The Greek Court of Auditors has approved the master plan for the Hellinikon project. This is the final piece in the puzzle allowing the Government to issue a tender for a casino license on the site of the former Athens International Airport.
Hellinikon is a coastal suburb to the south east of Athens, about a 25-minute drive from the downtown area. The 620-hectare site was originally an airport which closed in 2001; a few years later, it was the site of the 2004 Summer Olympic Games. The runways became part of the sport park, the purpose-built marina was used for canoe races, and one of the old airplane hangars was repurposed as a fencing arena. Most of the facilities have been vacant and left to rot since the Olympic Games closed.
In 2011, the Greek Govt held a tender to select a master developer for the site, and, despite interest from many developers only Lambda Developments, an international consortium including investors from China and the United Arab Emirates and led by the Greek Latsis Group, submitted a compliant bid. They bid over €900 million for a 99-year lease on the land and €1.5 billion for infrastructure improvements; the total investment promised was in excess of €8 billion. The master plan submitted did include a casino, but there was no license on offer in the original RFP. European procurement rules forbid the automatic issue of a casino license without a public tender that specifically states a license is on offer as part of the bid. Lambda, for its part, insisted it wanted a casino on the site, and so what has followed is a rather clumsy back fill of a tender for a casino license on land that is now part of a private development.
The Hellinikon project will include major leisure components such as a marina, restaurants, night clubs, bars, a 1km beach, hotels, spas, retail space, an aquarium and a casino; the company hopes the latter will be an integrated resort of interest to a major international operator. In addition, there will be an outdoor park with walks and bike trails and an office development. If they get it right, with the infrastructure improvements this could become a world class tourist destination.
The Greek parliament has already passed a law to enable the development, which includes the tax rate on gaming revenues. All casinos will enjoy a reduction in tax from the current rate of approximately 30% to a regressive tax structure where the higher the gross gaming revenue, the lower the tax rate applied. The highest rate will be 20%, applied to the first €100 million of gross revenue, and the rate then reduces incrementally, with the lowest band being 8% on any amount of GGR above €500 million. I doubt the revenues will ever be high enough for the lowest rate to apply. They can but hope.
I am surprised that the European Commission have signed off on this tax proposal; generally, the Commission frowns on regressive tax rates. This type of structure is usually seen as State Aid and, therefore, illegal under European law. In basic terms, illegal State Aid is something that confers a selective advantage on one or more commercial enterprises through the actions of the State. In this case, assuming the Hellinikon casino knocks it out of the park, the existing Athens casinos with lower revenues that will compete with the new one at Hellinikon will see a blended gaming tax rate higher than the new casino. I know from experience with other major projects that the Commission doesn’t like this type of structure, but then again maybe political expediency has made them change their minds.
One of the problems with illegal State Aid is that the legal case is between the Commission and the State in question. The commercial enterprise is just a bystander, and these cases can take forever to come to court and be adjudicated upon. An unfavourable decision will see the State being forced to claw back all of the “advantage” given, plus interest and penalties. Ouch! I hope whoever wins the tender has spent some time with EU State Aid experts.
It might seem odd that SYRIZA, a decidedly hard left government, should be pushing a casino project. Since the Greek economy imploded, Greece has been unable to pay its debts without borrowing more money. However, the new loans have come from “the Troika” – the European Commission, the IMF and the European Central Bank – and they have strings attached. These strings include huge cutbacks to pensions, increasing the pensionable age, the privatisation of state industries and approval of the Hellinikon project, including the new casino license. The loans are to be released in tranches, with each tranche being released conditional upon certain milestones being achieved. Hellinikon is one such milestone. The Troika has been applying pressure because the Greek Government will receive almost €1 billion and see €1.5 billion of infrastructure improvements, as well as desperately needed employment and tax revenues.
So why is there all this fuss over another casino license in the Athens market? There are currently two casinos servicing the Athens market, one in Loutraki and the other on Mont Parnes. Loutraki is an ailing resort to the west of Athens, approximately one hour’s drive from downtown, and Mont Parnes, as its name suggests, is at the top of a mountain. Well, a small mountain, yes, but still accessible only by a cable car that takes approximately 15 minutes to get from bottom to top, and the drive from central Athens is roughly 30 minutes besides.
In 2007, the year with the highest gaming revenues, the two Athens casinos generated over €400 million of gross gaming revenues, with Loutraki representing about 58% of the market. The propensity for Greek residents to gamble, and the spend per visit, were the highest in Europe. However, in 2017 with the financial crisis and austerity measures still biting the Greek economy, total gaming revenues for these two casinos had sunk to €135 million. Operators interested in bidding will be hoping that the economy cannot go any lower and that the Hellinikon project will, in addition to the Athens market, attract customers from Europe and the Middle East.
There are two matters that could reduce the desirability of the new license. The first is the relocation of the Mont Parnes Casino: it will be given permission to move down to the bottom of the mountain. The second is that there will be over 30,000 VLTs allowed in the market, albeit with restricted prizes. Still, some locations will be allowed as many as 50 machines.
Depending on where the Mont Parnes casino finishes up, and the final number of VLTs in Athens, the new casino could see a large part of the local market disappear. It’s hard to make an integrated resort work without a sufficiently large local market.
As Virgil once wrote about the wooden horse, Timeo Danaos et dona ferentes – roughly translated, ‘beware of Greeks bearing gifts.’
