

• Introduction
• The proposed development
• Market demand analysis
• Criteria for identifying appropriate and sustainable localities for the
  new casino
• Existing and proposed transport infrastructure
• Current provision for gambling
• The impact of this casino on existing casinos and other leisure
  based activities
• Potential critical mass effect of a cluster of casino and leisure
  based activities
• Investment potential
• Current level of investor interest

Introduction

In committing itself to licencing the casino, the Council intends to restrict the location of the casino to the Coastal Action Zone, which is the focus of its regeneration activity. The Council has identified six potential locations for a casino listed below, and they will provide the basis, if the Council is successful in obtaining authority to grant a licence, of the local assessment of location. There is firm local developer interest in three sites, which are described more fully below. The map shows the locations of all six sites.

Site 1

Butlins, Skegness (see Developer Proposal 1)

Site 2

Fantasy Island, Ingoldmells (see Developer Proposal 2)

Site 3

Southview, Skegness (see Developer Proposal 3)

Site 4

Southern Foreshore, Skegness

Site 5

Northern Foreshore, Skegness

Site 6

Mablethorpe

The proposed development

The development as planned by the council will comprise a small casino with associated restaurants and bars and a four star hotel. We will work with developers to encourage further leisure facilities such as a bowling alley or multi-screen cinema.

Within these parameters, and in the case of the casino the legal restrictions on size, it will be for the developer to decide on the scale and type of development, subject of course to the usual planning regulations.

We have, however, conducted a modelling exercise¹⁵ based on the following principal assumptions, all of which are regarded as prima facie reasonable by this authority, its partners and the developers or advisors that we have consulted:

• A 1,000 square metre casino costing £2.2m to build and equip.
• 2,000 square metres of restaurant space, costing £2m.
• A 90 room four star hotel costing £6.3m.
• An entertainment facility costing £2m – inevitably there is more uncertainty about this than about the other components.

As a market comparator, we note that our £4.2m of casino/catering investment is less than the widely-reported £7m capital cost of the Opera House Casino in Scarborough, a resort comparable to those in the Coastal Action Zone and already hosting one other casino.

The three indicative proposals actually received by ELDC envisage private sector capital spend on a greater scale even in the initial stages. As a result, we regard our estimates of investment as being cautious, and certainly as under-stating the long-term potential for private sector investment.

Market demand analysis

The primary market for the casino will be the six million plus visitors to the Coast, rather than residents. The table indicates our reasoning. We rely essentially on the Mintel analysis of the casino market, which indicates that about 3% - 5% of the adult population do currently visit casinos, but that many more are willing to consider a visit as part of leisure activity if this is ‘easy’ – and we note that the ending of the 24-hour wait for membership will make visits to casinos markedly easier. Accordingly we have estimated that 2.5%¹⁶ of adult day visitors and 4.0% of adult staying visitors will visit the casino.

Criteria for identifying appropriate and sustainable localities for the new casino

In deciding on a preferred site from amongst the six identified so far and others that may be identified in due course, our broad criteria¹⁷ will be as follows:

• Ability to accommodate the scale of development proposed and consistency with the district’s planning framework. This is a ‘hurdle’ criterion that all sites must meet. The decision between competing proposals will then be made on the basis of the remaining criteria:
• Maximisation of the favourable impact of the development on the local labour market and the economy. This impact will depend amongst other things on:
• The scale of development proposed.
• The opportunity for other leisure and tourism businesses to ‘cluster’ around the primary facilities.
• The potential of the specific activities proposed to employ residents, especially those not now in employment.
• Probability of the development proceeding, having regard to the financial status of the site owner and developer.
• Minimisation of the adverse social effects of gambling, for instance through commitment to relevant codes of conduct.
• Minimisation of unnecessary car journeys, for instance by optimising use of the existing public transport infrastructure, whilst recognising that many customers will arrive by car.
• Compatibility with the Community Safety Strategy.

Existing and proposed transport infrastructure

The transport infrastructure comprises a road network with good regional but rather poor local linkages, supplemented by limited rail and bus services. The central weakness of the infrastructure is that it offers low average journey speeds across the long distances to be covered in one of England’s largest districts; a secondary weakness is that on a limited number of summer weekend days the infrastructure experiences heavy demand with the influx of visitors leading to congestion. We do not anticipate the casino placing extra demands on the infrastructure.

Current provision for gambling

Excepting the usual number of high street bookmakers’ shops, and the AWP machines already mentioned above, there are no significant gambling facilities in East Lindsey and the closest existing casinos in Hull, Sheffield and Nottingham are some two hours’ drive time away. There have been no relevant recent trends or developments.

The impact of this casino on existing casinos and other leisure based activities

As noted above the closest casinos are in major cities at a considerable distance away from the Coastal Action Zone. We do not consider that there will be any material impact on their operations from the opening of a small casino here.

The question of impact on other leisure based activities is more significant. Tourism data indicate that spending on attractions and entertainment was £39m in 2003. Our modelling estimates gambling expenditure of £2.3m or about 5.8% of the attractions and entertainment total. However, we do not believe that there will be any diversion of expenditure from existing activities, for the following reasons:

• We expect the entertainment complex to raise visitor numbers – and thereby total spend.
• We expect gambling to be an ‘additional’ activity, raising per capita spend.
• Our estimate (£24) of per capita gambling expenditure is low by industry standards – our customers are not wealthy and regard gambling as a recreation.
• We believe that spending on attractions and entertainment is materially under-stated in the official figures – a conclusion based on analysis of cash withdrawals from ATM machines – and that gambling losses as a result will be a lower proportion of the total.

The hotel proposal is predicated on scarcity of good quality accommodation – the clearest evidence of this is the expressed willingness of our three developers to build further hotel accommodation in conjunction with a casino. Again therefore we anticipate no displacement. Moreover the indicative 90 additional rooms (180 bedspaces) will add just 0.4% to total bedspace on the Coastal Action Zone, though it will add 3.8% to the stock of hotel bedspaces.

Finally, we envisage a ‘mid-scale’ catering operation in conjunction with the casino – perhaps based on, for instance, an a la carte restaurant, and a second family restaurant of the ‘Frankie and Benny’ type. As with hotels, this type of good quality catering is in short supply on the Coast and we see the new developments as accommodating market demand rather than diverting demand from elsewhere.

Potential critical mass effect of a cluster of casino and leisure based activities

This is a decisive factor. The core investment of £12.5m will offer an iconic statement about the transformation of the Coastal Action Zone from ‘post-war resort’ to being a modern resort. Over time, we envisage existing and new leisure service providers locating activity close to the casino – if for no other reason than to benefit from ‘footfall’.

Investment potential

We have indicated above a probable level of £12.5m of private sector investment in the complex with a further requirement for up to £2m of public sector investment in environmental enhancements, and noted too that the actual proposals we have received are for somewhat higher investment than this.

Current level of investor interest

Current investor interest is indicated by the three Developer Proposals summarised on the following pages.

Penetration analysis
	All, m	Adults estimate	Adults est, m	Penetration	Casino visits, m
Day visitors	4.95	60%	2.97	1.8%	0.053
Overnight visitor days	4.76	60%	2.86
Overnight visitor numbers	1.13	60%	0.68	4.0%	0.027
Residents	0.13	70%	0.09	15.0%	0.014
Total					0.094
Note: ‘residents’ are residents of East Lindsey. It is assumed that 15% of adults will visit the casino on average three times annually – hence notional penetration of 15%

15. Financial and business model prepared by Glyn Owen Economic Advice, March 2006. A copy of the model is available from www.coastalactionzone.co.uk

16. This may of course, actually be (say) 3% of visitors making an average of 1.33 visits, or any similar combination

17. Draft Licensing Criteria