Failure of EuroVegas Victory for Spain Casino Market

While Adelson’s pulling out Spain may look bad on the surface, it may spell good news for Spain’s casino market.

Las Vegas casino magnate and archenemy of online casinos in America Sheldon Adelson and his Las Vegas Sands Corporation pulled out of a resort casino project in Spain last December. Dubbed “EuroVegas” in the media, the development outside of Madrid was to come with a $30 billion price tag and encompass 12 hotels and 6 casinos. The Sands Corporation predicted that EuroVegas would have created 250,000 jobs total for both temporary construction workers and permanent employees in the casino.

Adelson ultimately chose the “Spexit” option (get it?) because the Center-Right government of Prime Minister Mariano Rajoy was unable to meet some of his demands, which a government spokesperson referred to as “unacceptable” While the pull-out cost Spain a potentially lucrative opportunity, the local casino industry will benefit in an indirect way.

Background on Adelson’s Spexit

Adelson apparently felt that the desperate economic situation and indebtedness of the Spanish government would give him carte blanche in exchange for much-needed investment. Spain has unemployment hovering around 27 percent and the government has had a difficult time paying off creditors, so it is no position to be picky.

• The Las Vegas Sands Corporation canceled the $30 billion EuroVegas project last December after the government was unable to meet legal and financial conditions

• The city of Madrid lifted a ban on casinos in the area, and late last year issued two casino licenses

• Look for the casinos market in Spain and Madrid in particular to grow in upcoming years

However, the conditions Adelson was demanding in order to invest in the project were outrageous. He demanded that the current government either insulate him from future anti-gambling legislation or promise to compensate him in the event. There is no basis in Spanish law for a current government to impose conditions on a future government, so it was impossible for them to agree to this demand.

Adelson also demanded that his company get a special exemption from certain labor regulations, including the special right to employ foreign workers, an amendment of Spanish gambling laws to reduce the tax and an exemption from a national smoking ban in casinos. One opponent of the project argued that it would create a “state-within-a-state in which tax, labor and environmental regulations are disregarded.”

After Rajoy’s government proved unwilling (or unable) to give in to these demands, Adelson decided that the massive project wasn’t worth the investment dollars. The Sands Corporation will focus on further developing its operations in Asia for the time being. Adelson had this to say:

Developing integrated resorts in Europe has been a vision of mine for years, but there is a time and place for everything and right now our focus is on encouraging Asian countries, like Japan and Korea, to dramatically enhance their tourism offering through the development of integrated resorts there.

A blessing in disguise

Many are disappointed about missing out $30 billion in investment and hundreds of thousands of jobs. But the Spanish casino industry stands to benefit immensely. Why? During the negotiations Madrid and Barcelona competed fiercely to host EuroVegas. Part of Madrid’s bid involved lifting a ban on casinos with 18 miles of the city limits. Under pressure from domestic casino companies, the local government agreed to extend licenses to Spanish casinos as well as the Sands Corporation.

While the project was canceled, other companies are now free to apply for licenses in Madrid. Late last year Madrid awarded a license to Grupo Gran Madrid, which opened that first casino in Madrid and the company’s fourth overall. It also awarded a licensed to the Crupo Comar, which opened the Casino Gran Via. The two projects didn’t make gambling news on a scale comparable to EuroVegas, costing only a combined $35 million to build and created less than 500 jobs. However, their success could open the floodgates to more licenses and more casinos.

These projects also don’t carry to social cost associated with EuroVegas. No tax and labor exemptions and no long-term guarantees. They also didn’t face intense opposition from anti-gambling groups and the Catholic Church, who referred to Adelson’s project as “Sin City” and warned that it would become a cesspool or addiction, organized crime and prostitution.

What is means for the future of Spain’s casino market

With unemployment stubbornly high and the government in need of tax revenue, casino development will continue to be viewed as a partial solution Spain’s economic problems. Gambling could also become a larger part of Spain’s crucial tourism industry. The New York Times reported that a record 60.6 million tourists visited the country in 2013. However, only 4.2 million stopped in Madrid, down 5 percent from the previous year. Casinos could lure some visitors from other parts of the country into the capital city.

It appears likely that Madrid will see more casinos and more foreign visitors in upcoming years. While nothing near the scale of EuroVegas will be constructed, the industry will bring some much-needed money into the city, and into the country at large. The best part is that it won’t require caving to Adelson’s outrageous demands.