Abstract
Summary
Although it is still in progress, a review of the Canadian land-based gambling industry's response 1 to date to the COVID-19 pandemic is a useful illustration of how decisive, concerted and cooperative planning and action can set the stage for economic recovery once associated risks to health and safety are ameliorated. It provides, in addition, a strong indication of certain trends that will likely shape how the industry develops in the years to come.
The Closure Process
The Canadian gambling industry is governed by the Criminal Code, an act of the Parliament of Canada. The enforcement of the Code, and gambling regulation generally, is, however, mostly carried out at a provincial or territorial level. Even more importantly, matters of health are all managed and administered at a provincial or territorial level. Accordingly, when the severity of the COVID-19 pandemic's effect on Canada became abundantly clear in early 2020, it was principally provincial and territorial agencies that swung into action, issuing orders and directives that, in the span of less than two weeks between March 15th and March 23rd, directed the shut down all land-based gambling 2 across Canada. The orders gave no specific date for a reopening.
The industry response was immediate and comprehensive. All land-based operators 3 closed their facilities to the public, directed the majority of employees to remain at home, and notified customers, suppliers, and contractors. Skeleton staffs maintained the functionality of facilities, and management moved off-site to develop longer term corporate positions. Canadian gambling, other than by way of lottery tickets and online channels, had ground to a halt.
Consultations, Planning, and Policymaking
Even prior to the closures, provincial regulators, government, and private industry operators and other participants realized that the reopening process, whenever it would occur, would be difficult, fraught with risk, and open to change if it led to poor health outcomes. Consequently, beginning in late March and early April, 2020, informal discussions were commenced in most Canadian jurisdictions by industry representatives seeking to understand what the conditions for an eventual reopening would look like, what operational approach to take, and what strategies to adopt. Generally speaking, there was an early and unanimous recognition of a need for cooperation, open communication, and a unified approach in order for the process to be successful.
As noted at the outset, matters of health in Canada are provincially or territorially managed. Consequently, the Provincial and Territorial Medical Officers of Health were invariably appointed as the leaders of government policy and recognized as controlling the reopening process in all areas of industry, including gambling. The reopening strategy was conditioned on meeting two key health policy goals set by those authorities. First, maintaining and protecting the safety and health of customers and staff. Second, adopting an operational model that would contain and reduce the spread of the virus.
The industry consultations in some Canadian provinces suggested additional reopening goals, many of which were tailored more closely to the nature of the gambling industry, including (1) adopting an outcome-based regulatory framework; (2) ensuring that the reopening would be industry-led and sensitive to the needs of each sector within it; (3) appreciating that the reopening process for land-based gambling should be considered in a broader context that includes lotteries and online gambling; and (4) recognizing that the regulator would take a broader role in the process of reopening than it may have historically done for other matters or situations.
Industry participants realized that goals by themselves were insufficient to provide the needed guidance to ensure a level playing field between operators. Their focus turned to (1) a modification of existing operating standards, (2) the imposition of an explicit obligation to comply with health and safety guidelines and a recognition of their primacy; (3) the development and implementation of reopening plans specific to each gambling site (recognizing the significant variation between sites); and (4) the creation of an approval process, either by the regulator or through a third party, to confirm standards compliance and suitability for reopening.
Reopening Conditions
Each sector of the Canadian gambling industry adopted different reopening conditions depending on their circumstances.
Generally speaking, the following practices were adopted throughout all physical gambling venues:
Limits on the number of customers permitted on the premises Increased disinfectant and cleaning protocols Plexiglas shields and barriers between areas of activity, staff and customers, and, in some cases, between customers themselves Self-screening tools for staff before coming to work, and screening signage for employees and customers on-site Directed pedestrian pathways through facilities Many former amenities, including buffets, valet services, live shows, spas, nightclubs and coat checks, are, at least initially, closed Booking systems to regularize and space customer attendance.
A number of operators also adopted the following additional practices:
Contact tracing via customer loyalty programs
Obligatory use of non-cash payment mechanisms
Mandatory use of masks and other personal protective equipment
The reconfiguration of gambling equipment to allow for greater social distancing
Flexible opening hours
Employee training on the new workplace guidelines
Staggered shifts for employees.
These and other practices were applied in a site-specific manner, as operators developed reopening plans for each of their gambling premises. Each plan was subsequently submitted to the gambling regulator and/or to a third-party certification authority (pre-approved in such role) to confirm that the plan complied with the standards set and was consistent with the policy goals that had been adopted. In every jurisdiction, the gambling regulator had a final say whether the reopening plan was sufficient or not; the regulator could direct a change in each plan, reject or approve the plan.
Gambling regulators were provided associated powers to ensure that the reopening plans, once approved, were properly implemented. While pre-opening compliance reviews, additional compliance reporting, and new compliance monitoring were generally not adopted, regulators maintained the ability to investigate and monitor compliance, make determinations and take remedial action through their pre-existing authority.
The Reopening Process
Most Canadian jurisdictions adopted a phased approach to economic reopening. The earliest phase invariably obligated all businesses considered “non-essential” 4 to remain closed to everything other than distanced, online operation. Each subsequent phase of recovery permitted an additional group of businesses or activities, in some instances subject to certain restrictions or conditions, to resume operations. Under this regime, businesses and activities were grouped in different classes, based on perceived health risk. In general, gambling enterprises were grouped with businesses as part of the last reopening phase. While some provincial and territorial governments moved the whole of the jurisdiction through consecutive economic reopening phases, others, particularly those with larger populations, took a more regional approach, and relaxed restrictions in each local region of the jurisdiction based on the pandemic risks (predominantly based on number of active cases and number of new cases trends) presented by that region. This approach led to different phases applying across the province or territory. Every province and territory, however, imposed numerical limits on the size of public gatherings, typically beginning from a low of 5 or 10, to 25, 50, 100, etc., with larger numbers applicable to outdoor spaces, and increasing numbers applying as jurisdictions moved through the various reopening phases.
By August 2020, most of the Canadian provincial and territorial jurisdictions had allowed land-based gambling facilities, including casinos, bingo halls, and horse tracks, to reopen, contingent on meeting the conditions set by gambling regulators. However, certain gambling facilities (primarily casinos), notwithstanding the receipt of such permissions and having met all regulatory requirements, initially remained closed. This was due to the applicability of the numerical limits that health authorities continued to impose on gatherings of people, making the operation of larger enterprises uneconomical. Even those gambling facilities that have managed to reopen at the time of this writing are finding customer number limitations a fundamental impediment to profitable operation. Until all gambling facilities are able to open and run as profitable businesses again, it will be hard to consider any reopening process a substantive success.
Key Points
The Canadian land-based gambling industry's experience through the initial period of the COVID-19 pandemic raises a few key points:
Quick to close/slow to open—The impact of the pandemic was sudden and comprehensive. Closures were effected immediately and easily across all facilities. The industry acted quickly and without hesitation; everyone understood the seriousness of the situation and prioritized the health and safety of staff and customers. The fast response rate ensured that the sector was not cited as a significant contributor to the spread of the virus, a perception subsequently confirmed by contract-tracing analysis. However, the industry's experience with reopening has been that the nature of its operations—which thrives on social interaction and large scale participation—has made reopening slow and difficult. What is clear is that the industry is particularly vulnerable to the risks of a pandemic.
Cooperation, collaboration, and communication—To the extent that the closure and reopening process can be considered a success in Canada, it is largely due to how the industry responded. All industry participants immediately realized the importance of working together to address a unique situation. Expertise and strategies were often shared without regard to competitive advantage. Authorities and operators across jurisdictions worked together in an unguarded and open fashion. Communication within the industry was seen as exceptionally strong. Communication with other areas of government however, particularly with health authorities, was found to be less constant or transparent.
Customer relations—As gambling facilities reopen, the value of creating and maintaining close customer relations and associations has never been more important than it is now. Conversely, vulnerability to online businesses models, whether represented by online gambling or other forms of online leisure activity, constitute increasing risks to land-based gambling businesses, as the pandemic has significantly disrupted patterns of consumer behavior and created new concerns in relation to travel, hospitality, and physical distancing.
Operating flexibility—Because the phased and conditioned approach to reopening has resulted in gambling businesses having to transition through different operating regimes, it is clear that facilities with greater flexibility in their operations have an advantage. Businesses which are able to easily and inexpensively reconfigure their premises, close and open portions of their premises, maintain varied revenue models, operate on a no-touch or low-touch basis, and allow different types of activity access seem more resilient and better candidates for long-term success.
Long-Term Industry Change
The COVID-19 pandemic has facilitated or advanced a number of longer-term industry changes in the Canadian land-based gambling industry, including:
Cashless systems—With the increased sensitivity to reducing instances where customers and staff come into physical contact, the move to cashless operations accelerated significantly. Many jurisdictions have included cashless operation as a new (immediate or eventual) standard as part of the reopening process. This development was previously expected to occur over the next three to five years in most Canadian jurisdictions. It will now likely be adopted over the course of the next year without exception. Such a move, allowing customers to play only through membership cards, will have the additional benefit of facilitating comprehensive contact tracing, improved AML processes and better customer analytics.
Technology adoption—While all gambling businesses have increasingly adopted technology to facilitate their business operations, the pandemic experience makes it clear that those with an ability to operate online, structured to permit at-distance operations, and use fewer personnel and lower labor costs are at a distinct advantage. The relationships and divides between land-based gambling and online gambling surely are certain to be rethought in this light.
Health and safety—Health and safety concerns, protocols and procedures were historically treated by gambling businesses as important elements of their operations, but not in the way that is now necessary. The COVID-19 pandemic, along with the potential liabilities it has highlighted, has moved these matters sharply to the fore. It is unlikely that they will ever recede to their former status, even after the pandemic has passed.
The pandemic has had an enormous impact—a health scourge of unmatched global proportions and the cause of never-before-seen levels of global economic disruption. At the time of this writing, many Canadian gambling business remain shuttered, operating at partial capacity, or operating subject to severe restrictions or strict conditions. The pandemic is still active, with vaccines yet to be found. It continues to force society and industry to re-evaluate how they operate. Many would say this is long overdue in regard to the gambling industry, including in Canada—and therefore perhaps there is a silver lining to be found even in such trying times.