Mecca Bingo

Source: Retail Digital

Date :20/04/2007 00:00:00

Mecca Bingo: Mecca Bingo gets its house in order

In anticipation of a number of changes that are due to affect the bingo industry, with the looming smoking ban chief amongst these, Mecca Bingo has taken a number of steps to ensure its continued success in a competitive sector. Managing Director Simon Wykes spoke to James Hurley about the company’s plans in a changing gaming landscape

Written by James Hurley and Produced by James Smith

As part of Rank Group Plc, Mecca Bingo belongs to one of the UK’s premier leisure and entertainment organisations. Rank’s other assets include Grosvenor Casinos and Blue Square, the interactive betting and gaming business. In an effort to re-energise its UK gaming business, the company has been going through a restructuring process that has involved all of its operations.

Short term threat, long term opportunity

Mecca Bingo operates on a long term strategy of profitable growth and a high return on invested capital. Its approach to achieving these aims involves gaining and retaining market share through development of 'best in class' products, its service and operational standards meeting challenges, and grasping opportunities presented by an evolving regulatory and legislative environment. Managing director Simon Wykes says that a rather flat year in 2006 reflected the company’s preparations for this changing environment, with Mecca anticipating that well documented short-term threats to the bingo market will ultimately be turned into long-term opportunities.

Chief amongst these in the consciousness of both the company and its customers is the looming smoking ban, which takes effect on July 1 in England. If Scotland, where the ban came into effect in March 2006, is anything to go by, it will have a massive impact upon Mecca’s revenues and business plans. “We saw a 15 percent decline in our incomes in Scotland following the introduction of the smoking ban. I would be disappointed if all our actions that we have implemented in response to our Scottish experience didn’t lead to an improved performance in England and Wales. However the ban will impact us in the short-term”.

Research carried out by international strategic futures and marketing consultancy the Henley Centre suggests a more pessimistic view that the bingo industry as a whole can expect up to one third of the current bingo halls to close, although Wykes expects most of these closures to be amongst small, traditional family run bingo halls.

The main problem that the bingo halls face with the smoking ban is not simply that smokers, who comprise up to one half of the bingo playing demographic, may choose to stay at home, but that those who do continue to play will constantly leave the bingo hall during intervals.

Bingo operators draw the majority of their revenues from these intervals between games. A three hour bingo session will generally have more than an hour’s worth of breaks, when operators make money from slot machines and ‘mechanised cash bingo’, a quicker version of the game played for small prizes or cash.

Far from seeing the ban as an opportunity for doom mongering, however, Wykes instead interprets it as a long term opportunity. “While we are expecting a reduced supply of players in the short term, we firmly believe we will win in the long run. We have been working on plans to mitigate the impact of the smoking ban for some time. For example, we are making bingo gameplay more flexible through the introduction of a higher degree of variation between main stage and interval games and by expanding the use of linked games. We are continuing to develop desktop and portable electronics bingo solutions. By the time the smoking ban is implemented in England on 1 July, we will have introduced sheltered outside enclosures at the majority of our clubs.

“We will be applying for licensing approval to allow gaming in these enclosures, giving those of our members who smoke the chance to continue to enjoy their bingo. At the same time, this is also a great opportunity to widen our appeal. We have five and a half million registered members, which accounts for approximately ten percent of the adult population. Yet only one million of this membership base is coming on an annual basis. Our research suggests that the main reason for this remaining element of our membership staying away is their perception of bingo clubs as smoke filled venues. The smoking ban will remove this barrier and will open up a much wider customer base.”

A changing environment

The smoking ban will no doubt have a huge impact on the bingo industry, but this is merely one of many changes that are affecting a national pastime that may well be unrecognisable in a few years. The game is intrinsically associated with a narrow demographic; single or widowed women over the age of 45. This stereotype has been slowly losing its relevance for many years now, even if the cliché still persists. “Our fastest growth area is in younger customers,” says Wykes.

“The difference between the younger customers and the older ones is that the latter visit twice as often. For our younger clients, bingo is just a small part of a larger leisure repertoire, whereas for the older customers it’s often the only part of that repertoire, it’s a way of life. The challenge for us is to increase the frequency of visit from the younger customers and make bingo a more important part of their leisure time”.

To do this, Wykes believes that Mecca will have to fundamentally change the prevailing atmosphere in its bingo clubs, and he believes technology will allow this to happen. “The biggest impact technology has had on this game in the last two centuries has been the dabber which allows players to mark their tickets”, he jokes. “Handheld, electronic tickets are going to change the way that the game is played. At the moment, the atmosphere in bingo clubs can be like that in a library, which is hardly surprising when you consider that as much as £250,000 can be at stake. Any kind of interruption is looked down upon.

“The electronic tickets will eliminate the need for silence and promote a ‘talk and play’ atmosphere, which will be much more conducive for our younger customers. The great thing about this is that we can have different atmospheres for different customers – we don’t have to lose one by encouraging the other. We could also have the same customer coming on different evenings, depending on who they might be with and what atmosphere they’re looking for.”

Like poker before, bingo is now also a burgeoning internet pursuit. While Wykes acknowledges that this is a potential threat, it’s also something, like the smoking ban, that he believes can be interpreted as an opportunity. “When Sky took over the screening of live football, many predicted that it would spell the end of going to watch live football. Yet attendances have grown – I believe the same can be true of bingo. Poker was a run down leisure activity a few years ago, now it’s everywhere you look. Grosvenor (Rank’s casino division) has been very successful on the back of this.”

The company are looking to tap into this market with www.meccabingo.com, where players can play ‘fast bingo’ online. But Wykes says that players attracted to the online version of the game won’t necessarily be lost from the bingo clubs. “The online bingo will attract new customers, and maybe some who have less time. But the real version offers a completely different environment. Playing from home doesn’t provide an escape, and many of our customers see bingo as their time, so the internet isn’t going to change that. In the longer run, our website will be a hugely fast growing product. It will introduce the game to people who haven’t played before. There are numerous potential retail spin-offs from this as well, so it will certainly be a wonderful opportunity in the long term.”

Streamlining for the future

In anticipation of a changing industry, Mecca Bingo has taken a number of steps to streamline the business and make its operations more efficient. A major part of this has involved reviewing and improving the quality of its club portfolio. In February, Rank announced the closure of nine clubs, five of which it holds the freeholds for. It is planned that a number of the freehold properties will be sold, crystallizing value and allowing Rank to redeploy capital into assets with potential for higher growth and stronger returns. It is not anticipated that the closures will have a material effect on Rank's profits in 2007. “Some of our older clubs were unable to offer the bingo environment that the 21st century consumer is looking for. We’re improving the environment for our customers,” says Wykes.

The company has also undergone major staff re-structuring, with a more efficient labour model, a simplified management structure and the elimination of duplicate senior roles. “All this incurred some non-recurring costs which we’ll see the benefit of this year. We’re anticipating significant cost reductions in the region of £10 million annually.

At the same time, we’ve implemented a staff bonus scheme so employees can share in the success of the company. We’ve given management at individual clubs more autonomy so they can define their own strategies in local markets. Our fast track management programme is the best in the leisure industry in my opinion. Our general manager of the year had just graduated from this scheme.”

Going forward, Wykes sees a number of reasons for optimism, not least the opportunities that will be afforded by the 2005 Gambling Act, which takes affect in September. The act will mean that there need be no statutory limits on the stakes and prizes in bingo games, rollovers will be allowed and, crucially, new games approved by the Gambling Commission will be permitted in bingo clubs. This will mean many opportunities for new revenue streams, particularly in the lucrative intervals between games.

The company is also lobbying for change in the current tax regime which means that bingo operators, who pay both Gross Profit Tax and Value Added Tax, pay tax at a higher rate than the national lottery, which is of course a state run monopoly. “I feel bingo operators are very harshly done by. This double taxation costs the industry some £84 million a year, so if the gaming tax is made fairer it will be a huge opportunity for Mecca.”