Stakis to spend pounds 14m on expanding its casino division and creatin g mass-market appeal

Stakis, the hotel and leisure group, is gambling on a large expansion of its casino division, despite a poor performance from the business over the past few years. It plans to go ahead with an ambitious pounds 14m spending programme over the next 12 months, including a massive refit of sites at Hull, Leeds and Birmingham.

Stakis has given the casino division 12 months in which to effect an turnaround and warned it would have to put a for-sale sign over the business if it failed. However, David Michels, Stakis chief executive, is understood to be committed to the business for the long term and is unlikely to sell it.

Stakis has changed the division's management team and radically overhauled the business in an attempt to give the casinos mass-market appeal.

Analysts believe the group's financial results next Thursday will confirm that the casino business is on the road to recovery. A new casino at Edinburgh is also believed to be performing well.

In the longer term, Mr Michels believes the casino business has huge potential and the industry should benefit from the deregulation of the gaming industry. The Government is expected to pass legislation soon allowing casinos to start advertising and put their name in the phone book.

Stakis is also expected to confirm that the performance of the pounds 327m Metropole hotel chain it bought last year has beaten expectations. Stakis is proceeding with a pounds 85m refit of the London Metropole, a move designed to make it the biggest conference hotel in Europe.

Stakis plans to expand its hotel division gradually and roll out new restaurants and health clubs, rather than launching another major acquisition or going on a building spree.

Stakis recently put eight of its worst-performing hotels in England and Scotland up for disposal. Four sales are understood to be in the hands of solicitors, but it is struggling to sell the other properties.