Seeking the missed opportunity in Portugal
Expert insight provided by Pedro Cortés, Managing Partner of Lektou

It went more or less unnoticed for the industry the opening of a tender for land-based casino gaming concessions in the gaming areas of Estoril (which includes Lisbon) and Figueira da Foz, in Portugal.

Believing in the news that came out, two candidates submitted proposals for the concession of the Estoril gaming area: the company that currently holds the concession, until at least the end of this year, and a company that already holds an online gaming license (for online machine games).

As read in the news, the latter submitted a proposal – considering all the criteria at stake – that represented 20 million euros more in comparison with the current concessionaire.

The three criteria of the RFP were purely pecuniary: fixed annual consideration, the percentage of GGR stemming from the operation of the casino games and the variable annual consideration.

Everything seems to be based on a purely economic view of a Government that seems uninterested in developing the gaming industry, but solely focused in collecting revenue from an activity that continues to be an absolute reserve of the State. Hence the concession model, under which, the State, not willing to or not having the means to, allows it to be operated by private entities through concession contracts, in the case ofthe gaming areas of Estoril and Figueira da Foz, for a period of 15 years.

A very brief research of the history of industry in Portugal is sufficient to conclude that much or little has changed in terms of public policy since the practice of games in land based casinos was legalized in 1927, through Decree No. 14643 of 3 December 1927.

At that time, and notwithstanding other objectives, the legislature declared that the enactment of the legislation would serve as a means of reducing to a minimum the abuses that were being committed in the illegal gambling activity, protecting the stakeholders by avoiding marginal behaviour, assuming that gambling was a reality against which repressive measures could not fight, and a true intention to minimize theconsequences of the harmful of the activity by taking care of the interests of the families.

In addition to those public policy statements, the most important of all was the one that declared that the legalization intended to get the most revenue from the gaming activity.

I.e., after almost 100 years, the Portuguese State maintains the same configuration and legal structure.

Malgré the evolution that has been seen in various parts of the world, the Portuguese Government seems to maintain the same public policy with a single objective: to collect the maximum revenue for the State.

According to statistics published by the national department, Portugal set a historical record last July of 3.4 million guests and 9.9 million nights. What does that mean?

That Portugal has become an international tourism destination par excellence. In our views, public policy should be changed from only based on revenue collection into a policy that considers once and for all the gaming industry as part of the tourism and entertainment industry, attracting more and more tourists eager to have distinctive experiences.

1927 legislature assumed that gambling was an activity against which the State could not be fought in a “necessary evil” view. The legislature, almost a century later, is unaware of this reality, but seems dormant.

The same legislator who, despite late in time, but more or less correctly (the brutal original tax burden that has undergone a recent correction can be discussed) approved the Legal Framework for Online Gaming and Betting, through Decree-Law 66/2015 of 29 April, allowing, through license – and not concession, as in the case of land-based casino games – private entities that meet certain requirements, to operate this activity, where players play at a click on their computers or smartphones.

It is also not negligible to recall that 65% of the revenues that financed the development of the tourism industry in Portugal had its source in 12 casinos, one slot machine room and 16 bingo rooms (including that of the Espinho Casino) operated in the 10 gaming zones (in practice nine, because no concession was awarded for the Porto Santo).

Before the pandemic, the Portuguese tourism industry represented 15% of the GDP and 12% of the country's employment. It still is the activity that generates more foreign currency entries into the national coffers.

Public policy can be regarded, as the Distinguished Fellow in Gaming Law at UNLV, Professor Anthony Cabot, teaches "as the broad principles (or concerns) that a government espouses as the basis for regulating casino gaming”.

A change from the only general principle concerning gaming – which is revenue collection – that seems topreside the regulation of the activity needs to be taken. That change shall include the gaming activity as a fundamental part of the development of tourism and entertainment.

It is certain that the renowned international operators consider the Portuguese market. But when they realizethat public policy and the legal regime are obsolete promptly give up their investment intentions. If this was not the case, we would not have had only two bidders for the concession of one of the largest casinos in Europe, such as Estoril, with one of them with founded suspicions of lack of suitability – see the Portuguese newspaper “Público” of October 20, 2022. Though, it was not because of that that this Spanish group seem to have been defeated by current concessionaire but, otherwise, due to the lack of conditions of the plot land that would host the Lisboa Casino.

The legal regime for the operation of land-based casino games in Portugal requires a wide discussion towards a rapid legislative intervention, without hypocrisy or games of shadows, assuming that the activity is a millenary human practice and that can serve the economic development of the country.

But before such legislative change, Government needs to define what is intended for the industry.

In several jurisdictions the gaming industry creates jobs, dynamics in the tourism and MICE industries, with a tremendous contribution to the sustainability of the cultural market, being often the engine of development of several other areas of the economy, preventing capital flight to other regulated or unregulated jurisdictions. Take, for example, what has happened in Macau in the last 20 years or in Singapore, without forgetting the entertainment capital of the world that is still – and will remain – Las Vegas.

This all comes with the well known externalities: crime, canibalization of other industries and increase in problem gambling, among others. But the perception seems to lack evidences, at least, in the long term.

At first glance, the opportunity to have a wide discussion that could lead to the review of the public policyseems to have been missed with the launch, in a way very similar to those that govern since 1927, of the tender for the gaming areas of Estoril and Figueira. It will be for the Government to understand that we are no longer 1927 and that there is still time to change the policy and change the current regime, allowing it to collect even more revenue.