Could a massive casino rescue Madrid from its economic doldrums? Spain’s media is buzzing with news of a massive new investment in their capital’s region by the Maryland-based Cordish Companies, which is pumping a phenomenal €2.2 billion ($2.35 billion) into the area to construct a 330 acre gambling and entertainment complex called Live! Resorts. The facility is slated to go up just outside Torres de la Alameda, a small ex-urban town located on Spain’s high, dry central plateau. Containing a Broadway-style theatre, gaming rooms, a circus, and up to 4,000 hotel beds, the complex would be the largest—or rather, the only one—of its kind in Europe.
The idea is that it could lure up to 1.6 million annual visitors—not just from Europe, but from also North America and the rest of the world, in a location that’s convenient from Madrid’s Barajas Airport. This, the regional government suggests, could create 56,443 jobs, a real windfall for a region that has never quite found its feet again after the 2008 financial crisis.
It’s no wonder that figures like this have got politicians drooling, but the project’s exclamation point isn’t the only dubious detail of Live! Resorts’ makeup. To Spain-watchers, the casino plan has an eerily familiar ring to it, suggesting just the sort of pumped-up mega-project that littered the country in the years running up to the financial crisis.
In a bid to capitalize on spiraling land prices, the Iberian peninsula became scattered with grand designs that brought in huge funds (and huge potential for kickbacks) but ended up grinding to a hugely expensive halt. There was the €170 million ghost airport whose first flight took off five years after it was completed—a disaster project that still did better than another unused air terminal, which cost €1 billion to build but ended up being sold for €10,000. These projects are perceived to be so emblematic of the bubble years’ profligacy that they even formed a key plot device in a film by Pedro Almodóvar.
It’s not just that these projects were ill thought-out. What made them especially resented by many Spaniards is that they were seen as opportunities for graft and kickbacks—indeed, that creating opportunities for such things was a prime reason for their approval.
Spain’s ghost airports are just part of the story. There was the spectacular science and culture park that placed Valencia, Spain’s third city, so in debt it needed a €2 billion bailout from central government. There was even a plan to create a vast €30 billion casino complex dubbed Eurovegas not far from Madrid, a project that floundered for a somewhat ludicrous reason: The developers withdrew when they couldn’t get an exemption from Spain’s indoor smoking ban. The location of this casino? Near the small town of Torre de la Alameda, on exactly the same spot now slated to host Live! Resorts.
It’s hardly encouraging that Spain is trying once more where it has previously floundered. The new resort’s proponents nonetheless insist that it will be a more practical, sober scheme than the type greenlighted during the crazy years. Certainly, its €2.2 billion budget is a drop in the ocean compared to Eurovegas’ €30 billion, and it will all apparently come from private sources. And unlike the proponents of its Eurovegas predecessor, Cordish has gone so far as to actually buy the land, so the likelihood of something coming to fruition seems more plausible.
Look closely at the numbers, however, and something just doesn’t seem right. According to figures quoted in Spanish media, Live! Resorts’ €2.2 billion initial investment will supposedly create and attract 676,764 annual visitors to the site in its first year. In the long-term, it’s predicted that the resort will attract 1.6 million extra visitors to the Madrid region annually, apparently enough to sustain those 56,000 new jobs.
If you look at the actual economics of existing casinos, however, those numbers seem fantastical. Alan Silver, professor of Restaurant, Hotel and Tourism at Ohio University, and former executive in the casino industry, told CityLab that the predictions were not born out by his own experience:
“A projection of over 50,000 jobs created by a $2.3 billion property seems way off target. Of course there are indirect as well as direct jobs, but I would imagine that with an investment of that level, you could reasonably expect to create somewhere between 10-15,000 jobs.”
Furthermore, the standard practices of the U.S. casino industry that lies behind Madrid’s new project mean that many jobs will be short-term.
“Casino properties always over-hire initially. I've seen a lot of over-hiring then laying off soon afterwards, because the project doesn't meet the projections set out before it started,” Silver says. “The casino operators want to paint a real rosy picture for the politicians and people of the area. Then the reality sets in down the road and it turns out that the real level of revenue and jobs predicted doesn't meet the projections. I've seen that over and over again.”
On a continent without Las Vegas-style casinos, theme parks are Europe’s closest equivalents to this project and they produce nothing like this level of employment. As of 2013, Disneyland Paris employed 14,000 people within the park itself. A separately funded adjacent town next to the site provided more jobs, estimated by Disneyland Paris’ annual report at 28,000. All this was possible thanks to 14.9 million visitors. How Live! Resorts would exceed this number with only 11 percent of the same visitors remains a mystery. It could be argued, nonetheless, that questioning the numbers here is looking a gift horse in the mouth. Cordish’s investment is private, after all, so the Madrid region won’t necessarily spend a penny.
Or will they? Some other hidden costs may well be lurking, such as those needed to upgrade infrastructure around the site. Given that Spain is something of an elephant’s graveyard of unfinished mega-projects, it’s no surprise that Live! Resorts has one in its future backyard—a ghost highway abandoned in 2007. Planned as a toll road but left unpaved when its contractors went bankrupt, the ghost highway is now due to be resurrected, following an announcement this week from the Madrid region’s governor Cristina Cifuentes. The revival is timely. One key selling point for the casino site is that it is easily reached from the airport, and right now, local roads aren’t really up to the job of transporting the hordes of people that the casino expects.
There’s nothing wrong with private investors creating jobs. There’s nothing inherently wrong with regional governments funding infrastructure improvements either. Still, failing to learn from past failures matters.
“As a country we tend to believe in grand projects as a marker of progress. They’re seen as our counterpart to the German's postwar Wirtschaftswunder (economic miracle). But we've tried it before and it failed,” says Esteban García, a civil engineer and contributor to the website Nación Rotonda, which documents changes to Spanish lands over the past 15 years. “Trying to revive these mega-projects is a telltale sign that we haven't learned anything. … If they are going to build this complex in three years and create almost 60,000 jobs, then that's fantastic. The problem is, I don't believe them—and those sound like made-up numbers.”
The pattern García refers to certainly seems familiar. Yet again, there are airy promises of growth that don’t stand up to scrutiny. Yet again the full costs of making a mega-project work are not being acknowledged. And once more, a Spanish region is looking for a vast deus ex machina to solve its job dearth in one fell swoop. This is the sort of magical thinking that helped pump up, then burst, Spain’s property bubble in the first place. The eight years since the 2008 financial crisis may have shaken Spain hard, but given the high profile advocacy of the project by regional political leaders, it seems some political attitudes have still weathered the storm intact.