GGB Magazine February 2013 by Global Gaming Business

TurNiNg The TableS | FahreNkopF STepS DowN | hollywooD ToleDo’S ST. JeaN | CaSiNoS & blaCk hiSTory

Seminole

February 2013 • $10 • Vol. 12 • No. 2

Success

How America’s most prosperous gaming tribe became an international casino force

SPECIAL SECTION: SECURITY & SURVEILLANCE

Maryland Merry-Go-Round Official Publication of the American Gaming Association

Battle and opportunity in a young gaming state

Brand or Brawn? Making decisions on restaurant offerings

T s ’ h e g m wei a g s s T i i h “T orTh d, and ighed w gol e we in ah, i’vker.” ye e suc Th n d Ma

Ol – The

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CONTENTS

Vol. 12 • No. 2

february

ON THE COVER

COLUMNS

24 Seminole Rocks

Florida’s Seminole tribe has transformed its former Class II gaming business into a casino empire that employs more than 7,000, owns the prestigious international Hard Rock brand, and stands as a model for Native American gaming enterprises—not to mention gaming enterprises in general.

AGA Code Talker Frank J. Fahrenkopf, Jr.

By Roger Gros

Fantini’s Finance Growth is Back Frank Fantini

Gaming Regulation Black History Month: Ed Olsen’s Gift Richard Schuetz

FEATURES SURVEILLANCE SPECIAL REPORT Securing the Property Our annual World Game Protection expert report on security and surveillance in the gaming industry. 32 Marking Cards The modern version of marked cards are the result of poor manufacturing techniques. By Willy Allison

36 Guns in the House Today’s security staff needs to be prepared to handle the kinds of shooting events that are all too common. By Alan W. Zajic

38 The Right Staff The recovering economy means security and surveillance staffing levels can now be adjusted—but how much is enough? By Darrell Clifton

Global Gaming Women Give and Take Katie Lever

18 Maryland Moves As Maryland’s nascent gaming industry prepares for the addition of table games, operators look to capitalize on the potential of the market.

DEPARTMENTS 4

The Agenda

By Frank Legato

Dateline

44 The E-Table Boom Even in casinos that have live table games, the addition of multi-player electronic table games to the mix is still on the rise.

Nutshell 54

Frankly Speaking

By Rodric J. Bradford

Cutting Edge

48 Branding the Food Including branded restaurants in casinos can bring improved standards and consistency in food quality, but with drawbacks such as loss of control.

New Game Review

iGames

Goods & Services

People

By David Rittvo

52 Taxing Problem The IRS is looking at taxing tribal welfare programs funded by Indian casinos.

Casino Communications With Richard St. Jean, Vice President and General Manager, Hollywood Casino Toledo

By Dave Palermo

55 End of an Era With the retirement of Frank J. Fahrenkopf, Jr., the American Gaming Association looks to replace the only CEO it’s ever had. By Patrick Roberts FEBRUARY 2013 www.ggbmagazine.com

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THE AGENDA

Macau Momentum Roger Gros, Publisher

Vol. 12 • No. 2 • February 2013 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com David Coheen, North American Sales & Marketing Director dcoheen@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com

he revenue report for the 2012 gaming numbers in Macau was once again impressive. Coming on the heels of a year where the Chinese SAR posted revenue increases of 42 percent, the 13.5 percent boost in ’12 was amazing. And remember, it came during a year when the Chinese economy was slowing, so just to keep up the same pace as 2011 would have been a victory. So the question remains: how long can Macau sustain this level of growth? And every casino executive from Macau gives me the same answer: they don’t see any reason it will stop anytime soon. In fact, it could increase yet again in 2013. The market penetration into the Chinese middle class remains around 1 percent. There are only a few provinces where the citizens are allowed to travel to Macau. Let’s not forget that China is still a communist country with rigid controls on the movement of its people. Yes, this is slowly changing, but the emphasis is on slowly. Nonetheless, a new rail line, the GuangzhouZhuhai Intercity Railway, has already increased visitation to Macau, opening up a previously small market for the Macau casinos. What was once a two-hour bus ride has been cut in half. A new border gate that can accommodate more than triple the number of visitors as before has also recently opened. Some worry about the attitude of the Chinese national government toward gaming in Macau. When federal officials noted that the Macau gaming industry was overheating in 2008, they closed the spigot a bit by limiting the number of times a Chinese national could visit Macau. That had a devastating impact on the Macau casinos, but when the regulations were lifted, the current surge began almost three years ago. But what’s to prevent the national government from coming to the same conclusion? Some believe that the unusual actions of the Macau government late last year when it approved projects in the Cotai region for every one of the six casino concessionaires was a realization that these projects should be approved before the Chinese government changes its mind. Surely, the carefully planned growth of the past few years has been exploded with the new approvals. Clearly, the limits on the number of

table games and foreign workers are going to have to be revised if the government truly wants all these projects completed in a reasonable time period. One thing the Macau government has wanted has come to pass. Last year, the mass market showed remarkable growth, while the VIP market—which accounts for 70 percent of the Macau gaming revenues—slowed. The new Cotai projects are all designed to attract the mass market with new and better non-gaming amenities, intended to make Macau much more than just a gaming destination. It’s going to take a lot more attention to the mass market, however, to ease the grip of the VIP market on the city. And while we’re discussing the VIPs, the Macau regulatory scheme needs to become more transparent. While the government doesn’t want to crimp the all-important VIP market, there needs to be a better understanding of what the SAR’s criteria are when licensing the VIP operators. Reports of connections to the Chinese organized crime groups, the triads, continue. And the fact that very few of the VIP operators have applied for licenses in Singapore, Asia’s secondary gaming capital, makes one think they have something to hide. This irregularity has already drawn the attention of international law enforcement organizations, particularly when it comes to money laundering. So back to the original question of how far is up for Macau. I don’t know the answer, but I do know there are many concerns. While Singapore barely dented the Macau market, the entry of Taiwan or South Korea could have an impact. Vietnam will open its first integrated resort this month, and what happens when Japan really gets into the game? Or how about the unlikely—but possible—option of China opening another region to gambling? Coming from Atlantic City, I remember casino executives giving me the same answer about how long the Boardwalk town could sustain increasing revenues. It did so for nearly 30 years, but the last five have seen Atlantic City revenues fall by 40 percent. Not really apples to apples, but my point is that you never know what is coming down the road, and you have to be prepared for any eventuality.

Global Gaming Business FEBRUARY 2013

EDITORIAL ADVISORY BOARD Mark A. Birtha, Vice President and General Manager, Fiesta Henderson Casino Hotel

• Julie Brinkerhoff-Jacobs, President Lifescapes International

• Nicholas Casiello Jr., Shareholder Fox Rothschild

• Jeffrey Compton, Publisher CDC E-Reports

• Dean Macomber, President, Macomber International, Inc.

• Courtney Muller, Group Vice President, Global Gaming Expo Reed Exhibition Companies •

Judy Patterson, Senior Vice President & Executive Director American Gaming Association

• Jim Rafferty, President, Rafferty & Associates

• Thomas Reilly, General Manager, ACSC Product Group Eastern Region Vice President, Bally Systems

• Steven M. Rittvo, President, The Innovation Group

• Katherine Spilde, Executive Director, Sycuan Gaming Institute, San Diego State University

• Ernie Stevens, Jr. Chairman, National Indian Gaming Association

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 6625 S. Valley View, Suite 422, Las Vegas, NV 89118 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor. Copyright 2013 Global Gaming Business LLC. Las Vegas, Nev. 89118 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: Global Gaming Business, 6625 S. Valley View Blvd., Suite 422, Las Vegas, NV 89118

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DATELINE USA february 2013

Battle rOyal

AGA declares war on sweepstakes parlors

he growth of internet sweepstakes cafés is accelerating in many states across the country, a development that the American Gaming Association considers illegal gambling. The businesses, says the AGA, are designed to take advantage of state sweepstakes laws and avoid state anti-gambling laws and gambling licensing restrictions. The organization estimates the parlors will earn more than $10 billion this year with games that closely mimic the experience of traditional slot and video poker machines, but without the consumer protections required of commercial gaming operators. The AGA’s policy, adopted late last year, says: “States have longstanding policies that gambling businesses must be specifically authorized, strictly regulated to protect consumers, kept free of crime and fairly taxed to contribute resources for the public good. In recent years, thousands of ‘internet sweepstakes cafés’ with estimated annual revenues exceeding $10 billion have sprung up in more than a dozen states in total circumvention of state anti-gambling laws and gambling license requirements. After making very little investment, these rogue businesses spread quickly and become entrenched, posing a threat to existing statelicensed businesses and the thousands of jobs they create. “Although they often claim otherwise, internet sweepstakes cafés sell games that involve prize, consideration and chance and, thus, are engaged in the business of gambling. In the vast majority of communities where they operate, cafés lack regulation of (1) the integrity of the owners and operators, (2) the fairness of the games, (3) the exclusion of customers too young to gamble, and (4) their location, including the proximity to schools or churches. They do not educate customers about responsible gaming or contribute funds to combat problem gambling. In addition, neither the cafés nor the software companies that support them pay state or local gaming taxes. To the contrary, their largely unreported profits may siphon revenues from state-authorized businesses. “The American Gaming Association believes that strict regulation to protect consumers is the cornerstone of gambling policy and should apply to all forms of gambling. Responsible public policy should prohibit internet sweepstakes cafés, as numerous states have done.” Frank J. Fahrenkopf, Jr., president and CEO of the AGA, says new court decisions and legislative actions (or inactions) have changed the landscape for the businesses. “Sweepstakes café proprietors claim that these under-the-radar businesses don’t constitute gambling and would like to continue to operate without the accountability of normal gaming establishments, but if they aren’t controlled, states, existing gaming businesses and consumers all stand to lose,” he said. “That is why the AGA is educating governors, state legislators and regulators about this threat and working with them to deal with these establishments.”

Owner/OperatOrs Employees purchase Casino Queen

he nation’s first casino employee stock ownership plan, or ESOP, recently was established as the 700 employees of the Casino Queen in East St. Louis, Illinois, purchased the facility from the Koman family and its partners for $170 million. “To my knowledge, it’s the first ESOP casino in the country,” said Casino Queen General Manager and President Jeff Watson, who will be a co-trustee along with Chief Financial Officer Robert Barrows. The deal, which was unanimously approved by the Illinois Gaming Board, includes the assumption of $31 million in existing debt. Through the ESOP, company stock will be held in a trust and employees will receive a payout when they retire or leave the company. “It allows employees to become beneficial owners in the company,” Watson said. “The more successful the company is, the more value employees have individually in their retirement accounts.” The Koman family held a 20 percent ownership stake in the Casino Queen. Michael Gaughan, owner of South Point Hotel-Casino in Las Vegas, also sold his shares in the property. Other stakeholders included members of the Bidwill, Kenny and Rand families in Chicago. Jim Koman said in recent years the ownership group had received several inquiries from prospective buyers, but opted to sell to the ESOP to preserve continuity in management. “It was a great run for our organization,” Koman said. “We think this is a good transition, and the best way to keep the ideas we’ve built was to sell it back to employees.” Located on the Mississippi riverfront across from downtown St. Louis, the Casino Queen features a 40,000-square-foot gaming floor with 1,100 slot machines and 27 table games.

No New York Cuomo: Casinos Upstate OK, But ew York Governor Andrew Cuomo says three new casinos should be built in upstate New York to help boost economic development. According to the Syracuse PostStandard, the casino proposal is one

New York Governor Andrew Cuomo 6

Global Gaming Business FEBRUARY 2013

Not in NYC

of four initiatives in Cuomo’s proposed Market NY, a program aimed at economic development that was presented in the governor’s third State of the State address last month. The proposed plan calls for three casinos in the region. Ninety percent

of the state’s take would go to education, and 10 percent would go to property tax relief. Cuomo said a casino in New York City should not be considered until the impact of these casinos can be gauged.

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DATELINE ASIA february2013

sOlaire: all in Weidner group buys part of Manila project

he first project that will open in Manila’s Entertainment City got a new partner last month when Global Gaming Asset Management announced it is taking the option to buy 9 percent of Bloomberry Resorts Corp., the owner and Enrique Razon Jr. developer of the Solaire Manila casino hotel. Bloomberry is controlled by Philippine billionaire Enrique Razon Jr., while Global Gaming Asset consists of former Las Vegas Sands executives Bill Weidner, Brad Stone and Gary Saunders. Former City of Dreams executive Michael French is the property’s general manager. GGAM paid about $15 million for 921.18 million shares in Bloomberry. GGAM was brought on to build and manage the property with a five-year contract. The company will be paid 2 percent to 6 percent of the earnings before interest, taxes, depreciation and amortization (EBITDA) generated by Solaire Manila facilities, including local VIP table games. Another “incentive fee” will allow GGAM to be paid a graduated fee for achieving certain EBITDA thresholds for foreign VIP tables and junket players. The $1.2 billion Solaire Manila is part of the Entertainment City project put together by the Philippine Amusement and Gaming Corp. Three other projects are currently under way, owned principally by Genting and Travellers, Belle Corp. and Melco Crown, and Japanese billionaire Kazuo Okada and Robinsons Land.

Cotai Surprise

MGM China wins official nod for development

GM China has received official approval from the Macau government for the US$2.5 billion casino hotel the company plans to build in the territory’s booming Cotai resort district. Publication in the government’s official gazette means the Hong Kong-listed subsidiary of U.S. casino giant MGM Resorts International has cleared another hurdle toward a second casino to compete with operators that have a bigger presence in the $38 billion Chinese gambling enclave. The company received the land concession in October for the project, which will feature a five-star, 1,600-room hotel, a casino with 500 table games and 2,500 slot machines, pending government approval, and an expansive package of non-gambling leisure and entertainment attractions. The approval is “a very important milestone in the project’s development timeline, and likely came sooner (perhaps significantly sooner) than investor expectations,” said analyst Grant Govertsen of investment firm Union Gaming Research Macau. MGM China paid 450 million patacas (US$56.4 million) as an initial installment on its 25-year, 1.29 billion pataca lease of the 18acre site. The project still requires construction approvals before building can start. Govertsen estimates it will open by mid-2016.

Eight is Enough Plans unveiled for South Korean resort complex

fficials in South Korea have drawn up ambitious plans for a massive tourist mecca on the islands of Yongyu-Muui near the port of Incheon. Plans for “8 City,” as it’s known, located near Incheon International Airport and pegged at a cost of US$264 billion, include about 80 square kilometers of development comprising luxury hotels and casinos, condominiums, theme parks, shopping centers, a concert hall and a Formula One race course. It will also include a “megastrip,” which at 200 meters high, 880 meters wide and 3.3 kilometers long is billed as the largest single architectural edifice in the world. “It will become the world’s top city that has the creativity of Dubai and the convention centers and casinos of Las Vegas and Macau, as well as the shopping centers and financial hubs of Hong Kong and Singapore,” said Park SeongHyun, vice chairman of 8 City, the developer of the project. Park said 8 City so far has secured $2.8 billion from South Korean investors and $1 billion from Britain’s Sanbar Development Corp. The Associated Press reports that shareholders include international hotel operator Kempinski and Korean Air Lines. Completion is targeted for 2030.

Okada OK

Billionaire’s Manila resort to open in 2014; company to probe charges

leared of bribery charges by the Philippines Amusement and Gaming Corporation, Kazuo Okada and his Universal Entertainment announced last month that Manila Bay Resorts will open in late 2014. Embroiled in a long and drawnout dispute with Wynn Resorts, where he was vice chairman of the board until 2012, Okada recently arranged a large investment in the resort with Robinsons Land, a Philippine company. Henry Yap, general manager of Robinsons Land, announced the opening date last month for the resort, located on 44 hectares of Entertainment City on the shores of Manila Bay. With four hotels totaling 2,000 rooms, the resort will also contain a casino with 3,000 slot machines and 500 gaming tables, a shopping mall, a convention center, and a number of luxury retail stores and restaurants. The project is expected to create up to 5,000 jobs. Meanwhile, Universal Entertainment said it will launch a probe into the charges against Okada, cited in news reports from Reuters and other media outlets. The reports claimed that Universal transferred as much as $40 million to accounts in the Philippines to people associated with PAGCOR. Universal has vigorously denied the charges, and has sued three former employees for $15 million claiming they illegally approved the payments. FEBRUARY 2013 www.ggbmagazine.com

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DATELINE TRIBAL february 2013

Fighting the Fight Foxwoods implementing competitive strategy C

Scott Butera, president and chief executive officer of Foxwoods Resort Casino

onnecticut’s Foxwoods Resort Casino is doing its best to stay ahead of the competition. The casino, owned by the Mashantucket Pequot Indian tribe, is located 100 miles from Boston, and gets about 36 percent of its patrons from Massachusetts, according to a survey from the University of Massachusetts Dartmouth. That player base could take a hit, however, as the Bay State begins to consider licenses for three new casinos expected to break ground in the next few years. Scott Butera, Foxwoods president and chief

Almost Done Northern California casino ‘tops off’ structure

ast month the Graton Resort and Casino in Rohnert Park, California, held a “topping off” ceremony for its main structure. Hundreds attended the ceremony for the $800 million casino, which broke ground in June. Festivities included lifting a seven-ton steel beam into position near the future entrance to the casino, which is being built for the Federated Indians of Graton Rancheria by Station Casinos. The casino will have 3,000 slot machines and a 200-room hotel along California’s historic Highway 101. It is slated for completion by the end of this year. The casino will be completed ahead of the hotel. About 700 construction workers are expected to be employed by Tutor Perini Building Corp. before the work is finished, with 2,000 permanent workers after it opens.

executive officer, said in a recent interview that his casino has until late 2016 to ready itself for a new wave of competition. To that end, Foxwoods plans to break ground this spring on a “premium outlet retail mall” which will add about 75 stores to the $3 billion complex. The casino will also upgrade its existing retail concourse with “very modern, hip new stores,” according to Butera. In addition, Foxwoods is marketing heavily to its existing player base, counting on brand loyalty to turn its numbers around. “It is difficult to compete with assets that are more convenient,” said Butera. “You’ve got to accept the fact you will lose some part of your

Try, Try Again

business.” But Butera remains optimistic that the new amenities will retain some of the existing clientele while introducing new players to the mix. Convenience, he said, was just one box to check. Massachusetts is not the only competition for Foxwoods and its nearby tribal casino competitor Mohegan Sun. Twin River in Rhode Island has received approval to add table games to its slot offering, and will add 65 table games by July. Casino prospects are also looking up in New Hampshire, as Governor Maggie Hassan, who supports one high-end casino, takes over for John Lynch. The site of the casino proposed by the Seneca Cayuga tribe

Oklahoma tribe makes 2nd appeal for NY land n Indian tribe based in Oklahoma has asked the U.S. Bureau of Indian Affairs to set aside a parcel of land in New York state, possibly for a tribal casino. The SenecaCayuga tribe made the same request in 2008, but was denied. According to the Auburn, New York, Citizen, the initial request, which would have removed the land from county tax rolls and placed it into trust for the Indians, was denied because the Indian Reorganization Act of 1934 was designed to help tribes acquire and consolidate land holdings only if the action might contribute to the economic development of that tribe’s reservation. The SenecaCayuga tribe reservation is about 1,500 miles away from the 229-acre property in Montezuma, New York. The request in 2008 was denied for many

reasons, including the 1,500 miles that separate the land from the tribe’s Oklahoma reservation, which would be seriously impacted by an approval of the plan. “The potential departure of a signification number of reservation residents and their families could have serious and farreaching implications for the remaining tribal community and its continuity as a community,” James E. Cason, formerly of the Department of the Interior, wrote in a 2008 letter explaining the BIA’s decision. A spokesman for the BIA said the submission is in its very early stages, with notification of local officials just beginning.

top Down Supreme Court considering Bay Mills petition

he U.S. Supreme Court is considering hearing Michigan v. Bay Mills Indian Community. Michigan Attorney General Bill Schuette sued the tribe, arguing it violated the Indian Gaming Regulatory Act and waived its sovereign immunity when it opened a casino on a site it had acquired. A federal judge ordered the tribe to close the facility. However, the 6th Circuit Court of Appeals lifted the injunction in a decision on August 15, 2012. Although the casino has remained closed, Schuette filed a petition for the Supreme Court to review the Court of Appeals’ decision. The Supreme Court will announce whether or not it will take on the case in the near future. 8

Global Gaming Business FEBRUARY 2013

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DATELINE GLOBAL february 2013

rich GeT richer Packer increases Crown holding

The Voice of the People Toronto’s residents get their say

rown Limited Chairman James Packer has lifted his controlling share in the casino operator from 48.1 percent to 49.9 percent, in a recent transaction worth about A$142 million. Australia’s Business Daily said Packer was the buyer of 13.8 million shares in publicly listed Crown at $10.33 each in a trade carried out by investment bank UBS. The gaming mogul stopped short of going over 50 percent because Crown would then need to be consolidated in Packer’s private company, according to reports. The move comes after Packer sold his remaining stake in his family’s Consolidated Media empire to News Limited for $2 billion in a deal completed last month. Packer has been steadily closing in on a majority stake in Crown in recent years through a series of on-market share purchases. Under Australian “creep provisions,” shareholders who own more than 20 percent of a company are only allowed to buy an extra 3 percent of its shares every six months, unless they launch a formal takeover offer. The rules are designed to force investors seeking controlling stakes to make public takeover bids—for which they would generally have to pay a premium—rather than acquire a majority share by stealth. In April, Packer bought 15.3 million Crown shares for $8.72 each in a deal worth $133.4 million. The gaming mogul also has a 10 percent stake in rival Echo Entertainment, and is pursuing a $1 billion development at another waterfront casino near The Star, Echo’s Sydney flagship.

STRAIGHT UP

Canadians favor single-event sports betting

recent Ipsos Reid poll, conducted for the Canadian Gaming Association, indicated 64 percent of Canadians want the Senate to pass a bill legalizing betting on the outcome of a single sporting event; 36 percent oppose it. Currently, provincial lotteries and gaming corporations only let bettors wager on multiple sports games. The House of Commons has unanimously supported the bill. Supporters of the bill said single-game betting would offer greater regulation and oversight of sports betting, provide a new source of revenue for the government and attract Americans to Canadian casinos in border towns to bet on single games. Opponents said it would lead to game fixing and rigging and more sports betting in general. The CGA has estimated that annually Canadians bet more than $10 billion on sports through illegal books and another $4 billion through offshore online sports books; only 5 percent of sports betting in Canada is done through provincially regulated betting and lottery systems. 10

Global Gaming Business FEBRUARY 2013

oronto has launched its longawaited public consultation on a proposed resort casino with a website, an online survey and five open houses to be held across Canada’s largest city. The consultation will “gather input, including the public’s views and opinions on a casino generally, on possible locations for a casino, and what the public would like council to consider when making a decision on this matter,” a news release states. City Manager Joe Pennachetti will consider the public feedback in writing his report, which is expected to go to Mayor Rob Ford’s Executive Committee in March, to be followed by a vote by City Council on the casino, possibly in April. The Ontario Lottery and Gam-

ing Corporation’s plans for privatizing gaming in the province call for a casino somewhere in the greater Toronto area, with possible locations including the suburbs of Mississauga, Markham or Richmond Hill. But it’s the idea of a downtown location favored by the OLG, the mayor and the big Las Vegas-based casino companies vying for the license that has sparked intense debate. A report backed by the mayor’s office and released in October touted a downtown location as a jackpot in terms of revenue and jobs. Compiled by consultants Ernst & Young, the report suggests a resort-scale casino there could earn the city more than C$200 million a year in hosting fees, property taxes and lease or land sale revenues.

A Turkey?

Government may ask $10 billion for betting monopoly

urkey’s Prime Minister Recep Tayyip Erdogan has ordered the privatization of Spor Toto, the country’s lucrative sports betting monopoly. Operator of Iddaa, the only legal betting game in the country, Spor Toto has generated some US$24 billion in profits over the last eight years, and estimates of the government’s asking price approach $10 billion. That would surpass the highest bid in the government’s privatization so far—$5.7 billion offered by Koç, Gözde and UEM Group for the tender to privatize the country’s highways and bridges. The last word on Spor Toto’s price will be declared by the prime minister after examinations of detailed reports prepared by the High Privatization Board.

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DATELINE EUROPE february2013

STreeT FiGhT

Plus & Minus

Battle rages in U.K. over FOBTs

Gala deal will cost Rank some casinos

ritish gaming and betting giant Rank will have to sell as many as six casinos if it wants to revive its £205 million takeover of rival Gala Casinos. That’s the word from the U.K. Competition Commission, which took up the proposed purchase of 23 Gala casinos and three dormant Gala licenses back in August. Rank had offered to sell five casinos in its initial submission to the Office of Fair Trading, but the commission’s view is that the deal as currently proposed could impair competition in Aberdeen, Liverpool, Stockton-on-Tees, Bristol, Cardiff and Edinburgh, where Rank holds a license but does not operate a casino. If the merger proceeds, it will see Rank, which is majority-owned by Malaysia’s Guoco Group, and Malaysia-based rival Genting as the only major casino operators in Britain, and Martin Cave, the commission’s deputy chairman, said, “This will leave a number of areas with much reduced competition where casino customers could consequently lose out through a poorer casino offer.” The commission is scheduled to publish its final report in February.

he U.K. government had postponed its response to a report on the 2005 Gambling Act by a select committee of the Department for Culture, Media and Sport, a decision that effectively removes the spotlight, at least for now, from the controversial fixed-odds betting terminals operating in betting shops nationwide. The machines, which can be found in nearly every bookmaking shop, offer slot machine and roulette-style games with wins up to £500 possible, and their proliferation in recent years is a major social concern. Their numbers are limited by the Gambling Act to four terminals per betting shop. The DCMS committee, however, has recommended lifting that cap, a move that would significantly boost bookmakers’ bottom lines and likely spark a political firestorm. Critics and a growing number of MPs say the machines are dangerously addictive and must be curbed. Yet, many insiders believe the Conservative government isn’t willing to take on the powerful bookmaking industry, especially as it pays more than a quarter of a billion pounds in tax every year. In the meantime, opposition to the FOBTs continues to grow in Parliament. Last month, Liberal Democrat Communities Minister Don Foster called for the maximum stake to be £2, and claimed to have Prime Minister David Cameron and other political leaders lined up in opposition to lifting the cap. “For too long this problem has been swept under the carpet. There’s no doubt this is ruining people’s lives,” Foster said.

Three For One OPAP trio wins Greek Lottery rights n OPAP-controlled consortium A of major suppliers has been awarded an exclusive license to operate Greece’s national lotteries, although one of its members has dropped out, citing the costs involved. Hellenic Lotteries, sold as part of an international bailout that is contingent on the government divesting itself of certain assets, was granted to Intralot, Scientific Games and Lottomatica as the only bidders for the 12-year license. The government also is selling off its majority stake in OPAP, formerly the country’s monopoly betting and lottery operator.

In 2011, OPAP generated €4.4 billion lottery retail sales, making it the third-largest lottery in the world in terms of per-capita sales, according to data provided by La Fleur’s. However, the price of the concession, consisting of an up-front payment of €190 million and a monthly fee equal to a percentage of gross revenues, was too high for Lottomatica, which announced it would turn over its 33 percent stake in the venture to OPAP. It is believed the Italian lottery giant was not prepared to support an offer in excess of €150 million. The award is pending Greek parliamentary approval.

French Accent WSOP EUROPE SET FOR FRANCE aesars Entertainment announced that the seventh annual World Series of Poker Europe will take place October 11-24 at the lakefront Casino Barrière d’Enghien-les-Bains in greater Paris, the oldest casino in France. The casino—which is attached to two hotels—will stage the tournament in its newly remodeled convention facility, and in a 500-seat theater that will be used to host the televised final tables. “Part of our vision for WSOP Europe is to mix poker and pleasure, and introduce players to some of the most exciting destinations in Europe,” World Series of Poker Executive Director Ty Stewart said in a statement. The complete events schedule is still being finalized, but is expected to include seven WSOP gold bracelet events and a No Limit Hold’em Main Event with an entry fee of €10,000. The last two WSOP Europe events were held in Cannes, France. Prior to that the tournament was held in London.

FEBRUARY 2013 www.ggbmagazine.com

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NUTSHELL

“They Wynn Resorts Ltd. continues its efforts to remove Kazuo Okada, one of the company’s co-founders, from the board of directors. Wynn Resorts CEO Steve Wynn has scheduled a February 22 shareholder meeting at Wynn Las Vegas to vote on Okada’s proposed ouster. In a regulatory filing with the Securities and Exchange Commission, the executive committee of the company’s board said it believes Okada has “not been acting in the best interests of the company and its shareholders.” The Queens Chronicle headline last month said it all: “Resorts World rolling in dough.” The racino at Aqueduct Racetrack—the first legal gaming hall in New York City—met and exceeded even the most optimistic expectations during its first full year in business. Resorts World New York, developed by Malaysian casino company Genting, became the single largest slot revenue gaming property in the United States in 2012 and paid more to the state in taxes than casinos on the Las Vegas Strip, Atlantic City and Connecticut. It opened in October 2011. Last year, Resorts World’s gross gaming revenues exceeded $638 million. Of that, $435 million went to the state, which in turn sent $280 million to the state’s education fund. The number of imported workers in Macau has surpassed the 110,000 mark for the first time, official figures show. The majority— close to 67,000—came from the mainland. A new draft decree in Vietnam raises investment minimums and other requirements for operators looking to develop gaming resorts in the country. Companies applying for licensing now must submit plans for full-scale integrated resorts, for which they must contribute at least 50 percent of the investment capital. The new law also requires that developers be established and in operation for at least 10 years, and it limits the extent to which foreigners and overseas Vietnamese may invest in casino projects. The Ne-

vada Gaming Commission voted 5-0 to grant a license to operate two private high-roller gaming rooms at Bellagio. MGM Resorts International, owner of the resort, expects to have them open in time for Chinese New Year in early February. MGM officials will ask for a private salon at the Aria sometime later this year. Kentucky Governor Steve Beshear, who for years has been trying to get casino gaming authorized to help his state’s storied racing industry, said last month that he may pursue a new approach in the 2013 legislative session: He may drop the requirement that a racetrack be attached to new casinos. Beshear, speaking to the Louisville Courier-Journal, said he is contemplating promoting a gambling amendment in the new legislative session that would legalize casinos independent of the racing industry—a proposition that the powerful horse racing lobby has opposed in the past. He told the newspaper he will talk to racing industry officials “to see whether they can get their act together to support some type of approach like this.” The two casino development companies that are rivals for a license in Springfield, Massachusetts, MGM Resorts International and Penn National Gaming, were several days ahead of meeting the January 15 deadline for turning in detailed proposals to the city. They also submitted their phase-one applications to the Massachusetts Gaming Commission. Both had previously paid the $400,000 application fee to the state. Governor Jack Dalrymple of North Dakota last month signed amendments to the state tribal gaming compacts with representatives of five tribes in the state. The signing ceremony took place at the state capitol. The amendments, negotiated over the past year, are for 10 years with options to extend them by 10 years, although they are mainly minor adjustments to the compacts, which were first signed in the 1990s.

Said It”

“Mr. Okada, being a foreigner, maybe didn’t know exactly how to operate in the Philippines, but the administration now with President Aquino has created serious credibility on the corruption front.” —Enrique Razon, Jr., the principal in Bloomberry Resorts and the Solaire Manila casino hotel, on why investment in the Philippines is safer than ever, even in light of accusations that Japanese billionaire Kazuo Okada bribed officials to get a gaming concession

“Maryland’s current licensing structure really is nothing but a massive giveaway. The state would have been better off putting the license up on eBay.” —Christopher Summers, president of the Maryland Public Policy Institute, commenting that the state’s $3 million-per-500-machine license fee should be closer to $500 million per casino

“People are going to go to the most convenient, best facility. The process that we are going through is going to guarantee that we have the most convenient and the best facility.” —Stephen Crosby, chairman of the Massachusetts Gaming Commission, defending the commission’s slow pace in approval of casino licenses

“They have a way of self-regulation that is selfpreservation. In order to stay in business, they have to make sure they are not getting hacked into. They have always got to be assured they are accepting wagers from legal jurisdictions, that they are doing geolocation, and age verification.” —Nevada Gaming Control Board Chairman A.G. Burnett to the Las Vegas Review Journal on his assessment of online gaming companies

CALENDAR February 4-7: ICE 2013, ExCel Centre, London. Produced by Clarion Gaming. For more information, visit icetotallygaming.com. February 5-7: Western Indian Gaming Conference, Morongo Casino Resort & Spa, Cabazon, California. Produced by the California Nations Indian Gaming Association. For more information, visit wigc2013.com.

February 19-21: iGaming North America, Planet Hollywood, Las Vegas. Produced by the Innovation Group of Companies, Lewis & Roca, BolaVerde Media and egamingbrokerage.com. For more information, visit igamingnorthamerica.com. February 25-27: World Game Protection Conference, M Resort, Las Vegas. Produced by World Game Protection, Inc. For more information, visit worldgameprotection.com.

Global Gaming Business FEBRUARY 2013

March 24-27: Indian Gaming 2013, Phoenix Convention Center. Produced by the National Indian Gaming Association. For more information, visit indiangaming.org/events/tradeshow. April 23-25: Global iGaming Summit and Expo (GIGSE), San Francisco. Produced by Clarion Gaming. For more information, visit gigse.com. May 1 & 2: RD&E—Retail, Dining & Entertainment in the Gaming & Hospitality Industry, Planet Hollywood, Las Vegas. Produced by Global Gaming Business and the Innovation Group. For more information, visit RDEExperience.com.

“As in previous years, a gaming bill has as much chance of passing through both Lone Star State legislative houses as the Dallas Cowboys have of winning the Super Bowl with Tony Romo at quarterback.” —Howard Stutz, a columnist for the Las Vegas Review-Journal, commenting on a gaming bill being introduced in the Texas legislature last month

“We will not see an expansion of slot machines in Florida in 2013. We will, however, continue to see an expansion of internet sweepstakes parlors.” —Robert Jarvis, professor, Nova Southeastern University Law Center

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AMERICAN GAMING ASSOCIATION by FRANK J. FAHRENKOPF, JR.

Code Talker The Code of Conduct a decade later Frank J. Fahrenkopf, Jr., President and CEO American Gaming Association

his year marks the 10th anniversary of the Code of Conduct for Responsible Gaming, but the truth is our industry’s commitment to responsible gaming stretches back much further than one decade. In fact, when we at the American Gaming Association sat down with our board for our first meeting in 1995, how to properly address responsible gaming as an industry was one of the very first items on the agenda. Six years later, in 2001, the day our board approved the code is one of my proudest moments as president and CEO of the AGA. Developing the code was no small task. Getting the members of any association to agree on a code by which they will all abide is never easy, and ours were no exception. But through the efforts over several months of more than a dozen member representatives and our staff, the code was developed and approved. The result is a living document that serves as a pledge from the AGA and its member companies to employees, patrons and the community to make responsible gaming an integral part of the industry’s daily operations. It also is the final product of some of the best collaboration our industry has ever done. The fact that the code is still relevant today is a testament to not only that hard work, but the fact that its implementation has been a success— when it comes to the Code of Conduct, we in the commercial gaming industry have indeed practiced what we preach. We are proud of it, our member companies strictly adhere to it, and regulators respect it. The code has stood the test of time and even gone on to serve as a model for the development of comprehensive responsible gaming programs internationally. As you may know by now, to coincide with its 10th anniversary, the AGA has released an updated and revised Code of Conduct for Responsible Gaming. This updated code remains a comprehensive document that addresses all aspects of our business—from employee education to advertising and funding responsible gaming research. However, the ways in which we communicate about responsible gaming, with both our

employees and customers, have evolved in the last 10 years. This update recognizes that evolution. Just as we did 10 years ago, we assembled a working group of legal, regulatory, compliance, communications and marketing professionals representing AGA member companies and worked for several months to put this updated code together. It was approved by the AGA board of directors in October 2012. It is worth pointing out that, by and large, these changes are minor. That the code required so little adjustment after all this time is, perhaps, a testament to its staying power and the comprehensive nature of its original provisions. The basic tenants of how we address responsible gaming remain consistent. Simply put: The updated code reflects the way we do modern business. Compared to a

‘‘

Global Gaming Business FEBRUARY 2013

When it comes to the Code of Conduct, we in the commercial gaming industry have indeed practiced what we preach. We are proud of it, our member companies strictly adhere to it, and regulators respect it.

’’

decade ago, our interaction with customers has shifted online, using various websites and social media channels to market our entertainment product; also, the ways we deliver our products and services have expanded just as our businesses have diversified. While on the topic of our dedication to responsible gaming, I want to mention a recent study that was completed by a team led by a University of Iowa psychiatry professor who has been researching gambling for over two decades. In short, the in-depth study reaffirms what research by Harvard Medical School and countless

others have found: that the number of people with gambling problems did not rise in Iowa despite the increased number of casinos in the state. (In fact, both of these numbers decreased, compared to findings from similar studies conducted in the mid ’90s.) I mention this not to diminish a problem that we take seriously, but rather the opposite. While these and other studies confirm that about 1 percent of the adult population suffers from pathological gambling, our commitment to this issue cannot ever waver. The fact is we don’t want problem gamblers in our casinos. Even though 99 percent of the people who come to our properties can gamble responsibly, we have the moral obligation to help those who cannot. And we have a responsibility to educate our employees and customers. The code solidifies these obligations. In fact, there is scientific evidence that education can in fact help prevent gambling disorders, and it is why we continue striving to help people understand the odds, know how our games work and encourage responsible decision-making. Efforts such as posting information on where to get help and how to self-exclude from casinos are original provisions from the code that have had a proven, positive impact on responsible gaming. I should note that because of the specific issues and complexities raised by online gambling, this updated code does not include provisions relating to online, social or mobile gambling. A separate code to address those platforms in the future would likely use the 2011 AGA Code of Conduct for U.S. Licensed Online Poker Companies as its basis. The 10th anniversary of the code and the release of this update are an opportunity to re-educate our employees, regulators and the public about the industry’s commitment to responsible gaming and how elements of the code impact their daily lives. I encourage you to take the time to review the updated Code of Conduct, talk to your employees or employer about it, and join us in ensuring that the code remains a critical benchmark for how our industry addresses responsible gaming in the next decade and beyond.

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FANTINI’S FINANCE by FRANK FANTINI

Growth is Back Borrowing, consolidating and expanding are back in style in the gaming business

hen Wynn Resorts reported that it had hired MGM Resorts executive Gamal Aziz to head a new development subsidiary, it was sending a message: Growth is back. After a half-decade of modest development and balance sheet repair, American casino companies are positioned to grow. And, after a half-decade of caution, the animal spirits are returning, fueled by cheap debt, those stronger balance sheets, and growing confidence in the economies of Asia and North America. The warming up has been evidenced by companies willing to borrow to expand, such as Boyd buying Peninsula Gaming and Pinnacle offering to buy Ameristar. It also is indicated by the interest among major companies in likely metropolitan-area casino projects—MGM and Penn National outside Washington, D.C., Wynn and Caesars in Boston, all the majors in Toronto, and the push by each of the Macau operators for big new projects. The ability of the companies to finance expansions has improved considerably. At the height of the development boom in 2007, big-cap casino operators were spending in excess of 60 percent of their net revenues on capital projects. That figure today is under 10 percent. Wynn has been conservative about expanding, operating just two adjacent properties in Las Vegas and one in Macau with another on the way. In fact, one of the most interesting debates occurred long-distance during their respective investor conference calls when Steve Wynn would say that “Bigger isn’t better. Better is better,” and Las Vegas Sands CEO Sheldon Adelson would counter that “Bigger is better.” Nor does Wynn need a development subsidiary to handle current projects. Steve Wynn has been his own chief development officer in Macau, Philadelphia and Boston. It seems clear he has more in mind. Japan might be one possibility, as that country is again seen as moving to legalize destination resort casinos. And why leave Washington to MGM or Penn? 16

Whoever gets a casino a stone’s throw from D.C. and its affluent suburbs will own a gold mine. As of this writing, Wynn has not expressed an interest in Washington, but the opportunity is certainly worth a look. Then there is the asset-light model of noncasino resort development being pursued by MGM Resorts and Caesars. If the idea is that casino companies’ brands and resort expertise can be extended to non-gambling resorts, then Wynn would be the natural in that space. Isn’t an exquisite Wynn resort just what Dubai or a neighboring emirate would die for? But whatever Wynn has in mind, it is clear that industry growth is resuming. Shaun Kelley of Bank of America/Merrill Lynch, for example, has pointed out that by 2017 Macau will increase the number of table games by 35 percent, slots by 52 percent and capital expenditures by 75 percent. Though appetite for growth has revived, we doubt it will match the boomtown frenzy of Las Vegas before the Great Recession. One difference is that casino companies are looking at big markets in which competition would be limited. Clearly, the only casino in downtown Chicago, Toronto or Tokyo would be worth big investments. We also suspect the next development round will be more disciplined. Caesars’ Linq and the Bill’s Gambling Hall redo will cost less than $750 million. The conversion of Sahara into a trendy SLS also is not a multibilliondollar affair. Executives and investors also remain scarred by the 2008-2009 collapse, and owner/CEOs like Wynn and Adelson appear to be enjoying dividends, so they’ll want to maintain the ability to pay them.

PROLIFERATION AND CONSOLIDATION Pinnacle’s proposed purchase of Ameristar would further reduce the number of regional casino operators. It follows Boyd having taken out IP in Biloxi and, more recently, Peninsula Gaming.

Global Gaming Business FEBRUARY 2013

It continues the long process of consolidation that has seen the disappearance of both public and private operators such as Argosy, Aztar, Casino Magic, Boomtown, Horseshoe, Players, Riviera Corp. and Hollywood. But, in fact, there also has been a proliferation. That dynamic has been somewhat masked because they are mostly privately held—Landry’s Golden Nuggets, Cordish Cos., Neil Bluhm’s various properties, as examples. In addition, some small public companies have become multi-property operators, such as Monarch Casino, Churchill Downs, MTR Gaming and Full House Resorts. And many single-property enterprises have sprung up, such as Greenwood Racing’s Parx Casino, Valley Forge and Mt. Airy in Pennsylvania. Indeed, the low-profile proliferation bears within it the potential for another round of consolidation. As Joel Simkins of Credit Suisse noted, there are 118 privately held commercial gaming assets in the U.S. vs. 139 operated by public companies. That’s a lot of potential for consolidation. For gaming suppliers, the proliferation has happened and the time for consolidation is arriving. There has been a rush of new, or newly ambitious, competitors. We all know the names: Konami, Multimedia Games, Ainsworth, Summit, American Gaming Systems, Cadillac Jack, VGT, Aruze, Incredible Games, Spielo, etc. Other established companies are looking at entering North America: SHFL entertainment, Merkur and Novomatic among them. But the trend cannot continue. There is simply not enough business for every company to support the kind of cost structure needed to compete across broad markets. Thus, the recent demise of AC Slots might not be the last disappearance we see. Consolidation will come among the suppliers, one way or the other. Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

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Maryland Momentum Will table games and new casinos seize the opportunity of a potentially lucrative market? BY FRANK LEGATO

ive years ago, there was a new breeze in the Eastern gaming market. As established markets like Las Vegas and Atlantic City were sinking in the muck of the worst economic malaise in anyone’s memory, the upstart Pennsylvania casino industry was soaring—logging stellar gaming revenues at the expense of its neighbor in New Jersey. As the national recession deepened in 2008, state lawmakers in states surrounding Pennsylvania began looking to carve their own slices of the Eastern gaming revenue pie. Prominent among those states was Maryland. Maryland stood among its mid-Atlantic neighbors as a land of opportunity. Millions of gambling dollars had been streaming to Delaware’s three racinos, some of which claimed half of their gaming revenue from the hands of Maryland citizens. Even more importantly, Maryland was the epicenter of an enormous, largely untapped gold mine of potential gaming revenue—the Baltimore/Washington, D.C. corridor. Around 9 million people live in the metropolitan area comprising Baltimore, Washington, D.C. and northern Virginia. In 2008, the only casino in close proximity was Penn National Gaming’s racino in Charles Town, West Virginia. Maryland lawmakers looked to exploit this fact. That November, Maryland citizens voted to authorize five slot casinos in various regions of the state. However, the expected flood of gaming revenues did not happen—largely because of the Maryland gaming law’s onerous 67 percent revenue tax on slots. Only two casinos opened in the first three years of the nascent industry, small operations owned by Penn National in Perryville near the Delaware border and at Ocean Downs, a racetrack near Ocean City in the Eastern Shore region. The sole exception to the low investment was Anne Arundel County, where Cordish Companies—after bitter fights with former Laurel Park racetrack owner Maryland Jockey Club and Penn National, which had bought half of the Jockey Club—bought in big-time for a major destination casino adjacent to the

Global Gaming Business FEBRUARY 2013

Arundel Mills Mall in the Baltimore suburb of Hanover. Of course, by the time the massive Maryland Live! casino opened last year (after successfully defeating a ballot measure funded by Penn challenging its zoning), there was more change in the air. Other operators were interested in cashing in on the potential of the Baltimore/Washington corridor, but only with full-blown casinos. Within two months of Maryland Live!’s June grand opening, Governor Martin O’Malley and lawmakers held the special legislative session that created Question 7 on last November’s ballot—ultimately authorizing a sixth Maryland casino in Prince George’s County, 24/7 gaming operations and table games for all casinos, along with breaks in the revenue tax for most casinos, to occur within the next few years. That vast, untapped Maryland potential now seemed closer than ever.

Growing Pains The campaign over Question 7 was a bitter face-off of moneyed interests in Maryland over gaming expansion; upwards of $95 million was spent on proexpansion and anti-expansion television ad campaigns, exceeding the 2006 gubernatorial race as the most expensive campaign in Maryland history. But Cordish, whose Maryland Live! casino was already generating big revenues as the state’s largest casino, didn’t spend a penny of that money. The campaign spending was split between two industry behemoths—MGM Resorts International, which had partnered with developer Peterson Companies to propose a Prince George’s County mega-casino at National Harbor on the

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ty, a great location and ili fac s as -cl rld wo a ve ha we ve lie We be s—be it Caesars or er oth for lt cu ffi di be ll wi at th es iti great amen compete with. to — se en lic ’s ge or Ge ce in Pr e th whoever wins r, Cordish Companies

“

Managing Partne —Joe Weinberg President and

”

in-house dealer school. The dealer school is being run by a team Cordish assembled before Question 7 even passed. “In anticipation of its passing, we started in September with our recruiting of experienced supervisory and training personnel, and secured a location to handle the volume of people we’d be putting through the school,” Weinberg explains. He notes that the casino also is working closely with the Anne Arundel Community College in the training program. “We’re happy to have table games,” says Weinberg, who predicts Maryland Live! tables will be running by April. “We’ll have a nice head start in the market.” That head start will be measured in years—Horseshoe Baltimore, Caesars’ facility near the Baltimore sports stadiums, is pegged for a 2014 opening. Under Question 7, a Prince George’s casino cannot open until 2016. Weinberg says the opening of 24/7 gaming alone has increased business at Maryland Live! by double digits. “We believe we have a world-class facility, a great location and great amenities that will be difficult for others—be it Caesars or whoever wins the Prince George’s license—to compete with,” Weinberg says.

Future Is Here Potomac, in favor of expansion; and Penn National, which fought against it. The pro-casino forces also were supported politically by Prince George’s County Executive Rushern Baker, who stumped for the National Harbor location; and financially by Peterson and by Caesars Entertainment, which had been awarded the license for the city of Baltimore. (Caesars officials said legalization of table games was a fair trade-off for additional competition.) Penn National officials claimed this support amounted to a “fix” being in for the National Harbor location over its own Prince George’s facility, Rosecroft Raceway, which it had purchased out of bankruptcy with the express intention of making it a racino that would rake in revenues from the D.C. market. Penn’s claims of an alleged “back-room deal” were countered by MGM, whose political commercials claimed Penn was simply protecting its own revenues at the out-ofstate Charles Town racino. After opening Maryland Live! in the summer, Cordish emphatically opposed the creation of a Prince George’s casino while the referendum was considered by lawmakers, claiming its own $500 million investment in the state had been made with acceptance of the rules and potential competition as they were set in 2008. However, after lawmakers voted for the referendum, Cordish sat back and let Penn and MGM do all the fighting over expansion, and all the spending. “I’m not quite sure that any more money poured into this battle would have been useful at all,” says Joe Weinberg, president and managing partner of Cordish Companies. “This was probably one of the most expensive issue campaigns anywhere in the country.” Despite its former position, when Question 7 passed, Cordish moved quickly to capitalize on the opportunity it offered. On December 27, Maryland Live! became the first casino to open its doors for round-the-clock gaming, and the first to submit a request for table-game approval. On January 7, Cordish opened an

Meanwhile, the state’s regulators are busy preparing the way for expansion of the state’s nascent gaming industry into a full-blown casino market. Like Cordish, the state itself prepared for passage of Question 7 before the actual vote took place. In late October, O’Malley appointed the seven-member Maryland Lottery and Gaming Control Commission to regulate and oversee all gaming in the state. The new commission replaces the state lottery agency, which purchased and owns all the video lottery terminals. The Maryland Video Lottery Facilities Location Commission, the part-time body that evaluates the bids on new casinos, will decide who gets the new license. It is now an arm of the new commission. Stephen Martino, who has been lottery director since 2010, is now director of the new Lottery and Gaming Control Commission. The revamped agency’s first task this was to forge the regulations governing table games. Underlying regulations such as internal controls, security and surveillance requirements and responsible gaming rules were approved at the commission’s December meeting, along with specific rules governing blackjack and poker. Martino says the balance of the rules—for more than a dozen games including baccarat, sic bo and specialty poker—were on the agenda for January. “I think we will have a thriving table games market in Maryland,” Martino says. Also among the commission’s first tasks was approval of requests for increased hours. Maryland Live! was the only one of the three casinos to go for 24/7 gaming. The two other casinos went for round-the-clock gaming on the weekends, while keeping their early-morning closing times during the week. According to Martino, the Location Commission was to meet in late January to issue a request for proposals for the Prince George’s license. He readily denies the notion that approval of the National Harbor project is a fait accompli. FEBRUARY 2013 www.ggbmagazine.com

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“To the extent anyone believes that the ‘fix is in,’ or that there’s some kind of predetermined outcome for Prince George’s County, that’s completely false,” he says. “We are working very hard to put together a fair and transparent process that hopefully will bring many bidders, because ultimately, the state benefits form having a competitive bidding process.” Martino says he expects bids to at least come from National Harbor and Penn National. (Penn officials declined to comment for this article.) Martino also rejects criticism from some lawmakers that the licensing fee structure in Maryland—casinos pay $3 million for every 500 slots—is a “giveaway” to the operators. “They’re saying we should auction the (Prince George’s) license,” he says. “The downside of an auction is that there is not an unlimited amount of money these casinos have access to. And, every dollar you put into an up-front license fee or auction bid is in all likelihood a dollar that is no longer going to be invested long-term into the facility itself. “On the other end, we also have a very high tax rate in Maryland, so it’s not like we’re letting the casinos off free and easy.” The rate will come down for casinos in exchange for another provision of Question 7—beginning in 2014, casinos will take over purchase of slot machines and other gaming equipment from the lottery. “But even after all the reductions, you’re going to have effective tax rates in the best case that are just under 50 percent,” says Martino. “Compare that to other jurisdictions—almost all of them— and you’ve still got a higher effective tax rate than just about every other jurisdiction.”

Next Up As the framework develops for table games and new casinos, the two remaining current licensees are busy preparing for operations. The Rocky Gap Casino Resort in the rural western portion of the state will open in June. (See box.) Next up after that will be Horseshoe Baltimore. According to Chad Barnhill, general manager of the casino, groundbreaking for the Baltimore casino is expected in March or April, with a grand opening pegged for the second or third quarter of 2014. The casino—on a parcel next to M&T Bank Stadium, home of the NFL’s Baltimore Ravens—was originally pegged as Harrah’s Baltimore, but the switch to the Horseshoe brand was a direct result of the legalization of table games. “The Horseshoe brand is very table-centric,” says Barnhill. “What we found with (Horseshoe) Cleveland is that in the cores of these major cities, unlike some of the suburban casinos we operate, the core gamers are very excited about table games.” In addition to the inherent advantages in Caesars casinos such as the national Total Rewards players club and the World Series of Poker—Horseshoe will include a 30-table WSOP poker room—Barnhill says the casino will compete with Maryland Live! and other nearby casinos by identifying with the locals. “We’re going to start off without a hotel, but we’re going to have hotel partners throughout the city,” he says. “We’re going to have a Total Rewards Around Town program where customers can go into local restaurants, show their Total Rewards cards and get discounts. We’re really making this Baltimore’s casino.” When Question 7 passed, there were inevitable criticisms of a saturated market in Maryland—the Prince George’s casino will likely be less than half an hour from the two Baltimore-area casinos. While Martino says time will tell, he points to the quality of the participants in the market as evidence that there’s enough business to go around. “I would think that MGM, Caesars and Maryland Live! looked at those questions very carefully, and their support was not given blindly,” says Martino, “but from being educated about what the impact of full build-out would be.” Barnhill agrees. “I think there’s enough business,” he says. “The state’s done a nice job of analyzing where Maryland needs to be to be able to compete.” 20

Global Gaming Business FEBRUARY 2013

That Other Casino Rocky Gap prepares a gaming property different than all others in the state he Rocky Gap Lodge & Golf Resort in rural Allegany County was a money-

T loser for the state of Maryland. Attached to a state park, the lodge fell into

disrepair in recent years. After the 2008 gaming law made the lodge one of the approved gaming locations, it took three tries and a changing of the rules before three companies bid on the license. In addition to a lower revenue tax (50 percent), the state had sweetened the pot by dropping a requirement that the casino be a newly-built structure. The winning bidder was a subsidiary of Lakes Entertainment, the operator founded by former gaming executive and poker pro Lyle Berman. The Rocky Gap Casino Resort will open in June, with a casino located in former meeting space. (Additional construction may come in the future.) According to Tim Cope, president of Lakes Entertainment, the operator will call on its experience—it manages California’s Red Hawk Casino for the Springs Band of Miwok Indians and is a partner with Ohio’s Rock Gaming in two casinos—to do what the state could not: make money at Rocky Gap. “We will offer a different experience than the other casinos,” Cope says. “There is a boutique lodge feel to the property that I think will attract a lot of people for an overnight stay. I think people in the Baltimore area in particular have expressed interest in a place to come for an overnight stay, winter or summer.” The property includes a Jack Nicklaus-designed golf course, a world-class spa, and proximity to a variety of summer and winter sports. Cope says summer business was never a problem, but the company will concentrate on marketing the casino and nearby skiing and snowmobiling to fill the property in the winter. Cope says the reason the state lost money on the casino was that no improvements were made once it became clear it was going to be one of the casino locations. “Everybody who worked at the property kept thinking they were going to be sold the next day, and they hadn’t made any attempts to market rooms or groups,” he says, “because they didn’t know who was going to own it.” Lakes will change that, he says, when the new meeting space is complete. Meanwhile, after the casino opens, room renovations and construction of a new lobby and restaurant will be ongoing during the first months of operation. Cope predicts Rocky Gap can grow into a popular local casino destination not only for Maryland, but west-central Pennsylvania markets such as Altoona and Johnstown. “Within a 60-mile radius, there are approximately 250,000 people,” he says. “I think it’s definitely going to be a locals market here, supplemented by the fact we’ve got hotel rooms, a golf course, a spa and other amenities. “I think we’re going to offer a different casino experience than the mainstream Maryland facilities.”

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GAMING REGULATION by RICHARD SCHUETZ

Ed Olsen’s Gift Black History Month and the Regulation of Gambling

fter I awoke a recent Sunday morning and was well into my routine of rummaging through the internet (I understand that most people surf, but I rummage), I came across an article that reminded me that it was National Black History Month. While partaking in this rummaging, I also came to understand that February is National Cat Month and National Heart Health Month, but the fact that it was National Black History Month took me back to a time many years ago. In the mid-to-late ’70s, I was rummaging through the wilds of Northern Nevada trying to discover a dissertation topic (I was well into rummaging before the internet). I had completed both my Ph.D. qualifying exams and field exams at the University of Utah, and so needed a dissertation topic. Since I had basically funded my education through dealing cards and dice in the casinos of Reno, I was most interested in writing about gambling. I drove to Reno from Salt Lake City to mine for a suitable topic, and my first chore was to look up my two old professors from my University of Nevada days, Bill Eadington and Glen Atkinson. It seems that Bill was out-and-about in the world, making it safe for slot machines, so I spent most my time with Glen. Glen was teaching a summer school class, basically hanging around the university a lot, and so I attached myself to him. He sent me off to the library’s Special Collections Unit and told me to find a woman by the name of Mary Ellen Glass. Glass ran the Oral History Program, and immediately turned me onto that collection, especially those works that dealt with the gamblers. My favorite of the collection was that of Ed Olsen. Olsen had been the AP wire service correspondent for Northern California and all of Nevada. He covered the Bay Area during the 1950s, but was also given the Nevada beat that was primarily about Reno, which was the gambling center of the state, and Carson City,

which was the political center. Since not much happened in Nevada of interest to the AP, giving it to the San Francisco guy made sense. Some of Ed’s biggest stories had to do with the celebrity divorcees serving “the six-week sentence” at one of Reno’s dude ranches (the “six-week sentence” referred to the short residency requirement of the state which was important to many people seeking a divorce).

‘‘

Global Gaming Business FEBRUARY 2013

During the 1950s, Las Vegas was known by many as the Mississippi of the West. It acquired this moniker because the casinos located there, especially those resorts beginning to define the Strip, practiced segregation.

’’

But as casinos began to develop in the southern reaches of the state, and all kinds of questions were being floated concerning the ownership of those casinos, Ed’s work went from developing an occasional story about Nevada to spending a great deal of time there. He was the man covering the gambling beat in Nevada during the late 1950s, and it was during this time that he came to meet Grant Sawyer, a man who became governor of the state in 1958, and who appointed Ed as the head of the Nevada Gaming Control Board in 1960. Ed spent the next six years there during an interesting and turbulent time in the history of Nevada gambling. After reading Olsen’s oral history, I was discussing with Glass how I enjoyed it. She said

that I should go meet him, since he was living in Reno. She was kind enough to work through the details of arranging this visit, and so off I went to meet this man, armed with a tape recorder, pen, legal pad and a huge amount of naiveté. When I got to where Olsen lived, I discovered a very small structure that was basically a freestanding studio apartment. My knock was greeted with a muffled yell to enter, and so I did. The apartment was in a significant state of disrepair, quite messy, and reeked of alcohol and cigarettes. Olsen was also in a significant state of disrepair, quite messy, and he also reeked of alcohol and cigarettes. He was dying, and he was dying alone. I spent the next six weeks with him, going over his files, sharing my research, and watching him drink a ridiculous amount of vodka. The vodka helped him manage the pain of the various diseases that were destroying his body, and the loneliness and despair that was ravaging his soul. He seemed to have one person looking in after him from time to time, and I forget this angel’s name. I believe she worked in the office of N. Ed Miller, the president of the University of Nevada, and she would stop in to look after Ed, ensure that he was still alive, and that the taxi service had been delivering his groceries, which anymore mainly consisted of vodka. He had no visible signs of a family, and it seems that they had all died, divorced, left, or otherwise estranged him. For the next six weeks I became Ed’s new best friend. So what does all of this have to do with Black History Month and gaming regulation? Well, let me get to that… During the 1950s, Las Vegas was known by many as the Mississippi of the West. It acquired this moniker because the casinos located there, especially those resorts beginning to define the Strip, practiced segregation. People of color were not welcome as guests, and should they not understand this rule, the security forces of these establishments would cause them to understand. In the late 1950s, this practice was beginning to attract a bit of resistance. The NAACP began to chip away at this disgusting

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edifice, and there was an ever-increasing circle of both public and private officials who began working to remove this stain from the state. Why, even Frank Sinatra and his associates within the Rat Pack are often mentioned in this regard, working to integrate the Strip for many of the black entertainers who, while they could entertain on the Strip, could not stay there. At this time in the history of Nevada, all of the gambling areas of the casinos needed to be open to the public. It was also the case that the casino operator would suffer the wrath of the Nevada Gaming Control Board if they tried to prevent an agent of Gaming Control from ac-

cessing the gaming areas. Armed with this knowledge, Olsen, with the full and complete knowledge of his governor, set out to deputize a black schoolteacher as an undercover agent of the board. Well, the rest is fairly easy to figure out. Once a casino operator walked the agent off of the property, it was brought to his attention that he had just prevented an agent of gaming from carrying out his assigned duties, and therefore, the operator was in serious breach of the laws governing his license. And that word got around the Strip fairly quickly. Well, today, the Strip is a different place, in

small part due to the effort of a simple regulator who had the understanding that regulation can be a tool to accomplish important public policy goals. Richard Schuetz was appointed to the California Gambling Control Commission in September 2011 by Governor Edmund G. Brown, Jr.; and reappointed in January 2013. Schuetz is also comoderator of the Executive Development Program in Gaming Studies, with Dr. William Eadington, and sponsored by the University of Nevada, Reno, and the UNR Institute of Gaming.

FEBRUARY 2013 www.ggbmagazine.com

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Hard Rock Tampa

Seminole Secrets

Hard Rock Café Tampa

Jim Allen, Chairman, Hard Rock International and Seminole Gaming

Florida tribe has become big player in the international casino industry BY ROGER GROS

ike most Native Americans, Florida’s Seminole tribe was treated abhorrently by the U.S. government. After three wars, the Seminole tribe was down to fewer than 300 in the 1840s. For the next 100 years, tribal members lived on the fringes of society. Their reservations were placed on some of the state’s most inhospitable lands, including the Okefenokee Swamp. But in the 1950s, the tribe began to get organized, and when gaming became an option for Native Americans in the 1970s and ’80s, the Seminoles were ready. Today, the casinos and hotels owned by the tribe employ more than 7,000 people and comprise one of the most successful Native American gaming enterprises in the land. Also like some tribes in other states, the Seminoles had little luck in convincing the Florida state government that casinos were in their best interest, so they were limited to establishing small Class II slot parlors in a couple of locations on their own reservations. But the governor repeatedly refused to negotiate a compact, which meant the tribe could only offer Class II games. Later, the tribe joined with developers to build Hard Rock casino resorts in both Hollywood and Tampa, still limited to Class II gaming. It wasn’t until Charlie Crist negotiated in good faith for a compact, signed in 2008 and later amended in 2010, that the Seminoles were granted the right to offer table games and real Class III slot machines. In exchange, the tribe will pay Florida more than $1 billion over the next 10 years.

Global Gaming Business FEBRUARY 2013

Florida Foundation Jim Allen was there in 2000 at the beginning of the process that resulted in the Hard Rock resorts, brought into the development by the Cordish Companies, which managed the construction process. Allen later became CEO of Seminole Gaming, and was recently rewarded by the tribe with a contract renewal (along with Hard Rock International President Hamish Dodds and CFO Brad Buchanan). He explains the separation of Seminole Gaming and Hard Rock International. (He and Buchanan are the only executives who have roles in both companies.) “Seminole Gaming is actually the entity that is really part of the tribe itself,” he explains. “It’s the vehicle for the seven casino properties that we operate in the state of Florida. The flagships are the Seminole Hard Rock properties in Hollywood and Tampa. The other casinos are Seminole Casinos, including the facility that we’ve completely expanded and renovated up in Coconut Creek, and then the Seminole Casinos in Immokalee, Brighton, Big Cypress, and the original Seminole property, the Classic in Hollywood. “That really makes up Seminole Gaming. We were a licensee of Hard

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Hard Rock Holl

FEBRUARY 2013

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Seminole Coconut Creek

All of the dollars that we make on a net income basis, whether it be at Seminole Gaming or Hard Rock International, stay in the state of Florida. When you combine Hard Rock International, which is a company that’s in 55 countries around the world, and Seminole Gaming, there are revenues in excess of $4 billion. —Jim Allen, Chairman, Hard Rock International and Seminole Gaming Rock International when we opened the Tampa and Hollywood facilities back in ’04. But in 2006 we actually purchased the Hard Rock International company. So that really is a separate LLC. It is a tax-paying entity; it is a corporation here in the state of Florida that owns and operates the Hard Rock brand on a worldwide basis, excluding certain geographic territories.” Like most tribal gaming enterprises, the Seminole operations are good for the state, as well as the tribe, says Allen. “The tribe is one of the largest employers in the state of Florida, with an annual effect of billions and billions of dollars on the Florida economy,” he explains. “All of the dollars that we make on a net income basis, whether it be at Seminole Gaming or Hard Rock International, stay in the state of Florida. When you combine Hard Rock International, which is a company that’s in 55 countries around the world, and Seminole Gaming, there are revenues in excess of $4 billion. That company’s also based here in the state of Florida, with the worldwide headquarters for Hard Rock International in Orlando.” The recent flirtation between the state of Florida and commercial gaming companies came to an end in the 2011 legislative session when proposed bills were tabled for lack of votes. Allen and Seminole tribal officials reminded the state of the benefits brought by the tribal casinos that would be diminished if not eliminated by the introduction of integrated resorts. Allen says the tribal casinos were targets. “We certainly recognize that our success has created interest from all over the world,” he says. “Obviously, our friends at Genting probably will receive the most publicity about potentially doing something here in the state. But at the same time, the compact is a document that the tribe fully intends to honor, and we are hopeful that the state of Florida will. And that has some very specific language in it. That’s a public document, so everybody’s aware of it; there’s no secret here.” The consequences are far-reaching, should the state decide to expand gaming. “If the state decides to expand gaming, we’ve mapped out a very definitive course on what happens if there’s an expansion outside of Miami-Dade or Broward, what happens if there’s an expansion inside Miami-Dade or Broward, what happens if table games potentially are offered to the parimutuels, and the list goes on and on,” says Allen. “The compact addresses all these possibilities. And if the state of Florida feels that they want to create an environment where there is gaming all over the state, 26

Global Gaming Business FEBRUARY 2013

then obviously the revenue share that comes from the tribe would be deemed illegal by the United States, by the Department of Interior, and we would no longer be paying any revenue share to the state. And whether or not that works for the philosophy of the state of Florida, frankly I think that’s something for the elected officials of the state of Florida to address.”

Florida Market Allen believes that the state has some concerns about the kinds of visitors that expanded gaming may attract. “I’m not referring just to tax dollars or revenue share, but I’m referring to the social impact of gaming, the perception that Florida is a family destination state. We’ve all worked in Vegas at one time or another. Certainly Las Vegas is perceived to be kind of an adult entertainment environment. And when it did try to attract families, obviously that particular formula did not work. “So, I think if Florida wants to be more like Las Vegas, and have casinos all over the state, the results are unknown. We can be a true destination model and draw international tourism, specifically being so close to Central and South America. But until that roadmap is written and debated and discussed between all the parties, it’s a very interesting set of circumstances.” As successful as the Seminole Hard Rock is in Florida, the one in Tampa is even more lucrative. Allen says there are many reasons for that. “The brand is a great attribute to the building itself, so it becomes an interest for the tourism that goes into Orlando, as well as the local residents,” he says. “There’s pretty good demographics associated with household income in that region of the state, as well as a pretty strong population base within 100 and 120 miles. And at the same time, we’re not naïve to understand that it really doesn’t have a lot of competition up there. In Hollywood, where you’ve got nine or 10 different casinos you’re competing with, and while some of them are parimutuels with only 1,000 or 1,500 games, we’re competing with casinos that give coin or free play or comps or food or tickets to a show or whatever it is. Tampa does not have to deal with local competition.” Like Hollywood, the Seminole Hard Rock Tampa has continued to upgrade its facilities. A completely new Hard Rock Café was opened there in 2011, and last year a new Asian Gaming parlor and high-limit slot room debuted. Allen

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OTHER AGENCIES

DON’T KNOW

g says the tribe has been very judicious with reinvesting in the properties, and it has paid off handsomely. “We’re always considering how much we need to spend to stay current, and when you potentially over-spend then have excess capacity issues where you just can’t drive the margins,” he explains. “We talk about that on a daily basis. We spend a tremendous amount of time analyzing capital dollars return on investment, and I think there’s rarely a definitive answer. “It’s an evolving situation, that what may have been the right decision three years ago is now the wrong decision. And certainly, when you look at the decisions that people made in 2005, ’06 and ’07 where a lot of capacity came into the gaming industry on a national basis, with multibillion-dollar projects, probably a lot of us would have made different decisions then, based upon what we know today, as far as what was happening with the economy. “So from my standpoint, I think that is something that you always need to revisit. We are fortunate. If we see the need to enhance a particular area of the business model, we have the capital to do so.” One of the tribe’s original facilities, Seminole Casino Coconut Creek, has been totally transformed over the last several years with new restaurants, parking, landscaping, casino space and an entertainment venue called the Pavilion. “The place is just a home run,” says Allen. “It’s probably one of the prouder things that I’ve done in my 33 years in the industry. The numbers are really growing at rates which, candidly, we weren’t even expecting. And it’s not just a locals casino. We’ve developed a great relationship with the Boca Resort

and Country Club, so we will take blocks of rooms there, and we’ll give somebody an amazing experience at the Boca Resort, and certainly when they’re ready to come over and gamble, we have a car waiting for them to come over to the Coconut Creek facility.” Prior to the tribal-state compact, the requirement to offer only Class II gaming produced problems for the Seminoles, but Allen says that has turned out to be a benefit, as the tribe’s casinos are all using the state-of-the art Class II slot product. “We identified new technology as one of the core values or the mission statements of the organization,” Allen says. “And truth be told, it wasn’t that we were just that incredibly smarter than everybody else in the industry; we just were forced to figure out a way to offer a device that would be entertaining, and have it be able to meet the legal definitions of Class II, as we were migrating towards a Class III environment. So, because of that, we obviously needed to spend on talent, on capital dollars, on systems, and on relationships with manufacturers and providers. “In addition to that Lyle Bell, who recently retired with us, was also chairman of the Gaming Standards Association—Lyle and myself probably personally twisted more than a few arms, both from the manufacturers—including IGT—and even some of the operators. So we went out and solicited the manufacturers to get protocol technology developed on an industry basis, not just for Seminole Gaming, and Lyle just did an amazing job at leading that, not just for us, but on a national and international basis.”

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Hard Rock Hotel & Casino Punta Cana, pool and interior (below)

Brand Revival The Seminole purchase of Hard Rock International has brought it back to former prominence. BY ROGER GROS

hen Americans Peter Morton and Isaac Tigrett opened the first Hard Rock Café in swingin’ London in 1971, it quickly became a success. But it didn’t transform into an iconic brand until Eric Clapton and Pete Townshend donated guitars to hang over their regular bar stools. Since then, it has revolved around rock memorabilia and popular music of all sorts. But it looked like it had run its course in the early 1990s, when Morton sold his part of the company (a bitter split with Tigrett had already segmented it) to the Rank Group, a British entertainment and gaming company. Under Rank, the company continued its slow decline until one of its franchisees, the Seminole Tribe of Florida, bought it for $965 million in 2007. The decision to buy Hard Rock International wasn’t a difficult one for the tribe. The Rank Group was enduring financial hardships and the sale of Hard Rock only made sense. It also was logical to the tribe because it had been paying a hefty franchise fee that would no longer be necessary. Hamish Dodds, a former Pepsi executive, was pleased to see the arrival of the Seminoles, because he said the brand was tired and in need of reinvestment. “The tribe took a much longer-term view of the business,” he says. “(Hard Rock Chairman) Jim Allen and the board of directors supported a heavy reinvestment rate into remodeling our cafés, opening new cafés and making the tough decisions about closing underperforming units. And it’s paid off.” While Hard Rock’s entry into the casino business came back in the 1990s when the Hard Rock Hotel opened in Las Vegas (now owned and operated by 28

Global Gaming Business FEBRUARY 2013

Brookfield Asset Management, an offshoot of Morton’s settlement with Tigrett), that remained the only casino property for some time. Allen says when the tribe took over, that strategy began to change. “The previous owner was not receptive to go through a licensing process,” he says. “I obviously have an opposite point of view. I received my first key license in New Jersey back in 1981, and my life’s been an open book the whole time. So, we have no problems applying for licenses, and I continue to grow the business that way.” Hard Rock International doesn’t own any of the casinos branded with its name. While each deal is different, some are managed by Hard Rock for owners, and others are a licensing agreement with the owners operating the property. For Dodds and Allen, the management role is highly preferred. “It gives us better insight into our brand and how it relates to the gaming customer,” says Dodds. “From a brand point of view, the closer we can get to the consumer is better. Our goal at Hard Rock International is to promulgate the brand and increase the value of the brand for our shareholders. We do that with restaurants, hotels, casinos and all sorts of marketing programs. So, getting close to the customer ourselves is always advantageous.” Allen agrees, but points out that the company will adapt to any circumstance. “Our goal is to manage whenever we can,” says Allen, “but there are certain parts of the world where it makes sense to have a local partner, and if they’re in the business of managing, we’ll at least understand who they are and their capabilities.” Dodds says the company’s understanding of gaming creates a better financial situation if it has a management capacity.

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Our owners are very invested in gaming; they understand it, and therefore are willing to take some risks. —Hamish Dodds, President & CEO, Hard Rock International Hard Rock Macau

“Strategically, we understand that gaming is a high-capital enterprise that brings high rewards, and we can parlay that into gaming, hotels or restaurants,” he says. “Our owners are very invested in gaming; they understand it, and therefore are willing to take some risks.”

Hotel Heaven But gaming is just part of the Hard Rock International big property portfolio. Non-gaming hotels are also a major piece of the pie. Like the casinos, however, Hard Rock manages or licenses the hotels. Dodds says there is even a division in the types of hotels that Hard Rock manages. “We have two different kinds of hotels: hotels and resorts that are more leisure-oriented, and then we have hotels in cities that tend to be more urban and business-oriented,” he explains. “They each have different characteristics, obviously. On the gaming side, most of the situations we participate in are casino-driven, with hotels as key drivers of the casino business. In these cases, the casino is the primary revenue-generator. We will look at those projects from a gaming perspective. There are other situations where the casinos are more of an amenity to the hotel, like our property in Punta Cana (Dominican Republic) and one we are currently planning in Aruba. So we have to look at each property very independently and look at it in the context of its market.” Hard Rock has a presence in each of the two Asian hotbeds of gaming, Macau and Singapore. “They were both outcomes of different relationships,” says Dodds. “In Macau, our partner is Melco Crown—Lawrence Ho and Jamie Packer. They were looking for a differentiation of the resort experience, and being able to brand a Hard Rock casino added some differentiation for the gaming experience as well. In Singapore with Genting, there is only one casino, and the hotels at Resorts World Sentosa are seen as amenities to drive people to that casino, which is how the hotel there works.”

Café Couture The iconic Hard Rock Cafés are now in 55 countries around the world, a figure that Dodds would like to see increase to 70 in the next several years. But while the company actually owns more than half of its facilities in Europe and the United States, in new jurisdictions, partnerships are preferred. “We do this in areas where we don’t see a long-term critical mass for restaurants,” he says. “For example, in Santiago, we really don’t see the long-term prospects for more than one or two cafés in a country like Chile. It just isn’t worth the difficulty and the investment for us. We just don’t have the time or en30

Global Gaming Business FEBRUARY 2013

ergy to understand the accounting regulations, employment laws or the culture of the country. So, we’re better off using local folks who understand these things and usually are already passionate about our brand. We help them with the marketing components and they add value by being connected and understanding the nuances of their market. “It’s a low-risk approach for us, and probably means that we’re not going to be able to cash in much on the upside, but it gives us a great growth platform and allows us to expand our brand around the world pretty quickly.” The revival of the cafés altered all elements of the product, says Dodds. The design, food (made mostly from scratch) and ambiance were changed, but it was the core value of the restaurants that re-injected the excitement of the early days. “We’ve really tried to re-embrace music, particularly at the grass-roots levels in our new cafés,” he says. “People who go to our cafés these days have a good chance of seeing some live music.” The emphasis on local music has also created new events that bring more people and build excitement in each café. “We do what is now the world’s largest ‘battle of the bands’ with around 96 cafés participating,” he says. “The winner plays at one of our big concerts in London or does a round-the-world tour of our cafés. We’re probably going to do 20,000 live music events this year, up from 18,000 in 2012. That’s a pretty substantial commitment to live music by our company.” It’s this connection to music and artists that sets the Hard Rock brand apart from all others.

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Bruce Springsteen headlines at Hard Rock Calling 2012 in London

“Our big ‘Hard Rock Calling’ concert in London, or some of the big events we put together at the Hard Rock Hotel in Hollywood or the Orlando venue, which is quite unique… all the artists love playing those venues,” he says. “We provide genuine, high-quality destinations for the artists to play. And we have a long-term relationship with most of the artists. They understand that our brand is interested in promulgating all genres of music. They understand that our display of artifacts is a way of paying tribute to the music and the artists. They trust us because they know that we’re not in the memorabilia-selling business. Anything donated to us we agree to keep and display with museum-like quality.”

Building a Culture Anyone who has sampled the Hard Rock experience, whether its in the cafés, casinos or hotels, will agree that the employees are different than any other in those segments. In addition to careful customer service, the personality of each employee becomes clear. Dodds says that is encouraged. “This is the very challenging part of the hospitality business, particularly when you consider hotels and gaming, which sometimes has a history of being somewhat reserved,” he says. “We have to balance that and recognize that our guests are expecting a mature experience, but also a fun experience. “So, we have a delicate balancing act where we have to depend upon our employees to be really focused on executing their core competencies—the skills for which they are hired—but then we also encourage a degree of fun and individuality in their relations with our guests. But it’s a close call. They have to understand the guests and work out just how to interact with them with friendly and interesting attitudes. The staff also recognizes that they’re representing our brand and they can’t go too far.” Dodds proudly points out that the company employees have demonstrated admirable loyalty to Hard Rock down through the years. “We have a great culture that goes back to our roots with some of the philanthropic components that are identified with our brand,” he says. “We have the ability to retain employees that outpaces anyone in the industry, whether it’s the restaurant, hotel or gaming industry. We’re able to do that because we do trust our employee base to think and behave a little bit differently. But also, there are great career prospects here, and it’s a fun brand to work with. People want to work here because we’re a brand that doesn’t always just focus on the business. We work with our communities and some of the fun music-related components of our brand. We have a cultural indoctrination program for all of our new employees and managers, and it pays off because our human resources costs are much lower than other companies.”

Brand Loyalty The emphasis on the strength of the brand has been a paramount concern during the terms of Allen and Dodds. Brand integrity is being maintained even during occasional rocky relationships between Hard Rock International and its franchisees. “We have one of the most exciting and powerful brands in the world,” says Dodds. “We operate our brands in a combination of managed and self-managed, as well as a whole slew of franchises and licensed properties. We’re also focused in different segments—restaurants, hotels and casinos. So from a consumer point of view, it’s very important that it all hangs together. “The consumer doesn’t really understand—or care—about the different owners. Our goal is to do as much as we can to make the experience exciting using all those various components, by making sure we have strong brand controls and that we’re all using the brand in a consistent way.” When a tribal casino in New Mexico recently ousted the Hard Rock brand (managed by the separate Las Vegas company of the same name) for an alleged lack of support, Allen was so concerned about the impact on the brand that litigation is under way. “We are certainly disappointed that the relationship did not work out between Hard Rock Las Vegas and the tribe in New Mexico, the Isleta Tribe,” he says. “We certainly would have hoped for the best for both entities, and hopefully, things can progress positively for all parties in the future.” Dodds says the legacy of the Morton-Tigrett relationship is something that the company and all its partners have to acknowledge. “Everyone is dealing with a contractual reality,” he says. “We still have the same global agenda for the brand and still have a desire to keep growing the brand. Some of our licensees, however, have these so-called heritage agreements, and we need to use whatever we can to try to make sure the customer doesn’t get negatively impacted by some of our internal mechanics.” He says the brand is resilient, however, and can survive these ups and downs. “The good thing about our brand is we can be relatively flexible,” says Dodds. “We’re able to create a unique experience for our customers by using the brand as an overlay and adding music, food, resort, gaming and a few other components.” Allen is proud of the turnaround that has occurred for the brand since the purchase by the Seminoles. “Since our ownership, I think it’s fair to say that the Hard Rock brand is stronger now than it’s ever been,” he says. “So, I’m hopeful that we’ll be able to continue to mirror a similar path in the future to what we’ve been able to do in the past, but most importantly, so that it can bring real resources, real culture enhancement for the Seminole Tribe of Florida.” FEBRUARY 2013 www.ggbmagazine.com

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SURVEILLANCE SPECIAL REPORT

MAKING A

MARK

ing our backs? Are playing-card manufacturers watch By Willy Allison

n recent years, there’s been a huge increase in the number of casino table games around the world that allow players to handle the cards. From the masses of high-limit baccarat “squeeze” games in Macau to the lowerlimit poker derivative games in Vegas party pits, an increasing amount of players’ DNA can be found in our discard holders. But this isn’t a story about holding hands and transferring bodily fluids. This is a cautionary tale about the increasing threat of marked cards. Not by players bending, crimping, juicing or inking the cards at the table but by the companies who manufacture our cards. I’m not suggesting that card manufacturers are purposely marking cards with the intent to collude with players or casino management to rip off casinos. In 1999, a South African card manufacturing plant was compromised by a rogue employee who “altered” the printing plates. All the Aces and 10s of an unsuspecting casino were marked, giving the employee and his friends an advantage on all the blackjack tables. The scam was eventually picked up after casino management noticed the blackjack hold percentage dropped 3 percent over an extended period. Investigators believe the scammers also sold the information to gamblers for a flat fee. That was the industry’s first major wake-up call for the need for tighter security measures and controls in casino card manufacturing plants. The current threat is less sinister in intent, but mired in negligence and— dare I say it?—economics. It involves the quality of manufacturing, or more specifically, the lack of. Over the last few years, it appears an increasing amount of playing cards are being shipped to casinos with back designs that can be exploited by clever advantage players. The back designs are flawed because they have been badly cut during the manufacturing process. The badly cut cards result in a non-symmetrical appearance that may be exploited by “edge sorting” and “playing the turn.” In layman’s terms, the cards are being marked at the manufacturing plant. To get an idea of how bad it has become, last year I visited the Gamblers General Store in Las Vegas and bought used decks of cards from nine major Strip casinos. Five of the nine decks were badly cut to the extent that they could have been exploited and used in an edge sorting scam. This good deck-to-bad deck ratio is actually a little lower than the 70 percent of badly cut decks I discovered firsthand in my visits to casinos around the country in the last year.

THE PROBLEM To understand the problem, we must understand the importance of the back design of a casino playing card. The design should be symmetrical. If you took a pin and poked it in the middle of the back of the card, then turned it 180 degrees, it should look exactly the same as it did before you turned it. If it doesn’t, 32

Global Gaming Business FEBRUARY 2013

your casino may be exploited by smart advantage players using a method known as playing the turn. Here’s an example. A casino uses a back design that shows an arrow pointing upwards. As the cards are dealt from the shoe, players can see that the cards are all faced the same way by looking at the backs of the cards. If a player or dealer was to turn favorable cards 180 degrees, they would be able to identify them before they were dealt because the arrow would be pointing in the opposite direction. By sorting the cards and playing the turn, players can gain an advantage over the house primarily by identifying the first card out of the shoe or knowing what the dealer’s hole card is. Although there is an infinite number of custom back designs available, they can be broken down simply into three categories: full pattern, bordered edge and faded bordered edge. Full-pattern cards are the most common in casinos. A lot of them are referred to as diamondbacks, as they usually have some sort of geometric diamond-like pattern that covers the entire back of the card. Bordered-edge cards use patterns but have borders around the edge of the card. The faded bordered-edge cards are similar, but the border fades into the inside pattern, giving a blurred effect. Here is the problem. If the manufacturer does not cut the cards precisely, the edges of the cards will not look the same on both sides. In other words, the cards will not appear symmetrical, and therefore, the integrity of the game can be compromised through “edge sorting” and “playing the turn.” The easiest back design to sort if badly cut by the manufacturer is the full pattern or diamondback. Usually, an advantage player can spot the difference on opposite edges by the size of the diamond—i.e., half diamond, full diamond. To minimize the risk, it is commonly thought that a bordered edge is better. Not really; in some cases, the difference of border widths from the edges can stand out even more. For old guys like me, it’s sometimes easier to spot a thick white stripe on one side and a thin

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white stripe on the opposite. Probably the best type of card to minimize the risk of bad manufacturing is the faded border edge. It’s difficult to get a read on a badly cut card because of the blurry design. I’m not saying they’re always perfect. Sometimes flaws in the inside pattern design of all cards can be identified. I’m just saying if all inside patterns were equal, the faded border edge would be my choice.

HOW CASINOS ARE BEING RIPPED OFF

In the last two years, a team of players has taken a number of major high-end casinos around the world for millions of dollars using the above modus operandi. There are three keys to their success: 1) Finding a casino that uses badly cut cards on their high-limit baccarat games. 2) Finding casino executives who are willing to bend the rules and procedures. 3) Finding a casino lacking game protection knowledge and expertise.

Baccarat is the game of choice when it comes to edge sorting. The “game of kings” offers the highest limits in the casino and therefore the highest risk-to-reward ratio. Although the nuts and bolts of edge sorting have been explained, the biggest question and challenge is: How do the advantage players turn the cards on baccarat? The turn can only be played if the cards are used more than once, so that means cards must be sorted on a face-up game. So, how do the players turn the favorable cards when they don’t get to handle them? Simple—they get the dealer to do it. The scam starts with the “sorters” identifying a casino that is using badly cut cards. Once identified, the leader of the team will contact casino executives (usually a VIP host) and request a reserved mini baccarat table for a big player associate who has a large amount of money to gamble. But just before the host can ask where to send the limo, the player’s representative makes a special request. The host is told the big player likes to play a “special way,” and they would like a dealer who speaks Mandarin and a table that utilizes a shuffling machine. It seems like a harmless request at first, but when the players arrive at the casino, things start to get interesting. After choosing a table, the player’s representative requests that the dealer deal the first four cards face down. The dealer is then instructed to tilt each card back to expose the value to the player. At this stage (this is where it gets good) the dealer will then be instructed to either turn the card over or rotate it 180 degrees and then turn it over. If a fifth or sixth card is drawn to the hand, the dealer is asked to expose the cards the same way.

The player will place relatively small wagers during the first shoe. This phase of the scam is essentially the set-up phase, where the team is coaching the dealer to turn the Six, Seven, Eight and Nine cards. As standard procedure dictates, cards are always placed in the discard holder and shuffling machine the same way, the players have effectively used social engineering to sort and “mark” the high cards. Moving forward, the team will probably play the next shoe (the other eight decks of cards that have not been sorted) for a few rounds before requesting management to shuffle up. They may make up an excuse like the blue cards are not as lucky for their big player as the red ones. Of course, their motives are purely to get the eight decks that have

been sorted back onto the game. Once the set of sorted cards is back in play, the players make one more key request. They want to place their wager after the first four cards are dealt face-down. The acceptance of this rule change seals the deal for the scammers. Having turned the high cards, they can now identify where they are before they place a wager and gain an edge over the house by playing a mathematical strategy referred to as the baccarat hi-low strategy. This strategy can be found on Dr. Eliot Jacobson’s website, www.apheat.net. Jacobson is a math professor and a leading expert in casino advantage play strategies. In the last two years, a team of players has taken a number of major high-end casinos around the world for millions of dollars using the above modus operandi. There are three keys to their success: 1) Finding a casino that uses badly cut cards on their high-limit baccarat games. 2) Finding casino executives who are willing to bend the rules and procedures. 3) Finding a casino lacking game protection knowledge and expertise.

THE SOLUTION The solution is obvious. Don’t buy badly cut cards. If you read this article and decide to conduct an audit of your card inventory and find you’ve been sold a bad batch, there is a temporary Band-Aid solution. Add a turn in your shuffle procedures. This will mess up any sorting sequence that may have been introduced by a player or dealer. FEBRUARY 2013 www.ggbmagazine.com

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SURVEILLANCE SPECIAL REPORT

The root of the problem lies with the manufacturer, and as an industry we should demand better. But the ultimate responsibility for the integrity of the game should lay with casino management. The fruit shop owner doesn’t blame the plantation if the banana is rotten. Keep in mind that baccarat is not the only game that can be exploited with edge sorting and playing the turn. Other card games can be taken advantage of using sorting techniques. In blackjack, if you sort the Aces and 10s, you can sit on first base and have a field day with a 52 percent advantage when you know the first card out is an Ace or a 13 percent advantage if you know it’s a 10. The edge gained by knowing the dealer’s hole card is quite substantial too. The root of the problem lies with the manufacturer, and as an industry we should demand better. But the ultimate responsibility for the integrity of the game should lay with casino management. The fruit shop owner doesn’t blame the plantation if the banana is rotten. The responsibility starts with the person who signed off on the back design of the card. This person should have game protection expertise and understand the need for symmetry. I often hear stories of how purchasing and marketing people choose the back designs without any input from gaming or surveillance managers. Do your due diligence. Does the manufacturer you are looking to have the appropriate security and quality controls in place? The Atlantic City Golden Nugget fiasco last year highlighted the deficiency in quality controls of a card

manufacturer when the pre-shuffled cards they purchased were not pre-shuffled. A group of baccarat players noticed the predictable sequence and went on to win over $1.5 million. Casino management should be vigilant when it comes to manufacturer defects and flaws. A quality control process should be in place to cross-check the manufacturers’ work. I recommend the creation of a gaming equipment manager to oversee research, development, procurement, storage and quality assurance of all gaming equipment. This would include cards, dice, roulette wheels, chips, shoes and shuffle machines. Above all, educate your gaming and surveillance people to identify and recognize the threat of marked cards. Casinos are churning through large amounts of cards these days, but we have to be careful that we don’t become complacent when it comes to quality and security. Watch your backs. Willy Allison is a game protection consultant and trainer, and managing director of the annual World Game Protection Conference in Las Vegas, February 25-27 at M Resort. For more information, visit www.willyallison.com or www.worldgameprotection.com.

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SURVEILLANCE SPECIAL REPORT

GUNS AND Are You Prepared?

By Alan W. Zajic

GAMING

he recurring events over the last few years demonstrate even more what law enforcement already knew. There are people who can and will some day come into a business, including a casino, and just start shooting and killing people with some form of semi-automatic weapon. The fact is any semi-automatic gun can fire rounds as fast as a person can pull the trigger. The question you should ask yourself is: “Are my facility and team members prepared to deal with an active shooter event?” The tragedies of the theater in Aurora, Colorado and the Newtown, Connecticut grade school shock most people because of the nature of what they did. The massive press coverage in the U.S., with satellite trucks and reporters, unfortunately continues to encourage future events for the infamy a perpetrator may desire. Many people have become hardened to the news as long as it does not touch them personally. We feel sad and even try to help, but do we do enough to prepare our workplace or our families for what the bad guy may do? The reality in gaming environments is that we remain a “soft target,” in that casinos have multiple ingress/egress points where the bad guys can enter with arsenals beneath their clothing and start carnage at any moment. North American casinos have resisted the concepts of target-hardening to include metal detectors and screening much like TSA performs. Many properties already conduct screening into night and day life environments with their four walls. Is your casino as prepared to deal with an active shooter event before, during and after one occurs?

ADVANCED PREPARATION: READING THE SIGNS In most situations, the best predictor of events is the past. If criminal activity occurs regularly at your property and nothing substantial is done to mitigate it or reduce the opportunities, it will continue to occur. It is quite different in active shooter or similar events. In an active shooter incident, it is very rare that a person just snaps and starts killing people spontaneously. Most experts agree that the perpetrators of these murderous crimes plan them over long periods of time, and there are clues and indicators that just went unnoticed. You cannot predict when and how a shooting event will occur, and that 36

Global Gaming Business FEBRUARY 2013

makes it difficult to plan to prevent it. There are, however, many things that can be done to train and educate team members in what to do during a major incident involving a gun. The United States Department of Homeland Security developed a very effective program to teach people basic survivor skills during an active shooter event. The program is free, and anyone can obtain the pocket cards, posters and collateral materials in different languages. All employees should know what to do to for optimal survival in the event of a shooting rampage. Some executives say they do not want to train rank-and-file employees on active shooter events, and only train their security personnel on what to do. Some general managers say it would only scare the staff. Unfortunately, that approach will get people killed if they don’t know what to do. If implemented correctly, it can be a great employee relations program to show all team members what to do whether they are at work, the mall, the theater, restaurants or anywhere else shootings have occurred. Demonstrating you care for your employees is the definition of employee relations. Workplace violence programs can easily incorporate active shooter training into the mix. Reporting unusual behavior including comments, drawings, actions and attitudes is the greatest chance for intervention during the planning phases of the active shooter. They can also be deterred during this phase in different ways. Once they are armed and loaded for the kills, deterrence is typically not an option.

INTERRUPTING THE PHASES There are five phases to an active shooter event: the fantasy, planning, preparation, approach and finally the implementation phase, when it is too late. Having solid proactive and highly visible security can interrupt the successful processes of planning and preparation of the active shooter. The most success in preventing a potential active shooter is during these initial planning stages. Simple approach and inquiry can discourage the perpetrator. Questions such as, “Hi, you seem to be looking for something; can I help you?” have proven value to reduce crime through deterrence. The perception by the perpetrator that he is being watched and could be identified could have a life-saving effect. Security personnel should always attempt to deter and deflect potential criminals from their property through proactive and visible security presence.

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TREATING PEOPLE BADLY Too often the employees, including security personnel and managers, lose patience and treat people badly in negative situations including trespass, terminations or disciplinary actions that start the process of revenge or other motivation to commit murder. Taking a person’s livelihood from him in a struggling economy may start a process of desperation, which is accelerated if it is done poorly and with perceived malice.

Simple approach and inquiry can discourage the perpetrator. Questions such as, “Hi, you seem to be looking for something; can I help you?” have proven value to reduce crime through deterrence. The perception by the perpetrator that he is being watched and could be identified could have a life-saving effect.

DURING THE CARNAGE Once an event starts, it occurs rapidly and with deadly results. The immediate actions of staff will mean the difference in how many people are killed or injured. Simply put, if team members just tell people to get down or hide behind a kiosk or slot bank and protect themselves and anyone within their voice, much has been accomplished. Casinos have many things that can be put between a shooter and a target. Regardless of what it is, anything that can slow down, deflect, or stop a bullet from killing someone should be used. Slot machine banks, signs, stools or anything available can be used. Lying prone instead of running might make you less of a target. Sheltering in place are options that include restrooms, closets, back rooms or offices where a door can be locked or held shut in some fashion. Because the actual shootings do not typically last longer than a few minutes, these options are viable for survival. It is uncommon for shooters to enter a restroom, for example. The New York Police Department compiled a compendium of over 1,000 active shooter events that every security and surveillance professional should download and read. It can be found at www.nypd.com. The Federal Bureau of Investigation has yet to publish a profile of a typical active shooter because of the wide variables in targets and actions. The one thing that is clear from history is that it will continue to occur.

POST-INCIDENT Having a post-incident plan is the easiest part of the process. Multiple triage locations to treat the wounded and stage for ambulances will save lives. Remember that the responding paramedics and other emergency medical personnel will not enter until the police have rendered it safe. Those ambulances will not be there to help you until later.

History also tells us that cell service becomes problematic due to the massive amount of communications, texting, photographs and many other technologies we take for granted. Planning in advance will also save lives. Be prepared to close your casino or at least a significant part of your property. There will not be enough security personnel available to do all that will need to be done. Does your emergency operations plan consider this? The onslaught of press will be huge and problematic if not planned out where to stage for press conferences, satellite trucks, and controlled release of information through designated managers. The long-term effects of an active shooter event need to be considered in advance. The years of press coverage, employee welfare and morale, business continuity and the loss of revenues will all need to be managed long-term. Having a committee of executives to meet regularly post-incident solely on the topic would be recommended. Team members will be affected in different ways. From extreme physical and mental trauma to just being scared will be of concern, and need to have a wellplanned response. Counseling, employee assistance programs, time off and all the things that occur after a significant event will impact operations in some form. History also tells us that litigations will surely follow, and also need to be carefully managed long-term with legal and risk departments. A good plaintiff’s attorney will argue that an active shooter event is foreseeable and that you did not do what was reasonable under all of the circumstances. If a jury believes that your casino failed to do some simple basic planning to mitigate a shooting event like those that occur regularly across the United States, it could prove costly, from negative public relations to punitive damages.

HAVE A PLAN A comprehensive training program, documented action plan with deliverables, and table-top exercises will save lives and mitigate all of the negatives that occur. Make sure you can honestly say to the families of your employees that you did everything possible. Alan W. Zajic, CPP, CSR, is an independent security consultant who specializes in gaming security environments. He is board-certified in security and surveillance, and is an instructor in gaming management programs and at the University of Nevada Reno and in the International Gaming Institute at the University of Nevada Las Vegas. He is a track adviser for G2E in security and surveillance. For more information, go to www.casinosecurityexpert.com.

FEBRUARY 2013 www.ggbmagazine.com

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SURVEILLANCE SPECIAL REPORT

THE

GOOD OLD DAYS

omy Security staffing in a recovering econ

By Darrell Clifton

GOING FORWARD

he experts tell us we have finally hit the bottom and are on a slow (very slow) recovery back to prosperity, profits and prominence. So, you made it. You survived. You weathered the weekly onslaught of nagging and threatening from your bosses to cut, cut, cut. Now you can start rebuilding your security department and get back to normal. Wait a minute. Not so fast. If you think you are going back to your budget of five years ago, go ask your boss. Go ahead. I will wait here for you until you to come back. That conversation did not go quite as you had hoped, did it? The reality is that dealing with a rising economy is going to be just as difficult—if not more so—than those bad times that we thought were behind us. With some tricks that we learned on the way down, we can rise to the top as we come out of the down economy.

THE NEW NORMAL Most casino executives will tell you that if there is one lesson they learned during this recession, it was that a casino actually can run more efficiently and less expensively. After all, did you not cut your staff by X percent? And is the building still standing? Nobody was seriously hurt; no major losses? At least not more so than when you had a larger staff, right? The fact is, you did the same job, under most of the same circumstances, and you did it with less money. So what general manager in his/her right mind would let you go back to those old days of inefficiency? Hopefully, during that time you found some clever ways to save money without sacrificing safety. Maybe you cut a level or two of supervision. Perhaps you found some creative ways to schedule officers without using as much overtime. You probably even found ways of eliminating some of the superfluous tasks and costs associated with your department. If you are like me, you also found that your staff has acclimated quite nicely to the “new normal.” Morale is up, costs are down, and our guests and property are doing just fine. Instead of looking back, let’s capitalize on our accomplishments and move forward. 38

Global Gaming Business FEBRUARY 2013

Here are a few suggestions that will satisfy the boss, the lawyers and your staff. First of all, wherever your budget and staffing levels are—down here at the bottom—consider that to be your baseline. This is your minimum from which you can cut no more. If that “bottom” happened months ago, then back it up to that time, and that is your base. This base is the minimum number of staff (payroll) that you need to adequately protect your facility and the people in it. If this minimum is too low, you will know it because you have had bad things happen. Rising property losses on the floor or in the parking or hotel areas mean that you need to adjust your minimum. In fact, it probably means you were not covering these areas adequately, and need to adjust your minimum to include coverage of them. Once that is done, you have a base of how many officers are required to protect the property (or, in lawyer-speak, prevent claims of inadequate security). You should have a metric that looks something like this: 10 officers for 100 occupied hotel rooms; or 100 officers for a casino head count of 1,000, and so forth. For your count, use whatever metric reasonably reflects how busy your property is. This could be number of cars in your parking lot, employees on duty, occupied rooms or slots, etc. Now that we have a reasonable base (minimum) number of staff, we can talk about raising it incrementally with business volume. Suppose the revenue (which is tied to our volume metric) goes up 10 percent (our boss would like that, and I like it because these are easy numbers to work with). It seems reasonable to everyone that if you have 10 officers on a shift and business goes up by 10 percent, then your manpower needs to go up by 10 percent. That is one officer. Does this seem too simple? Of course it is simple, but this is how every other revenue-producing department operates. Cost of sales goes up incrementally with revenue. Manpower is your cost of sales. You already staff this way in your nightclub, for example. Say you need three officers just to open the doors of the club. Then you add one officer as the head count goes up every 150 persons or so. Same idea. This is a much easier concept to sell to your boss than the old way. The old way would have been to go back to the C-suite and justify rehiring the 30 people you eliminated over the last four years, just because things are starting to look up. It just is not reasonable. But asking for a couple more positions because business is up 5 percent is certainly reasonable and affordable.

E H T E SDAATVE FOR G2E

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SEPTEMBER 24-26, 2013 TH E SANDS E XPO & CONVE NT ION CENTER LAS VE GAS, NEVADA S EP T E M BE R 2 3 —iGA M ING CO NGRE SS, SECURITY & S U R V E IL L A NCE INS T IT UT E , A DVA NCE D G AMIN G IN STITUTE, S OC I A L M E DIA BO O T CA M P S EP T E M BE R 2 4 - 2 6 —E XHIBIT S A ND CON F EREN CE S EP T E M BE R 2 2 - 2 4 —NCRG CO NFE REN CE ON G AMBLIN G & AD D ICTION W W W.GLOBALGAMI NGE X PO.C OM

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SURVEILLANCE SPECIAL REPORT

FROM THE LAWYER

Create a training program that gets that new employee up to the level of your other officers so he or she can fit right into the new team. Hiring a bad attitude or slow learning level now will slow down the team at a time when they cannot afford it. You can be selective if you are hiring two officers rather than the 30 you wanted to bring back. Make some good decisions here, and take your time.

This is one time when the company lawyer is your friend. Knowing that you cut staff when times were tough, he or she definitely wants you to increase staff as business gets better. Lawyers will have a hard time defending an inadequate security claim if you operate with manpower that does not rise with business levels. Exploit this new friendship to your advantage and get the lawyer’s opinion on increasing staffing levels. This is a good ally to use when you make the case for more security. Speaking of lawsuits, are you and your staff still walking around complaining about being “short-handed” because you operate with less staff than before? Time to knock it off. This will hurt you bad when that opposing lawyer puts your employees on the stand and asks them about staffing in front of a jury. The fact is, you are adequately staffed based on the history and formulas we just presented above. Get your people to buy in to that premise or all of this other stuff is a waste of time.

SECURITY STANDARDS People ask all the time about using industry standards to set staffing levels. How nice it would be to calculate our manpower based on square footage, number of hotel rooms, or employees. After all, hospitals, prisons, police departments, even schools do this. The fact is, there just are not any such standards in the casino business—or the hotel industry, for that matter. For good reason. Every casino is different. The locations differ, the neighborhood and market environments vary drastically, and most of all, they cater to a variety of clientele. The only standard you can use is the one you set for yourself. Though we do not have standards, we do have best practices. Best practices are procedures and strategies used by successful companies that have proven them in court—or at least in the business world. Examples of best practices in our world are: one officer in each hotel tower; two officers on a pit drop; one officer for every 125 nightclub patrons, and so on. Of course, even these can vary depending on specific circumstances, but the strategy here is to meet the precedent set by your competitors or exceed them. If your neighbor casino of about the same size and business level operates with 25 officers on a shift and you have 15, that is not going to look good if you have a robbery or a shooting. There may be good reason why those numbers are different, but you’d better be able to explain them without using the word “money.”

WORKING SMARTER When some of us started in this business, the security deployment strategy was 40

Global Gaming Business FEBRUARY 2013

to hire tough-looking guys and give them a pair of handcuffs. Training was whatever they could absorb along the way. We made up for our lack of skills with our sheer numbers. Quantity over quality. Fortunately, this philosophy was discarded with mechanical slot machines. Even better for us, we learned during the past few years that security officers who are smarter and bettertrained and equipped can save money, protect assets, and provide guest service that promotes business. You have to admit: Those bottomfeeders in your department really stick out when there are fewer on the floor doing the same work. Ideally, those who were slowing you down eliminated themselves during your downsizing, and you have an experienced, efficient, lean staff of professionals. Hiring and training the way you did in the past would be like taking a step backward. If you are going to bring on new officers gradually as we discussed above, then do it right. Create a training program that gets that new employee up to the level of your other officers so he or she can fit right into the new team. Hiring a bad attitude or slow learning level now will slow down the team at a time when they cannot afford it. You can be selective if you are hiring two officers rather than the 30 you wanted to bring back. Make some good decisions here, and take your time. Another way to work smarter is to prevent problems rather than react to them. One casino, for instance, was having all sorts of difficulties when several of the neighborhood bars would close. The drunks would stumble out and walk through the casino to go to their cars, hotel rooms or wherever. There were fights and vandalism and accidents as a result of this increase in “traffic” walking through the property at about 3 a.m. The security team was stretched to its limit responding to fights, taking accident reports, or investigating minor property losses. This was all at a time when manpower was thin and officers were doing those fun drops and other business functions. In the old days, we might have hired more officers to take care of these calls. This was not an option, so the manager simply did not allow any breaks, drops, or routine duties to occur between 3 a.m. and 4 a.m. He posted those “extra” officers in the area to prevent trouble. Problem solved, without any extra expense.

THE COMFORT ZONE Many of us have become creative wizards with our manpower during this period of decreased spending. No doubt you have already learned how to run a shift (again); your supervisors can cover breaks; your lost-and-found clerk is doing

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SURVEILLANCE SPECIAL REPORT

Maybe the secretary wears a name tag and walks the floor twice a day. “Deputize” your bell persons, cleaning staff, or slot personnel to be extra eyes and ears for you—they can also perform valuable duties during emergencies. things never imagined previously for the good of the department. This new way of doing business is not over—take it a step further. First of all, seeing you and your management team on the floor is a huge morale booster, so keep it up. Second, cross-training clerks, dispatchers and even surveillance officers is only going to make everyone better at what they do and probably more committed. Third, try some crazy ideas: How about the entire management team wears uniforms? Maybe the secretary wears a name tag and walks the floor twice a day. “Deputize” your bell persons, cleaning staff or slot personnel to be extra eyes and ears for you—they can also perform valuable duties during emergencies. Ask your compliance folks why all those drops on grave shift overlap and cause you to tie up bodies. Put them on a linear schedule that ties up one or two officers at a time. Find out why you do an incident report for stuck elevators, guests with kidney stones, or missing picture frames. These are just examples to get you to think why you do things the way you do

Global Gaming Business FEBRUARY 2013

them, so you can increase your staffing without spending (too much) money.

FINALLY, RECOVERY Recovering from this recession, if that is what this is, does not have to be difficult or involve a battle with your higher-ups. It just requires a basic understanding of the business and being able to communicate in the same language as the ones controlling your budget. Show them that you have maximized your efficiency (finding your base line, honing your staff, and using everyone to their potential), and then justify increasing it at a reasonable rate that keeps cost to a minimum and results to a maximum. Good luck to all of us! Darrell Clifton, CPP is the director of security at Circus Circus Hotel Casino in Reno, Nevada. His book, Hospitality Security, describes staffing, budgeting and many other skills useful to all security directors.

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Dancing on the Table {

Can the electronic table game growth spurt be sustained? By Rodric J. Bradford

he allure of the table game environment at casinos is legendary, whether it’s the crowd behind the hot hand at the craps table or the entertaining small talk that occurs between a player and dealer at the blackjack table. With technology driving a growing amount of social interaction within the general public and in corporate environments, it is not a surprise that this trend has quickly penetrated gaming operations in recent years, as electronic table games (ETGs) have experienced growing popularity in both domestic and international markets. “Electronic table games have become more popular due to technical developments that allow for improved operational flexibility, greatly increased player choice and ease of play while delivering a truly live game experience,” says Tracy Cohen, vice president of marketing for TCSJJohnHuxley, which has earned a reputation for providing a wide variety of electronic multi-player gaming systems in the industry across a spectrum of casino floor setups. “Electronic multi-player products have made a massive impact on table games. Operators can make available any combination of live, automated, virtual-casino multi-player games on a traditional-style table or via individual electronic player terminals.” In a time when the casino industry is rapidly expanding around the world, electronic table games are widening the base of potential players, allowing for a new player segment that casinos should be able to count on for decades. For many younger gaming patrons, casinos featuring electronic table games scattered across the floor is all they know. The ability to meet the younger demographic’s need for a more interactive experience has given companies that produce electronic table games an extreme amount of confidence about their ability to grow market share and the acceptance of future innovation that will be developed within their games. “We are excited about the growth of electronic table games,” says Ron Marks, vice president of sales for Galaxy Gaming, whose brands include the popular Lucky Ladies card game. “We fundamentally believe that we are creating a ‘new’ segment of players that love skill games but want to have a relaxing atmosphere to play their game of choice. Our vision is that electronic table games of today are going to be vastly different from the electronic table games of the future. With electronics and software, the sky is the limit when it comes to creating fun and exciting games.”

Global Gaming Business FEBRUARY 2013

}

Industry Evaluation There is mixed reaction from the gaming industry about the growing popularity of ETGs. All industry insiders agree that ETGs are an efficient way to introduce new and lower-limit players to a gaming table environment without feeling intimidated by the speed of the game or other players. “We’re seeing the increased popularity of electronic table games because beginning players shy away from live dealers, and they can move at their own pace,” says Steve Walther, chief marketing officer at Aruze Gaming America, manufacturer of the Shoot to Win craps game. “It is a nice transition from the standard slot machine to a table gaming environment.” It is a transition that can be a lot more difficult for casino operators and manufacturers of the games when there is a lack of communication during the development phase of ETGs. While developers, engineers and technology consultants may have the smarts to create these lifelike electronic games, it is necessary that they consult casino operators during development to create a final product that complies with operational and regulatory policies. “I urge all ETG manufacturers to get someone involved who knows the game from an operator’s point of view,” says Kathi Meci, a gaming operations

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“

In the beginning it was mostly slot players, but as everyone becomes more at ease with the electronic world we live in, the electronic table games are a natural for all players. —Dave Krise, Senior VP of Game Development, DigiDeal

consultant who has worked as a casino executive in both the U.S. and Asian markets. “It has to be someone who has physically operated a live table game.” Meci points to an experience she had while working at a Pennsylvania casino where the ETG manufacturer built a slot-style money drop within the game. “Nobody working on the (table game) floor of a casino knows how to pull a slot machine drop box,” she says. “Instead of rushing to get a product out to market, all ETG manufacturers need to spend time fine-tuning their product, conducting gap analysis and identifying the needs for the machine to function properly.” Along with proper function, ETG manufacturers and casino operators alike have to take in the regulatory environment in the given jurisdiction. In jurisdictions where government places a limit on the number of live table games, ETGs have become a vital component for increasing revenue while attracting players who would usually shy away from the casino’s live table games. Casinos are faced with the dilemma of whether to leave ETGs on the floor if they are able to increase the number of their live table games. Although the decision depends on the individual property, many casino operators keep their ETGs at lower limits to continue to reach out to beginner and lower-skill players. “The advantage of ETGs is that we offer an added experience in offering players a more dynamic environment, with more side bets and complexity in a simplified way,” says Luke Alvarez, chief executive officer of Inspired Gaming Group, which manufacturers the popular Sabre Electronic Roulette product. “In Europe and Asia, we see the popularity of electronic table games based on costdriven factors, like minimizing employee overhead.” As with many gaming trends, the popularity of ETGs first appeared in markets outside the U.S. With their popularity firmly established in U.S. markets, ETG manufacturers are confident their popularity is here to stay. “In the beginning it was mostly slot players, but as everyone becomes more at ease with the electronic world we live in, the electronic table games are a natural for all players,” says Dave Krise, senior vice president of game development for DigiDeal, whose most popular games are Classic Blackjack, Classic Baccarat and the new Pik-it Poker game. “We are very conscious of the player’s needs and strive to make every game easy to understand and play. We definitely think the electronic table games market will continue to grow.”

A Glance at the Games All of TCSJohnHuxley’s products feature hybrid electronic gaming platforms and live game content, allowing players to compete against a live roulette wheel, dice shaker or card shoe while striking a balance between the thrill of live gaming and the advantages of electronic betting. TCSJohnHuxley’s MultiPLAY platform is able to identify individual players

”

and specific bets with its Touch ID technology. There are two versions. Quad HD Live features a live dealer and wheel, where the HD Auto version is fully automated and offers a cashless configuration. One of the industry’s most innovative mobile games is TCSJohnHuxley’s Tablet Roulette, which allows customers to play live roulette tables on a touchscreen tablet device anwhere in a gaming venue. For multiple-bet gamers, Sabre Multi-Win Roulette gives the player a choice of up to four wheels (where legislation allows), and can be connected to live wheels with real dealers, both in the venue and remotely. The first North America placement of the game occurred at Revel Atlantic City. “We work very closely with our customers when developing any of our products,” says Cohen. “We will certainly showcase products during the development stage to understand how operational procedures and other issues might alter the final execution. Although our R&D teams are highly experienced gaming specialists, there is no substitute for operational and therefore ‘end user’ knowledge. “Casinos will continue to demand products that satisfy the craving of the table game player while enhancing the playing experience, simultaneously driving cost and error out of the operator’s business. These types of products enable the dealer to interface with the player more and create a much better playing experience than just sitting at a table.” All of DigiDeal’s games are available on various electronic platforms. The DTS-V platform is popular because it is all virtual and hosted by a live person acting as the cashier and dealer. The DTS-X is a stand-alone, eight-player system with the ability to be expanded to any number of player terminals, while the newest DigiDeal platform, the Automated Virtual Attendant, can be played with a live host or a choice of virtual AVA hosts. “Attractive graphics with simple and fun interaction by the player is the goal in every game we design,” says Krise. “If players do not understand the game or know what to do next, they will walk away.” Galaxy Gaming’s new product is the Model E Virtual E-Table that is pending regulatory approval. This new model will be available to casinos in both three- and five-seat configurations. Galaxy is focusing its initial content on blackjack-style games with multiple side bets, capitalizing on their popular brands Lucky Ladies and 21+3. “It is very important to produce an e-table that is very intuitive to all players or you will lose a potential loyal player,” says Marks. “The machine also has to be attractive and maintain its competitive space among the ever-changing slot product on the floor today. If you create an attractive machine that is intuitive to the player, you should do very well.” Krise agrees on the value that multiple side bets bring to ETGs. FEBRUARY 2013 www.ggbmagazine.com

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It is very important to produce an e-table that is very intuitive to all players or you will lose a potential loyal player.

“Players today have that lotto mentality where they are looking for multiple bonus bets or secondary bonus plays that could pay big like they are used to getting on a slot,” he says. “These type of games slow down traditional table play and are difficult for dealers to administer, where electronically it is very fast and simple to determine an accurate outcome every time.” The ability for ETGs to produce gaming scenarios impossible by live human operators is also what brings many people to experience them for the first time; it is a true novelty effect. Inspired Gaming Group offers a four-wheel roulette game that has become very popular. The company used extensive player research in developing its newest electronic roulette product, the Sabre Multi-Win Roulette. It features a 26-inch primary widescreen to deliver all the information a player might need on one screen. Players can see all four wheels on the righthand side (color-coded to avoid confusing players), and they can bet via the traditional or racetrack layouts (both of which are available at the same time). There is a variety of easy bet options, including repeat bet, favorite bet, complete bet and double bet. “We pride ourselves on providing the maximum entertainment and excitement to the player, which appeals to all types of roulette players from beginners to high rollers,” says Alvarez. “Regardless of their playing level or experience, they are actively seeking out the electronic table game experience, and they enjoy it very much.” Along with the popularity of Shoot to Win craps, Aruze Gaming has also found a hit with its Lucky Big Wheel product. Lucky Big Wheel is different from its competitors because it is not based on a traditional casino game like roulette, blackjack and baccarat ETGs. “Consumers have been very responsive to our craps product because people are very hesitant to walk in and play a live dice game,” says Walther. “It makes for a nice transition to the live dice game. Lucky Big Wheel has great ambiance, and can run 24 hours a day, seven days a week, 365 days a year without being manned.” In Asian markets, Aruze Gaming is seeing success in baccarat and a popular Chinese three-dice game. “As shooters make points in craps, the theme of the game goes from blue to green to red, signaling a hot shooter,” says Walther. “The announcer states that there is a hot shooter rolling, and that is how we duplicate the experience from the live game. The more realistic the scenarios are, the more loyal of a following we will earn.”

Popularity with Players As described by Walther, the ability for advanced 21st century technology to duplicate the experience of a live casino table game without the distractions or intimidation factor is a large part of why ETGs have seen such a dramatic rise in popularity over the last five years. “The goal of the electronic table game is to do its best to replace the live environment,” says Walther. “You have to complete your due diligence and duplicate the live game down to audio effects, visuals, lights and player experience.” Inspired Gaming Group’s Sabre Electronic Roulette product incorporates a high-definition camera feed display of a live roulette wheel, appealing to visual senses, while the game history information provides hot and cold numbers for the player’s cognitive side. Inspired Gaming also offers a virtual sports product line, very popular in international markets. 46

Global Gaming Business FEBRUARY 2013

”

—Ron Marks, VP of Sales, Galaxy Gaming

ETG manufacturers also keep the social aspect of play in mind, as many games have larger bench-style seating so couples or friends can enjoy the experience simultaneously. Initially, ETGs were often placed in quiet areas of the casino floor. However, as they have become more mainstream, their visibility on the casino floor has increased along with their player demographic. “We are definitely experiencing more of a mass-market phenomenon as popularity increases,” says Alvarez. “Our player base is becoming more diverse in age, gender and ethnic background. Younger players who grew up on video games are more comfortable with electronic table games.” “Novice players and the younger generation players are not necessarily low-limit players,” says Marks of what he calls the “iPad Generation.” Even if the players are gambling lower limits, ETGs are beneficial because their increased hands per hour will earn as much for the house as a higher-limit table. “We believe that the popularity of ETGs will continue as gaming grows in both domestic and international markets,” says Marks. “Social media and the internet will be sure to help companies capitalize on brand recognition in this space.”

An Excellent Future? Whether discussing domestic or international gaming markets, the future looks bright for ETGs and their manufacturers. Although the source of the demand is different for each market, the long-term viability of ETGs in the casino marketplace has been established. “Electronic table games offer the player all the popular games with the exciting features and bonuses they want while the house gets more productivity, security and accountability that is available 24 hours, seven days a week,” says Krise. The direct correlation for ETGs to increase a casino’s bottom line, no matter the game type or the regulation of the local jurisdiction, is what gives it staying power in the gaming industry. “We are very optimistic and bullish in regards to ETGs in the marketplace,” says Alvarez. “You see these games throughout larger U.S. casinos, and we have started working with emerging markets, as well.” From a casino insider’s point of view, Meci sees specific areas where ETGs can continue to thrive. “In areas where there is no live gaming available or a limit to the number of live tables, electronic table games will definitely fill a niche,” says Meci. “The racinos in New York that offer slot machines and horse racing offer a quality example of where these games fit in. However, many of these markets want to expand directly to live table games.” While the trend for the increasing demand for live table gaming grows steadily across the U.S., the regulations in international jurisdictions may lead to the strongest demand for ETGs in the near future. “The U.S. may not be the center for growth for electronic games,” says Meci. “Macau and the Asian markets may lead that charge of demand, but whether the players come and play as much as they are expected is another story.”

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the

Names you Know

Do branded

restaurants benefit

the consumer and remain cost-effective for the casino?

By DaviD Rittvo

o brand or not? Restaurant, bar and nightclub brands provide consumers with a sense of familiarity and consistency, often becoming an advantageous differentiator for casinos operating in a competitive environment. In Las Vegas, branded restaurants have operated with great success for both their owners and their gaming industry partners. In the smaller regional markets, the branded restaurant and bar has had limited exposure, mainly through breakfast restaurants such as Denny’s. There are many pros and cons of the branded food and beverage experience. The following will provide insight into the associated costs and the ROI evaluation process, and describe a hybrid branded food and beverage experience that has succeeded in smaller regional casinos in both the commercial and Native American markets.

casino—the gaming floor. Nyman also observes that in addition to increasing the guest experience outside of the restaurant, “brands can bring in an expert with proven talents, name recognition and a positive reputation to the host casino.” Furthermore, he contends that signature brands allow for a casino to bring an established food and beverage operator to an aspect of the business where the host property may lack experience. Nyman asserts that brands provide consistency and standards where oftentimes, the host casino’s food and beverage operations do not. Accompanying expertise and higher standards comprise an established and positive execution strategy for the food and beverage program, the development of Brand Bias which can otherwise burden a casino’s internal Brands bring with them an The branded restaurant experience has been part of operations. inherent reputation and casino food and beverage programs for many years; By capitalizing on the regional or national recognition of the food nationally recognized entities and celebrity chefs who and a standard dining awareness of a restaurant brand, a casino can utilize its have expanded their namesake restaurants have hisfood and beverage program to drive visitation. A great experience, which is in torically exposed casino guests to brands in a positive some cases coupled with example of this is the soon-to-open Horseshoe Casino in way. Brands bring with them an inherent reputation Cincinnati, which will be operating in partnership behigher check averages. and recognition of the food and a standard dining extween Rock Gaming and Caesars Entertainment. Caesars perience, which is in some cases coupled with higher Entertainment has made it a point to partner with wellcheck averages. known restaurant and bar operators to create unique Corey Nyman, a Las Vegas-based food and beverage consultant, states that a food and beverage experiences at their casinos and resorts. branded restaurant can drive between 15 percent and 20 percent higher price One such high-profile operator Caesars is bringing into the Cincinnati fapoints when compared to non-branded restaurants in a facility. cility is Jimmy Buffet’s Margaritaville, along with one other to-be-named “Brands bring with them standards and consistency, which in most cases restaurant to couple with an in-house steakhouse and buffet. Caesars officials can appear as higher quality and drive higher prices to the customer,” explains expect these restaurants to drive added visitation and increase exposure to the Nyman. “The higher check averages and consistent quality standards have casino through product differentiation and enhancement for their potential proven to be a successful mix for both the brand operator and host casino.” gaming and non-gaming guests. According to Mark Healey, senior vice president of casino operations for Additionally, by partnering with Margaritaville, the casino can tap into the Ovations Food Services—a nationally recognized food service management national “Parrot Head” phenomenon and enhance the marketing exposure of company and member of the Comcast/Spectacor Group of Companies—a the casino. brand should deliver three things better than a generic offering. The three priorities, according to Healey, are “increased length of stay for Plus and Minus the customer on property, increased frequency of visits to the casino, and enBrands like Margaritaville also bring with them some disadvantages and drawhanced reward and comp opportunities.” backs—most notably, the loss of operational control and flexibility. One of the Healy’s and Ovations’ point of view is that branding enhances the overall key strengths of a casino’s operations is its control over the guest experience for appeal of a restaurant, with such food and beverage outlets bringing higher food the complete duration of the visit. An externally operated food and beverage quality for the guest and greater growth potential for the main show at a restaurant forces the host casino to relinquish that control. 48

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If the guest experience at the restaurant is not on par with the overall property, problems will arise; the guest may leave before spending any time on the gaming floor, may never return to the casino, or may pass along less-than-favorable reviews to other potential customers what will discourage them from frequenting the casino, all because of the actions of the branded restaurant and not the casino itself. In other words, a casino needs to choose its food and beverage partners wisely. The introduction of a brand limits the flexibility of the host casino to make changes. Should the brand not work in a certain market or location, it is very costly to either eliminate the restaurant or bar or make changes. In one sense, this handcuffs the host casino. However, most of these issues can be mitigated on the front end with strong due diligence and proper planning. “It is important to do your homework and learn about the brand and its culture and make sure it fits with your operations,” Nyman says. “This will alleviate a lot of headaches further down the road.” In addition to asserting a certain level of operational control, brands bring with them costs to the host casino in the form of royalties and marketing costs, which can reach up to 12 percent of revenues. These costs can limit a restaurant’s or club’s impact on the overall F&B program, and it is important to evaluate the entire picture of brand’s introduction, including the ROI. “The ROI analysis must include an evaluation of the impact beyond the four walls of venue and how it will increase gaming revenue and player loyalty,” says Charles Lawrence, vice president of development for Ovations.

Soft Touch To reconcile the benefits of branding with its potential costs, casinos are beginning to pioneer the in-house, or soft brand, which has gained traction in certain local and regional casino markets. This hybrid brand brings together the standards and systems of a national brand while maintaining the overarching theme and integrity of the host casino. In addition to providing the host casino with added control over the customer experience, the in-house branded restaurant is advantageous in its novelty. In-house brands allow for a property to differentiate itself from its competition. “Especially in highly competitive jurisdictions, branded F&B can provide the casino with an added lift beyond the gaming floor with limited risk to overall operations,” says Lawrence. The Comanche Red River Casino and Resort provides a useful model of this type of branded restaurant and bar at the regional scale. The Comanche Tribe partnered with Ovations Food Services to establish a branded food and beverage experience. The result—Countryville Bar and Grille—fuses Ovations’ established food and beverage operations expertise with a unique, branded

dining experience that is reflective of both regional tastes and the Comanche Tribe’s values and desired guest experience. Additionally, Ovations was able to utilize resources from its parent company, Comcast, to provide entertainment content for the bar. Organizations such as Ovations provide casinos with a unique third-party strategy for taking advantage of branding’s benefits while minimizing its risks. These models allow casinos to retain control of their operations and reap the benefits of efficient operations and nationally recognized brands such as Shula Steakhouses, or create their own in-house brands. Ultimately, the question of whether or not the branded food and beverage solution is worth the costs and integration efforts necessary to make it work has no easy answer. “This really depends on how the brand fits into the casino’s overall marketing goals and objectives,” says Lawrence. “It also comes down to making solid choices that will help the casino meet these goals. “This is not an intuitive process, and it should follow a careful evaluation of player behavior in order to choose brands that will activate and motivate players to play more, stay longer and return often.” David Rittvo is the director of business development and leads the Innovation Group’s food and beverage division, Innovation Food and Beverage. Rittvo has 15 years of experience with food and beverage operations across the globe. He can be reached at 504-352-6856 or drittvo@theinnovationgroup.com.

Request for Pre-Qualification for Modernizing Lottery in Ontario OLG Ontario Lottery and Gaming Corporation OLG has issued a Request for Pre-Qualification for Modernizing Lottery in Ontario. RFPQ# 1213-073 OLG is using the MERX™ electronic tendering system to issue the RFPQ. MERX™ is a national service designed to facilitate the procurement process within the public and private business communities.You may obtain more information by referring to their website at www.merx.com/olg or by telephoning 1-800-964-MERX(6379) or by faxing 1-888-235-5800 and quoting the RFPQ solicitation number. The closing date and time for the submission of proposals is April 4, 2013 at 2:00 p.m. EST.

FEBRUARY 2013 www.ggbmagazine.com

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GLOBAL GAMING WOMEN by KATIE LEVER, Executive VP and General Counsel, SHFL Entertainment, Inc.

Give and Take The value of a mentoring relationship goes both ways

spent the first several months of my first job out of law school watching senior partners passing time every afternoon in one associate’s office. These were the same partners who didn’t acknowledge any of the other associates’ existence and certainly weren’t going to leave their offices without a good reason to be wedged in the small, chairless and windowless offices in which we associates were warehoused. Slightly desperate and as yet unspoken to by any partner, I cornered this associate in the firm’s library to learn the source of his magic attraction: his personal—and the firm’s only—espresso machine. With that answer, my first mentoring relationship was forged. In any highly competitive and complex business environment, having the guidance of someone who has “been there first” can be one of the keys to a satisfying and sustained professional career. A mentee can gain an insider’s guide to their own industry and a valuable spyglass for navigating their profession. While the benefits of the mentoring relationship to the mentee are somewhat obvious, what can be often less obvious are the benefits that the relationship can bring to the mentor. However, regardless of whether the mentoring relationship is between two people within an organization, within an industry or based on other commonalities, the benefits are many. • Enhanced Leadership Skills. During the process of providing the mentee with guidance, advice or strategic insight, you are continually enhancing your own leadership skills. Typically, as you aren’t your mentee’s boss, your mentee has the freedom that your direct reports don’t to give you honest feedback when your guidance comes across as too strong, too weak, too impatient or in a way that just isn’t productive. Thoughtfully received feedback can translate to better communication in your own organization and can make you a better leader. • New Strategic Insights to Old Issues. The mentee can bring a different perspective to an old strategic problem or issue, providing you with an entirely new outlook and perspective. While discussing your mentee’s troubles in finding that elu50

sive work-life balance may not wholly solve her issue, it may give you a new understanding of your own delicate equilibrium. You may end up finding out that it isn’t just your mentee who has the opportunity to take your sage advice. • Renewed Enthusiasm. Energy, enthusiasm and drive are infectious. Get around someone who views their career and our industry as new and exciting and pretty soon, you’re going to experience some of that too. As you get more energized and enthused, your enthusiasm becomes infectious to others in your own organization. See how that works? • Reflective Awareness. Sometimes, while listing to a mentee, you can gain valuable awareness of issues that may exist—and have room for improvement—within your own organization. This doesn’t have anything to do with confidential information or trade secrets, but more with broad-based issues that tend to exist across companies. If your mentee is struggling with managing communication issues with her direct managers or others in her organization with particular job functions, there is a good chance that her management is pretty unaware that she is having this problem. Now ask yourself: What’s the communication like in your own organization? • Becoming a Mentee. Every mentor has an opportunity to become her mentor’s mentee. Whether it’s the careful explanation on how to use the “Do Not Disturb” function on your iPhone or holding up a mirror to you during the aforementioned work-life balance conversation, you will learn from your mentee. Every partner who crammed themselves into that associate’s office learned something from him, at some point, during his years at the firm. In its inaugural year, Global Gaming Women (GGW) set a goal of creating an interactive software program for women within the gaming industry to establish meaningful mentoring relationships based on qualities they identify as important to their own relationships. After countless brainstorming and programming hours, we are ready to launch this first-of-its-

Global Gaming Business FEBRUARY 2013

‘‘

Regardless of whether the mentoring relationship is between two people within an organization, within an industry or based on other commonalities, the benefits are many.

’’

kind resource for our industry—the Global Gaming Network. During the process of creating the software program, some unique stories were told that were simply too impossible to not be true. While most of them started with “I was the only woman in the room/gaming pit/office/hearing… ,” almost every story also included the advice from the teller’s own mentor. There are so many different ways to create a mentoring relationship. They can be created organically out of desperation in law firm libraries, by mandate from corporate human resources departments, and by countless other permutations in between. As GGW gets close to the launch of our mentoring program, and our opportunity to give the next generation of women in the gaming industry the benefit of the diverse and unique experiences of our industry’s women, it’s important to remember the value we all—mentors and mentees—can bring to and gain from the mentoring relationship. Sometimes, it’s as simple as a cup of coffee. I encourage every woman in the gaming industry to pursue a mentoring relationship. If you are interested in learning more about the Global Gaming Network and signing up to become a mentor or mentee via this exciting new tool, visit www.globalgamingwomen.org.

World Game Protection Conference

WGPC LAS VEGAS February 25-27, 2013

www.worldgameprotection.com

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Tribal Help—Without Tax IRS SAYS TRIBAL WELFARE PROGRAMS FUNDED BY CASINOS SHOULD NOT BE TAXED By Dave Palermo

ousing and education assistance, elder care and cultural programs for American Indians funded by tribal government casinos will remain tax-exempt under a draft general welfare doctrine adopted last month by the Internal Revenue Service. The new guidelines, reached after months of consultations by a tribal coalition, the IRS and Treasury Department, eases tribal anger over increasing IRS audits demanding that often-impoverished Indians pay taxes on benefits from tribal welfare programs, many funded with gambling revenue. “Our weather gets quite cold in South Dakota, and some of our homes only have wood heat,” said President John Yellow Bird/Steele of the Oglala Sioux Tribe on the poverty-ridden Pine Ridge Reservation, home to the Prairie Ridge Hotel & Casino. “It’s imperative the tribe help out with energy assistance: buying a pickup load of wood; helping to pay a light bill; buying some propane,” Steele told a recent Senate Indian Affairs Committee hearing. “Do we give a 1099 (tax form) to all of these people?” Indian leaders have also been assured that Treasury will respect long-standing federal policy that per-capita payments from timber, energy and other tribal trust resources remain tax-exempt. Recent IRS correspondence to several tribes indicated per-capita payments from trust accounts and checks from the recent settlement of the Cobell lawsuit over Department of Interior mismanagement also would be considered taxable income. The landmark general welfare doctrine and largely conciliatory consultations between federal and tribal officials are expected to help resolve the complex issue of taxing Indian tribes and Alaska Native villages, many experiencing economic progress through government gambling. “Self-governance tribes dedicate their own resources to supplement federal funding for programs intended to benefit tribes and their members,” said Chief Lynn Malerba of the Mohegan Tribe of Connecticut, who represents the United South and Eastern Tribes in a coalition of Indian groups meeting with Treasury and the IRS. “Yet, in recent years, the IRS has increasingly sought to tax what were previously understood as non-taxable benefits provided by tribes to their members.” Treasury’s General Welfare Exclusion (GWE) doctrine generally calls for the IRS to exempt from taxation social service programs provided by state, municipal, county and tribal governments. But tribal leaders as early as 2006 began noticing an increase in IRS audits of tribal programs, a trend they believe was prompted by economic growth on tribal land and the fact 70 of 246 tribes operating casinos in 28 states were issuing per-capita payments to their members. The Indian Gaming Regulatory Act, which provides a regulatory framework for the nation’s $27.2 billion tribal gambling industry, requires that casino revenues be used for the general welfare of tribal citizens.

Gambling revenues have been used by tribal governments to subsidize housing, education, health care, cultural and religious activities and other notoriously underfunded federal programs promised to tribes in treaty agreements. But IGRA also requires that the tribe deduct and withhold income taxes from gambling revenues paid directly to tribal members. “The IRS has frequently initiated its audits on the presumption that tribal general welfare benefits are actually disguised per-capita payments from tribal gaming revenues” subject to taxation, Malerba said. “IRS field auditors began examinations with a bias and presumption of guilt until proven innocence.” “One IRS agent ruled that tribal citizens who benefited from a tribal government program should be taxed on the part of the revenue generated from gaming proceeds,” said Bill Lomax, president of the Native American Finance Officers Association, a member of the tribal coalition. “The same benefit from other revenues was considered exempt.” Lomax said tribes have been singled out for GWE audits. Treasury in a 2007 work plan said it had in the previous two years conducted 139 examinations on tribal governments “that focused specifically on the use of net gaming revenues,” Lomax said. The results of the investigations are not known. “The taxability of GWE benefits from state and local governments was not even mentioned,” he said. The IRS in 2006 began auditing casino tribes purchasing health insurance for members, threatening to tax the benefits as income. Mark Macarro, chairman of the Pechanga Band of Luiseno Indians, led an effort to amend the Affordable Health Care Act to keep the benefits tax-exempt. The landmark draft GWE doctrine was unveiled in early December, when more than 500 tribal leaders attended the fourth White House Tribal Nations Summit in Washington. “A key challenge for tribal nations is economic development,” Deputy Treasury Secretary Neal Wolin told leaders at the summit. “Many of your communities face poverty, high unemployment and lack of good paying jobs. “Effective immediately, tribes can rely on this guidance and have comfort that programs that meet these guidelines will be respected by IRS.” The guidance is not yet final, and comments can be submitted in writing through June 3. The proposed guidance generally exempts from taxation assistance from a government program that is not compensation for services. Treasury said exclusions from taxation are housing payments to help individuals and families acquire modest homes or apartments, aid for disaster victims, education expenses, medical or dental assistance and services of a shaman or medicine men or women for health and spiritual and cultural reasons. NAFOA Executive Director Dante Desiderio said tribes are pleased with the proposed GWE doctrine.“The idea is that we as tribes don’t base our benefits and services on financial need,” he said. “It’s the need of the community.”

THE IRS IN 2006 BEGAN AUDITING CASINO TRIBES PURCHASING HEALTH INSURANCE FOR MEMBERS, THREATENING TO TAX THE BENEFITS AS INCOME. MARK MACARRO, CHAIRMAN OF THE PECHANGA BAND OF LUISENO INDIANS, LED AN EFFORT TO AMEND THE AFFORDABLE HEALTH CARE ACT TO KEEP THE BENEFITS TAX-EXEMPT. 52

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FRANKLY SPEAKING by Frank Legato

Scary Thoughts

Global Gaming Business FEBRUARY 2013

VI C TO

R RIN ALDO

’m approaching a big milestone in my career as a gaming journalist. This August will mark 29 years since I wrote my first article about a gaming company—which, I’m fairly certain, means that next year, I will have written about casinos for three friggin’ decades. That’s right. Anything that makes me feel that old must be relayed in italics. It’s downright scary. I would like to retire, like Mr. Fahrenkopf (look to the right), but alas, at 56, I’ve still got a mortgage and a car payment and weddings to pay for and other financial obligations that are in all likelihood going to lead me to write about gaming up to an age much more ripe than that of the outgoing AGA president. I envision a 95-year-old man with a goofy white mustache, being found at his desk, his one hand on a computer keyboard and his other frozen on a slot-machine sell sheet’s information on payback percentages. I only hope I make the deadline before I go. Hey, maybe my caricature will age but I won’t. You know, a Picture of Dorian Gray kind of deal. I’m going to start watching that caricature closely, to see if the cartoon ages. If it does, I’ve got nothing to worry about. In any event, I thought I would start now with occasional reflections on how things have changed in the business since 1984, when I first wrote about Bally (Bob Mullane was the CEO) and Aristocrat (Len Ainsworth was still in charge—I think he was only 90 back then). In 1984, slot machines had reels that were spun manually by little people inside the machines. No, I’m kidding. Actually, they were powered by steam. Alright, they had electricity, but most of them were still electro-mechanical. That meant to offer big jackpots, they had to have big initial bets, because the possible results were limited by the physical reels themselves. Universal and Bally were just bringing out the first slots using microprocessors and the “virtual reel” method of choosing results—which meant much larger jackpots could be offered that you could never win. Maybe not “never” (is that correct?), but put it this way. You had better odds of being struck by lightning during an earthquake while writing a song that would become a No. 1 hit for Michael Jackson and later covered by both Tony Bennett and Guns ‘N Roses.

Another thing about slots in the mid-1980s was that they pretty much all looked the same. Three reels, and a handle. And you’d pull the handle, and sometimes these round things called “coins” would fall into a tray. Jackpot celebration sounds consisted of “ding.” If you were lucky, it would be followed by several other “dings.” Thankfully, technology intervened, and before long, the “dings” were accompanied by “buzzes,” and eventually, by pictures of Gomez Addams, Jed Clampett and Gene Simmons from KISS. (Not all on the same machine. Although that would be really cool.) If you ran out of coins, you had to either go stand in line at a cage or flag down one of the employees pushing these carts of rolled coins around like they were in a grocery store. Besides the slot machines, one thing I remember about those early days was that there were still wiseguys here and there in the industry. It was only a year after Lefty Rosenthal and Tony the Ant and the whole Stardust skimming scandal (for you youngsters out there, think DeNiro as Ace Rothstein and Pesci as Nicky Santoro in Casino). Once in a while, I’d go into a casino executive’s office and one of these bosses would say something to me in Italian, and expect me to respond like I was from the old country. Now, I’m a generation removed from my Italian ancestors, so I only know stuff my grandmother used to say, which usually was, “Manga!” Remarkably, it always struck a chord with the old-school casino bosses. But the mob stereotype in casinos lasted much longer than the mob itself. For years, any time I was in a casino wearing a suit, players assumed I was one of the bosses. Hey, Italian guy in a suit, right? They’d tell me their slot machines were broken, and I would assure them that I would have the slot tech whacked at my earliest convenience. I’ll come up with more amusing recollections periodically over the next year and a half, as I plunge helplessly toward my 30th anniversary in the gaming-writer business. Has the cartoon started to age yet?

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WORLD WITHOUT

FAHRENKOPF

AMERICAN GAMING ASSOCIATION WEIGHS REPLACEMENT FOR THE ONLY PRESIDENT AND CEO IT EVER HAD BY PATRICK ROBERTS Frank Fahrenkopf at the AGA Hall of Fame Induction, November 1, 2011, Venetian Casino Hotel, Las Vegas

hen the gaming industry decided to form a trade association based in Washington, D.C. in 1994, there was little question about who to place in charge. Frank J. Fahrenkopf, Jr. was the unanimous choice for several reasons. He was a well-known gaming lawyer in Nevada, but was also plugged into the American political landscape in unique ways. As chief of staff for powerful Nevada Senator Paul Laxalt, Fahrenkopf built major influence for the state with the national Republican Party in the 1970s. He became a member of the Republican National Committee in 1975, joining its executive committee in 1977. In 1983 he became chairman, engineering Ronald Reagan’s landslide re-election victory in 1984 and George Bush’s election in 1988. He was the longest-serving chairman of the Republican Party in the 20th century, resigning in 1989. The American Gaming Association became a home for Fahrenkopf, who built a powerful organization representing what was in 1994 a relatively unknown industry in Washington. But its founding came just in time, as some congressmen, alarmed by the spread of gaming across America in the 1990s, sought to develop federal laws controlling or even stopping the growth of the industry by organizing the National Gambling Impact Study Commission. The nine-member panel was designed to spend more than a year studying the industry and return with a scathing report that would institute rigid controls and high federal taxes—at least that is what the anti-gaming congressmen hoped. Fahrenkopf, using his skill as someone who could talk to both parties, was able to secure positions on the commission for three pro-gaming advocates, MGM Grand President and CEO Terry Lanni, Nevada Gaming Control Board Chairman Bill Bible, and the hotel union boss, John Wilhelm. Four other com-

mission members were relatively neutral and only two members could be characterized as anti-gaming—most notably James Dobson, the head of the conservative group Focus on the Family. After a grueling travel schedule crisscrossing the country from Boston to San Diego, the commission issued a report that, rather than punish the gaming industry, acknowledged its economic benefits and produced studies that accurately measured social problems, particularly problem gambling. Thanks to Fahrenkopf, the industry had dodged a huge bullet. But it was his foresight to understand that the industry had to get out in front of its perceived problems rather than let the problems come to him. In one of his first acts, he encouraged the industry’s leading companies to set up the National Center for Responsible Gaming, a research organization that studied the little-known subject of pathological gambling. More importantly, he convinced them to blindly fund it, with no chance to influence the outcomes of the research. “I didn’t want to see casino executives sitting before Congress saying they didn’t know about the problems,” says Fahrenkopf, referencing the congressional hearings that vilified tobacco executives for turning a blind eye to the damages done by their products. Today, the NCRG is the preeminent organization studying problem gambling, and only the most cynical critic continues to cite the industry’s funding of the research. In addition, Fahrenkopf founded and has served as the co-chairman (along with co-founder Democrat Paul Kirk) of the Commission on Presidential Debates since 1986. So, the loss of Fahrenkopf and his considerable political skills will be a blow to the organization. In addition to the politics, the AGA is virtually self-funding by its ownership—along with Reed Exhibitions—of the Global Gaming Expo. Now 12 years old, G2E is the main trade show for the worldwide gaming industry, held each year in Las Vegas. Attracting up to 30,000 people every year, the show offers the newest products, the latest trends and educational opportunities for gaming executives at all levels. The 73-year-old Fahrenkopf was born in Brooklyn, but moved early in his life to Reno, where he attended the University of Nevada Reno. He earned a law degree from the University of California Berkeley in 1965. The AGA board of directors has appointed a search committee and retained an executive search firm. Fahrenkopf will step down on June 30, but stay on as a consultant for the remainder of 2013 to help ease the transition. But a transition to what? Early candidates include former members of Congress Shelley Berkley and Jon Porter. Caesars executive and former Las Vegas Mayor Jan Jones was mentioned. But no one will have the depth of political experience or the skill of Fahrenkopf. Sources tell Global Gaming Business that a “two-headed monster” scenario is being considered: a high-powered lobbyist would be hired as president to direct the lobbying efforts, while current Senior Vice President Judy Patterson would be retained to run the day-to-day operations of the association, including the G2E activities, NCRG relationship and other initiatives started at the AGA under Fahrenkopf’s term. Patterson has also been an effective executive at the AGA since its inception. FEBRUARY 2013 www.ggbmagazine.com

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CUTTING EDGE by Frank Legato

Compact Solution Product: Vision MegaBall Camera Manufacturer: Arecont Vision

recont Vision has added a new dimension to its IP megapixel camera lineup with the Vision MegaBall All-in-One H.264 camera. The ultra-compact MegaBall, with its spherical form factor, features resolutions of 1.3 megapixels, 1080p, 3 megapixels and 5 megapixels. There is also a choice of coloronly or day/night models. MegaBall provides a wide variety of configuration options to give security professionals the installation flexibility to meet the needs of customers in the casino industry.

Features of the MegaBall camera include: • 3 MP, Wide Dynamic Range, Day/Night, Auto Exposure • Fixed Focal and Vari-Focal Lens Options • Installer Friendly: External Lens Adjustment, Cable Management, 3-Axis Adjustment, Wall Mount • Dual Encoder H.264 (MPEG Part 10) and MJPEG • PSIA and ONVIF Conformant • 1024 Zones Motion Detection and Privacy Mask • Bit Rate Control • Multi-Streaming • Forensic Zooming • PoE & Auxiliary Power: 12-48 VDC / 24 VAC For more information, visit the company’s website at www.arecontvision.com.

Cashless Revolution Product: Loyalty Card Plus Prepaid Manufacturer: Sightline Payments

oyalty Card Plus Prepaid is an innovative payment solution created by Sightline Payments, in collaboration with Vantiv and Discover, which creates a prepaid card for the gaming industry’s more than 37 million casino loyalty cardholders. For gaming purposes, cardholders can transfer funds in real-time utilizing Sightline’s proprietary closed-loop SPAN network, to and from accounts for use at slots, table games, race and sports books, social gaming sites and i-gaming sites (subject to jurisdictional approval). Using the open-loop general-purpose reloadable prepaid card, which runs on the Discover network, cardholders can make cash withdrawals (including ATM) or purchases within or outside the casino property for travel, dining, hotel and other transactions at locations everywhere Discover is accepted. Cardholders can prefund their prepaid account online, through their mobile phone or by loading funds at the casino with cash, jackpot payouts, and numerous other ways, including TITO tickets. “LCP creates one account for everything, whether for physical and virtual gaming or purchases on and off casino property,” says Kirk Sanford, CEO of Sightline Interactive, a wholly owned subsidiary of Sightline Payments. “From a responsible gaming perspective, it’s not a new way to get more cash, but rather a more safe and less costly way to obtain, hold and manage cash for a patron’s gaming entertainment.”

Global Gaming Business FEBRUARY 2013

Operators can fully customize every detail of their prepaid card programs by leveraging their own brand and unique marketing tools. Benefits include a reduction in cash, multiple new income opportunities, and invaluable consumer spending data outside of the casino. For more information, visit the company’s website at www.sightlinepayments.com. Discover and the Discover acceptance mark are service marks used by Sutton Bank under license from Discover Financial Services.

The American Gaming Association (AGA) is proud to commemorate the 10th anniversary of the adoption of the AGA Code of Conduct for Responsible Gaming. For the past decade it has been the blueprint by which all AGA member companies have addressed responsible gaming, impacting every aspect of our business. To mark this milestone, the AGA is releasing a revised version of the Code that reflects how the gaming business has evolved during the last 10 years, especially the ways we communicate with our employees and patrons. Visit the AGA website, www.americangaming.org, to download a copy of the new Code of Conduct.

americangaming

@AGAUpdate

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NEW GAME REVIEW by Frank Legato

Cash Express Gold Class Aristocrat Technologies

his is the first new version in years of the “Cash Express” multiprogressive slot that was one of Aristocrat’s most popular games around a decade ago. In Cash Express Gold Class, the familiar train-themed common progressive bonus—this time, topped with a display shaped like the smokestack of an old-time steam locomotive—is combined with any of seven different popular Aristocrat base games. The base games—Buffalo, 50 Lions, Geisha, More Chilli, More Hearts, Pompeii and Timber Wolf—consist of various line configurations and “Reel Power” scatter-pay games, each with its own game-specific free-spin or second-screen bonus event. The bonus feature consists of three different common events, including the top progressive bonus, traditionally a four-level jackpot (Mini, Minor, Major and Grand), but this time with a fifth, top-prize jackpot added, resetting at $9,500. The other reset levels are $8, $25, $150 and $1,000. The common Cash Express bonus events are all triggered at random. In the “Multiplier Wheel” feature, a wheel appears in the top screen—it spins to multiply any base-game win from 2X to 100X. In “Gold Class,” a special bonus three-reel screen appears for 20 free games. During the free games, any “UPGRADE” that appears on the center pay line moves the player up one level on the smokestack bonus tower. With each level, jackpot prize levels increase. At each level, the

value of a “Bonus Train,” won with three train symbols on the reels, increases. If the player upgrades to the top level of the smokestack, it awards the Gold Class progressive jackpot. The “Cash Express Gold Class” jackpot feature is the new version of the original Cash Express jackpot. The reels spin, and the player either touches the screen or presses a “Stop Reels” button to stop each of the reels on a point total. The accumulated point total determines which of the Cash Express jackpots is awarded: the Grand for 50 or more points; the Major for 46-49 points; Minor, 37-45 points; Mini, 36 points or fewer. Manufacturer: Aristocrat Technologies Platform: Vii, Viridian WS Format: Five-reel, multi-line or scatter-pay video slot Denomination: .01, .02 Max Bet: Various Top Award: Progressive; $9,500 reset Hit Frequency: Various Theoretical Hold: Various

Moneyball

Multimedia Games

his is a new series of games using a pinball/pachinko-style top-box game on Multimedia’s “High Rise” cabinet, incorporating a tall, vertical video display. Versions of the game include a generic Moneyball title and several in which the top-box pinball bonus is added to popular Multimedia base games including “Invasion from Outer Space.” The common top-box Moneyball bonus takes on many different forms, and different outcomes. When the bonus is triggered, the animated top-box pinball game takes on one of four different scenes—a tree with the pegs and bumpers as fruit, a desert scene with UFOs, a hotel, or a classic pinball layout. In each game, the player manipulates a button to “aim” the pinball’s direction as it is fired to the top of the bonus board. Each peg triggers a small award as the ball touches it, and the bumpers trigger larger

Global Gaming Business FEBRUARY 2013

awards. There are also spaces on the boards that award games within the game. A “ball lock”—the video equivalent of the physical pinball hitting a spot and staying there—triggers one of two secondary events. In one, a prize wheel appears, which the player spins for an extra bonus prize. In another, a set of three bonus reels appears, and the player gets three spins for bonus awards. In either case, after the mini-game, the feature reverts to the regular pinball bonus. Another possible extra feature on the Moneyball board is a “ball split.” In another nod to classic pinball, the ball will split into three balls, and all will bounce down the board simultaneously, registering multiple bonuses. Yet another possibility on the big board is a “Fireball” feature. This multiplies all awards by three. When the ball hits the bottom of the board, it lands in a prize slot or bucket for the main bonus amount. There is a guaranteed prize in every bonus. Manufacturer: Multimedia Games Platform: High Rise Format: Five-reel, 30-line video slot Denomination: .01—1.00 Max Bet: 300 Top Award: 384,825 Hit Frequency: Approximately 50% Theoretical Hold: 2.05%-15%

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Plants vs. Zombies: Gargantuar Spielo International

his is one of the first games produced under Spielo’s license with social-game provider PopCap. The Plants vs. Zombies series will consist of variations on the funny animated zombies and plants in the popular internet game of the same name. Plants vs. Zombies: Gargantuar uses the animated undead and plant characters in several random events and triggered bonus sequences in a 30-line video slot. The cabinet is a show in itself, decked out in arcadestyle painted images of the game characters with a large vertical top box displaying three progressive jackpots, each corresponding to one of the game’s “flower” characters. There are two random events that occur during base-game play. In the “Plant and Zombie Scatter,” zombies pop out of gravestone symbols on the reels and are killed by adjacent plants for scatter awards. In “Random Wilds,” a balloon, a pogo stick or “bungee zombies” will pop up and award wild symbols for a spin. There are three triggered bonus events, activated by the Plants vs. Zombies logo on the first and third reels with a corresponding bonus symbol on the fifth reel. When that occurs, the player is awarded one of three events:

The “Vase Breaker Bonus” is a pick-a-prize feature in which the player picks a vase that will break for various credits and multipliers. In the “Gargantuar Free Spin Bonus,” the “Gargantuar” character—a giant zombie—stomps across the reels during free spins to smash various reels, turning them into wild symbols. The main “Graveyard Bonus” is based on one of the internet game’s most entertaining sequences. A graveyard appears at one side of the screen, and the player picks stones to reveal credits or suns. The suns count toward one of the three progressives. As the stones are selected, zombies come out and start walking across the screen toward the player’s “house.” The goal is to win one of the progressives before the zombie reaches the house and eats your brains. (The sound effects are hilarious.) Manufacturer: Spielo International Platform: Sensys EP Format: Five-reel, 30-line video slot Denomination: .01, .02, .05 Max Bet: 250 Top Award: 2,000 times line bet Hit Frequency: 37.78%-40.55% Theoretical Hold: 8.88%-14.87%

Penthouse Slots Casino Technology

asino Technology has used its license from Penthouse magazine to create a multi-game unit giving the player a choice from among five Penthouse-themed base games—“Blazing Guitars,” “Foxy Wash,” “Butterfly Dreaming,” “Umbrella Dance” and “Wild Temptations.” The game is featured in the Sensation Plus cabinet, or optionally, in the “Play Me” setup, which embeds the machine in a themed grand piano. All feature a high-quality video presentation and a game-specific range of bonus events. Players can easily switch from one game to another. The product line is complemented by the themed mystery progressive multi-level Jackpot “Foxy Girls,” featuring beautiful girls corresponding to the different jackpot levels. Each base game features its own theme and bonus features. “Blazing Guitars” places the Penthouse Pets in a rock-and-roll theme and a free-game event that allows the player to choose the free-game mode. The base game features wild symbols that expand into full wild reels depicting one of the models. “Foxy Wash” is a high-volatility game with three different expanding wild symbols in the free-spin bonus. The player selects from three girls to reveal the number of free spins. The free games feature only the highest-paying symbols. “Butterfly Dreaming” presents the Penthouse Pets in a fantasy scene, and includes a special option during the free games to “lock” any wild “Butterfly Girl” on the same reel for the remainder of the free games. There is a chance for the entire screen to be filled with the wild symbols, or different winning symbols.

“Umbrella Dance” features locking wild symbols during free games and wild umbrella symbols that can fill up the entire screen to trigger the Umbrella Bonus, returning an award of 500 times the total bet. If this happens, all the umbrellas open to reveal a full-screen picture of a Penthouse Pet. “Wild Temptations” allows the player to choose one of three expandable wild symbols for the free game round, each representing a different Penthouse Pet. If that wild symbol appears during free spins, it expands into an entire wild reel (depicting a full picture of the Pet). Manufacturer: Casino Technology Platform: Penthouse Slots Format: Five-reel, 20-line video slot Denomination: Multi-denomination Max Bet: Varies with base game Top Award: 1,000 times line bet Hit Frequency: Various Theoretical Hold: Various

FEBRUARY 2013 www.ggbmagazine.com

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New Jersey Governor Urged to Sign I-Gaming Bill The recipients are Ladbrokes,

888 Holdings, Betfair, PokerStars, ew Jersey Governor Chris bwin.party, bet365, Bet-at-home, Christie is being urged by lawMybet, Cashpoint, Online Casino makers to sign the online gambling Germany, Tipico and Skill On Net. bill that reached his desk on DecemThe licenses bring the total in ber 20 after being approved by both Schleswig-Holstein to 27, with the houses. The governor has until Februrest granted to sports books. They ary 8 to sign or veto bill AS2578, stand in sharp contrast to Germany’s which allows Atlantic City casinos to State Treaty on Online Gaming ratioffer online games such as poker and fied in July by 15 of the 16 Länder, New Jersey Governor blackjack through servers placed at Schleswig-Holstein being the lone Chris Christie their properties. dissenter. The treaty permits only onChristie has made no public stateline sports betting and also limits the ments on where he stands on the legislation. number of licensees. Senate President Steven Sweeney, along with a The European Gaming and Betting Assogroup of four other Democrats, sent a formal letciation, a trade group representing online opter to the governor asking him to sign the bill. The erators, has submitted a formal complaint to lawmakers, all from southern New Jersey, have the European Commission, claiming the cited the need to open up new revenue streams treaty violates European Union free-trade and to increase the casino revenue tax fund— guarantees. The EC agrees, and has given the which suffered a double-digit dip in October and German state governments two years to prove November—as needed for the new legislation. that their gambling laws comply with EU reg“Given the fiscal conditions facing our casiulations. nos, especially in the aftermath of Hurricane In the meantime, many online operators Sandy, and the recent movement toward internet continue to offer their services to the country’s gaming in states across the country, we cannot afresidents. ford to wait any longer,” the letter stated. The letter, authored by Sweeney as well as Nevada Bill: Interstate Senators James Whelan, Raymond Lesniak and Online Poker Is OK Jeff Van Drew, cited Nevada and Delaware as posevada’s nascent internet poker market sible competitors in the online gaming market. could grow beyond the borders of the Gaming sites are expected go live in Nevada in the state if the Gaming Control Board prevails. coming months. New Jersey’s neighboring state, In a draft bill submitted to the legislature, Delaware, enacted legislation to allow for casino the board proposes amending the current reggambling over the internet in 2011, but has yet to ulatory language to allow the state to enter fully organize a program. In addition, Illinois has into agreements with other states that legalize authorized the sale of lottery tickets online to online poker. begin in 2013. Under the existing regulations, websites in Christie vetoed a similar internet gambling bill the state can only accept wagers from players in late 2011, citing state constitutional concerns gambling on computers or mobile devices and the possible proliferation of “internet cafés,” physically located within the state. as well as a subsidy for racetracks he opposed. A.G. Burnett, chairman of the Gaming State lawmakers believe they have addressed the Control Board, says Nevada would benefit governor’s concerns in the current legislation. from the new rules because several states, including New Jersey and California, are in the Schleswig-Holstein Awards process of enacting online gaming laws. ConMore Licenses gress has not enacted federal legislation to lehe German state of Schleswig-Holstein has isgalize the online games. sued its first online gambling licenses, allow“The need to make clear the governor’s ing a dozen operators to offer casino-style games, ability, should he choose, to negotiate such including poker, on the internet. agreements was paramount,” Burnett said.

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Global Gaming Business FEBRUARY 2013

Which states would partner with Nevada is the question. California has a massive built-in market, and would have no need for the few Nevada players. Nevada regulatory structures are mature, but would any state partner with Nevada simply to get use of the regulators? So far, a total of 17 casino operators and technology providers have been licensed to provide the framework for web-based games in the Silver State. Three more companies are seeking license approvals. Interactive poker websites could launch this spring after the technology is approved by testing laboratories and gaming regulators.

Wright Submits Bill to Legalize Online Poker in California

alifornia Senator Roderick Wright has submitted a bill to legalize online poker in the state. Operators would be required to pay $30 million for a five-year license under SB 51. As they have from the beginning, several gaming tribes in the California Senator state oppose such a bill, Roderick Wright although they are not opposed in principle to some bill that legalizes online gaming. Some gaming industry experts estimate that online poker could generate as much as $685 million in revenues. Wright has introduced similar bills three times before, but feels that some factors have changed. “What I’m finding is that more of the stakeholders are better educated,” he said in an interview with Online Poker. “From the initial introduction of this bill to today, a substantially greater number of the participants also have partners, so they’re much more likely, and qualified, to go into the business. As people understand and realize that it’s profitable for them, they’re much more likely to play. I watched the Morongo Band of Mission Indians move into the business. I watched Thunder Valley and some of the major tribes shift their position because they see how they can benefit.” Wright predicts gaming tribes in California to be a “major players” in any online poker offered, and that they will operate some of the poker “hubs” that his bill anticipates.

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Pro Poker Player Deals with DOJ

Howard Lederer

Lederer admitted no wrongdoing as a result of the deal, but his reputation in the poker world is in ruins. After Black Friday, he disappeared for many months, only surfacing recently, taking in cash games at Bellagio and Aria. Other players sought to create a petition to ban Lederer from playing at Aria, but casino officials wouldn’t let the petition be circulated on the property.

he effects of Black Friday, April 15, 2011, continue to be finalized as Full Tilt Poker cofounder Howard Lederer wrapped up the charges against him by reaching an agreement with the U.S. Justice Department last month. While not criminally charged, Lederer settled a civil suit in which the DOJ claimed that he defrauded customers of Full Tilt and sought damages. The settlement calls for Lederer to forfeit bank accounts with funds in excess of $1.25 million, as well as some real estate in Las Vegas worth more than $1 million, and other luxury items valued at under $200,000. In addition, Lederer has agreed not to work for any other U.S.-facing online poker room until the legalization of online poker in the country is settled. The government had originally sought more than $42 million in settlements from Lederer. Also charged with Lederer were fellow pros Chris “Jesus” Ferguson and Rafe Furst, along with Full Tilt President Ray Bitar. Furst has also reached a deal with the DOJ, albeit for much less than Lederer is paying.

Bwin Finds a Partner in Belguim

win.party digital entertainment has partnered with Belcasinos, a subsidiary of Group Partouche, to fulfill its Belgian online license requirement. The two companies will now work together to offer sports betting, poker and casino games to the Belgian market. The deal brings to a close a longrunning legal dispute with the Belgian Gambling Commission. The news follows a year of clashes between bwin.party and Belgian gambling authorities. Bwin, the owner of the popular Party Poker site, was blacklisted by the BGC for operating without a license and flouting the country’s online gambling laws. BGC regulations require that all online gambling operations must partner with a brick-and-mortar

casino located in Belgium to qualify for a license. Bwin contended that the regulations were discriminatory and violated European Union law. The company sued the BGC over the matter, only to have the suit thrown out. The company continued its presence in Belgium through its bwin.party and Party Poker domains, both of which were placed on the BGC blacklist. ISPs in Belgium had blocked access to the sites, and any players caught gambling on them were hit with fines. The Belgian court fined bwin $100,000 for offering its online services without a license. Then in November, in a showdown that rocked the online poker world, bwin’s CEO, Norbert Teufelberger, was detained in Brussels by Belgian authorities. According to a company press release, Teufelberger cooperated fully and was released after a two-hour interview. The incident strengthened both bwin’s and the BGC’s positions, with both parties publicly entrenched. Bwin has now successfully navigated the problem with its partnership with Belcasinos, a unit of local casino owner Group Partouche. The company has had other clashes concerning gaming regulations in Europe. As it seeks to obtain an online gaming license in Nevada and enter the U.S. market, it appears that bwin is trying to resolve its compliance issues.

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GOODS&SERVICES Mathewson Initiates IGT Proxy Fight der Investment ManA agement, the investment firm founded by former Wall Street analyst Jason Ader that currently holds 3 percent of the shares of slot manufacFormer IGT Chairman turer International Game Chuck Mathewson Technology, reportedly will nominate four candidates to the IGT board, including former IGT CEO and Chairman Emeritus Charles Mathewson, in a proxy fight initiated by Mathewson to regain a seat on the board in a challenge to the slot-maker’s current leadership. IGT claimed that Ader is also among the four names submitted on behalf of Mathewson, who has been involved in a long-running dispute with the company since his 2003 retirement. Ader disputes that his name is up for nomination. He said his company would nominate Mathewson, Daniel Silvers of Ader Investment and Raymond Brooks Jr., principal of R.J. Brooks Cos. and former CEO of ACA Financial Guaranty Corp. “We believe investors are confounded by IGT’s strategic direction and that IGT’s valuation has suffered as a result,” said Ader, who is investment principal of Ader Investment. “We are further convinced that IGT has abdicated its competitive advantage in its core business through its recent strategy. We expect that this new slate will add experience and depth.” IGT is nominating eight board members, including current CEO Patti Hart and Chairman Phil Satre. Votes will occur at the company’s 2013 annual meeting, which has yet to be scheduled. Mathewson has repeatedly criticized the company’s current leadership since his retirement. According to a statement from IGT, the former chairman “has repeatedly attempted to exert influence over the company’s operations and extract personal financial benefits at the expense of all other shareholders.” Ader says the company continues to go in the wrong direction. “We believe IGT is deeply undervalued as a result of a lack of focus on the core slot machine and systems business that we believe generated IGT’s historic success, a lack of casino gaming industry experience in management ranks, and the results of poor capital allocation decisions highlighted by a series of costly non-strategic acquisitions,” Ader said. 62

“We are convinced our slate will make a major improvement in this company.” Mathewson was IGT’s chairman emeritus after retiring his CEO post. IGT’s board severed all financial ties with him in 2010. Ader was a senior managing director for Bear Stearns from 1995 to 2003. He later launched a hedge fund called Haymarket Investments. He is also on the board of Las Vegas Sands.

Cantor Race & Sports Book at the Venetian

NEWave Signs With Cantor oftware supplier NEWave announced that it has STitlesigned an agreement to supply its award-winning 31 compliance software to all Cantor Race & Sports Book locations in Nevada. NEWave’s Title 31 Manager software completes, files and archives forms required to comply with FinCEN Title 31 money laundering requirements, and includes real-time tracking, audit consolidation, e-filing, and other functionality. The package also includes NEWave’s TINCheck, which provides casinos a quick way to validate address and tax ID information against USPS and IRS databases, and NEWave’s OFAC Watch List, which provides real-time notification that a patron could be on at least one of a variety of watch lists. “At Cantor Gaming, we use the most advanced technology available for our state-of-the-art race and sports books and, in choosing a compliance partner, we wanted to work with a reputable firm that knows our industry,” said Jeff Burge, COO and CFO of Cantor Gaming. “We selected NEWave for their depth of knowledge and experience in guaranteeing smart solutions for compliance within the gaming industry. After careful analysis, we believed only NEWave’s software had the sophistication and innovation that was on par with our premier technology platform.” NEWave Senior Vice President of Sales Clair Rogers added, “Having partnered with many leading gaming operators, we are excited to expand our footprint with Cantor Gaming. Like NEWave, Cantor

Global Gaming Business FEBRUARY 2013

Gaming is reputed for their technologically advanced race and sports wagering solutions. Working in partnership with Cantor Gaming is a perfect fit.”

iGaming North America Eyes Record Attendance continues to wait and watch as i-gamTtheheingU.S.world finally reaches a regulated critical mass in and Canada. 2012 showed some progress, and this year promises to provide even more momentum as more states and provinces jump into the fray. iGaming North America will be a forum for updates and debate on those topics February 1921 in Las Vegas. Some 600-plus attendees will converge from the worlds of public, tribal and private gaming operators as well as suppliers, regulators and policy-makers to discuss when and how this will play out in 2013. The conference organizers have again added an optional boot camp for the basics featuring information on marketing, preparing for launch and a detailed look at the models in those states which have already legalized the activity, as well as lessons learned from around the world. The full conference will focus on legal and regulatory updates, including a keynote address by outgoing American Gaming Association President Frank Fahrenkopf, who will give his views on the political realities that support a federal path to online gaming. In addition, the programs look at how social gaming is converging with gambling, an exploration of the prospective expansion of sports betting, payment challenges, and how tribal and government lotteries are positioning themselves. The program also includes a look at the prospect of interstate compacts for poker. For more information, go to www.igamingnorthamerica.com.

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BMM International Celebrates Five Years In Peru ambling equipment testing laboratory BMM G International recently celebrated five years in Peru. During that time the company has provided jobs in the local market and has assisted several regional manufacturers to expand to international markets. For example, said Peter Palexas, chief executive officer of Intervision Games, “In small countries like Peru, having a real local lab with global coverage really helped us to understand the international requirements, and then of course test our products.” BMM Senior Vice President of Business Development-Americas Drew Pawlak noted, “BMM made the decision to open in Peru as it was one of the only formally regulated markets in all of South America. Over the last few years we have seen so many changes in the region.”

GLI Europe Accreditation Renewed

processes and activities, technical aspects of the testing process, and quality management system, among others. GLI Europe received a “no deficiencies” review, the highest rank possible. “Earning our ISO Guide 65 accreditation renewal is an important achievement,” said GLI Europe Managing Director Martin Britton. “When a test lab like GLI is itself tested and passes successfully, that means the regulators we serve in the land-based and i-gaming industries can have the utmost level of confidence that our activities, processes and systems meet the highest possible global standards for excellence.” With its Guide 65 accreditation, GLI can issue its Gaming Labs Certified mark to devices and systems that pass GLI’s testing standards and processes.

RD&E Reveals Keynote Speakers for May Conference

aming testing company Gaming Laboratories ne of the gaming industry’s most anticipated G International announced that its GLI Europe conference, RD&E: Retail, Dining & EnterO subsidiary has received a renewal of its RvA Guide 65 tainment in the Gaming and Hospitality Industry, accreditation. The accreditation is the result of a rigorous audit process by an international panel of experts examining all aspects of the company’s certification

announced the keynote speakers for each day of the conference, May 1 and 2 at Planet Hollywood in Las Vegas. The presentations will represent the first time these distinguished speakers will appear

before a gathering of the gaming industry. At lunch on the first day, a tag team of Tom Breitling and Tim Poster will describe the evolution of gaming and how non-gaming amenities, technology and online gaming will come together to craft the industry of the future. During the second day’s lunch, Sam Nazarian, the chairman and founder of sbe Entertainment Group, a Los Angeles-based hospitality company, will explain how he plans to renovate and reopen the Sahara Hotel in Las Vegas as an SLS brand, the flagship of the company’s hotel chain, with a focus on nongaming attractions. Breitling and Poster founded the internet reservation service Travelscape in 1998, which they later sold to Expedia for more than $100 million. They then purchased the Golden Nugget in Downtown Las Vegas in 2003 for $215 million, selling it two years later to current owner Landry’s Restaurants for $340 million. Next, they signed on with Wynn Resorts, where Poster still serves as senior vice president of casino marketing. Breitling is now president of Ultimate Gaming, the online gaming arm of Fertitta Interactive. Poster still works closely with Breitling, while serving as senior vice president of casino marketing for Wynn Las Vegas. Nazarian founded Platinum Wireless, a telecommunications business specializing in the distribution of Nextel software, in 1998, which quickly became the leading company in that field. He then launched 3Wall Development, a real estate company that quickly became one of Southern California’s largest owners of multi-family housing. His sbe Entertainment Group developed several nightclubs in Los Angeles, including Area, MI-6 and Hyde, later diversifying into the SLS hotel brands, now with properties in Los Angeles, Miami Beach and New York City, with the Las Vegas property slated to open in 2014.

TransAct Signs New York Deal rinting supplier TransAct Technologies announced it has signed a contract to install its Epicentral PPrintthat System at Resorts World Casino New York City, at the Aqueduct racetrack in Queens. The system will initially be connected to 2,500 slot machines. It is projected to go live in the second quarter of 2013. “We are excited to be working with Genting Group, one of the most dynamic casino resort operators in the world, as we install our Epicentral Print System at their casino at Aqueduct in New York City,” said Bart C. Shuldman, chairman and chief executive officer of TransAct Technologies. “We plan to initially install Epicentral on 2,500 slot machines with the potential to extend the installation to Resorts World’s other 2,500 slot machines in the near future.” 64

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PEOPLE WYNN PROTÉGÉ AZIZ RETURNS TO THE FOLD

amal Aziz, former president and chief operating officer of MGM Hospitality, has been appointed president and COO of the new Wynn Resorts Development LLC. Aziz opened the Bellagio in 1998 as the hotel’s senior vice Gamal Aziz president, a post he held until 2000. Most recently, Aziz was president and COO of MGM Hospitality. Company founder and chairman Steve Wynn said Aziz will work directly with him to develop resorts in North America and Cotai. “Gamal’s return to our company will give us a tremendous boost as we begin 2013,” he said. At MGM Hospitality, Aziz helped complete more than two dozen hotels in markets around the world. Prior to that, he was president and COO of MGM Grand. He also has held executive positions at Caesars Palace in Las Vegas, the Plaza in New York, the Westin Hotel in Washington, D.C., and the St. Francis in San Francisco. The return of Aziz is the strongest indication to date of Wynn’s plans to expand into non-gaming resorts and expand his holdings outside of Las Vegas. Aziz previously worked with Wynn on developing the Bellagio. MGM Resorts has seen a recent exodus of executives from the company. In December, Bobby Baldwin took over for Bill McBeath as president of Aria at CityCenter. Later that month, Mirage President Felix Rappaport announced his departure. MGM Resorts COO Corey Sanders is running the hotel casino until Rappaport’s successor is named.

LONG TO LEAVE SOL CASINOS

endell Long, the last non-tribal-member chief executive officer of Pascua Yaqui Gaming Enterprises in Tucson, Arizona, announced a tribal member will take over the organization’s leadership by early June. Long said the Pascua Yaqui Tribal Council is considering five candidates. Wendell Long “I’m confident any of the five tribal members can do this job,” said Long. “Now is the time for them to manage their own casino and resort.” Long said he will work with the new CEO through June 9. Prior to joining Pascua Yaqui Gaming Enter-

prises, Long worked at Mohegan Sun and Foxwoods Resort Casino in Connecticut and was general manager at Treasure Island Casino in Minnesota. He began his gaming career in 1982 at the Playboy Hotel & Casino in Atlantic City, where he also worked for Trump Organization. Pascua Yaqui Gaming Enterprises owns and operates two casinos, including its original Casino of the Sun.

RESORTS ANNOUNCES NEW TOP EXECUTIVES

tlantic City casino veteran Mark Giannantonio has been appointed the new president and chief executive officer of Resorts Casino Hotel. Giannantonio, the former president of Tropicana Casino and Resort, takes on the duties of Mark Giannantonio Gary Van Hettinga, president of Mohegan Gaming Advisors, who will now split his time between Atlantic City and other Mohegan casinos in Connecticut and Pennsylvania. In addition, Mark Sachais will take on the role of vice president of hotel operations for Resorts. Sachais is a former top executive at Trump Marina and Trump Plaza in Atlantic City. He has more than 20 years of experience in gaming, including his most recent role as general manager of Trump Marina. The new appointments are part of a management restructuring by Mohegan Sun, which took over management operations of the casino in September. Giannantonio, who worked at Tropicana for over 20 years, joined Resorts in September as vice president of hotel operations.

MOHEGAN SUN AT POCONO DOWNS ANNOUNCES PROMOTIONS

ohegan Sun at Pocono Downs has announced the appointment of two top executives to its management team. Kara Fox-LaRose has been promoted to assistant general manager and Jeff George to the position of vice president of hotel and food & beverage. Fox-LaRose has been with the Mohegan Sun organization for 18 years, serving most recently as the vice president of marketing at Mohegan Sun at Pocono Downs, where she was responsible for a number of departments including bus sales, regional marketing, player’s club, promotions and special events. Prior to her arrival in Pennsylvania, Fox-LaRose

served as vice president of marketing and promotions at Mohegan Sun in Connecticut. In her new role, Fox-LaRose will be responsible for all nongaming operations. George has been with the company since 2008, serving as director of food & beverage. Over the course of his 22-year career, George has worked in food, beverage and hotel positions at a number of gaming companies including Harrah’s Entertainment, Boyd Gaming Corporation and Binion’s casinos.

McTAVISH APPOINTED AT MULTIMEDIA GAMES

ultimedia Games in Austin, Texas has appointed Todd McTavish as senior vice president, general counsel, chief compliance officer and corporate secretary, effective January 21. Most recently, he was general counsel in charge of the Legal & Compliance Department and corporate legal counsel at Video Gaming Technologies. From 2005 to 2008, McTavish was vice president of business development and general counsel at D1 Sports Holdings. He also served in a financial consulting role at PricewaterhouseCoopers and worked in tax planning at PepsiCo from 2003 to 2005.

February 2013 Index of Advertisers AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Bally Technologies . . . . . . . . . . . . . . . . . . . . . . .2 Cadillac Jack . . . . . . . . . . . . . . . . . . . . . . . . . .29 Cantor Gaming . . . . . . . . . . . . . . . . . . . . . . . .67 CIRCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . .64 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 G2E Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Incredible Technologies . . . . . . . . . . . . . . . . . .42 Innovation Group . . . . . . . . . . . . . . . . . . . . . . .41 Inspired Gaming . . . . . . . . . . . . . . . . . . . . . . .47 Konami Gaming . . . . . . . . . . . . . . . . .Back Cover Multimedia Games . . . . . . . . . . . . . . . . . . . . . . .9 NEWave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 NIGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Ontario Lottery OLG . . . . . . . . . . . . . . . . . . . .49 RD&E Experience . . . . . . . . . . . . . . . . . . . . . . .63 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . .27 Spielo International . . . . . . . . . . . . . . . . . . . . .15 UNLV Foundation . . . . . . . . . . . . . . . . . . . . . . .53 World Game Protection . . . . . . . . . . . . . . . . . .51

FEBRUARY 2013 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Richard St. Jean

Vice President and General Manager, Hollywood Casino Toledo

hen four casinos were approved for Ohio in 2009, Penn National Gaming and a partnership between Dan Gilbert and Caesars were each awarded two licenses. Hollywood Casino Toledo was Penn’s first entry into the state. Richard St. Jean, who comes to Penn following a 16-year career with Station Casinos, understands the locals market and customer service. Hollywood Casino Toledo directly competes with the Detroit area casinos, so capturing the locals market is crucial. He spoke with Global Gaming Business Publisher Roger Gros at his office in Toledo in December. A full podcast of this interview, which includes comments on the food-and-beverage outlets by F&B VP Mark Guastella, can be accessed at GGBNews.com/podcast. GGB: You have been open for about six months now. How has it been performing during that period? Richard St. Jean: Each time we open a property, the projections are realistic and the flow of business, from the onset, is very typical. We had a huge influx in the first month or two, then we have a settling down that is also impacted by seasonality, so it’s also determined based on the part of the year you open up. And then we really tend to gradually slow down over the course of the year. Within the first 12 months, as the database is growing and the loyalty rewards program grows, I can tell you that we’re up north of 250,000 accounts to date, which is very, very impressive. The Detroit casinos say that about 5 percent of their market came from this northeast Ohio region. Is that your market? Where are the people coming from? About a third of our database comes from southeast Michigan, as far as Ann Arbor, up to Detroit, which is a relatively small dent when

you compare it to the overall population in Detroit. We go east about as far as Sandusky, which is a natural breakpoint with Cleveland, and as south as Findlay, and then we’re starting to tap into Fort Wayne a little bit too. But, setting Detroit aside, we’ve virtually monopolistic here in northeast Ohio. We’re also pleased to see that the impact has been much less than what I think everyone expected in Detroit; they’re seeing about a 2 percent decline from our property opening to date. So, I think we’ve really seen great organic growth. What’s your mix between slots and table game revenues? It’s a pretty much typical spread between slots, table games, and the poker room. It’s somewhere in the neighborhood of 85 percent slots, 15 percent table games. What kind of development plans do you have for this property? Right now it’s just a casino, with some nice food and beverage amenities. Are there other plans? The property was master-planned for a hotel and a small banquet facility. As far as the date when we expect to pull the trigger, that hasn’t been determined at this point. We do have the capability to add another thousand slot machines to the floor. Although we started with just over 2,000 games, we can take that up to 3,000 as demand continues to grow. I think we have the right number of restaurant seats ratio to gaming positions. You’re competing against full-scale casinos in Detroit and Windsor. Does that put you at somewhat of a disadvantage, or is this a different market? Those are destination resorts, all with a hotel component. So that does make a difference. But we think that being a non-smoking facility is attractive to some. And we expect to add enter-

Global Gaming Business FEBRUARY 2013

tainment, which is something that we can do here, like a summer concert series outside. So with the addition of a hotel, I think that would change the dynamic somewhat. But right now, we’re a day-tripper property. You mentioned early on the revenues have declined after going up in the beginning. That’s a little bit unusual in new jurisdictions, because they seem to go up pretty steadily for the first year, or even two years. Why do you think that that’s happened so quickly here? Part of what we’ve seen in Ohio is that players are not real sophisticated gamers. Much like when Missouri came online years ago, people had to learn how to game. And that’s a lot of what we’re seeing here. And it’s very evident in the type of product they play; they tend to gravitate towards reels versus video poker, or the video reels, which is a much newer game. So you see it in the gaming pattern. It’s one reason we’ve experienced a softening, because it is a new jurisdiction, and we think that over time, as the customers get more comfortable and understand the games, etc., that continues to grow, in conjunction with our rewards program. What’s buoyed that to a degree is a third of the play that we get out of Michigan. You have much experience with Station Casinos in Vegas, of course, the king of the locals market. Are there some similarities to this market? There are some similarities. Obviously, Las Vegas is a much more competitive market, when you talk about the locals market. But there are some nuances. What we learned at Stations years ago, it’s all about service, taking care of the customers, and properly rewarding the right guests. And that is the formula we use. We manage this very much like a locals market, but the difference is, instead of a threeto five-mile radius, we’re a 30- to 90-mile radius. So, that’s why the big difference.

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