Bingo halls
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
1.1 This section covers the valuation of bingo halls.
2.1 In the early 1990s a move developed towards the building of large purpose built and converted clubs in out-of-town locations. These usually have good access to major roads and extensive parking. To increase the number of participants, occupiers may have to arrange to bus-in players.
2.2 The industry suffered as a result of the Smoking Ban in 2007 and the gaming machine restrictions introduced later the same year and customer numbers have been in decline since.
3.1 Primary description code: LT2
3.2 List description: bingo hall and premises
3.3 Scat code: 025, suffix S
4.1 This is a specialist class of property, to be valued by valuers in the National Valuation Unit.
5.1 The Class Co-Ordination team has overall responsibility for the co-ordination of this class. The team is responsible for approach, accuracy and consistency of valuations. The team will deliver practice notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists.
5.2 Caseworkers and referencers have a responsibility to:
- follow the advice given at all times
- not depart from the guidance given on appeals or maintenance work without approval from the co-ordination team
- seek advice from the co-ordination team before starting any new work
6.1 There are three types of licence that bingo halls operators need to possess:
- an operating licence
- a personal management licence
- and a premises licence
6.2 The Gambling Commission issues operating licences and personal licences (under the Gambling Act 2005); premises licences are issued by local licensing authorities (under the Licensing Act 2003).
7.1 Bingo halls should be measured to gross internal area (GIA) in accordance with the VOA Code of Measuring Practice for Rating Purposes.
7.2 The survey should include the following information: the type of premises, previous use where known, age, construction, services (including heating and/or air conditioning), whether recently refurbished, number of seats, type, extent and quality of ancillary facilities, gaming machines, parking, location, transport links, existing and proposed competition, competing or complementing leisure attractions in the area, etc.
8.1 Surveys and plans should be stored in the property folder of the Electronic Document Records Management (EDRM) system.
9.1 Rental method.
9.1.1 The principal method of valuing bingo halls was established using the rental method, when a significant body of rental evidence existed. For comparison purposes, rents were analysed in terms of a percentage of gross receipts.
9.1. 2 This method was used to create a scheme of valuation accepted by the industry and their representatives
9.2 Receipts and expenditure basis
9.2.1 In the absence of a scheme, and also any direct rental evidence or suitable rented comparables, a receipts and expenditure valuation could be adopted where full accounts are available.
9.3 Scheme of valuation
9.3.1 It is anticipated that for each rating list the scheme of valuation will be updated and will be agreed with the agents who represent the bingo industry.
9.4 Sources of income
9.4.1 The main game - licensed bingo operators are allowed to run certain games, and to obtain their income from several sources. Bingo operators can charge an admission and/or participation fee, which they may retain. All stake money is returned to the players as prize money. The operator is allowed to provide “added prize money” up to a weekly limit. This gives the operator flexibility to increase the prize or to guarantee a certain level, even if the stake does not cover this.
9.4.2 Linked bingo - this is where a number of clubs link together to aggregate their stakes and play a joint game of bingo. There is a maximum weekly prize to be shared amongst the clubs in the link, which is set and periodically reviewed by the Gambling Commission.
9.4.3 The national game - this was introduced in 1986 and is run by a company set up specifically for the purpose. Essentially, it allows bingo clubs throughout the country to play a single game of bingo. It is available to all member clubs on payment of a fee, and is played every evening for a very substantial prize at a level which it set and reviewed by the Gambling Commission.
9.4.4 Mechanised cash bingo - this is an interval game using computerised table-top equipment. There is a limit to the maximum numbers of players.
9.4.5 Gaming machines - in many clubs substantial numbers of gaming machines provide significant net profits
9.4.6 Catering - the extensively refurbished and modern purpose built clubs in particular have recognised the importance of revenue from food and drink as a part of the total potential profit.
9.5 Valuation considerations
9.5.1 Gross receipts for rating purposes
9.5.2 It is accepted that the stake money does not form part of the gross receipts, as the operator has no interest in it. For analysis and valuation purposes stake money should not therefore be included in gross receipts. Details of the following income streams, exclusive of VAT and gross profit tax/bingo duty, should be sought:
- admissions
- meals and refreshments
- car parks
- gaming machines (excluding prize money)
- prize and mechanised bingo
- participation fees
- all other receipts
9.5.3 Location and design
9.5.4 It is important that clubs are in locations accessible to their likely customer base, have reliable bus services and that the area is safe. Car parking should be well lit and nearby, if not part of the hereditament.
9.5.5 Modern clubs in out-of-town locations will benefit from a modern design and facilities and well laid out car parks, but may require the transportation of members where there are inadequate bus services. This may be an added cost to the operator if not recoverable from those using the service. Conversely, an out-of-town location is likely to attract a new, younger customer base that is more likely to be car drivers.
9.5.6 The size of the catchment population and competition is also important, as prize money is dependent on the stake provided by those at the session. The only exception to this is the “National Game” and linked bingo.
9.5.7 A combined heating/cooling system is beneficial to allow a comfortable temperature at all times within the club.
9.5.8 Competition
9.5.9 The nature and extent of local competition is of course a major factor in determining the level of receipts, profitability and value of a bingo club. A new modern, purpose built, out-of-town club is likely to have a major impact on existing clubs, although it is also likely to generate a significant number of people who have not played bingo before.
9.5.10 As well as the direct effect on admissions, the added competition leads to promotions using added prize money to maintain market share. It also restricts the ability to charge the maximum admission fee.
10.1 All valuations should be entered onto the Non-Bulk Server under the relevant Scat code.
10.2 Other support available:
- Survaid
- Class Co-ordination team
1. Market appraisal
The Bingo Industry suffered in the aftermath of the 2007 Smoking Ban and the gaming machine restrictions introduced under the Gambling Act 2005 - effective from later in the same year (September) with admissions falling.
The industry experienced dwindling customer numbers with the spend per head making up for the decline to a degree but this had started to stabilise. In 2014 the Chancellor announced Bingo Duty (Gross Profit Tax) was to be cut from 20% to 10% in 2016, this translates to substantial savings for the bingo companies. It was anticipated that this would have a positive effect on the industry and following the announcement bingo hall operators announced they would increase investment through refurbishment of sites and job creation and one operator pledged to open three new sites. Whilst the Bingo Duty cut had an immediate positive impact on prizes, small operators are still finding it difficult to invest in their businesses.
Several clubs have closed or downsized, and this is set to continue affecting the flat floor halls as well as the converted clubs as operators look for downsizing opportunities.
The advance of on-line gambling will inevitably reduce the need for a physical presence.
The 12 months leading up to Antecedent Valuation Date (AVD), 1 April 2021, was dominated by the COVID-19 pandemic. However, this market appraisal reflects the whole period since April 2015.
The bingo market is consolidated and mature and had started to stabilise from the impact of the smoking ban.
In 2016 for the first time in seven years a purpose built 1000 seat bingo hall was opened but no further bingo halls have materialised and gross gambling yield (GGY) has declined each year from 2016.
The GGY has declined since 2016 but the ratios between main stage bingo, mechanised bingo and prize bingo has changed. The yield from mechanised bingo has declined whilst main stage and prize bingo has increased.
The responsible gambling tool became effective from 1 April 2018 and all operators are expected to see reductions in activity which is likely to translate into weaker revenue growth in the short term.
Younger consumers had been increasingly likely to adopt new technologies, and this is driving an increasing demand for remote gambling.
The COVID-19 pandemic had a major impact on Bingo Halls in the period leading up to the AVD (1 April 2021). Details of the various restrictions implemented by statute in response to the pandemic, and of the vaccination rollout, can be found online. In February 2021 the UK Government published its Roadmap out of lockdown for England which set out four steps to relax restrictions. Step 1, easing restrictions on outdoor gatherings, had already taken place by the AVD.
The later three stages of the Roadmap for England included
- the opening of outdoor hospitality, and non-essential retail (Step 2, no earlier than 12 April);
- most legal restrictions on meeting others outdoors to be lifted, opening of indoor entertainment venues such as cinemas, casinos and bingo halls (Step 3, no earlier than 17 May 2021); and
- the removal of remaining restrictions on social contact (Step 4, no earlier than 21 June)
Subsequent to 1 April 2021 steps 2 and 3 took place.
The situation in Wales, both leading up to and after the AVD, was similar although not identical.
Bingo performance in 2020
Following the first lockdown bingo halls were permitted to reopen from 04 July 2020 and whilst some reopened on this date some operators took a phased approach in reopening.
2. Changes from the last practice note
There are no significant changes to the last Practice Note.
3. Ratepayer discussions
Contact has been made with the leading agents for the industry. Discussions will be ongoing in the period prior to compilation with a view to securing agreement on the scheme before that date.
4. Valuation scheme
4.1 Basis of valuation
This scheme should be applied to all 2023 Rating List assessments of bingo halls in England and Wales.
The initial valuation consideration is to determine the Fair Maintainable Trade (FMT) as at the Antecedent Valuation Date (AVD), 1 April 2021. Two valuation scales, by reference to gross turnover and derived from an analysis of the available evidence, have been produced and are set out in Appendix 1.
4.2 Fair maintainable trade
FMT is an estimate of annual receipts that could be derived by occupying the property and conducting the bingo operation with the skill and expertise that could be reasonably be expected from a potential tenant of the hereditament. This figure will represent the gross annual receipts from all sources (exclusive of VAT and Gross Profit Tax) but disregarding both stake money from the game and prize money from gaming machines that is returned to players.
The effects of the COVID-19 outbreak need to be taken into account as they would have been anticipated by the parties at the AVD. Trade evidence that includes long periods of lockdowns is unlikely to provide good evidence of the FMT at the AVD. Valuers are advised to take as their starting point the closest reliable trade, which is likely to be the 2019/2020 trading year (ending March or before) and any previous trading years.
Having established the likely FMT for the 19/20 trading year (ending March or before), the valuer should then consider any further adjustments needed to reflect the receipts envisaged as at 1 April 2021. The reasonable efficient operator (REO) will take a view not only on the trade immediately achievable at AVD, but the trade over a period of time ahead, as they are assumed to be taking a tenancy with a reasonable prospect of continuance.
4.3 Rental percentages
The rental percentages to be applied to FMT are set out in Appendix 1.
Scale A – applies only to bingo halls in converted cinemas, theatres or concert halls.
Scale B – applies to purpose-built bingo halls, and all others not covered by scale A.
4.4 Promotional activity
In order to maintain or achieve market share, many operators will engage in promotional activities. This can include the buying-in of trade through such methods as additional prize money, bussing in of customers etc. Such expenditure may be incurred in the following circumstances:
- to defend against competitor activity;
- to promote the re-launch of a club following a re-badging or refurbishment;
- to promote the launch of a new club.
Where such expenditure can be demonstrated as being considerably in excess of industry norms, adopted fair maintainable AVD receipts may require adjustment to a level which could have been anticipated if that excessive expenditure had not been made. Appendix 1 sets out the bases for adjustment.
4.5 Other factors affecting value
Physical attributes
For bingo halls in converted cinemas, theatres or concert halls valued on scale A, the level of FMT adopted and the lower scale reflect the physical factors affecting both income and running costs. The scale reflects the disadvantages of this older type of property and no further end allowances should be made.
A modern purpose-built bingo hall will normally be valued at the percentage determined for the level of fair maintainable trade on Scale B. No allowance is warranted for purpose-built units constructed post 1990, irrespective of whether ground or first floor.
For converted property, valued on scale B, an allowance may be made to reflect physical disabilities or disadvantages that are not reflected in the adopted gross receipts. Examples of such disadvantages might include a main entrance to the property being at a different floor level to the bingo hall with no escalator access, awkward access, poor ground floor entrance facilities, intrusive pillars, shape, low ceiling height and duplication of entrances at different levels or where there is more than one public entrance to the club necessitating dual staffing. The best modern conversions may not warrant an allowance, but other converted property is expected to attract an allowance in the range of 2.5% - 10%.
A small proportion of bingo halls, whilst not operating in former cinemas, theatres or concert halls, have considerably inferior characteristics compared with modern conversions and a higher end allowance will be appropriate in these cases. Whilst not an exhaustive list, these conversions may be from former bowling alleys, ice rinks, swimming baths, car parks or bus depots. These will suffer from a combination of several of the above factors, and be severely affected by one or more, leading to consideration of a higher level allowance. In exceptional cases, end allowances of up to 25% may be considered. These are normally expected to apply only to properties that were first converted to bingo use before 1990.
Size relative to turnover
Size relative to turnover will only affect properties values on scale B.
With markedly reduced admissions post the smoking ban a situation has arisen where at certain levels of turnover the property is over-sized relative to the income yield. In order to address this in value terms, adjustments to RVs should be applied in accordance with the following:
- for halls greater than 2,750 square metres (sqm) GIA regardless of turnover a maximum of a 7.5% downward adjustment may be made
- for halls greater than 2,500 sqm GIA where the adjusted FMT is below £2.25m a maximum of a 7.5% downward adjustment may be made
- for halls greater than 2,000 sqm GIA where the adjusted FMT is below £1.7m a maximum of a 7.5% downward adjustment may be made
4.6 Approach to applying allowances/adjustments
Where appropriate, any allowances/adjustments for the factors outlined above should be made direct to the Rateable Value that would have been derived without any end allowances and not to the adopted fair maintainable trade.
Care should be taken to avoid situations where in extreme circumstances a scale B valuation falls significantly below that produced by scale A.
4.7 Application of this Scheme
Whilst it is intended that this scheme should enable the assessments of all bingo halls to be determined correctly, the opportunity for properties to be valued outside its terms is not precluded where exceptional circumstances would otherwise make its application inappropriate.
Bingo Halls should be valued on the NBS.
Appendix 1
1. Revaluation 2023 - Bingo halls Valuation scales
1.1 Scale A - All Bingo Halls in converted cinemas, theatres or concert halls
| Fair maintainable trade£ | Percentage |
|---|---|
| Below 420,000 | 3.25 to 4.0 |
| 420,000 | 4.0 |
| 700,000 | 4.5 |
| 975,000 | 5.0 |
| 1,950,000 | 5.5 |
| 3,350,000 (and above) | 6.75 |
Interpolate between points
1.2 Scale B - All purpose-built Bingo Halls and converted Bingo Halls (where Scale A is not appropriate)
| Fair maintainable trade £ | Percentage |
|---|---|
| 700,000 (and below) | 4.5 |
| 975,000 | 5.0 |
| 1,400,000 | 6.0 |
| 2,100,000 | 7.0 |
| 2,800,000 (and above) | 7.5 |
Interpolate between points
1.3 Promotional expenditure
1.3.1 Background
For 2000 Rating Lists a scale of deductions to be adopted was agreed. For the 2005 Rating Lists the upheaval experienced in the market at 1 April 1998 had settled down by 1 April 2003. Promotional expenditure had reverted back to “normal” levels at AVD and for most properties there was no need to adjust for excessive promotional expenditure. There is no evidence that this situation has changed since then so the 2005 approach should be continued.
The exceptions to generally there being no need for adjustment for promotional expenditure are:
- where existing units respond to the opening of new units with increased, defensive spend for a time as they seek to maintain turnover. The trading pattern over a longer period should then indicate the maintainable admission and turnover levels to be adopted at the AVD as increased promotional expenditure drops back to “normal” levels
- a tiny number of operators that, as a matter of course, run their business by spending higher than the normal amounts of promotional expenditure compared with other operators. This needs to be reflected
Promotional expenditure is added prize money, gifts and additional prizes, printing and postage of special promotional flyers, bussing-in/out of customers and live entertainment.
1.3.2 Traditional Conversions (Scale A)
Examination of levels of promotional expenditure for traditional conversions throws up a wider range of percentages to gross receipts, especially where independent operators are concerned, and at low levels of annual receipts compared with flat floor units. Levels of 15-25% are evident for some very modest turnover properties, but although these percentages seem high, they are relatively small amounts in absolute terms. At levels of turnover below £375,000 Scale A reflects the lower profitability and levels of expenditure incurred and no further adjustment should be made for excessive promotional expenditure.
To accommodate those properties where higher promotional expenditure is incurred, the following adjustment to gross receipts should be adopted:
| Promotional Expenditure as a proportion of Gross Receipts (if greater than £375,000) | Percentage of Promotional Expenditure in excess of 13% of Gross Receipts allowable as a deduction from adopted Receipts |
|---|---|
| Under 13% | No adjustment |
| 13% | 10% |
| 14% | 20% |
| 15% | 30% |
| 16% | 40% |
| 17% | 50% |
| 18% | 60% |
| 19% | 70% |
| 20% plus | 75% |
Interpolate between percentage points
1. Market appraisal
The Bingo Industry has continued to suffer in the aftermath of the 2007 Smoking Ban and the gaming machine restrictions introduced under the Gambling Act 2005 - effective from later in the same year (September). However a lifeline was thrown to the industry in 2009 when the Gambling Act 2005 (Gaming Machines in Bingo Premises) Order 2009 was introduced increasing the number of machines allowed in bingo clubs. From 2009 to 2014 three amendments were made to the Act increasing the amount of winnings receivable from gaming machines on the premises. According to a 2015 industry report from Mintel, “B3 slots” (jackpot machines) are generating more than three times the gross gambling yield (GGY) that they did five years ago, in fact machines have now surpassed main stage bingo in revenue terms.
A further boost was given to the industry in 2014 when the Bingo Duty (Gross Profit Tax) was cut by the Chancellor from 20% to 10%, this translates to substantial savings for bingo companies. Following the announcement, Mecca, Gala, Castle Bingo and Crown Bingo announced that they would increase investment through refurbishment of sites and job creation. In addition Mecca pledged to open three new sites.
However, it remains to be seen whether this change will have the necessary impact to arrest the ongoing decline, both in terms of revenue and customer visits. While bingo revenues slipped back into decline in 2013 and 2014, Mintel expects the cut in Bingo Duty to offer some relief in the current year. However, continuing problems of declining footfall and lack of money to invest in new promotions and formats remain in the background. While the Bingo Duty cut has had an immediate positive impact on prizes, smaller operators are still finding it difficult to invest in their businesses on a genuinely transformational scale and the stream of closures seen over the past 7 years is expected to continue. The advance of on-line gambling in recent times will inevitably reduce the need for a physical presence.
2. Changes from the last practice note
There have been no changes to the main principles of the 2010 valuation scheme. The valuation scale has been revised to reflect the market knowledge currently available.
3. Ratepayer discussions
Contact has been made with the leading agents for the industry. Discussions will be ongoing in the period prior to compilation with a view to securing agreement on the scheme before that date.
4. Valuation scheme
This scheme should be applied to all 2017 Rating List assessments of bingo halls in England and Wales.
The initial valuation consideration is to determine the Fair Maintainable Trade (FMT) as at the Antecedent Valuation Date (AVD), 1 April 2015. Two valuation scales, by reference to gross turnover and derived from an analysis of the available evidence, have been produced and are set out in Appendix 1.
Following the list publication, the agent representing a significant proportion of bingo operators led scheme negotiations and these have resulted in agreed revisions to the original scheme as set out in Appendix 2.
4.1 Fair Maintainable Trade (FMT)
FMT is an estimate of annual receipts that could be derived by occupying the property and conducting the bingo operation with the skill and expertise that could reasonably be expected from a potential tenant of the hereditament. This figure will represent the gross annual receipts from all sources (exclusive of VAT and Gross Profit Tax) but disregarding both stake money from the game and prize money from gaming machines that is returned to players.
4.2 Rental percentages
The rental percentages to be applied to FMT are set out in Appendix 1
Scale A - applies only to bingo halls in converted cinemas, theatres or concert halls Scale B - applies to purpose built bingo halls, and all others not covered by Scale A
4.3 Promotional activity
In order to maintain or achieve market share, many operators will engage in promotional activities. This can include the buying-in of trade through such methods as additional prize money, bussing in of customers etc. Such expenditure may be incurred in the following circumstances:
- to defend against competitor activity
- to promote the re-launch of a club following re-badging or refurbishment
- to promote the launch of a new club
Where such expenditure can be demonstrated as being considerably in excess of industry norms, adopted fair maintainable AVD receipts may require adjustment to a level which could have been anticipated if that excessive expenditure had not been made. Appendix 1 sets out the bases for adjustment.
4.4 Other factors affecting value
4.4.1 Physical attributes:
For bingo halls in converted cinemas, theatres or concert halls valued on Scale A, the level of FMT adopted and the lower scale reflect the physical factors affecting both income and running costs. The scale reflects the disadvantages of this older type of property and no further end allowances should be made.
A modern purpose built bingo hall will normally be valued at the percentage determined for the level of fair maintainable trade on Scale B. No allowance is warranted for purpose built units constructed post 1990, irrespective of whether ground floor or first floor.
For converted property, valued on Scale B, an allowance may be made to reflect physical disabilities or disadvantages that are not reflected in the adopted gross receipts. Examples of such disadvantages might include a main entrance to the property being at a different floor level to the bingo hall with no escalator access, awkward access, poor ground floor entrance facilities, intrusive pillars, shape, low ceiling height and duplication of entrances at different levels or where there is more than one public entrance to the club necessitating dual staffing. The best modern conversions may not warrant any allowance, but other converted property is expected to attract an allowance in the range of 2.5% - 10%.
A small proportion of bingo halls, whilst not operating in former cinemas, theatres or concert halls, have considerably inferior characteristics compared with modern conversions and a higher end allowance will be appropriate in these cases. Whilst not an exhaustive list, these conversions may be from former bowling alleys, ice rinks, swimming baths, car parks or bus depots. These will suffer from a combination of several of the above factors, and be severely affected by one or more, leading to consideration of a higher level of allowance. In exceptional cases, end allowances of up to 25% may be considered. These are normally expected to apply only to properties that were first converted to bingo use before 1990.
4.4.2 Size relative to turnover
This will only affect properties valued on scale B.
With markedly reduced admissions post the Smoking Ban a situation has arisen where at certain levels of turnover the property is over-sized relative to the income yield. In order to address this in value terms, adjustments to RVs should be applied in accordance with Appendix 2.
4.4.3 Approach to applying allowances/adjustments
Where appropriate, any allowances/adjustments for the factors outlined above should be made direct to the Rateable Value that would have been derived without any end allowances and not to the adopted fair maintainable trade.
4.4.4 Total effect of allowances/adjustments
Following all justified allowances/adjustments to B scale properties the resultant RV will never be less than the following:
Where the FMT is greater than or equal to £1.25m the RV will never be less than the scale A percentage to RV plus 0.25%.
Where the FMT is less than £1.25m the RV will never be less than the scale A percentage to RV.
4.5 Application of this scheme
Whilst it is intended that this scheme should enable the assessments of all bingo halls to be determined correctly, the opportunity for properties to be valued outside its terms is not precluded where exceptional circumstances would otherwise make its application inappropriate.
Scale A
All Bingo Halls in converted cinemas, theatres or concert halls
| Fair Maintainable Trade £ | Percentage |
| Below 375,000 | 3.50 - 4.50 |
| 375,000 | 4.50 |
| 625,000 | 5.0 |
| 875,000 | 5.50 |
| 1,750,000 | 6.0 |
| 3,000,000 (and above) | 7.25 |
Interpolate between points
Scale B
All purpose built Bingo Halls and converted Bingo Halls (where Scale A is not appropriate)
| Fair Maintainable Trade £ | Percentage |
| 625,000 (and below) | 5.0 |
| 875,000 | 5.50 |
| 1,250,000 | 6.50 |
| 1,875,000 | 7.5 |
| 2,500,000 (and above) | 8.0 |
Interpolate between points
Promotional Expenditure
Background
For 2000 Rating Lists a scale of deductions to be adopted was agreed. For the 2005 Rating Lists the upheaval experienced in the market at 1 April 1998 had settled down by 1 April 2003. Promotional expenditure had reverted back to “normal” levels at AVD and for most properties there was no need to adjust for excessive promotional expenditure. There is no evidence that this situation has changed since then so the 2005 approach should be continued.
The exceptions to generally there being no need for adjustment for promotional expenditure are:
-
where existing units respond to the opening of new units with increased, defensive spend for a time as they seek to maintain turnover. The trading pattern over a longer period should then indicate the maintainable admission and turnover levels to be adopted at the AVD as increased promotional expenditure drops back to “normal” levels
-
a tiny number of operators that, as a matter of course, run their business by spending higher than the normal amounts of promotional expenditure compared with other operators. This needs to be reflected
Promotional expenditure is added prize money, gifts and additional prizes, printing and postage of special promotional flyers, bussing-in/out of customers and live entertainment.
Traditional Conversions (scale A)
Examination of levels of promotional expenditure for traditional conversions throws up a wider range of percentages to gross receipts, especially where independent operators are concerned, and at low levels of annual receipts compared with flat floor units. Levels of 15-25% are evident for some very modest turnover properties, but although these percentages seem high, they are relatively small amounts in absolute terms. At levels of turnover below £375,000 Scale A reflects the lower profitability and levels of expenditure incurred and no further adjustment should be made for excessive promotional expenditure.
To accommodate those properties where higher promotional expenditure is incurred, the following adjustment to gross receipts should be adopted:
| Promotional Expenditure as a proportion of Gross Receipts (if greater than £375,000) | Percentage of Promotional Expenditure in excess of 13% of Gross Receipts allowable as a deduction from adopted Receipts |
| Under 13% | No adjustment |
| 13% | 10% |
| 14% | 20% |
| 15% | 30% |
| 16% | 40% |
| 17% | 50% |
| 18% | 60% |
| 19% | 70% |
| 20% plus | 75% |
Interpolate between percentage points
Flat floor units (scale B)
Most modern flat floor units appear to have a stable profile of promotional expenditure within a range of up to10%. Where excessive promotional expenditure occurs, an adjustment to gross receipts should be made as set out below:
| Promotional Expenditure as a proportion of Gross Receipts | Percentage of Promotional Expenditure in excess of 10% of Gross Receipts allowable as a deduction from adopted receipts |
| 11% | 10% |
| 12% | 20% |
| 13% | 30% |
| 14% | 40% |
| 15% | 50% |
| 16% | 55% |
| 17% | 60% |
| 18% | 65% |
| 19% | 70% |
| 20% plus | 75% |
Interpolate between percentage points
Basis of agreed changes to original REVAL 2017 basis of valuation.
The adjustments below apply to Scale B where circumstances dictate;
- Inflation from April 2008 to April 2015 (RPI) is 258.0/ 214.0 = 20.6%.
- Therefore, any club that has not increased turnover by same amount has ‘declined’ over period.
- In recognition scale points have been moved up by 25% (i.e. from £700,000 to £875,000 and from £1,000,000 to £1,250,000); i.e. static turnover (Less than £2.0 million) results in reduced assessments.
- However, top 8% band is static (i.e. any club with £2.5 million turnover in 2008 will still be caught at 8% even if income has fallen in real terms and remains at £2.5 million). In fact, any club with turnover greater than £2.0 million in 2008 is likely to be valued at 8% as at 2015 AVD; i.e. clubs at this level are perversely facing increased assessments; therefore the “Trading Obsolescence” allowance below should be applied.
- The background to this is there exists no evidence of any rental growth, but there is evidence of falling rents across the sector and bingo clubs continue to suffer falling admissions and closure. Against that profile it is difficult to justify those small number of the better performing bingo clubs having assessments which increase.
- The continued admissions decline over the period between the 2010 and 2017 lists results in many bingo clubs having increasingly superfluous space relative to the admissions.
- No need for any bingo club to be greater than 25,000 ft² irrespective of trading performance; therefore the “Size relative to Turnover” allowances below now apply.
- FMT to be based on 2014 turnover save in exceptional circumstances.
‘Trading Obsolescence’ Allowance (2017 FMT greater than £2.0 million) save in exceptional circumstances.
| 2015/2008 FMT | Allowance |
| Greater than 1.25 | |
| 1.20 | 2.5% |
| 1.15 | 5.0% |
| 1.10 | 7.5% |
| 1.05 | 10.0% |
| 1.00 | 12.5% |
| 0.95 | 15.0% |
| 0.90 | 17.5% |
| 0.85 | 20.0% |
| 0.80 | 22.5% |
| Less than 0.75 | 25.0% |
| Interpolate between points |
- Scale B percentages to be applied for purpose built bingo clubs – interpolate between the points.
- Only exception is for bingo clubs where 2017 FMT is greater than £2.0 million but less than £2.5 million and which benefit from reduced Scale B percentage (i.e. less than 8%) and where 2015/2008 FMT is less than factor 1.00; reduce Trading Obsolescence Allowance greater than 12.5% by 50%.
Size Relative to Turnover Allowance
| GIA | Allowance | Threshold |
| 2,750 m² | 7.50% | Regardless of turnover |
| 2,500 m² | 7.50% | Where turnover is < £2.0 million |
| 2,000 m² | 7.50% | Where turnover is < £1.5 million |
1. Co-ordination arrangements
This is a Specialist Class. Responsibility for implementing the scheme as set out within this practice note lies with the assigned specialist(s) as does responsibility for ensuring effective co-ordination. Co-ordination responsibilities are set out in Rating Manual S6: Pt 1 For R2010 Special category code 025 should be used; as a specialist class the appropriate suffix letter should be S.
2. Background
2.1 Market appraisal between 2005 and 2010 lists
Increasing competition from online bingo sites and falling admissions driven by an ageing customer base did not prevent the bingo market continuing to increase in profitability from 2003 to mid 2007. This was due to increasingly sophisticated methods the operators used to increase spend per head, such as combining clubs for a national high jackpot game; introduction of mobile gaming technology allowing customers to play anywhere in the club and improved quality of non-bingo sales such as food and drink. As a consequence some rents continued to show increases up to and including those set in 2006.
As the implementation of the Smoking Ban approached on 2 April 2007 for Wales and 1 July 2007 for England, operators took various steps, such as more mobile gaming technology and the introduction of smoking shelters, seeking to offset any impact, based on experience of the earlier introduction of the Ban in Scotland. In spite of this the industry seemed for the most part to be caught out by the dramatic effects on its business with the development pipeline continuing to provide new units for some time to come.
In fact, following the implementation of the Smoking Ban admissions were significantly down whilst spend per head also decreased; the combined outcome was a significant fall in net profit. The downward pressure on receipts continued from 1 September 2007 when the gaming machine regulation changes under the Gambling Act 2005 were introduced for bingo clubs, limiting them to four category B3 or B4 machines. There has been a relaxation of this subsequently in early 2009 to allow more category B3 machines.
2.2 Outlook at AVD (1 April 2008) and beyond
The general economic climate at the antecedent valuation date (AVD) was more challenging than was the case in 2003 with a much greater air of uncertainty around the proportion of disposable income that might be directed to leisure pursuits such as bingo.
Since the Smoking Ban there has been little activity in the rental market for bingo halls. Those reviews that have been activated have seen nil increases. In the 2/3 years after AVD landlord/tenant negotiations have focused on restructuring existing leases and on property transfers involving revised terms and different occupiers. A considerable number of clubs have actually closed for good. Significantly lower levels of rental value have been evidenced. That said, it is important that only expectations as foreseeable at AVD are reflected in the basis for rating valuations.
3. Valuation
3.1 Valuation scheme
Following analysis of all relevant information, and discussions with agents representing the leading bingo hall operators and the Bingo Association, the valuation approach for the 2010 rating lists has been agreed. This scheme should be applied to all 2010 rating list assessments of bingo halls in England and Wales.
The initial valuation consideration is to determine the fair maintainable trade (FMT) as at the antecedent valuation date (AVD), 1 April 2008. Given the exceptional circumstances affecting the industry towards the end of 2007 it is appropriate to consider turnovers and trends evidenced in the period to September 2008 when establishing the level of FMT to be applied. Two valuation scales, by reference to gross turnover and derived from an analysis of the available evidence, have been produced and are set out in Appendix A.
3.2 Fair Maintainable Trade (FMT)
FMT is an estimate of annual receipts that could be derived by occupying the property and conducting the bingo operation with the skill and expertise that could reasonably be expected from a potential tenant of the hereditament. This figure will represent the gross annual receipts from all sources (exclusive of VAT and Gross Profit Tax) but disregarding both stake money from the game and prize money from gaming machines that is returned to players.
3.3 Rental percentages
The rental percentages to be applied to FMT are set out in Appendix A.
Scale A - applies only to bingo halls in converted cinemas, theatres or concert halls
Scale B - applies to purpose-built bingo halls, and all others not covered by Scale A
3.4 Promotional activity
In order to maintain or achieve market share, many operators will engage in promotional activities. This can include the buying-in of trade through such methods as additional prize money, bussing in of customers etc. Such expenditure may be incurred in the following circumstances:
- to defend against competitor activity
- to promote the re-launch of a club following re-badging or refurbishment
- to promote the launch of a new club
Where such expenditure can be demonstrated as being considerably in excess of industry norms, adopted fair maintainable AVD receipts may require adjustment to a level which could have been anticipated if that excessive expenditure had not been made. Appendix A sets out the bases for adjustment.
3.5 Other factors affecting value
3.5.1 Physical attributes:
For bingo halls in converted cinemas, theatres or concert halls valued on Scale A, the level of FMT adopted and the lower scale reflect the physical factors affecting both income and running costs. The scale reflects the disadvantages of this older type of property and no further end allowances should be made. A modern purpose-built bingo hall will normally be valued at the percentage determined for the level of fair maintainable trade on Scale B. No allowance is warranted for purpose built units constructed post 1990, irrespective of whether ground floor or first floor.
For converted property, valued on Scale B, an allowance may be made to reflect physical disabilities or disadvantages that are not reflected in the adopted gross receipts. Examples of such disadvantages might include a main entrance to the property being at a different floor level to the bingo hall with no escalator access, awkward access, poor ground floor entrance facilities, intrusive pillars, shape, low ceiling height and duplication of entrances at different levels or where there is more than one public entrance to the club necessitating dual staffing. The best modern conversions may not warrant any allowance, but other converted property is expected to attract an allowance in the range of 2.5% - 10%.
A small proportion of bingo halls, whilst not operating in former cinemas, theatres or concert halls, have considerably inferior characteristics compared with modern conversions and a higher end allowance will be appropriate in these cases. Whilst not an exhaustive list, these conversions may be from former bowling alleys, ice rinks, swimming baths, car parks or bus depots. These will suffer from a combination of several of the above factors, and be severely affected by one or more, leading to consideration of a higher level of allowance. In exceptional cases, end allowances of up to 25% may be considered. These are normally expected to apply only to properties that were first converted to bingo use before 1990.
3.5.2 Size relative to turnover:
This will only affect properties valued on scale B.
With markedly reduced admissions post the Smoking Ban a situation has arisen where at certain levels of turnover the property is over-sized relative to the income yield. In order to address this in value terms, adjustments to RVs should be applied in accordance with the following:
For halls greater than 2,750 square metres (sqm) GIA where the adjusted FMT is below £1.75m a maximum of a 5% downward adjustment may be made.
For halls greater than 2,250 sqm up to 2,750 sqm GIA where the adjusted FMT is below £1.20m a maximum of a 5% downward adjustment may also be made.
In both cases the highest adjustments will apply to the lowest in the range of FMTs encountered.
3.5.3 Approach to applying allowances/adjustments
Where appropriate, any allowances/adjustments for the factors outlined above should be made direct to the Rateable Value that would have been derived without any end allowances and not to the adopted fair maintainable trade.
3.5.4 Total effect of allowances/adjustments
Following all justified allowances/adjustments to B scale properties the resultant RV will never be less than the following:
Where the FMT is greater than or equal to £1m the RV will never be less than the scale A percentage to RV plus 0.25%.
Where the FMT is less than £1m the RV will never be less than the scale A percentage to RV.
This property is valued using the non-bulk server. The manual can be accessed here.
4. Application of this scheme
Whilst it is intended that this guide should enable the assessments of all bingo halls to be determined correctly, the opportunity for properties to be valued outside its terms is not precluded where exceptional circumstances would otherwise make its application inappropriate.
5. IT support
All valuations should be entered onto the Non-Bulk Server under the relevant Scat Code.
Scale A
All Bingo Halls in converted cinemas, theatres or concert halls
| Fair Maintainable Trade £ | Percentage |
| Below 300,000 | 3.50-4.50 |
| 300,000 | 4.50 |
| 500,000 | 5.0 |
| 700,000 | 5.50 |
| 1,400,000 | 6.0 |
| 2,500,000 | 7.25 |
Interpolate between points
Scale B
All purpose-built Bingo Halls and converted Bingo Halls (where Scale A is not appropriate)
| Fair Maintainable Trade £ | Percentage |
| 500,000 | 5.0 |
| 700,000 | 5.50 |
| 1,000,000 | 6.50 |
| 1,500,000 | 7.5 |
| 2,000,000 | 8.0 |
| 3,000,000 | 8.0 |
| 4,000,000 | 8.0 |
Interpolate between points
Promotional Expenditure
Background
For 2000 Rating List a scale of deductions to be adopted was agreed outside the Memorandum of Agreement. For the 2005 Rating List the upheaval experienced in the market at 1 April 1998 had settled down by the 1 April 2003. Promotional expenditure had reverted back to “normal” levels at AVD and for most properties there was no need to adjust for excessive promotional expenditure. There is no evidence that this situation has changed so the 2005 approach should be continued.
The exceptions to there generally being no need for adjustment for promotional expenditure are:
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where existing units respond to the opening of new units with increased, defensive spend for a time as they seek to maintain turnover. The trading pattern over a longer period should then indicate the maintainable admission and turnover levels to be adopted at the AVD as increased promotional expenditure drops back to “normal” levels.
-
a tiny number of operators that, as a matter of course, run their business by spending higher than the normal amounts of promotional expenditure compared with other operators. This needs to be reflected.
Promotional expenditure is added prize money, gifts and additional prizes, printing and postage of special promotional flyers, coaching in/out of customers and live entertainment.
Traditional Conversions (Scale A)
Examination of levels of promotional expenditure for traditional conversions throws up a wider range of percentages to gross receipts, especially where independent operators are concerned, and at low levels of annual receipts compared with flat floor units. Levels of 15-25% are evident for some very modest turnover properties, but although these percentages seem high, they are relatively small amounts in absolute terms. At levels of turnover below £250,000 Scale A reflects the lower profitability and levels of expenditure incurred and no further adjustment should be made for excessive promotional expenditure.
To accommodate those properties where higher promotional expenditure is incurred, the following adjustment to gross receipts should be adopted:
| Promotional Expenditure as a proportion of Gross Receipts (if greater than £250,000) | Percentage of Promotional Expenditure in excess of 13% of Gross Receipts allowable as a deduction from adopted Receipts |
| Under 13% | No adjustment |
| 13% | 10% |
| 14% | 20% |
| 15% | 30% |
| 16% | 40% |
| 17% | 50% |
| 18% | 60% |
| 19% | 70% |
| 20% plus | 75% |
Interpolate between percentage points
Flat Floor Units (Scale B)
Most modern flat floor units appear to have a stable profile of promotional expenditure within a range of up to10%. Where excessive promotional expenditure occurs, an adjustment to gross receipts should be made as set out below:
| Promotional Expenditure as a proportion of Gross Receipts | Percentage of Promotional Expenditure in excess of 10% of Gross Receipts allowable as a deduction from adopted Receipts |
| 11% | 10% |
| 12% | 20% |
| 13% | 30% |
| 14% | 40% |
| 15% | 50% |
| 16% | 55% |
| 17% | 60% |
| 18% | 65% |
| 19% | 70% |
| 20% plus | 75% |
Interpolate between percentage points