Global Gaming Business, December 2017 by Global Gaming Business

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GGB Global Gaming Business Magazine

FANTINI: HOW HIGH IS UP? CASHLESS SYSTEMS ANTI-MILLENNIALS RAMESH SRINIVASAN

December 2017 • Vol. 16 • No. 12 • $10

Macau

Momentum Will the recovery be long lasting?

The Legend of

KIRK

The founding of MGM and why Kerkorian was a central figure in gaming history

Association of Gaming Equipment Manufacturers

Official Publication of the American Gaming Association

TRENDS for 2018

Experts explore cutting-edge issues

Japan Process Step by step, casinos are coming The

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CONTENTS

december

Global Gaming Business Magazine

30 COVER STORY

Vol. 16 • No. 11

COLUMNS

Lion’s Legacy It can be argued that no one person is more responsible for the makeup of modern Las Vegas and its main industry than MGM’s Kirk Kerkorian, whose influence lives on two years after his death in everything from corporate casino ownership to themed gaming resorts, non-gaming amenities and every other now-commonplace aspect of the industry Kerkorian pioneered. By Oliver Lovat

12 AGA Many Faces Geoff Freeman

14 Fantini’s Finance Why So High? Frank Fantini

34 Operations The Millennial Is Not Your Customer Steve Gallaway

FEATURES

DEPARTMENTS

18 Trending in 2018

The Agenda

Our view of the 10 trends for 2018 that will have the most impact on the future of the industry, from new technologies to new ways to wager on sports, eSports, skill games and more.

By the Numbers

By Bret Abarbanel, Dike Bacon, Nicholas Casiello, Jr., Darrell Clifton, CJ Fisher, Lea Giosa, Jeff Hwang, Desmond Lam, Frank Legato, Yuko Matsumoto, Katherine Spilde, Jordan Whitten and Tom Wood

10 5 Questions 16 AGEM Page 46 Emerging Leaders With Akwesasne Mohawk Casino’s Shannon Keel, Penn National Gaming’s Justin Carter, and Boyd Gaming’s Gina Vorgiatzidis

48 New Game Review 49 Frankly Speaking 50 Goods & Services

28 Japan’s Next Move

40 Return of Macau?

While Japan legalized integrated casino resorts late last year, the realization of Japanese casino gaming will be a long process, with IRs not expected to open until after 2020.

Operators in Macau have much evidence to indicate their slump is over, but as new capacity comes on line, the whims of the Chinese government remain a reason for caution.

By Koji Ishikawa, Martha Sabol and John Stapleton

By Marjorie Preston

36 Tribal Challenges Expansion of commercial gaming, the emergence of online gaming and sports wagering and saturation of tribal markets head the list of challenges to the future of Indian gaming. By Dave Palermo 4

Global Gaming Business DECEMBER 2017

42 After Cash Technology is maturing that will take the cash out of player hands and relieve casinos of cash-handling costs through the use of mobile technology and other advances. By Dave Bontempo

53 People 54 Casino Communications With Ramesh Srinivasan, President & CEO, Agilysys

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THE AGENDA

Wild Horses

Vol. 16 • No. 12 • DECEMBER 2017 Roger Gros, Publisher | rgros@ggbmagazine.com twitter: @GlobalGamingBiz Frank Legato, Editor | flegato@ggbmagazine.com twitter: @FranklySpeakn Monica Cooley, Art Director | cooley7@sunflower.com

Roger Gros, Publisher

arly this month, the U.S. Supreme Court will hear arguments brought by the state of New Jersey over the establishment of the Professional and Amateur Sports Protection Act (PASPA). The case hinges on whether or not the law is constitutional or not. The issue, according to legal experts, is that all states should be treated equally and since PASPA “grandfathered in” four states where sports betting was already occurring in some form or another, it wasn’t fair to the rest of the states. Passed in 1992, PASPA was written by New Jersey’s very own senator and former star basketball player Bill Bradley, who was aghast that bettors would sully his sport. “Athletes are not roulette chips, but sports gambling treats them as such,” wrote Bradley sanctimoniously at the time. “If the dangers of state-sponsored sports betting are not confronted, the character of sports and youngsters’ view of them could be seriously threatened.” There were others who had some common sense, even back then. “My reaction is that we’re trying to close the barn door here after it’s already been opened, and a great many of the horses have escaped,” said Kentucky Congressman Romano Mazzoli at a PASPA hearing in 1991. “I just don’t know whether we can corral those horses and put them back in the barn.” Even the Department of Justice didn’t think PASPA was a great idea, opposing its passage. “Generally speaking, it is left to the states to decide whether to permit gambling activities based upon sporting events,” Assistant Attorney General W. Lee Rawls wrote to then-Senator Joe Biden. Well, Mazzoli’s horses are now running wild, spawning an illegal industry worth many billions of dollars with not one red cent going to any state or federal coffers. In a call with reporters last month, Sara Slane, senior vice president of public affairs for the American Gaming Association, called PASPA a “failed law” which, instead of prohibiting sports betting, simply channeled it to a vast illegal and unregulated business. “It’s a different world than when PASPA was signed,” she said. “Both the perception and the industry have changed. Now, it’s time for the law to do the same. We want to empower states and tribal

sovereign nations by giving them the opportunity to decide whether to legalize and regulate sports betting, just as they have done for years with casinos, lotteries and other forms of gaming.” So everyone is waiting with baited breath to see what the Supreme Court will decide, sometime next spring. But you know what? It probably doesn’t matter. The handwriting is on the wall. The legalization of sports betting began to get momentum more than three years ago when National Basketball Association Commissioner Adam Silver penned an op-ed in the New York Times pointing out that PASPA has been a complete failure, and it’s time to look again at making the wager legal. So it’s probably not a coincidence that just last month the NBA began lobbying members of Congress to allow sports betting. According Legal Sports Report, NBA Assistant General Counsel Dan Spillane is working with “advisors” in Washington, D.C. to craft legislation to permit sports betting. Since the Silver piece in the Times, other heads of major sports leagues have affirmed his stance. While not as aggressive as the NBA, leaders in American soccer, baseball, hockey and other sports have at least agreed we need to reconsider the issue. Only the NFL—the 800-pound gorilla—is still on the fence. But it won’t be for long. No matter what the Supreme Court decides—and the range of possibilities goes from complete rejection of PASPA to a more nuanced approach—there is a sea change occurring over sports betting. After New Jersey, more than a dozen states have already drawn up legislation that would create a path to legal sports betting once PASPA is repealed or replaced. Oh, and let’s also not believe this is the silver bullet, either. While the repeal of PASPA could open that proverbial barn door again, there are still issues like the very narrow margins the sports-betting business creates, as well as a federal excise tax on the books that could stop the industry before it even gets started. But first things first. Let’s find those horses, herd them together and get them running in the same direction. That in itself would be a tremendous accomplishment—a step that must be taken in order to make sports betting the viable part of the gaming industry we all know it can be.

Global Gaming Business DECEMBER 2017

John Buyachek, Director, Sales & Marketing jbchek@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com twitter: @LisaJohnsonPR Columnists Frank Fantini twitter: @FantiniResearch Geoff Freeman twitter: @GeoffFreemanAGA Steve Gallaway Contributing Editors Bret Abarbanel | Dike Bacon | Dave Bontempo Nicholas Casiello, Jr. | Darrell Clifton | CJ Fisher Lea Giosa | Jeff Hwang | Koji Ishikawa | Desmond Lam Frank Legato | Oliver Lovat | Yuko Matsumoto Dave Palermo twitter: @DavePalermo4 | Marjorie Preston Martha Sabol | Angela Slovachek | William Sokolic Katherine Spilde | John Stapleton | Jordan Whitten Tom Wood | Micheael Zhu

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

•

Mark A. Birtha, Senior Vice President & General Manager, Hard Rock International

•

Julie Brinkerhoff-Jacobs, President, Lifescapes International

•

Nicholas Casiello Jr., Shareholder, Fox Rothschild

•

Jeffrey Compton, Publisher, CDC E-Reports twitter: @CDCNewswire

•

Geoff Freeman, President & CEO, American Gaming Association twitter: @GeoffFreemanAGA

•

Dean Macomber, President, Macomber International, Inc.

•

Stephen Martino, Vice President & Chief Compliance Officer, MGM Resorts International, twitter: @stephenmartino

•

Jim Rafferty, President, Rafferty & Associates

•

Thomas Reilly, Vice President Systems Sales, Scientific Games

•

Steven M. Rittvo, Chairman Emeritus, The Innovation Group twitter: @InnovGrp

•

Katherine Spilde, Executive Director, Sycuan Gaming Institute, San Diego State University, twitter: @kspilde

•

Ernie Stevens, Jr., Chairman, National Indian Gaming Association twitter: @NIGA1985

•

Roy Student, President, Applied Management Strategies

•

David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 901 American Pacific Drive, Suite 180 • Henderson, Nevada 89014 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 2017 Global Gaming Business LLC. Henderson, Nevada 89014 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 901 American Pacific Dr, Suite 180, Henderson, NV 89014 Official Publication

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BY THE

NUMBERS

HOpE fOr MIllEnnIals a

t a recent event for analysts and investors, Caesars Entertainment President & CEO Mark Frissora had some good news about industry attempts to corral the millennial customer. According to the data compiled from an internal company report, says Frissora, 70 percent to 80 percent of Americans are active in some form of game play. For casino games, millennials edge out Gen Xers and are far ahead of the boomers. For non-casino games, millennials were also the winners. Frissora later went on to say that Caesars is seeking to use mobile technology to drive more play and help to develop a unified view of the customer.

Indian Impact

n a report issued at a recent event in Oklahoma, the American Gaming Association released a report developed by Alan Meister and Nathan Associates to gauge the economic impact of tribal gaming in the U.S. From the passage of the 1988 Indian Gaming Regulatory Act, the tribal gaming industry has grown from a small $121 million segment to an enormous $30 billion industry, responsible for 635,000 jobs, $33 billion in wages, $16 billion in taxes and direct payments to local, state and federal governments, and an overall annual economic impact of more than $96 billion. The chart below shows the impact on the various states.

Economic Impact of Tribal Gaming: Output

Global Gaming Business DECEMBER 2017

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NUTSHELL

5Questions

Jeff Hartmann

CEO, The Hartmann Group eff Hartmann got his start in the tribal gaming industry at Foxwoods after he began his career at Price JoverWaterhouse. He later moved to the Mohegan Sun, where he was president and CEO. In 2011, he took the Revel casino in Atlantic City and later started the Hartmann Group. His organization has a joint venture with Foxwoods to build and operate a Foxwoods casino in Biloxi, Mississippi. He spoke with GGB Publisher Roger Gros at G2E in October. A full podcast of this interview is available at GGBMagazine.com. GGB: Tell us about the formation of the Hartmann Group. Jeff Hartmann: We formed the Hartmann Group in 2012, and over the last couple of years we’ve had a

1 2

lot of success. We do two things: We work with Native American and commercial casinos and do the Hartmann Group 360-Assessment, which is a deep dive on the complete operations—everything from operations to marketing to game protection to slot floor layout. And then we also focus on retail, dining and entertainment—what are the cutting-edge restaurants, entertainment and stores? Non-gaming revenue is such an important element these days. How do you advise tribal casinos about how to enter that space?

It starts with the technology when the guest arrives. We need to recognize every guest. A lot of operators only focus on the gaming data, but we look at all the customer spend. What’s the holistic view of the customer and how do you acknowledge the guest? Are you using any retail beacons, and how do you recognize guests for some of their non-gaming behavior? F&B is so important. The industry is moving away from food courts to food halls. In retail, the trend is now for personal shopping, so we try to bring some of that to the retail ventures. It all starts with integration. You’ve got to have great service and all the touch points as well. We look at the marketing data and reinvestment. We see a lot of tribal operators who get caught up unfortunately competing on price, like free slot play. We try to get them to focus on their products and their service and look at trends in their database.

“They

Said It”

“Companies need to be more transparent than they were 10 years ago. From my perspective, it is a conversation that the board should have, because we are living in a world of more and more transparency.” —James Packer, chairman, Crown Resorts, under fire from anti-gaming activists at Crown’s annual general meeting in Melbourne

CALENDAR December 4-6: Global Symposium on Racing, Loews Ventana Canyon Resort, Tucson, Arizona. Produced by the University of Arizona Racetrack Industry Program. For more information, visit ua-rtip.org. December 6-8: World Gaming Expo, Grimaldi Forum, Monaco. Produced by Monaco International Events. For more information, visit World-Gaming-Expo.com. January 5-7: National Council of Legislators from Gaming States Winter Meeting 2018, Hyatt Regency Miami. Produced by Spectrum Gaming Group. For more information, visit nclgs.org. February 6-8: ICE Totally Gaming, Excel Centre, London. Produced by Clarion Gaming. For more information, visit ICETotallyGaming.com.

How do you work with tribes? Each tribe is different and the approach has to be different.

3 4 5

I learned a long time ago you have to listen and ask questions, rather than tell the tribes what you have to offer. Tribes have been free of compensation for a long time, and now states are considering getting into the game or allowing other tribes to open casinos on non-tribal lands. There are additional pressures, so we try to get tribes to think less gaming-centric and more about the integrated resort. You have to take certain snippets of that if the tribes are in remote locations, but we try to help them think long term. What has been a recent effort where you helped a client?

We recently worked for the Lucky Eagle Casino, which was facing the opening of the Cowlitz casino right in their market. We were able to come in and refine their operations and their marketing strategies. Some of the pundits said there would be a high-teens or low-20s impact on their revenue. We’re happy to say it was just a low-single-digit impact. We’re proud of the work we did at Lucky Eagle. Tell us about the joint venture with Foxwoods in Biloxi.

It’s been a pleasure to reconnect with the tribe and Felix (Rappaport) and his team. That’s where I got my start, so it’s a great opportunity. Our project has 500 rooms, 70,000 square feet of convention space, 1,200 slots, 30 tables. It will truly have an authentic Gulf Coast experience. The site we have at Point Cadet is kind of like the Borgata site in Atlantic City. It’s on the back bay with great brands from the Gulf Coast. It will be an entertainment-centric experience. It’s been a fun project so far.

Global Gaming Business DECEMBER 2017

February 6-8: Western Indian Gaming Conference, Harrah’s Southern California. Produced by the California Nations Indian Gaming Association. For more information, visit CNIGA.com. February 8-10: London Affiliate Conference 2017, Excel Centre, London. Produced by Clarion Gaming. For more information, visit www.igbaffiliate.com. March 12-15: World Game Protection Conference, Bally’s Las Vegas. Produced by World Game Protection, Inc. For more information, visit WorldGameProtection.com. March 13-15: iGaming Asia Congress, Grand Hyatt Macau. Produced by Beacon Events. For more information, visit iGamingAsiaCongress.com.

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AMERICAN GAMING ASSOCIATION

Many Faces

PUBLICATIONS

Casino gaming renews its commitment to a diversified workforce Global Gaming Business Magazine

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Casino Style Magazine

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www.ggbmagazine.com 12

Global Gaming Business DECEMBER 2017

By Geoff Freeman, President & CEO, American Gaming Association

he casino gaming industry is proud of its commitment to a diversified workforce. Of the 1.7 million casino gaming employees nationwide, 45 percent are minorities—far more than the national average of 33 percent. To highlight this, and the industry’s overall efforts, the AGA traveled to Detroit, Michigan in October to present at the National Minority Supplier Development Council Conference & Business Opportunity Exchange (NMSDC). This year, for the first time, AGA is proud to partner with NMSDC to actively support their mission and advance “business connections that count” for many years to come. In fact, many of AGA’s members have been active participants with NMSDC for years, and we were pleased to highlight them at the conference roundtable. The event, a part of AGA’s Get to Know Gaming (G2KG) campaign, included Stacy Taylor, senior vice president and chief procurement officer of global procurements, MGM Resorts International; Jessica Rosman, vice president of procurement, Caesars; Renee Boyce, president, CEO and founder, My Next Career Path Staff, LLC; Jacci Woods, vice president of public relations and community affairs, MotorCity Casino Hotel; Paul Jenkins, MiG Construction; and Shaundell Newsome, founder, Sumnu Marketing. During this year’s G2KG campaign, AGA has highlighted a number of minority-owned businesses nationwide. In April, AGA kicked off the American Gaming Small Business Jobs Tour at Eastern Food Services, a minority-owned business in Laurel, Maryland that works with MGM National Harbor to provide MLife water bottles to the new property. In June, AGA traveled to St. Louis to meet with minority-owned Regents Maintenance Supply, a janitorial supplier and equipment provider for the region’s casinos. That same month, AGA traveled to Maryland Live! Casino to highlight Edwards & Hill Office Furniture, a minorityowned office furniture supply and installation

firm in Annapolis, Maryland. Each company said its business grew exponentially thanks to their work with the gaming industry. Earlier this year, AGA released a report, “The Gaming Industry’s Impact on Small Business Development in the United States,” that examined nearly a dozen U.S. gaming markets and assessed casino gaming’s direct and indirect impact on local, small businesses. Researchers from Spectrum Gaming Group concluded that gaming’s widespread impact is felt in markets across the country, but has larger impacts in small to mid-sized communities where local businesses work to integrate into gaming operations.

$52 billion

in annual revenues is generated by the casino gaming industry for American small businesses, according to the small business report released by AGA.

Nationwide, the small business report concluded that the casino gaming industry generates $52 billion in annual revenues for American small businesses and supports $13 billion in small business employee wages. In addition, $52 billion in annual small business revenues goes toward real estate, finance, health care, STEM, manufacturing, information technology and other industries. We’re proud of our commitment to working with minority and women-owned businesses in cities across the country. Small businesses—and minority-owned businesses—are instrumental in driving our industry from $240 billion today to $300 billion tomorrow. AGA looks forward to working with NMSDC and partnering with the minority business community. Follow Geoff Freeman on Twitter at @GeoffFreemanAGA.

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FANTINI’S FINANCE

Why So High? Gaming stocks are soaring and there seems to be no end in sight, but how did we get here? By Frank Fantini

he stock market is high by almost any measure. And every day it climbs higher. As of this writing, the S&P 500 is selling at 25 times earnings, 3.4 times book value and generating a paltry 1.94 percent dividend yield. The index has risen 16 percent this year, a prodigious feat but puny compared to the NASDAQ Composite’s 26 percent rocket ride. And gaming has made the overall market look like a laggard. Fantini’s North American Gaming Index is up over 30 percent, and our World Index is up an astonishing 43 percent. The gains have been remarkable and widespread: Supplier Scientific Games rose 325 percent over its 52-week low, as fellow supplier Aristocrat is up 80 percent and IGT 40 percent. Or take a hybrid supplier like TransAct Technology, 120 percent over its 52-week low. Regional casino operator Golden Entertainment is up 190 percent, while Eldorado is not far behind at 165 percent. Penn National, Pinnacle, Tropicana and Monarch are all up more than 100 percent and Churchill Downs is at a 52week high. Big casino operators are soaring, too: Wynn at 85 percent, Caesars over 90 percent, Las Vegas Sands and MGM Resorts each up 30 percent. Ditto for international casino operators such as Galaxy Entertainment and Melco Resorts, both over 70 percent from their lows. Each day brings a pile of stocks hitting 52week highs, and they aren’t just the familiar names. They range from iGamers like Evolution, Jackpot Joy and LeoVegas to Asian casino operators such as Paradise Co. and Grand Korean Leisure, to Swedish company Kindred to U.K. betting company Ladbrokes Coral and to companies in India, of all places, where casinos hardly even exist, like Delta Corp. on the Bombay Stock Exchange.

Business performance, the economic environment and sentiment seem to support the high prices. In the U.S., for example, the economy is creating jobs by the hundreds of thousands every month and consumer sentiment is the highest since 2004. Jobs and consumer sentiment are often cited as the two most important statistics for the casino industry. Players are continuing to visit casinos. Gaming revenues in the U.S. rose 3.15 percent through September and growth has accelerated through the year with September itself up 3.4

‘

(Gaming companies) are increasingly buying back stock, initiating and raising dividends, reducing debt ratios and, in many cases, paying down debt. All those actions support stock prices.

’

percent, as reported in Fantini’s National Revenue Report. Macau is back in business as growth there is running at a sustained rate, rising double digits and performing at the best level since 2014. Perhaps most impressive about Macau is that all three market segments—premium mass, base mass and VIP—are growing, and this despite the government’s ever-stricter rules on accessing cash and greater regional competition from places such as the Philippines, which itself is becoming a significant market. The result of all of this is a kind of golden age of profitability. Companies across the spectrum and in all parts of the globe are achieving record profits on ever-higher margins as they continue to practice the expense discipline learned during the Great Recession of what is now nearly a decade ago.

Global Gaming Business DECEMBER 2017

Further, they are increasingly buying back stock, initiating and raising dividends, reducing debt ratios and, in many cases, paying down debt. All those actions support stock prices. Finally, despite their big advances, most gaming stocks, while priced high, are not historically or hysterically high. PE ratios of 25 times are high, but we’ve been there before; likewise, relatively low dividend yields. And some companies remain bargains by certain measures. Pinnacle and Penn National have enterprise value-to-EBITDA ratios of just over eight times. Boyd has a price-to-growth ratio well below 1. Dividend yields of nearly 7 percent for Gaming and Leisure Properties and 4.5 percent for Las Vegas Sands provide healthy cash returns and promise healthy total returns. In short, we seem to be in a Goldilocks era. But, to use one of our favorite expressions, trees do not grow to the sky. Investors would do well in this environment to look for what can go wrong. For example, we remain in an era of cheap money. The Federal Reserve Board has been raising interest rates, but at a very cautious pace, continuing to make stocks attractive investments in what could be an asset bubble. And, as we all know academically if not viscerally, all bubbles burst. The price of oil has been rising steadily, a fact hardly noted by prognosticators. At some point, higher prices pinch consumer spending power. A shock, whether an exogenous event like war or simply profit-taking gone out of control, could shatter investor confidence. The economy could grow to the point of labor shortages and subsequent higher wages and inflation that could lead even our most accommodating Fed to raise interest rates and cool off the economy. In other words, the Fed hasn’t repealed, nor has spiffy technology obsolesced, the business cycle. Bottom line: Goldilocks was a story. All stories end, and this one will, too, sooner or later. 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.fantiniresearch.com.

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AGEMupdate AGEM MEMBER PROFILE

Quixant Plc. is the market-leading supplier of gaming technology, specializing in the design and manufacture of PC-based gaming hardware and display solutions. Despite being a relatively young company, Quixant harnesses many years of industry experience into providing the only truly gamingspecific product offering in the global marketplace. The year 2018 will bring a raft of exciting new Quixant computer platforms of unprecedented power, and further impressive innovations in the monitor and button deck field. In addition, Quixant’s all-encompassing Gaming Ecosystem will continue to evolve, allowing machine manufacturers and game developers to realize all their objectives, and more, in an incredibly short timeframe. This year has been another very strong one for Quixant, releasing the QXi-400 platform, with power for two-screen applications coupled with full Windows 7 support, which addresses a major concern in the industry. Quixant has also diversified its monitor range greatly, with the introduction of a variety of LED-illuminated and slim bezel designs. Quixant features comprehensive gaming-specific hardware systems and reliable, eye-catching monitors for the machine, and can provide them faster than any other company. Quixant will exhibit its portfolio at the ICE exhibition in London, taking place February 6-8. ICE is a very important focus for Quixant, a truly international show that is growing every year. For more information, contact Amit Sharma, 702-522-7849, or via email at amit.sharma@quixant.com.

NOVEMBER 2017 KEY BOARD OF DIRECTORS ACTIONS • Dr. Russell Sanna, executive director for the National Center for Responsible Gaming (NCRG), gave an in-person presentation at the recent AGEM monthly meeting. His overview included the important work carried out by the center to provide information and groundbreaking research undertaken by leading academics that helps policymakers to make better decisions. The scientific-based research is helping to increase awareness among the gaming industry by educating employees and patrons about problem gaming and responsible gaming. AGEM is a major supporter of NCRG through annual contributions as well as raising money from the AGEM-AGA Golf Classic. Over the past 19 years, the event has managed to raise an astonishing $2.7 million for this very worthwhile cause. • As part of AGEM’s support for education initiatives, members approved an annual contribution of $10,000 for Nevada State College students and its Visual Media Department. The focus of the college is to help educate youth in areas of need in Nevada and help them to get jobs in the community. Graduates from the visual media program can find careers in a variety of industries, including gaming creation, film and graphic design. • Macau’s Gaming Inspection and Coordination Bureau, known as the DICJ, recently published new language that significantly affects suppliers and test labs. Some of the key proposed amendments suggest only companies incorporated in Macau will be allowed to sell gaming machines, equipment and systems and will not be allowed to operate from branch offices outside of the region. Similar changes will also affect independent testing labs and gaming suppliers in general. • AGEM welcomed three new members at the November board meeting, taking the membership to 156 companies across 24 countries. Bronze members are DR Gaming Technology, based in Belgium and a global supplier of integrated casino management solutions for the gaming industry; and Jackpot Digital, based in Vancouver, Canada, developers of leading electronic table games and mobile games for casinos, cruise ships and online operators. New Associate member Shenzhen General Lottery Technology (Genlot) is a provider of goods and services to the Chinese lottery.

UPCOMING EVENTS • AGEM members approved a $5,000 contribution to the Western Indian Gaming Conference, which will take place February 6-8 at Harrah’s Southern California. The event, supported for years by AGEM, brings together representatives from all the California gaming tribes.

AGEMindex During the latest period, seven of the 12 global gaming equipment manufacturers reported month-tomonth increases in stock price. One manufacturer saw no change in its stock price, while four manufacturers reported decreases in stock price during the month, with one posting a double-digit decline. The AGEM Index experienced significant gains for the second month in a row during October 2017. The composite index closed the month at 475.35 points, a gain of 17.44 points or 3.81 percent, when compared to September 2017. The AGEM Index reported a year-over-year increase for the 25th consecutive month and has climbed 153.45 points, or 47.67 percent, since October 2016. The three broader stock market indexes produced exceptional results in October. The S&P 500 reported a month-to-month increase of 2.22 percent to 2,575.26. The Dow Jones Industrial Average increased 4.34 percent to 23,377.24, while the NASDAQ increased 3.57 percent during the period to 6,495.

" $#& AGEM is an international trade association representing manufacturers of electronic gaming devices, systems, lotteries and components for the gaming industry. The association works to further the interests of gaming equipment manufacturers throughout the world. Through political action, trade show partnerships, information dissemination and good corporate citizenship, the members of AGEM work together to create benefits for every company within the organization. Together, AGEM and its member organizations have assisted regulatory commissions and participated in the legislative process to solve problems and create a positive business environment.

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Crystal Ball Follow the Top 10 Trends for 2018, courtesy of the expert writers for GGB

t’s always a bit dangerous to predict the future, but when you’re simply following your expertise, it’s almost a given. Every December, GGB magazine brings together experts from the many and varied fields of gaming to identify the trends that deserve attention for the upcoming year. While the trends identified in this feature probably won’t qualify as jaw-droppers, the details offered by our expert writers should. From the casino floor to the high-roller suites, things are looking up. But to stay ahead of these trends you must understand them, and our writers will keep you up to date and informed. Prepare or be left behind!

High Stakes The world’s largest slotmakers up the ante with high-denomination slots By Frank Legato

or years, slot manufacturers such as IGT and the former Bally Technologies (now Scientific Games) have included a contingent of traditional reel-spinners among their new-game lineup every year, and invariably, executives have repeated the same comment: The high-denomination space is underserved in today’s slot market. The culprit, of course, has been the rise of the penny denomination, and the typically high operator slot holds that go along with it. And while pennies are still dominant, there has been a pushback, from players who are tired of pumping money into the penny games with little return, and who are ready to give up a higher initial wager in exchange for a higher return. One look at this year’s lineup of games launched at the Global Gaming Expo confirms that suppliers are now attempting to capture that underserved high-denom market. And the trend is not restricted to IGT and Scientific Games, which both rode the initial popularity of higherdenomination, traditional slot machines to success in the 1990s. All of the smaller U.S. manufacturers, as well as slot-makers like Ainsworth, Novomatic and Merkur that are new

to the North American market, are launching lines of games in higher denominations, with higher returnto-player percentages. And while the trend to offer higher denominations certainly includes a return to the traditional three-reel steppers that originated the genre, it is by no means limited to that game style, as there is no shortage of five-reel, multi-line video slots now being offered in quarters, dollars and higher. Typically, suppliers lower the number of paylines from 30 or 40 to five or nine to make them more affordable on the main floor, but leave the higher payline counts in high-denomination games for the high-end rooms. Evidence of a return to higher denominations abounded in the G2E displays this year of several major manufacturers, led by IGT and Scientific Games. IGT reloaded its S3000 stepper category with higher-denomination traditional games, but also included high-denom games in its TRUE 3D group of slots offering 3-D video effects. Prominent among them is a TRUE 3D version of the classic reel-spinner Red, White & Blue, in single-line, three-line or five-line versions. Scientific Games, meanwhile, is rounding out what is now called the 3RM line (for threereel mechanical) with some of the most famous traditional Bally steppers in new, high-denomination releases. Among them are new versions of the classic Blazing 7s, Bonus Times, Black & White,

Global Gaming Business DECEMBER 2017

Black & White 5X Pay, Double Jackpot Triple Blazing 7s and Quick Hit 5X 10X stepper slots. In the high-denomination wide-area progressive space, the company is launching Michael Jackson Legend and Cirque Kooza, both with progressive wheels on the Blade mechanical stepper, and Diamonds Are Forever in the new James Bond series. But the two originators of high-denomination games are not the only ones on the

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Nerds Need Not Apply

eSports has gone mainstream; casino applications are many and varied

big-bet bandwagon. Aristocrat, the manufacturer that defined the low-denomination, multi-line video slot, has launched its first stepper series, RELM, with a concentration of high-denomination games. The RELM series was created to capture some of the underserved traditional stepper market, and the higher denominations and higher-volatility math that go with it. In June, the company launched the series with eight inaugural games following the volatile math model of the traditional high-denomination steppers. Aristocrat’s high-denomination offerings also are following a separate trend in the slot market—the giant-format game. At G2E, the company launched RELM XL, a giant-format stepper group utilizing a 43-inch monitor for bonus events. The first games are Britney One More Time, Buffalo Inferno and Buffalo Thundering 7s. Buffalo Inferno and Buffalo Thundering 7s employ high-denomination stepper math (dollar and up), with the Britney game a mid-denomination stepper (nickels through quarters in a buy-a-pay setup). Newer entries to the U.S. slot market are following suit. At G2E, AGS launched several new high-denomination video slots for its ICON cabinet based on the math model of Colossal Diamonds, its giant-format dollar stepper slot on the Big Red cabinet, reporting high early returns on games like French Quarter 7s and Premier Diamonds. Everi also is returning to high denominations in many of its game groups, beginning with a big hit in Casper the Friendly Ghost, which has spawned an entirely new game group in the high-denomination stepper category. And Ainsworth, which is still growing in the U.S. market, has made high-denomination games a specialty this year, releasing many of its top-performing video slots in three-reel, five-line versions and dollar denominations. There clearly is a growing number of players willing to pony up higher initial stakes in exchange for that traditional rush of volatile math and higher returns. And the major suppliers are happy to oblige. Frank Legato is the editor of GGB magazine and the recognized expert on the slot machine industry.

By Brett Abarbanel

Sports was included in the GGB trends for 2017 with a focus on how to make the concept work in a casino environment. What a long way we have come in just one year! Gambling operators around the world are now involved in eSports in some capacity. In the U.S. alone, MGM Resorts International partnered with Allied Esports to open a dedicated Esports Arena (early 2018) and Caesars Entertainment Studios launched with Sidekick Productions, vowing to include eSports production in their lineup. Downtown Grand has diversified significantly since their feature in last year’s write-up, expanding their lounge and launching an eSports boot-camp training facility. Casino resorts across the country have hosted eSports competitions, such as Tropicana Atlantic City’s Royal Flush Smash Tournament and Talking Stick Resort’s Esports Arizona event. The growth is global: this fall, World Poker Tour teamed with ELC Gaming to hold the first joint poker and eSports event at Holland Casino, while Galaxy Entertainment hosted the 2017 China E-Sports Carnival at Broadway Macau. Online wagering on eSports has also grown substantially, with average eSports betting year-on-year growth of about 50 percent, and much higher for online books with larger market share. The past two years have seen eSports betting overtake rugby and golf handle, and eSports now appear as a primary feature on many online betting websites. Pinnacle employs an eSports trading team that rivals that of soccer, in terms of size. It is also important to remember that eSports exists as its own vertical outside the scope of the casino industry. The industry can capitalize on the growing trends in this parallel sector. In particular, eSports has seen a vast increase in sponsorship and marketing from non-endemic brands, such as big investment from sports franchises around the world. While the eSports community has not always been particularly welcoming of sin industries—ESL famously blocked Team YP from competition in 2016, because their primary sponsor is YouPorn—many gambling-focused businesses have made inroads. Unikrn, for example, is a major sponsor of the eSports organization Berlin International Gaming. Sponsorship ability, however, is highly dependent on the game publisher’s and/or event organizer’s preferences. In March, game developer Psyonix issued a public statement disapproving of gambling on its game, Rocket League. In August, Betway was dropped as the main sponsor of eSports organization Ninjas in Pyjamas (NiP) to fall in line with the Riot Games League of Legends Championship Series (LCS) rules forbidding the display of gambling product logos. Betway continues to sponsor individual NiP Counter Strike: Global Offensive players.

In the coming year, the convergence of eSports and gambling suggests several continuing and new trends: • Use of cryptocurrency and blockchain technology already exists for both eSports and gambling, but the transformative potential and rapid adoption of these frameworks mean novel approaches to operations and regulation are on the horizon. • Increased eSports community awareness and action in the gambling world, both positive and negative: Last year’s skins betting scandals pulled us into the first melee, and we now see skins included as a regulated virtual currency under some gambling licenses. The current debate surrounds the classification of loot boxes, which the Entertainment Software Rating Board (ESRB) recently announced it does not consider gambling. Given the debate that rages on, ESRB is not likely to be the final word on the matter. • As the continued growth of eSports into the mainstream puts more pressure on game integrity issues, gaming, gambling and sports regulators from around the world watch with heightened interest. • New games are consistently released, and newcomers can overtake old favorites with sudden, explosive popularity. Player Unknown’s Battlegrounds (PUBG) is one such example, ending League of Legends’ 31-month streak as the most streamed game in August. And this happened while PUBG was still in a beta/early access phase. Traders may struggle to keep up with new releases like these. Blizzard Entertainment’s Overwatch, meanwhile, has been out for about a year and a half, and its Overwatch League will host its first professional games in 2018, to the great anticipation of both the gaming and betting communities. Finally, we all should recognize by now that eSports is no longer a niche market of nerds in their mothers’ basements, nor is it solely a millennial phenomenon. The population includes all ages, genders and demographic backgrounds. It even includes female university professors in their early 30s, who like to watch and play a little Hearthstone with their morning coffee. Brett Abarbanel is director of research for the International Gaming Institute at the University of Nevada, Las Vegas. She can be reached at brett.abarbanel@unlv.edu.

DECEMBER 2017 www.ggbmagazine.com

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One Industry, Two Systems?

AGA will continue to recruit tribal members and pursue tribal casino alliances By Kate Spilde

hen Geoff Freeman took the leadership role at the American Gaming Association, he changed the organization’s orientation toward tribal government gaming. Previously, the AGA focused on drawing distinctions between the commercial casino industry and other gambling industry segments, including convenience gambling, state-run lotteries and tribal government gaming. Redirecting from this position in 2017, the AGA released a national impact study of tribal gaming, and now actively recruits tribally owned gaming companies and tribal governments to join the organization. In 2018, the AGA’s recruiting of tribal members and promotion of tribal gaming as “part of the casino industry” has the potential to confuse the public and policymakers about the distinct differences between the commercial casino model and the tribal government gaming model in the United States. It also has the potential to drive a wedge between tribes who do not agree on how (or whether) to engage with the AGA. In particular, the AGA’s collapsing of tribal and commercial gaming into “casino gaming partners” has raised concerns by some tribes that the AGA is leveraging tribal gaming’s strong economic development successes at the regional level (such as New York or Connecticut) in order to open new markets for commercial casinos, which ultimately compete with these existing tribal properties. The AGA’s embrace of tribal gaming is a departure from the mission of its founders, and it appears this trend of expanding its own mission beyond commercial casino matters will continue. When the AGA was formed in 1995, the first board was focused on defeating a proposed federal tax on commercial casino gambling and on influencing the federal legislation that would ultimately create the National Gambling Impact Study Commission (NGISC). When the NGISC released its final report, the founding president of the AGA, Frank Fahrenkopf, commented, “While this report is not without its faults, it definitely draws a favorable distinction between commercial casinos and other segments of the gaming industry.” The distinctions between commercial casinos, tribal gaming facilities and other gambling industry segments are meaningful. The gambling industry is not easily categorized. Legalized gambling in the United States consists of a range of diverse activities including state-run lotteries, riverboat casinos, parimutuel horse and dog racing, tribal government gaming, commercial casino gaming, internet gaming and sports betting, among others. Each product is specifically marketed to particular market segments and defined and regulated in

specific ways. While gambling opponents collapse these differences when they claim that gambling is a vice, there are very few similarities between the legal gambling products, the use of their revenue streams or their impacts on consumers or communities. The NGISC Final Report (with input from the AGA) acknowledged and highlighted these differences when it stated: …the gambling industry is far from monolithic. Instead, it is composed of relatively discrete segments…that can, in turn, be divided or aggregated into a variety of other groupings… each segment of the gambling industry ‘has its own distinct set of issues, communities of interests, and balance sheets of assets and liabilities’... In California, tribal governments will continue to focus on the unique history, regulation, attributes and impacts of tribal gaming as opposed to commercial casino gaming in order to pre-empt any attempts by commercial casinos to enter the state. The history of tribal gaming is rooted in self-reliance, economic development and nation-building, not casinos. Tribal governments own and co-regulate their own properties, which must be located on tribal lands. Tribal government gaming revenues are invested in tribal social programs and in recovery from a long history of failed federal programs. These stories are a critical feature of markets like California, and these stories will continue to be told by tribes, by regional tribal associations and by NIGA. While the AGA and the tribal government gaming industry have some issues in common, the trend of collapsing the two distinct industries appears to help the commercial casino industry while it has the potential to erase the unique story of tribal innovation that created what is now the $30 billion tribal government gaming industry. As one tribal representative noted, “When we lose our sovereignty story, we lose.” In spite of these critical differences, the trend of the AGA including tribal gaming in their messaging will continue and intensify, because telling tribal gaming stories reveals the best of casino gaming. Freeman’s statements continue to be forward-looking, and there is little reason to believe that their position will change: “As tribal and commercial operators continue to work together, our industry will continue to grow in the years to come.”

Global Gaming Business DECEMBER 2017

Katherine Spilde is an associate professor and executive director of the Sycuan Gaming Institute at San Diego State University. She can be reached at kspilde@mail.sdsu.edu.

Video poker is an example of a “niche” game

The Benefit of

Niche Gaming Developing strategies to attract small but influential groups to your casino By Jordan Whitten

oday’s casinos face myriad challenges: a vast and competitive market, the rising costs of slot products and technology, and the industry’s uncertainty about millennial gamblers. Many in the industry are working to combat these challenges with fancy marketing campaigns and guest-service initiatives to wrest players from local competitors. They’re integrating newfangled technologies to optimize cap-ex spending, and experimenting with social- and skill-based gaming to modernize their operations. When executed properly at the right property and targeted to the right players, these initiatives can help operators reap dividends in the short term. For sustained benefit, however, consider a niche gaming strategy that operators can use to enhance their gaming operations and drive new revenue in the long term. Before we start, let’s define niche games as games that are extremely appealing to a small, yet highly loyal subset of players. In this sense, niche gaming is not new, and it occurs naturally when players gravitate toward the games they prefer. Developing a niche gaming strategy simply means that the casino explores its player database to identify its most valuable niche players as well as the types of niche games they prefer and that drive incremental revenue. Niche games are not popular. They’re not played by hundreds of players and don’t top the win-per-unit list each month. Niche games appeal to very specific groups of players and are effective at driving those players to visit your property. In the last two years at VizExplorer, we’ve supported more than 70 casinos with between 300 and 4,000 slot games each. Across properties of all sizes, niche gaming is thriving, but in some cases, operators are unaware of its existence or impact.

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Let’s start with the most obvious and universally accepted forms of niche gaming: video poker, electronic table games (ETGs) and high-limit rooms. Each gaming experience appeals to specific players who seek a certain experience. With video poker games, the average diehard player plays no other games and typically goes paytable shopping to find the best machine. ETGs have similarly loyal players, with the average game getting 60-80 percent of its win from players who exclusively play ETGs. The appeal of high-limit rooms stems from how they are built. Operators place a mix of expensive games into a room designed to deliver optimal guest service (think dedicated cashier or bar service). Over time, both the amenities and the games become even more niche as operators work to customize their high-limit rooms to meet the exacting demands of their high-end clientele. The success of these niche gaming styles prompts the question: Why haven’t casinos put more effort into identifying additional niche gaming opportunities? The answer is simple: lack of time and resource constraints. The three niches we describe above are fairly high-level, and while niches by definition, they represent a huge chunk of casino wins. Going deeper to

identify smaller niches requires analysis of playerlevel data matched to game performance and to player loyalty metrics. For the average casino, this level of analysis isn’t feasible because they lack the staff with the right skills or the time. However, as competition increases, it’s becoming more necessary to explore these opportunities to gain an advantage. Let’s review a real-world example of the potential value of doing that deep-dive analysis. A casino in the Midwest has a direct competitor one hour away. The competitor is about 30 minutes closer to the population center from which both casinos pull. The competitor is also newer, and populated its gaming floor with brand-new games for its opening, meaning it didn’t have some of the classic themes in classic boxes. The older casino ran analysis to understand the players who drove the extra 30 minutes past the new competitor to play, and found that by a margin of 3to-1, those players were playing the older classic games. Financially speaking, these classic games are just under house average as a group, but these loyal players were making up almost 60 percent of those games’ value. Current industry trends would indicate the need to consolidate older cabinets and encourage these players to try newer boxes. The property took a different approach and moved those boxes into a

classic section to provide a space especially for these loyal players. As a group, those players were worth the effort to protect the classic games from potential removal as well as to re-bank them into a small niche. Most slot operators will agree that every casino’s players are different, and that what works at one casino won’t necessarily work at the other. This can benefit individual casinos that have slot operators willing to do the work to understand players and find the niche games to drive incremental revenue. The Midwest casino example makes it clear how identifying and supporting niche gaming can be a highly effective and profitable way for properties to cater to player desires and keep players from defecting to competitor properties. Based in Las Vegas, Jordan Whitten is director of industry specialists for VizExplorer. In this position, he serves as the advanced trainer and subject matter expert for the company’s slot floor optimization solution floorViz. Prior to VizExplorer, Jordan spent three years in the slot operations departments at various casinos in Colorado, Nevada and Mississippi, where he developed his interest and expertise in slot analytics, location optimization and strategic game mix decision-making.

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Luxury Redefined

Stripped down is out, high quality is in for hotel room transformations By Dike Bacon

he industry is constantly evolving—transforming itself as the market pivots and demographics change. Increasingly, savvy guests are demanding a heightened sense of luxury in their experiences, and this is driving a new shift from what’s traditionally been thought of as “luxurious.” Four Seasons Hotels and Resorts calls it “deconstructing the formalities of luxury,” and Ian Schrager’s new hotel concept, Public, promises “luxury for all.” Understanding how the new notion of luxury can be implemented on a project starts with a change in design perspective. Luxury redefined connotes a lifestyle that is less formal and noticeably less stuffy. This new standard of luxury is focused on what guests really want and value, but it doesn’t mean “stripped down.” Thoughtful design, attention to detail and visual sophistication are the drivers of today’s luxury. It’s less about flashy opulence and more about the way a space makes the guest feel and interact. Authentic and accessible design features are smart design touches that make the experience simpler and less complicated. For example, resort guest rooms are moving away from the sameness of a brand-standard type of approach and more toward the creation of a unique, well-curated room experience that feels “special” to the guest. Emily Marshall, head of interior design at HBG Design, says her gaming resort projects nationwide are trending toward a greater mix in room designs. “We’re creating style variety through multiple room packages at the same property,” says Marshall. “Designing three or four distinct variations in carpet design, light fixtures, fabrics and furnishings gives guests an experience that differs each time they visit a property—so they never feel like they’re staying in the same place twice. The challenge for designers is to work with manufacturers to explore distinctive design elements without incurring more cost to create unique guest experiences within a large-scale property.” Today’s guests are well-versed in matters of style and design; they travel more frequently and crave immersion in the locality of place. “Modeling environments that are part of the fabric of a culture or a community has never been more relevant to design than it is right now,” says Nathan Peak, design leader for HBG Design. “We find design inspiration from authentic yet unexpected sources, emphasizing details of a culture or ele-

Connectivity and Parity Creating continuity by designing games that cross platforms By Tom Wood

T Suite Living Room, Wind Creek Wetumpka

ments of the locality of a project. “When you can express those details in subtle, sophisticated moves that aren’t immediately obvious, you give guests the opportunity to discover those details on their own, adding to their experience.” Elevating convenience and efficiency in guest rooms also adds to the expression of luxury. Integrated lighting in the bathroom; motion sensor lights built into the nightstand that work as a night light; wireless Bluetooth speakers built into rooms all represent heightened attention to smart details. “We’re reimagining all the essentials in the guest room to give guests what they want and value in their experience,” says Marshall. Original art continues to be an important touch of luxury, and while Wynn Resorts set the standard for art collection, casino resort owners are increasingly using art as an opportunity to tie their facility to local context and culture. For example, Choctaw Casino Resort in Durant, Oklahoma features one of the most impressive collections of Native American art in the industry. The collection creates an important connection to Choctaw culture and is a differentiator in quality and luxury that clearly sets it apart. “The art becomes a focal point—something special that elevates the space,” comments Marshall. Dike Bacon is principal and development leader at HBG Design, a Top 10 architecture and interior design firm in the national hospitality/entertainment industry. With 37 years direct industry experience, Bacon works closely with the firm’s gaming clients to strategize and transform business opportunities into long-term successful investments.

Global Gaming Business DECEMBER 2017

he gaming industry constantly adapts to meet the needs and wants of consumers, and those adaptations must meet the standards set forth by constantly changing technology. Throughout the ever-shifting landscape, though, content remains the best way to engage players. In the B2B social casino space, one key emerging trend is content parity with the casino floor. As 2018 approaches, suppliers should be prepared to provide world-class content in line with land-based offerings, and operators should look to promote games and themes that are available on multiple channels, all of which can engage players, enhance loyalty and drive revenue. Content parity with the casino floor makes an undeniable positive impact on player engagement and adds incremental revenue opportunities by way of brand recognition. Successful social casinos allow players to explore many titles from the libraries of the developer’s landbased and real-money gaming businesses. When a player sees, plays or prefers a specific theme on property, they may also enjoy playing that theme in the digital space. We see this with many of our brands within SG Universe that are also popular on the casino floor. Brands like Zeus and Spartacus perform well across multiple channels. Simply put, players seem to enjoy finding their favorite games in multiple places. The exploration opportunities that B2B social casinos provide are unparalleled. Unique to the digital realm and prominent in the B2B social casino world is the sheer accessibility of an entire library of games. With a few simple swipes, players can access and play hundreds of games. When paired with a collection of content also available on casino floors, the social casino becomes a treasure trove to the player for exploration of familiar and new content; players are encouraged to explore the library and try new games without any extra effort. Games aside, B2B social casinos are already

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Multi-State iGaming Agreements

As iGaming spreads across the country, cooperation between the legalized states will become crucial By Nicholas Casiello, Jr., CJ Fisher and Lea Giosa

I beginning to reflect the casino floors in other ways. Portrait-mode gaming, an innovation now available to the real-money space in legal jurisdictions, will start to make its way to the B2B social space in the coming months. Portrait mode makes it easier to play games online for smartphone players and better reflects the land-based experience by making full use of a device’s screen space. The vertical orientation allows for dynamic portrait animations, new art and sound opportunities, and a more immersive playing experience that recreates the larger-than-life feel of many slot cabinets. Additionally, as the world of technology becomes more connected than ever, we’ll begin to see enhanced connections between players, their devices and land-based properties. Players can already access their loyalty account information, book hotel rooms, make restaurants reservations and much more using just their device. This connectivity will improve as customers learn to expect more from the technology that enables these functions. Portfolio parity and technological innovations in the B2B social casino world will continue to bring digital gaming to the forefront of the gaming landscape. As operators adopt an omni-channel approach that involves expanding online libraries and continual innovation, B2B social casinos will gradually be acknowledged as a must-have rather than an enticing extra. As this happens, players will reap the benefits of enhanced features and functionality, better connectivity with the property, and, of course, more engaging games. As SG Interactive’s vice president and chief product officer, B2B, Tom Wood leads global product strategy, technology, compliance, delivery and roadmaps for the remote game server (RGS) and SG Universe business lines. He manages a worldwide team of product managers, game development squads and technology specialists who are driven to meet or exceed market and customer expectations.

nternet poker players in New Jersey, Delaware and Nevada will soon be able to compete against one another pursuant to the Multi-State Internet Gaming Agreement (MSIGA), which New Jersey joined on October 13. Under MSIGA, mutually licensed operators may allow internet poker players in Nevada, Delaware and New Jersey to play together at the same virtual table. Nevada and Delaware initially entered into MSIGA on February 25, 2014, allowing operators licensed in both states to pool players located in Nevada and Delaware on their respective platforms, with the goal of increasing liquidity, and ultimately, internet gaming revenues. The addition of New Jersey to MSIGA should significantly increase the number of internet gaming participants, which in theory will enhance the variety and quality of internet gaming offerings, attract new consumers, provide more opportunities for internet gaming participants and operators, and increase net state revenues. As internet poker is the only form of internet gaming universally permitted in all three states, MSIGA is currently limited to internet poker. While Nevada only offers internet poker, Delaware and New Jersey offer a variety of internet games in addition to poker. MSIGA expressly provides for and envisions the expansion of internet gaming offerings subject to the agreement, such as internet slot machines and table games. If MSIGA is expanded to include other games, operators will be able to offer such games to players in other member states that authorize those games, and may allow players from different states to play together. Member states may amend the agreement if two-thirds of the members agree to the amendment. Thus, New Jersey and Delaware have the option to amend MSIGA to include other internet games. Further, MSIGA allows operators to offer internet progressive systems and progressive jackpots that are funded by both internet and land-based patrons located within the three states, provided it is permissible under each respective state’s law. For example, a progressive player in New Jersey could contribute to and play for the same jackpot as an individual playing at a land-based casino in Delaware. Operators must submit internal controls for such systems and jackpots to each state in which they will be offered, and obtain approval for the same. The state in which each player is located will receive the revenue or tax attributed to that player, regardless of the location of the operator. MSIGA includes provisions for determining the amount to be

paid by an operator to each state, including for calculating the portion of the rake or tournament fees attributed to a respective player. The amounts will be distributed to each state on a monthly basis. This structure will also apply if MSIGA internet gaming offerings are expanded. MSIGA is comprised of a representative of each member state, to facilitate, oversee and govern MSIGA and the internet gaming offerings provided pursuant to MSIGA. Each member state must also designate a law enforcement representative to collectively address appropriate matters that may arise under MSIGA. MSIGA also provides for the addition of other states. To join the agreement, a prospective state must demonstrate that its operators, internet gaming system and regulatory structure meet a set of minimum standards. For example, each prospective state must demonstrate that its process of issuing internet gaming operator licenses promotes public confidence and trust in the internet gaming industry and that its operators meet certain standards of suitability. In addition, each prospective state must show that its operators have a demonstrated technical capability of verifying the age, identiity and physical location of players, and that out-of-state persons are excluded. Each prospective state must also exhibit that its operators have appropriate consumer protections and safeguards concerning responsible gambling in place. Pennsylvania could be the next state to join MSIGA. On October 30, Pennsylvania became the fourth state to pass legislation authorizing internet gambling, including poker and other internet games. The new legislation authorizes Pennsylvania to negotiate and enter into reciprocal internet gaming agreements with other states. The legislation also permits multi-state agreements with other states concerning the operation of multi-state widearea progressive slot machines systems.

Nicholas Casiello, Jr. (l.) is chair of the Gaming Practice Group and CJ Fisher and Lea Giosa are associates in the group of Fox Rothschild LLP, an Am Law 100 law firm. Their practice focuses on all aspects of gaming law, including gaming regulatory compliance, investigations and licensing. They may be reached at 609-348-4515 or casiello@foxrothschild.com, cjfisher@foxrothschild.com or lgiosa@foxrothschild.com.

DECEMBER 2017 www.ggbmagazine.com

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The Case of Japan The dilemma and way forward for Asian integrated resorts By Desmond Lam and Yuko Matsumoto

he Asian casino gaming market has undergone huge changes in the last decade. The growing interest among various Asian jurisdictions like Taiwan, South Korea and Japan to legalize or expand the availability of casino gaming, within the context of an integrated resort setting, has stirred up heated debate within some Asian societies. Everyone believes that the way forward is to, essentially, package the “gaming deal” into a multifaceted complex that includes entertainment facilities, hotel, MICE, retail and restaurants. The deal is then aggressively sold to stakeholders, who are increasingly skeptical about the benefits of such a resort and why there is a need for a casino in it. The resulting deal, although disguised as an integrated resort (IR), is nevertheless a “gaming deal”—the casino plays a pivotal role in maintaining the business financial equation. It is perhaps more accurate to call such a facility an integrated resort. In any case, the Asian public remains skeptical of the motives of their politicians, governments and IR operators. As the Asian casino gaming market expands, scattering into cities throughout emerging and developed Asian economies alike, it becomes increasingly difficult to differentiate one gaming offering from another. The cultural uniqueness of each market then plays a critical role in making the difference. Asians are culturally different from the Westerners. Historically, one thing that Asian countries value highly is keeping their social fabrics intact. The development of the IR has given rise to new model of casino gaming, providing new strategic development that was otherwise impossible in the past. The combination of various elements in an IR is expected to lead to greater synergy than when each operates on stand-alone. With Macau leading the pack, Singapore, South Korea, Malaysia, Philippines, Vietnam and now Japan are chasing after the Holy Grail of Asian gaming—an exceptional IR with synergized activities that result in positive economic impact but minimal negative societal consequences. However, there is no foolproof way to keep social harm at bay. One cannot expect zero harm from gambling consumption, much like

The Japanese public is concerned about problem gambling, an issue so far ignored by the government despite the proliferation of pachinko parlors around the country.

alcohol consumption; rather, one should make harm minimization a long-term goal. Everyone can be a winner in this market; a stakeholder approached is needed, with a stronger inclination to protecting social norms and orders. Many business executives still do not understand this. While gaming operators unveil all sorts of creative ideas for their proposed new resorts, the public remains critical of their core business model—one based on the support of an active casino operations located within their neighborhood. There are some real issues to ask and tackle. For example, why is a bet on lottery socially acceptable but not a bet on the baccarat table? Why do Asians object to casino gaming but are more receptive to lottery and/or sports gaming? What are the roots of all these objections? Is it a matter of public misconception or a lack of trust in the local government and/or IR operators? In December 2016, the long-delayed Japanese Casino Law (Japanese Casino Implementation Act) was passed. This worries many Japanese, in particular, about the possibility of more organized crime and problem gambling. Let’s face it: Japan has never been a gamblingfree society; there is a long history of gaming in horse races and lottery. What’s wrong is the public’s perception that gaming is related to organized crime groups. To be fair, the Japanese government has been very active in controlling and breaking up organized crime groups. The other negative perception that the public has about casinos is problem gambling. The Japanese government fully understands this concern. Indeed, the Japanese public would be very thankful and relieved if its government would finally do something to deal with problem gambling as part of the casino legalization process, because that would encompass all other forms of gambling, particularly pachinko. Every year, the Japanese pachinko industry

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Global Gaming Business DECEMBER 2017

makes huge amount of money. However, pachinko has never been categorized as “gambling” in the eye of the Japanese law, even though many Japanese see it otherwise; the Japanese government has refused to recognize pachinko as a form of gambling. The idea of an IR is partly misunderstood by the Japanese public because they believed that pachinko has been used as a camouflage for gambling, and so may the establishment of IRs. As the Japanese population questions its politicians for the logic of legalizing casinos on its own soil, many plans are now in discussion to heavily regulate the Japanese casino gaming industry even before it begins. This is much like the process that Singapore underwent during its own casino gaming legalization about a decade ago. It is an essential course of action to identify and meet the needs of all stakeholders. Although a heavily regulated IR will limit operators’ revenue and profit, it is meant to satisfy the population and key stakeholders as well as safeguard everybody’s interests. Bear in mind that Asians have a highly collectivistic mindset, where “we” is so much more important than “I.” Potential operators, in this sensitive circumstance, must be prepared to take it or leave it. It is, and will be, their choice to make. Desmond Lam (top) is a professor in international integrated resort management at the University of Macau. He can be contacted at DesmondL@umac.mo. Yuko Matsumoto is a senior instructor in management at the University of Macau. She can be contacted at yukom@umac.mo.

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Evaluating Success

Skill-based gaming in three acts and contexts By Jeff Hwang

n order for a skill-based game—or any other game for that matter—to be a success, the game has to do at least one of three things: 1. Broaden a given casino’s audience. By appealing to gamblers a casino might not otherwise reach, whether it be younger gamblers (e.g. millennials), higher-stakes gamblers or any other demographic. 2. Give the casino a game portfolio advantage. If a casino can offer a desirable game or a

value proposition (e.g., 3:2 blackjack, 10X odds on craps, lower table minimums, etc.) that other casinos aren’t, that casino may have a game portfolio advantage that may win customers from the competition. 3. Generate a sufficient amount of gaming revenue. The game must either make more money

than the alternative (i.e., produce incremental revenue gains), or at least generate a minimal amount of gaming revenue combined with enough value from either of the first two items to justify the cost of leasing the game. And with regard to skill-based gaming, 2017 was about addressing the first two items by answering one bottom-line question: “Is there a market for something different?” The initial rollout of next-generation skill-based games began with GameCo’s single-player, housebanked “Video Game Gambling Machines” (VGMs) in Atlantic City in November 2016, followed by games on Gamblit’s Model G multi-player platform in Las Vegas in March 2017. And then in October, Gamblit’s TriStation platform—a multi-game, single-player, house-banked platform—made its debut at Planet Hollywood, the Venetian and MGM Grand in Las Vegas. This first year of next-generation skill-based gaming has been a feeling-out period probably best described as trial-by-fire, as this first wave of games went to market despite facing a laundry list of challenges inherent to trying to gamblify non-gambling games, chiefly: • Game speed or lack thereof • High stakes and high house edges/rake • Issues with regard to wagering structure • Learning curves The picture you get is that what these companies are attempting to do is quite difficult. But you also realize that this is just the beginning. We’ve already seen refinements being made. At G2E in October, GameCo unleashed Terminator 2, a premium-branded, direct upgrade and replacement for Danger Arena, the first VGM to hit the market. 26

Meanwhile, Gamblit revealed Deal or No Deal Poker Special, which is Gamblit Poker (which went live in March) but with an added Deal or No Deal twist; the twist adds a split decision, which allows for a wider range of payouts (both bigger and smaller), and should help to better hide the size of the rake. The bigger challenge will be solving the game speed issue in the way that makes sense. And so in a sense, skill-based gaming is a tale of three stages—three acts, and three contexts. 2017 was about proving out the platforms, testing out the waters and seeing what the audience is for these machines regardless of financial performance, which was always going to underwhelm given the aforementioned challenges. But if skill-based games are to work into the future, 2018 will be about two things: 1. Casino operators and skill-based game developers properly identifying the current games as smallstakes arcade games. This means being realistic about what we’re looking at, and finding a way to offer the games at reasonable stakes in an effort to give the games and platforms a chance to build a player base. 2. Solving the game speed issue while utilizing wagering structures that make sense. This will be the key to turning these platforms into proper gambling machines—efficient revenue-generators with realistically scalable stakes. The latter will be the ultimate trick. Now for the three contexts: 1. Platforms (2017). Game performance aside, the most important thing to be proven out is the potential efficacy of these platforms. Can these machines broaden the appeal of the casino floor and provide a casino with a game portfolio advantage? 2. Arcade machines (present). As currently constructed, the proper context for the skill-based games we’ve seen thus far are as small-stakes arcade machines on the casino floor. These games are not necessarily well-equipped at present to function as high-stakes gambling machines. 3. Gambling machines (future). As skill-based gaming developers start to figure how they want to approach wagering, skill-based games will evolve from mere video game machines with a wagering component, and we will instead see new gambling-based games utilizing new technologies. Games that start with gambling will be far more efficient at generating gaming revenue; these games will have practical game speeds, which will allow practical stakes and house edges. These games will also have the ability to scale stakes and produce higher-stakes play.

Global Gaming Business DECEMBER 2017

Jeff Hwang is a game developer and president of High Variance Games LLC. He is also the all-time bestselling author of Omaha poker books. Follow Hwang on Twitter, @RivalSchoolX.

10 Culture Change How can casinos prevent terrorist incidents from occurring? By Darrell Clifton

hen a tragedy like October 1 strikes, we generally take away one or two valuable lessons. 9/11, Columbine, Virginia Tech, Fort Hood and Pulse all brought important vulnerabilities to light, and even spawned new technology and techniques for prevention and response. These enhancements tend to counter one threat, but we are starting to realize that we cannot anticipate the imagination or ingenuity of someone who is bent on doing harm. This will require a comprehensive change to the security culture. The “See Something Say Something” campaign was a great slogan with good intentions, but was too generalized and vague. Security experts have taken this slogan and built training programs and technology around it to make a security culture change. This new culture where persons have some responsibility for their own safety is the trend for 2018 and beyond. Behavioral recognition is already being practiced discreetly at concert venues, amusement parks and many other resorts. Awareness campaigns, job descriptions, in-service training and on-boarding enhanced with these techniques will shift the culture from uninvolved victims to interactive groups of people sharing responsibility for their own safety. The most common inquiries we have received since October 1 are technology-based: Metal detectors? Lethal weapons? Tactical response teams? Counter snipers? One reporter even asked if we would be installing bulletproof glass on the exterior windows of the hotel. Certainly these and other technologies will become more advanced and play a larger role in the protection of soft targets (except the glass—not sure where that idea came from). However, the common denominators of all bad acts are that they are committed by humans, and those humans give warnings, no matter how imperceptible they may seem. This “human” technology is turning into an industry and a science as we speak. Behavioral

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recognition, security awareness and social engineering are some of the skills being taught and applied throughout the security industry (and the hospitality industry). These fields of expertise, rather than being vague and ambiguous like the See Something campaign, are detailed, advanced, and targeted to certain employee and even visitor groups. Here are some current examples where security uses active and passive behavioral recognition to counter potential threats: • A popular amusement park observes persons entering the venue and refers those with certain behaviors to uniformed police officers. Guests are further examined by plain-clothes security once inside the gates. • A large mall in the Midwest uses a recognition process to scrutinize its patrons upon entry. • Many retail chains post persons at the door to greet incoming patrons. • One casino creates “choke points” to observe guests and their behaviors on video. • Many corporations train their employees to recognize the pre-violence indicators associated with workplace violence. In coming years, we will take this training to the next level. What exactly this new culture will look like in the gaming industry will be defined by all of

us. But consider these facts that are affecting the future of security for us: • Most of our new employees attend an orientation that includes a 10-minute video on security awareness. No one remembers anything they were presented in new-hire orientation except where the dining room is and when do they get their first check. • Those tasked with “security” at a resort make up less than 5 percent of the workforce. Imagine multiplying those eyes and ears by 20. • Your valet, bell and housekeeping staff “touch” every guest every day. This group of employees knows your guests better than anyone, but what is their mechanism for transferring that intelligence to someone who can do something with it? Does their training include “what to look for?” • Cruise ships require all passengers to participate in evacuation drills on every embarkation. Each crew member has a dual assignment during an emergency. Could hotel/casino employees have dual roles? Especially in an emergency? • We still discourage employees from carrying and using their phones on the job, even though it is arguably their best tool for safety. How about managing the use instead of prohibiting it?

• When confronted with a life-threatening situation, most people will revert to their instincts. A lack of training or practice means most people will freeze while their brain processes a plan. • Many of us put up a poster that says something like “See Something Say Something.” What does that mean? Did we tell our employees? What do we do with the information? It is not technology alone that is going to save us from ourselves, but it is our fellow humans. While we will always rely on, and be expected to embrace, new technologies, it is the science of social engineering that will be trending for us in the years to come. Changing the culture requires education, buy-in, management support, guest interaction, and 100 percent dedication by the company. Darrell Clifton, CPP, CSP has been managing security operations in the gaming and hospitality industry for over 25 years. While currently managing three properties for Eldorado Resorts in Reno, Nevada, he also consults, trains and advises security operations throughout North America. He is the author of Hospitality Security.

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Japan Time Where do we go from here? By Koji Ishikawa, Martha Sabol and John Stapleton

hen Japan decided to legalize gaming in order to attract more tourism in late 2016, it proved to be just the beginning of a long road to implantation. The Act Concerning Promotion of Development of Integrated Resort Areas (the IR Promotion Act) was passed into law by the Japanese National Diet in December 2016. The IR Promotion Act does not legalize wholesale casino gaming in Japan, but instead provides for the creation of a limited number of integrated resorts. Japanese IRs will integrate casinos with facilities such as international conference and exhibition centers, hotels, shopping centers, restaurants, theaters, amusement parks, sports complexes and other similar attractions. The IR Promotion Act does not itself introduce a detailed regulatory framework for integrated resorts in Japan. Instead, the IR Promotion Act provides broad concepts, principles and goals, which must be included in a more detailed legal framework to be set out in a second bill, generally referred to as the IR Implementation Bill.

Proposed Regulatory Framework Administrative bodies with varying roles and levels of authority have been established in accordance with the provisions of the IR Promotion Act. One such administrative body is the Expert Committee. The Expert Committee is the promotional leadership body charged with advancing the development of integrated resorts. On July 31, the Expert Committee published an interim report, which provides a high-level proposal regarding the basic structure of the IR Implementation Bill (the Interim Report). A stated goal of the regulatory framework is to develop “the world’s highest standard for casino regulations,” as publicly called for by Prime Minister Shinzo Abe. The Interim Report spends a lot of space defining the role of the Gaming Control Board, another administrative body to be established in accordance with the IR Promotion Act. The Gaming Control Board will act as a type of watchdog over the IR industry in Japan. In its role, the board is to have investigatory power to conduct background investigations on specified parties, authority to issue penalties for certain violations of IR regulations, and supervisory power over the IR area, among other functions.

Selection and Licensing Process The Interim Report sets out a proposal for IR selection and licensing. According to the Interim Report, the Ministry of Land, Infrastructure, Transport and Tourism (the MLIT) is to become the competent authority over IRs, and will be charged with designating IR areas. In preparations for IR area designation, the MLIT is to establish a basic national policy that contains several matters such as national unified guidelines and basic requirements for selection of IR areas. Candidate local governments are also separately tasked with establishing an implementation policy that discusses 28

Global Gaming Business DECEMBER 2017

matters such as anticipated IR facilities as well as a screening process and requirements for candidate IR operators. Once these policies are established, local governments interested in bidding for an IR area will conduct a public tender process for candidate IR operators. Upon selecting a partner IR operator, the local government will file an application with the national government for designation of the IR area. The application will include both a business plan mainly created by the partner IR operator and an IR area development plan. The IR area development plan will include details such as the IR’s business model, infrastructure development, and how to prevent negative effects of gaming. Upon review of the application and completion of a selection process, the national government will select certain local governments for designation. At first, it is expected that perhaps two or three local governments will be designated for IR areas. Upon receiving a designation, successful local governments will then execute an accord with their respective partner IR operator. IR Operator Licensing: Local government IR area designation and IR operator licensing will be done in two separate steps. The MLIT will first designate local governments upon completion of the selection process as discussed above. Only after the local governments are selected will the partner IR operators file a gaming license application with the Gaming Control Board. The Interim Report states that IRs should operate under a licensing system that ensures a high level of integrity. One of the areas focused on extensively throughout the Interim Report is a licensing and approval process that would be effective in totally excluding anti-social groups (e.g., organized crime) from deriving any benefits from the IR area. To achieve this goal, the Interim Report proposes that the Gaming Control Board conduct background investigations on a wide range of relevant parties such as operators, directors, shareholders, and external parties who have a controlling influence on IR operations. The subjects of the background investigation would include not only the IR operator itself, but also the IR operator’s subsidiaries, other related companies, and those connected at a degree of two, three or more from that subsidiary or related company, not only at the time of licensing or approval, but as necessary. Process Overview: The chart below provides a general overview of the process from policy development to beginning IR operations as proposed in the Interim Report.

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Two-Step Selection Process Risks: The two-step selection and licensing

on Japanese patrons.

process creates risk for candidate local governments as well as for IR operators in the form of investor uncertainty. If a partner IR operator fails to obtain a license after IR area designation, given the integral relationship between the local government and IR operator in the national government’s designation process, will the local government also lose its designation? As stated above, the application for IR areas will include both an IR area development plan and a business plan. In that case, will the local government be required to recreate the IR’s business model and infrastructure development plan from scratch? These questions remain unanswered in the Interim Report.

Collection and Allocation: According to the Interim Report, fixed fee contributions will be national government revenue collected to pay for Gaming Control Board expenses. GGR contributions and entrance fees, on the other hand, should be split evenly (50-50) between the national government and local government. Further, GGR contributions should be collected monthly by the national government in a lump sum and paid to the local government as a local consumption tax. Each of these special taxes for IR operators would be in addition to corporate taxes, consumption taxes and local taxes.

Gaming Area

Next Steps

The Interim Report proposes that the gaming area be just one part of the entire integrated resort. A primary purpose of introducing IRs in Japan, as set out in the IR Promotion Act, is to develop “stay-type tourism” in Japan. So, the Expert Committee’s intention with this proposed rule is likely to make clear that IRs are not only to include casinos, but also MICE, hotels, restaurants, entertainment and other facilities as well. In addition, the Interim Report states that the gaming area is not to exceed a certain absolute upper limit of the IR area. Although a specific size is not mentioned, it has been suggested informally that an upper limit of 15,000 square meters (164,458 square feet) be established. Japanese IRs have high expectations in terms of tax revenue. Furthermore, the Interim Report places an emphasis on assuring the success of non-casino businesses such as MICE, even suggesting that revenues from casino gaming be used to support MICE. Meanwhile, MICE and certain other non-casino IR businesses have historically acted as a sort of weight on casino IR businesses, earning less revenue overall. So talks of increasing this size have been a large focus for many insiders, as a sufficiently large gaming area will be particularly important to meet these stated goals and requirements.

Public hearings on IR implementation began on August 17 and ended around two weeks later on August 29. A total of nine public hearings were held around the country in places such as Tokyo, Osaka, Hiroshima, Fukuoka (on Kyushu Island) and others. Some attendees at the hearings were opponents of the legislation, citing concerns with gambling addiction and other social problems. This is in light of recently published opinion polls in Japan reflecting general antipathy towards the notion of establishing IRs, with opponents outnumbering advocates by 2to-1 or even 3-to-1 margins. Meanwhile, other attendees of the hearings participated to learn further details about the implementation of the IR project, especially in connection with the Interim Report. As one would expect, certain hearing attendees also lobbied for inclusion of certain desired provisions in the IR Implementation Bill. For example, in Fukuoka, the prefectural government officials in attendance called for the central government to allow for strong inclusion of regional bidders in the IR development process, and to not focus too heavily on the major urban areas of the country. Several cities and prefectures have expressed an interest in bidding for an integrated resort in their locality. Such cities and prefectures include Hokkaido, Akita, Tokyo, Yokohama, Chiba, Osaka, Wakayama, Nagasaki and Fukuoka. The leading favorites thus far appear to be Osaka and Yokohama. However, it is still too early to accurately forecast the locations for any integrated resorts. Although many of the expected front-runners for IR site selection are major cities, there is room for IRs in regional areas as well. One of the goals of introducing IRs into Japan, as stated in the IR Promotion Act, is to stimulate local economies by attracting tourists and creating jobs. Regional governments interested in Japanese IRs are also an opportunity for mid-market operators to take on a big role. It is commonly believed that when large markets such as Yokohama submit an IR proposal to the national government in competition with other large markets, large-scale operations will be seen as a major point in the national government’s evaluation of the bids. Yet, smaller regional markets will likely have more moderate expectations in terms of scale and revenue. As such, mid-market operators interested in Japanese IRs will likely have a niche of their own by partnering with a smaller regional government. Prime Minister Abe’s Liberal Democratic (LDP) party achieved an overwhelming victory on October 22, allowing the LDP and its coalition partner Komeito to maintain their two-thirds lower-house “super majority.” This victory gives Abe’s coalition a decided referendum from Japanese citizens to continue with its plans to promptly advance the IR implementation process. Many expect the IR Implementation Bill to be submitted to the Diet in January 2018, and IR business to begin after the 2020 Tokyo Olympic Games, helping to buoy the Japanese economy long past the end of the games and into the future.

What Will the Tax Model Look Like? The IR Promotion Act provides for two special IR-related taxes. The first tax is a contribution levied on the IR business, and the second tax is an entrance fee to be levied on IR patrons. Both taxes are to be used for IR promotion, social welfare, promotion of culture and arts and other public benefits. Contributions: The Interim Report sheds some additional light on a proposed tax scheme for IRs in Japan. With regard to contributions, the Interim Report proposes that contributions be comprised of: (i) a fixed amount equal to the Gaming Control Board’s expenses, and (ii) an amount in proportion to gross gaming revenue. GGR is defined in the Interim Report as “total wager amount minus payouts to customers (excluding comps)” and is to be calculated monthly by IR operators. The fixed amount will likely be collected primarily as a license fee by license holders, and is to be in an amount equal to necessary administrative expenses incurred by the Gaming Control Board. The Interim Report does not specify an appropriate rate of GGR. Instead, the report simply states that such a determination “should be established taking into consideration foreign models and the competitive environment surrounding IRs.” Entrance Fees: The second special tax for IR areas set out in the IR Promotion Act is an entrance fee. The IR Promotion Act provides few details on the scope and policy to be implemented with regard to entrance fees. However, the Interim Report offers some recommendations. According to the report, entrance fees should be charged on a per-day (24-hour) basis on all Japanese citizens and residents, while foreign visitors would enter without charge. No specific entrance fee was suggested in the Interim Report. Nevertheless, the report proposes a general principle that the entrance fee amount be sufficient to deter easy entrance while also avoiding imposing an excessive burden

Koji Ishikawa is the Tokyo managing shareholder; Martha Sabol is co-chair of Global Gaming Practice; John Stapleton is a Tokyo associate for the international law firm of Greenberg Traurig. DECEMBER 2017 www.ggbmagazine.com

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The

Modest

By Oliver Lovat

LION

Kirk Kerkorian, the MGM Grand and the impact on strategic thinking

n December 18, 1993, MGM Grand opened as the largest hotel not just in Las Vegas, but in the world. It wasn’t the first time Kirk Kerkorian’s company had held this honor. Or the second. But by the third time, Kerkorian had learned from past ventures, and as today’s MGM Grand celebrates 25 years, we look at how the property came to be, how it has survived the changing landscape of Las Vegas, and what the impact is of Kirk Kerkorian’s thinking on modern Las Vegas and future developments. On his passing in 2015 at the age of 98, the Las Vegas lights were not dimmed as they had been six times previously. It is unlikely he would have wanted it, but it is arguable that Kirk Kerkorian deserved this token of remembrance more than any of the past honorees, as it can be strongly argued that he was more responsible for modern Las Vegas than any other person. Kerkor Kerkorian’s early life was undoubtedly tough. As the proud son of

Armenian immigrants who lost whatever they had in the recession of 192021 and without any more than a basic education, Kerkorian undertook a series of hard-working but menial jobs, and built a name for himself as a good amateur boxer. He was a self-trained mechanic, buying older cars and making them good, before trading them for profit. As World War II broke out, Kerkorian trained as a pilot and worked with the Royal Air Force undertaking long, dangerous trans-Atlantic cargo flights—which proved to be his making, as after the war he used his savings and bought a small single-engine airplane. He later expanded his fleet by buying planes from Europe and bringing them to the U.S. West Coast, where a popular flight route proved to be shuttling wealthy patrons between his home in Los Angeles and the growing but certainly adult-orientated and mob-controlled gambling city of Las Vegas. Los Angeles Air Service was to be Kerkorian’s first corporate acquisition. He renamed it Trans International Airlines (TIA), with a focus on growing the nascent U.S. charter flights industry. After running the business for several years, Kerkorian sold TIA to Studebaker and plowed the proceeds into acres of the barren desert land in Clark County, just south of the city of Las Vegas around what is now the Las Vegas Strip. Three years after selling TIA, in a habit which Kerkorian was to repeat later in life in many industries, in 1965 he reacquired the company at a discount. He continued to reinvest in Las Vegas land, but without acting as a casino owner or developer. Instead, he leased his land to Jay Sarno and Stan Mallin, two Missourian hotel developers with a crazy idea of building a Greco-Roman-themed palace of decadence in the Nevada desert. “Kirk Kerkorian was key to us being able to build Caesars Palace, and he

One of Kerkorian’s early business ventures was Trans International Airlines. Kirk Kerkorian (left) in 1969 in front of his first casino, the International 30

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backed us again in building Circus Circus, but he was no pushover,” says Mallin, co-founder of Caesars Palace and Circus Circus. “He was one of the smartest, toughest and shrewdest people in town. For some people, the currency in Las Vegas is dreams, but with Kerkorian it was always dollars.” As we now know, Caesars Palace was not just to invent the modern casino resort, but was also to inspire Kerkorian to move into development of his own casino resorts.

Birth of the International Eyeing the profits that Caesars Palace generated, Kerkorian invested in 85 acres of land to the east of the then-center Strip, behind the Riviera and adjacent to the convention center. His company, International Leisure Corporation (ILC), bought the Bonanza and Flamingo hotels, ostensibly to train staff for his next projects, but ILC was also active in renovating and investing in the existing properties. This period coincided with the “corporatization” of Las Vegas, as long-held mob interests were replaced by Howard Hughes and Kerkorian, who gave the old mobsters a legitimate exit as they were coming under renewed federal scrutiny. Legendary architect Martin Stern Jr. was employed to design Kerkorian’s first property, coming up with the “Y-shaped” design that is now commonplace on the Strip, and which formed the basis of the Mirage, Bellagio and many more properties built over the subsequent decades. The International was unlike anything in Las Vegas at that time. Not only was it bigger than anything else—over double the size of Caesars Palace—but it featured so much more than the typical Las Vegas hotel. It had a place for children to play as their parents gambled, a range of resort amenities to compete with the best, and the entertainment was revolutionary. The International was the first property to bring in the next generation of iconic entertainers; Elvis Presley and Barbra Streisand played the main showroom and Hair, the coun-

terculture hit from Broadway, was in the smaller showroom. The hotel made headlines and featured heavily as the Whyte House in the James Bond film Diamonds Are Forever. However, behind the scenes, Kerkorian and ILC were facing questions from the federal Securities and Exhange Commission, which was investigating all things Las Vegas with an overtly critical eye, relating to the previous ownership of the Flamingo. With pressure coming from previous European loans taken by Kerkorian, he was forced to sell his stock to Hilton, which had made a previous investment in the company. The International became the Las Vegas Hilton. It was to become the best-performing property in the entire Hilton portfolio. Today, it is the Westgate.

The First MGM Grand In 1969, now firmly based in Los Angeles, Kerkorian acquired a substantial stake in MGM Studios, attracted by the significant land holdings in Los Angeles and the brand name that conjured the glamor and legacy of Hollywood. This brand was subsequently attached to his next project, the MGM Grand, again designed by Martin Stern Jr. The Grand opened in December 1973, with a movie theater, retail and multiple showrooms, including the largest showroom in Las Vegas with both residencies and nightly performances from America’s leading entertainers, including Dean Martin singing on opening night. The hotel cost $106 million and was the largest hotel in the world, again. The MGM Grand was a solid and successful operation, but sadly, the hotel is now mostly remembered for the fire in 1980, the darkest day in the history of Las Vegas and one that cost the lives of 85 people. Kerkorian settled all claims and personally oversaw that this tragedy would not be repeated in any of his properties. The property was sold at a profit in 1986 to the former Bally Manufacturing, the slot manufacturer, but Kerkorian smartly kept the MGM brand out of the sale. Today, as Bally’s, the resort is part of the Caesars Entertainment portfolio.

The Second MGM Grand Kerkorian built the largest hotel in the world three different times (top to bottom): The International (home to Elvis Presley), the original MGM Grand (sold to Bally after a tragic fire that killed 85) and the current MGM Grand, still one of the largest hotels in the world

Kerkorian, flanked by the former CEO of MGM Resorts, the late Terry Lanni (l.) and the current president and CEO, Jim Murren

Undeterred by the tragedy, Kerkorian was to acquire the Desert Inn, and briefly, the Sands hotel. In 1989, he bought the Marina hotel at the southern end of the Strip and several parcels of land in the surrounding area which were to form the footprint for what is today’s MGM Grand. The context of the acquisition was the unexpected success of Steve Wynn’s Mirage and the expansion of Circus Circus Enterprises’ offerings with Excalibur and the Luxor on the southern Strip. At $1 billion, with 5,005 rooms and on 112 acres, the Veldon Simpson-designed MGM Grand opened in late 1993. The MGM Grand was conceived and built as a full-scale theme park, rather than an integrated casino resort, with Disneyesque characters, including a Mickey Mouse-inspired “Looey The Lion” greeting guests. In the age of themed hotels,the MGM Grand fit in. Kind of. The 30-story green building was reminiscent of MGM’s Emerald City from The Wizard of Oz, and references to the iconic movie were peppered throughout the property, from the Flying Monkey Barn to the Wizard’s Magic show and a full animatronic Wizard of Oz show. There was a clear strategy to advance on Kerkorian’s past ventures by targeting families, with investments in a midway and arcade, successfully employed in Circus CirDECEMBER 2017 www.ggbmagazine.com

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CityCenter, with its Aria Casino Hotel, was the final triumph in the amazing life of Kirk Kerkorian

cus, and a theme park with rides, movie theaters and separate restaurants away from the casino. But the theme was not all-pervasive, as it had been in Sarno’s imaginariums. Although a couple of restaurants were Oz-themed, the resort featured traditional offerings, such as Chinese food in Dragon Court and Santa Fe-style offerings, among the wider range. Notably, MGM Grand was one of the earlier adopters of bringing in celebrity chefs such as Mark Miller and Charlie Trotter to run their own restaurants; although Puck’s Spago was open in the Forum Shops, his restaurant at MGM was his first within the walls of a casino. Kerkorian had obviously experienced the magic of The Wizard of Oz in his own life, and related that to the escapism of Las Vegas—when we leave our home or our routine and go to Las Vegas, with the aim of beating the odds and hopefully returning as conquerors after winning that life-changing jackpot. For many customers, this alignment is subconscious, born out of the collective narratives and dream of the brand of Las Vegas. We buy into the fantasy that is being offered and alter our behaviors accordingly, most notably in spending and consumption behaviors and in an increased attitude to risk. On opening, the MGM Grand was an iterative product of Kerkorian’s past work combining everything that he and his team had learned from 25 years in building Las Vegas, yet was remarkably innovative and forward-thinking. The now-ubiquitous ticket-in/ticket-out for slots was first employed at the property, which featured the first coinless slots in Las Vegas. Former MGM Grand Chairman and CEO Larry J. Woolf proudly reflects on the hiring practices, bringing in and training staff from non-traditional backgrounds, seeking to build a diversified workforce, and opening drug-free after mass screening, via hair testing. “All along the journey, he had a details man, Fred Benninger, who made sure every detail was taken care of and not one penny was spent that was not an absolute necessity,” recalls Woolf. “We fought many times over the smallest things. He made Kirk’s vision come to life. Kirk was a modest, honest man who was always thinking and had great vision. It was like he could see or feel the future. However, he was a private man who tried to stay out of the limelight.” But unlike Wynn’s much-feted Mirage, which became the textbook case study for the integrated resort, the MGM Grand’s story was more complex.

Goodbye Yellow Brick Road Within three years, much of the Wizard of Oz theme had started to disappear, including the much-loved and equally reviled animatronic experience, with criticism that a child-focused attraction (not to mention the child-focused theme and characters walking around the property) was ill-fitting with a casino resort squarely intended to drive revenues from adults. The Grand Adventures theme park was closed in 2002, and today is the home of the Signature apartments and hotel. In 1998, Elton John opened Studio 54, one of the first mega-nightclubs in a Strip property. 32

Global Gaming Business DECEMBER 2017

Where the Mirage had Siegfried and Roy’s white tigers, in 1999 the MGM opened the Lion Habitat housing Goldie Metro, a descendent of the iconic roaring lion that appeared in MGM’s movie openings. And in the same year, the lion’s-mouth entrance—which offended the superstitious Asian guests, who felt that entering the casino through a lion was a bad omen—was replaced. The lions stayed on in MGM until 2012, and were quietly retired to a less public pasture. As the decade closed, the MGM Grand built an exclusive annex, the Mansion, the very existence of which was denied by many in the company. This unique “hotel within a hotel” remains one of the most exclusive products in Las Vegas, and is highly relevant in maintaining the MGM Grand’s allure. Many of the remaining original features had been removed by 2000, when MGM acquired Wynn’s Mirage Resorts—which by now included the Mirage, Treasure Island, Golden Nugget and Bellagio. In 2005, MGM Mirage, the new corporate entity, acquired Mandalay Resorts, which operated properties including Circus Circus, Excalibur, Luxor and Mandalay Bay. CityCenter, featuring Aria and Vdara, was completed in 2009, and today, MGM Resorts International operates 14 resorts on the Las Vegas Strip and has a global footprint from Macau to Maryland. MGM’s lion roared loudest, but the MGM Grand was no longer at the top of the food chain.

MGM Grand’s Renaissance Within the MGM portfolio, MGM Grand was the largest resort, but lacked the clear identity of other assets. Whereas the Bellagio, Mirage and even Circus Circus and Excalibur held significant brand equity and clear market segmentation, MGM Grand was relying on a brand aligned with a legacy movie studio which had sold many of the movie-related assets, and had little evidence of a movie theme remaining. The property stood as an enigma. It was an emerald-green monument to a once-themed legacy, with the broadest range of amenities on the Strip which had been curated over decades, from the top-level convention center to the Garden Arena (which saw some of Las Vegas’ most iconic fights, including the infamous Tyson-Holyfield epic of 1997), Joel Robuchen’s threestar Michelin restaurant (the only restaurant in the city with that accolade) the VIP-focused Mansion, KA by Cirque du Soleil and David Copperfield providing entertainment—but also with room rates at the budget level, a food court which sold hot dogs and burgers by the score, a Rainforest Café and the original rooms that were built for the Marina Hotel, now named “The West Wing,” that were built in 1975. Nightclubs are among the most visible and lucrative elements of Las Vegas’ renaissance, attracting the next generation of customer. After a long run, Studio 54 closed its doors in 2012 and was replaced by the Hakkasan nightclub. It was to change the fortunes of Las Vegas and the MGM Grand. Hakkasan, which regularly produces gross revenues of over $100 million per annum, is home to leading DJs Tiesto and Calvin Harris, who challenge Copperfield for prominence on the building’s exterior. As Kerkorian moved into his final years, the Great Recession hit his Las Vegas legacy, but under the management of his disciples, the company reemerged stronger than before, and the MGM Grand is experimenting in attracting the next generation of customer. Level Up is a concept space to try and bring gaming product into relevance for millennial customers, and the food and beverage offering is remarkably contemporary, with offerings by acclaimed chefs and concepts including Morimoto, Emeril Lagasse, Robuchon and Hakkasan. Wet Republic, one of the most enduring pool parties, re-

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mains a staple for young clubbers, and despite newer venues coming to market, five years later the Hakkasan nightclub remains one of the hottest spaces in town. With millennials seeking experiences, MGM Grand is home to Top Golf, which has proved a highly popular attraction. As the next generation of customers to Las Vegas seeks an increasing number of non-gaming attractions, it allows us to reassess the vision of Kerkorian, who in many ways was ahead of his time.

Reassessing Kerkorian Kerkorian as a casino owner was unlike many other casino owners, who were known to micro-manage elements of operations. Rather, he was significantly less hands-on, employing the best people to undertake individual roles. Longserving executives including Terry Lanni, Bill Hornbuckle and current CEO Jim Murren implemented the strategy, as aviator Kerkorian viewed from above. Once his properties were built, there was constant refinement and demonstration of tight management discipline, as Kerkorian, who had involvements in other businesses, was very aware of good management practice. His legacy to MGM is not just the buildings, but the strategic approach that drives the company and its properties. On his passing, Kerkorian was hailed as a great entrepreneur, but strategist Igor Ansoff would define the Kerkorian strategic approach as competitive, rather than entrepreneurial. As we can see in the adaptation of Ansoff’s “Approaches to Strategic Challenges Table” (below), Kerkorian’s legacy is apparent in MGM’s strategy today, which is far less entrepreneurial than the top-down approach of Wynn Resorts and Sheldon Adelson’s Las Vegas Sands, and less bottom-up than the data-driven approach of Caesars Entertainment, but instead concentrates on long-term incremental evolution with a focus on efficiency and trust in management. BUSINESS ATTRIBUTE Occurrence in shift of objectives Direction of change

KERKORIAN STRATEGY Serial and continual development Continuation of history and evolution of product Size of change in relation to asset Small and incremental Relevance of management capability High trust in management Problem solving Experience driven, internal capability Cost of information Low, information must be accessible Structure Formal and well structured Appetite for variability Low Risk Outcomes

Increased Efficiency

The Kerkorian Legacy For all his impact in building Las Vegas, Los Angeles was Kirk Kerkorian’s home. A psychologist could assess the personal circumstances of Kerkorian in his formative years, seeing his family lose everything, but working hard and building businesses from small acorns. One could look at his appetite for and attitude to risk, gaining confidence by succeeding where others faltered. He was adept in understanding the strengths and weaknesses of competition, perhaps from his time as a boxer or by flying high, seeing the bigger landscape from above while others could only see ground level. Perhaps it is all of these, but where obituaries to Kerkorian note his career as a serial investor, developer and corporate raider, what underlines his success was his confidence and vision in understanding the need for

people to be entertained. Where many others would not have backed Sarno and Mallin to build Caesars Palace, Kerkorian did, perhaps as he shared their vision in the future of the city as a place of fun. He took significant risks on multiple occasions in building his resorts, yet each seemed a natural progression from past successes. Unlike Wynn (Bellagio), Bennett (Excalibur) and Sarno (Circus Circus), Kerkorian was much more inclusive in his approach to casino development. Where other resorts looked at segmenting their customers, either by demographic or psychographic analysis, focusing on pivoting the offering towards customer segments, Kerkorian’s mission was different. He sought to entertain everyone. Again, Kerkorian saw entertainment as a universal driver of happiness, to make people feel good and to have a great time. He borrowed from his own memories from the MGM movies, which engendered an emotional response, and sought to bring this happiness and escape to the masses. Whether this was the intention or not, by building properties that were broad in terms of their target, fueled with entertainment and amenities for the widest customer base, Kerkorian built iconic casinos in the vision of understanding not what Las Vegas was, but what it could be. In 1970, the year after the International opened its doors, Las Vegas visitation was 6.7 million people; in 2016, it was almost 43 million. In many ways, his offering was 25 years ahead of its time.

Non-Gaming Revenues Steve Wynn repeats the mantra that gaming revenues are a consequence of a strong non-gaming offering. Kerkorian was the first casino resort developer to fully implement this, decades before Wynn—building resorts that attracted potential customers, even those that had never considered Las Vegas as a vacation destination or gambling a pastime. Looking back, each of Kerkorian’s properties focused on American entertainment for that age, with experiences for all, from the highest rollers to the American everyman. Is it by accident or design that his MGM Grand, Bally’s and today’s Westgate have had the architectural flexibility to adapt and evolve over time, whereas the more defined resorts (such as the Luxor, Paris, Excalibur and even the Mirage) are constrained in adapting to change? Is it significant that no casino resort built by Kerkorian has been imploded, whereas there is nothing left of the portfolio of his peer and fellow airline mogul, turned Las Vegas developer, Howard Hughes? There is no doubt Kirk Kerkorian was a genius, years ahead of his contemporaries in understanding what Las Vegas could be. He may have felt that his proudest achievement were in the field of philanthropy, which are notable. However, all that recall him highlight his extreme modesty in everything that he achieved. Russian dissident Alexander Herzen wrote of Venice, “To build a city where it is impossible to build a city is madness in itself, but to build there one of the most elegant and grandest of cities is the madness of genius.” With hindsight, Kerkorian was a man who built a city where others thought it was impossible to do so. He invested in and believed in the promise of Las Vegas and built, literally, the “Grandest” of properties, which a quarter of a century later remains as relevant as ever. On reflection, the collective happiness of millions of customers would make even the most modest of lions rightly proud.

Oliver Lovat leads the Denstone Group, which offers strategic advice on customer-facing, asset-backed investments. He lives in Las Vegas. DECEMBER 2017 www.ggbmagazine.com

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OPERATIONS

The Millennial Is Not Your Customer

Don’t spend another second focusing on this segment; concentrate on your own customers

By Steve Gallaway

People may not be able to feel a slot machine’s higher hold on a given day, but they do start noticing when their $100 is lasting two hours instead of three and a half hours. At the end of the whole. year, the gamer notices they only have five WWhat do millennials like? How do we design 2Gs from their jackpots won, instead of 15 like our product to attract millennials? Should we in prior years. serve only organic food in our restaurants and Payroll cuts and efficiencies directly impact provide beard trimmers in our bathrooms? the entertainment experience as well. As personSome casinos believe that millennials prefer nel were replaced with kiosks and other techtable games over slots. Or, for slots, millennials nologies, the number of floor servers was reduced will like skill-based games, so money should be and casinos found that they didn’t need as many invested in skill-based pits. Despite many casinos techs on the floor. Players stopped seeing many trying to attract millennials, not one casino has of their friends at the casino. Those employees succeeded in a meaningful way. were the players’ social group. The reason is that millennials will not be As gamers’ friends disappeared, their money valuable casino customers for another 20 years. didn’t last as long, and with the price of their faAs gaming has expanded across North Amervorite buffet increasing, the entertainment expeica over the past few decades, the same customer rience quickly declined, and can be seen pounding away at the While it is true that there is a given life cycle to many found enjoyment in slot machine, and she is typically any gaming customer, there is always another other forms of entertainment. over 50 years old. He is often there customer behind him that can be attracted to To blame lackluster gaming as well, pounding away on those casino gaming if they are given the right product. revenue on customers passing buttons or sitting at a nearby table. away or on casinos burning When I lived in Las Vegas in them out is simply wrong. While it is true that grade school, my brothers and I would go to the als) were being replaced with computers or less there is a given life cycle to any gaming customer, Strip for a $1.99 all-you-can-eat buffet. We’d expensive labor overseas. With no job and large there is always another customer behind him that watch the “old men” (which was 45-60 to us) debt loads, the millennial will not be the core can be attracted to casino gaming if they are throwing dice and playing blackjack, and the gamer anytime soon. given the right product. older women playing slots. Instead of attempting to understand the milTo increase revenue and overall profit, to When I lived in Atlantic City in middle lennial to grow revenue, time should be spent on grow the current customer base and attract future school, 55-year-old shoebies (a person who visits how to entertain current customers and the next generations (including millennials), casinos must the beach for a day and reportedly carries their generation of customers. The next generation of do what they do best: hospitality. Provide a gamlunch in a shoebox) from Philadelphia and New customers is my generation, Generation X, not ing product that allows players more time on deYork were sitting around slot machines, poundthe millennial. To grow revenues, casinos need to vice. Be sensitive to providing customers with a ing away. focus on the player’s entertainment experience personal touch and making them feel like they Shockingly, the exact same women and men and how to improve each aspect if it. This experiare with friends. Focus on providing quality food that I saw in Vegas were now in Atlantic City ence includes the games played, time on device and great service at a facility-appropriate price. playing the same games. In the 1990s, as gaming (read as “hold percentage”), the people who deDesign a hotel room that provides a better experapidly spread across the South and Midwest, liver the experience, and all other aspects, includrience than they have at home or at a highway those exact same players showed on up on the ing the restaurants, bars, hotel, etc. hotel. slot floors and at the tables. Unfortunately, we as an industry have not Simply provide the best overall entertainIn order to be a frequent gamer, one must generally improved this experience over the past ment experience and the customers will follow. have both time and money. When people start few decades. turning 50, their kids have often moved out of As manufacturers have been developing more Steve Gallaway is a principal and partner in the house and the need to pay for summer and more penny games, and more recently, skillGlobal Market Advisors. Reach him at camps, kid’s clothes, college tuitions, etc., has based games, a large increase has been seen across smg@globalmarketadvisors.com. mostly ended. Combined with children moving the country in market-average hold percentages. illennial has become the new buzzword and focus of the gaming industry and commerce as a

out, these 50-plus individuals are enjoying the second half of their careers, where they are making more money than they did 20 years earlier. With the availability of time and money, many choose casino gaming as their preferred form of entertainment. According to Merriam-Webster, the definition of a millennial is a person born in the 1980s or 1990s. As such, the oldest millennial is now 37 years old. People in their 20s and 30s are not a casino’s core customer, and they never will be. This is particularly true for millennials. In droves, millennials went to college with the promise of high-paying jobs when they graduated. Instead, they found themselves in the midst of a recession, with no job and large student loans to pay off. As companies began to grow again, many U.S. tech jobs (the prime industry for millenni-

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To The

BARRICADES Tribal gaming facing challenges ‘from all directions’

By Dave Palermo

merican Indian leaders, reflecting on generations of tortured history under federal government paternalism, greeted passage of the Indian Gaming Regulatory Act of 1988 with a healthy dose of skepticism. Although IGRA promised—and delivered—unprecedented economic progress on Indian lands, many indigenous scholars predicted the benefits of tribal government gambling would be short-lived, particularly in states where tribes, alone, operated casinos. “Native Americans fear that this ‘cure’ may result in yet another disappointment if the state governments elect to legalize gambling,” wrote author Klaus Frantz in his 1993 book, Indian Reservations in the United States. “The ease with which the government could devastate tribal casinos alarms many tribal members who fear that they will realize wealth only to return to a state of abject poverty.” Frantz predicted tribes “would have a window of perhaps five to 10 years” to reinvest casino profits and create balanced reservation economies before state-sanctioned gambling and other factors rendered tribal operations useless. His predictions were off quite a bit.

30 Years and Counting State-sanctioned commercial gambling has, indeed, expanded since IGRA, from Nevada and New Jersey to 24 states, which are now home to commercial casinos and gambling at racetracks. And the once double-digit growth of tribal casinos has long vanished. But the tribal casino industry 30 years after IGRA continues to thrive. Some 480 gambling outlets operated by roughly 250 tribes in 28 states generated $31.2 billion in 2016, according to federal audits, a 4.4 percent increase over the previous year. Revenues have enabled indigenous communities to strengthen governments and create diversified economies. Casino income subsidizes housing, health care, education and other poorly funded government programs for tribal citizens.

Indian Gaming States

But while the doomsday prophecies are no longer valid, the tribal gambling industry is facing serious challenges. And the threats are coming from all directions. A mature and in some regions saturated tribal casino market has diminished revenues and opportunities for new facilities on Indian trust lands. Casino expansion in the Northeast United States is constricting tribal revenues in Connecticut, prompting the Mohegan and Mashantucket Pequot tribes to pursue a partnership in development of a commercial casino. A recent federal court decision out of New Mexico, combined with the U.S. Supreme Court ruling in Seminole Tribe v. Florida (1966), has diminished tribal leverage in negotiating state regulatory agreements, or compacts, required by IGRA for tribes seeking to operate casino-style gambling. Prospects for federal- and state-sanctioned sports betting, online wagering, daily fantasy sports, eSports and other types of gambling threaten to create competition for tribes. Legal and regulatory constraints of IGRA may hinder tribes seeking these new forms of wagering many believe are needed to attract millennials fixated on mobile gambling. The U.S. Department of the Interior under the Trump administration is poised to enact rules making it more difficult for tribes to place new land in federal trust for casinos or other purposes. And, perhaps most important, tribal leaders fear the political consequences of a growing and largely false perception of Native Americans not as traditional, culturally rich communities, but wealthy purveyors of gambling.

“If the Indians are generating $100 billion, congressional leaders may ask, ‘Why do they need money from us?’” —Joe Valandra, former chief of staff, National Indian Gaming Commission

Global Gaming Business DECEMBER 2017

Complicated Rules Unlike commercial casinos unencumbered in a free-market society, tribes operate in a complex web of politics and federal, state and Indian laws and regulations that hinder their ability to adapt quickly to market fluctuations and new technology.

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“Given our commitment to being a good neighbor and steward, we believe local voices must have a fair opportunity to provide input and insight into these decisions.” —Deputy Assistant Secretary of Indian Affairs John Tahsuda

While IGRA is the primary law governing gambling on Indian trust lands, tribes are also subject to congressional Indian affairs, presidential politics and Interior policies dealing with land/trust and other gambling and economic development issues. IGRA subjects tribes to the whims of equally sovereign state governments. Indian governments are required under IGRA to enter into tribal-state compacts before they can operate casino-style gambling, tax-free and with primacy over regulations. Tribes can, however, operate electronic bingo-style gambling without interference from the state. IGRA limits tribes to forms of gambling otherwise legal in the state in which they are located. Laws currently prohibit tribes from accepting wagers from outside reservation borders, leaving a legal cloud over the ability of tribes to engage in internet wagering or online sports betting. The compacts in at least 10 states require revenue sharing, although IGRA prohibits the taxation of gambling income. California tribes are required to enter into labor and local government mitigation agreements. Should the commercial casino industry succeed in lobby efforts to repeal a federal ban on sports wagering, tribes would be required to negotiate with the state for amendments to existing compacts, a process often fraught with politics and threats of onerous revenue-sharing demands. Meanwhile, evolving Indian law and federal policy surrounding the often controversial and lengthy process of acquiring and placing land in federal trust for casinos contributes to the difficulty in predicting the ebb and flow of tribal gambling. “There are always legal issues, regulatory issues, legislative issues and political issues,” says Alan Meister, a senior economist with Nathan Associates and author of the annual Indian Gaming Industry Report. “Those matters change. They evolve over time. “It creates a great deal of uncertainty. There are a lot more uncertainties with tribal gaming than commercial casinos. Political, regulatory and legislative issues can affect their industry and change the dynamics of how things work and the prospects of things going forward.”

Slowing Growth Tribal casino revenues, which last hit double digits with a 10 percent jump in 2006, grew by 5.5 percent in 2015, Meister says, topping the 1.6 percent growth by the $29 billion commercial casino industry and the 4.2 percent rise in the $8 billion racino industry. The growth has been less the result of new facilities and more from the expansion of existing operations with hotel rooms and non-gambling amenities. A few of the more lucrative gambling tribes—the Seminole Tribe of Florida, Poarch Band of Creek Indians in Alabama and the Mohegan Tribe of Connecticut, to name a few—have turned to commercial gambling investments, both in the United States and overseas.

A greater trend, however, has been the diversification of tribal economies beyond gambling. “For several of the more progressive, larger, wealthier tribes we’ve been working with, they’ve taken the stance that gaming is eroding; their share of the marketplace is eroding and more competition will come,” says Kristi Jackson, chairman of TFA Capital Partners. “They’re building up in more areas outside of gaming. They are also building in areas outside their geographic footprint. “One tribe says it’s their goal that within 10 years they want their revenue and earnings from non-gaming sources to eclipse their gaming revenue,” Jackson says. “It becomes easier as the gaming erodes, but it remains a tall order to fill.” It is in that context that the predictions of Klaus Frantz do, indeed, prove prophetic. “A lot of people didn’t think we’d be able to roll it out this long,” tribal attorney Scott Crowell says of the 30 years of gambling under IGRA. “But the hard reality is that—with the market changing and the growing opportunities for non-Indian gaming—tribal government gambling is no longer the golden egg it was in ’88.”

Obstacles In New Gambling Options The National Indian Gaming Association, the trade group and lobby for tribal casinos, has formed a work group to explore how indigenous governments operating under a variety of state legal and regulatory structures can adapt to the potential for sports betting and other new forms of gambling. “The working group will be the pulse of Indian Country,” NIGA Chairman Ernie Stevens told Legal Sports Report. Stevens in October testimony asked the Senate Committee on Indian Affairs to consider the myriad laws and regulations confronting tribes, particularly compacts that vary dramatically from state to state. “As this committee examines issues and opportunities to help Indian gaming succeed over the next 30 years, we urge you to work with other committees of jurisdiction in closely examining emerging markets such as internet gaming, daily fantasy sports and sports betting,” he said. “These activities pose both potential expansion opportunities and challenges to existing tribal gaming operations and tribal-state compact agreements.” The disparity of rules and regulations under which tribes operate makes it difficult to craft a nationwide strategy on new forms of gambling. “It’s going to be tribe-by-tribe, state-by-state,” says consultant J.R. Matthews, president of Red Feather Productions. “Trying to provide a blanket answer for the entire country for an issue like sports betting is like trying to say New Mexico is going to react the same way as the state of Virginia. It’s not going to happen.”

DECEMBER 2017 www.ggbmagazine.com

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“We urge you to work with other committees of jurisdiction in closely examining emerging markets such as internet gaming, daily fantasy sports and sports betting.” —NIGA Chairman Ernie Stevens to the Senate Committee on Indian Affairs

Tipping the ‘Balance of Sovereign Interests’ IGRA requires states to enter into “good faith” negotiations on casino compacts, but justices in the Seminole case upheld state immunity under the 11th Amendment against lawsuits requiring that state officials sit down at the negotiating table. State leverage in compact talks was further strengthened earlier this year when the 10th Circuit Court of Appeals rejected efforts by the Pueblo of Pojoaque in New Mexico to negotiate a Class III, casino-style compact directly with Interior, a process called secretarial procedures. The 10th Circuit also ruled the state acted properly in threatening to pull the licenses of vendors doing business with the pueblo. The rulings—along with a related decision by the 5th Circuit Court of Appeals—effectively eliminates secretarial procedures as an option for tribes seeking new or amended compacts needed to operate sports betting or other new forms of gambling. Jonodev Chaudhuri, chairman of the National Indian Gaming Commission, warns that the court rulings in the Seminole and Pojoaque cases tip the balance of state and tribal sovereign interests Congress sought in enacting IGRA. “That balance was changed dramatically by the Seminole decision,” Chaudhuri told the Senate committee. “When tribes don’t have that recourse,” he said of secretarial procedures and 11th Amendment immunity, “states are free to leverage their position with tribes much more freely and are becoming more creative, such as bringing pressure on vendors.” “The situation is materially altered in states like New Mexico,” Crowell, attorney for the Pueblo of Pojoaque, says of the court rulings. “It’s basically a state veto of discussions. It’s unacceptable.” Tribes in several states have, since IGRA, developed political and/or economic leverage needed to bring states to the negotiating table. This is particularly true of states such as Oklahoma, where officials are looking to tribes to bail them out of budgetary problems. “If this were 1988, the situation would be devastating,” Crowell says. “Now, tribes have other means of achieving their intended results than the enforcement of federal law in recalcitrant states. “In many states, tribes have economic power or political power or a conscious state government or a combination of the three, whereas they can still achieve decent results.” Crowell calls for the federal government as trustee for indigenous communities to file litigation against states such as Texas and Louisiana that willingly violate IGRA’s “good faith” provisions and refuse to negotiate compacts. “Failure to act on behalf of the tribes makes the federal government complicit in the illegal negotiating tactics that are embraced by those states,” Crowell says.

Global Gaming Business DECEMBER 2017

“I don’t think the Department of Justice and the Department of the Interior realize how far compact negotiations have run askew because of Seminole and now the 5th and 10th Circuit decisions.”

Ancestral Lands Will Be Scarce Under Trump

After an Interior under President Barack Obama placed 630,000 acres of land in trust for Native Americans, the Trump White House is threatening new rules to the Fee-toTrust Regulations (25 CFR 151) that would make it more difficult for tribes to reacquire ancestral lands. A proposed “two-phased” review for tribes seeking land away from existing reservations requires them to submit employment and other economic data while providing evidence of “cooperative efforts” with local non-Indian communities. It’s no secret that much of the push-back on new trust land is the result of congressional and local government opposition to tribal casinos, despite the fact only about 20 of 2,300 land/trust applications in the Obama administration involved gambling. The fires of anti-casino momentum have been fueled by recent efforts to establish regulatory safeguards against prostitution and human trafficking in reservation gambling facilities. Tribal casino operators have also expressed concerns about cybersecurity issues. “I consider the lack of law enforcement resources in Indian Country—especially for gaming tribes—to be one of the most critical issues Indian County is confronting,” says Democratic Senator Heidi Heitkamp of North Dakota. “The department is mindful that while gaming has great potential to improve economic conditions for tribal and non-tribal communities, it can also introduce new complications to communities, including a drain on local resources, increased traffic, visitation and crime, such as drugs and prostitution,” Interior’s Deputy Assistant Secretary of Indian Affairs John Tahsuda told a Senate committee. “Given our commitment to being a good neighbor and steward, we believe local voices must have a fair opportunity to provide input and insight into these decisions.” Interior is holding a series of public hearings prior to adopting new fee-totrust rules later this year.

Perception Versus Reality About 80 of the tribal gambling operations generate 73 percent of the revenues, according to various sources. Many marginal operations on rural, often impoverished reservations are kept running because of the jobs they provide tribal citizens and surrounding communities. “There’s a huge amount of revenue being generated by a small number of tribes,” Meister says. “Sometimes the benefits are largely with jobs.” But tribes are confronted with the commonly held perception they are wealthy from gambling, a false belief reinforced by a well-intended economic impact report released in October by the American Gaming Association. The AGA study puts the economic impact of tribal gambling at nearly $100 billion, a figure that alarms tribal leaders fearful of Trump’s austerity agenda. “That’s a real dangerous figure when it comes to perceptions,” says Joe Valandra, former chief of staff for the National Indian Gaming Commission. “If the Indians are generating $100 billion, congressional leaders may ask, ‘Why do they need money from us?’”

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“Some of the anxiety you may be picking up on has more to do with who is doing the study and how the narrative is playing out,” says Dante Desiderio, executive director of the Native American Finance Officers Association. The AGA is largely a lobby for the commercial gambling industry, though it does have nine of the nearly 250 casino tribes as members. Unlike commercial casinos, tribal revenues are directed to programs for the general welfare of tribal citizens. “Having our own organization do this means we get to control the narrative a little bit more, or at least have more of a say,” Desiderio says of the impact study. “Are they (AGA) really thinking this through? Do they know what this means—what the impact is and, from a political perspective, how this may help or hurt tribes?” Rather than pointing out the vast disparities between the two industries, AGA President and CEO Geoff Freeman said in a press release, “as tribal and commercial operators continue to work together, our industry will continue to grow in the years to come.” “The suggestion that commercial gaming and tribal governmental gaming can be talked about in the same breath is somewhat shocking,” Crowell says. “The purpose of commercial gaming is to maximize profits for publicly held corporations. The purpose of tribal gaming is to generate revenues necessary for the governments to survive and for tribes to be economically self-sufficient. Those are two completely separate objectives.” Officials with AGA and Spirit Rock Consulting, a tribal firm hired to represent the lobby group, declined to comment.

A number of tribal leaders applaud limited cooperation between tribes and the AGA. “The relationship between the commercial gaming industry and the Indian gaming industry is uneasy, but I believe in cultivating allies where possible,” says Kevin Washburn, former assistant secretary of Indian affairs and professor of law at the University of New Mexico. “These two major spheres of the larger gaming industry have very different goals. Tribes engage in governmental gaming to raise public monies for governmental services and initiatives. Commercial gaming operations operate to enrich shareholders. In that respect, Indian gaming has a higher purpose. “That said, both industries have a long-term interest in preserving gaming as a safe and trusted industry and maximizing the revenues from this resource. For some purposes, it makes sense for them to work together, and I am glad to see cooperation between the AGA and NIGA, rather than fighting and division.” Others fear the “higher purpose” Washburn refers to will be lost if the distinction between the tribal and commercial casino industries becomes blurred. “There are several tribes that have some concerns about the tribal entities and the AGA,” says John McCarthy, executive director of the Minnesota Indian Gaming Association. “It’s purely from the standpoint of tribal sovereignty. We have to be careful. Our whole existence is based on tribal sovereignty. “So now we’re playing a little close to these guys with the AGA who were after our heads early on and said nothing good about us,” McCarthy says about the casino operating companies that lobbied against IGRA. “Next thing you know, we can’t stand up in a Senate hearing and say ‘our tribal sovereignty’ because it isn’t about tribal sovereignty anymore. We’re part of the industry.”

The staff of the Akwesasne Mohawk Casino Resort would like to congratulate Shannon Keel on being honored as an Emerging Leader of Gaming under 40 at this year’s Global Gaming Expo held in Las Vegas, Nevada. Shannon was endorsed by Emily Lauzon, Assistant General Manager for AMCR who stated “In many ways Shannon exceeds the challenging requirements and expectations for the award. Shannon’s ambitions, intelligence and accomplishments complement precisely the stellar community of past recipients and make her highly deserving of the honor and opportunity bestowed by Emerging Leaders of Gaming Program!” “On behalf of the St. Regis Mohawk Tribal Council, we are extremely proud to have Shannon as the General Manager of our casino. Our community of 15,000 plus members relies on the success and progress of the casino, under Shannon’s guidance to provide employment and revenues to fund essential governmental services which provide for the health, education, and welfare of our community members from newborn babies to our elders. It was an honor to be present to see Shannon accept her “Emerging Leader in Gaming” award. As one of only 6 winners from throughout the country, our community is proud to have Shannon as part of our team and look forward to future success of our casino under her leadership,” as stated by Chief Michael Conners of the Saint Regis Mohawk Tribal Council.

DECEMBER 2017 www.ggbmagazine.com

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Is Macau Back?

Macau has seen its ups and downs since 2014. Will the world’s No.1 gaming town see long-term stability or a return to the roller coaster? By Marjorie Preston

he Macau rally is officially in its second year. Following an unprecedented two-year slump in which the city’s casinos shed billions in value, China’s only legal gaming jurisdiction is back in business and seemingly stable. Will the recovery last? It depends on the good graces of the federal government, the sustained health of the Chinese economy, the effects of new supply and improved infrastructure on the local industry, and possibly, emerging competition. In June 2014, Chinese President Xi Jinping’s anti-corruption crusade sent Macau’s casino industry into a tailspin. High rollers took flight, often to other jurisdictions. In August 2016, after 26 months, revenues started to rebound. They’ve been on the plus side ever since. But analysts continue to watch the seismograph amid rumblings about further clampdowns by Beijing. Among other measures, the government has instituted stricter controls on junkets, limited ATM cash withdrawals, and introduced facial recognition technologies to combat capital flight and money laundering. In a city that’s derived up to 80 percent of government revenues from a single industry—casinos—Xi also called for a stronger, more diverse economic base. With gaming concessions up for renewal starting in 2020, operators are motivated to stay on the government’s good side. That could be a long-term positive. “Diversifying its revenue streams not only satisfies the wishes of public policymakers, it’s good business,” says Andrew Klebanow, partner at Global Market Advisors. “The financial returns on revenues from retail leases, hotel

“We need to reinvent ourselves.” —Pansy Ho, vice chairman of the Macau’s Global Tourism Economy Forum, on the need to attract young, middle-class families to the city

room revenue and even food and beverage are all satisfactory and worthy of additional capital investment.” New developments on the Cotai Strip live up to the term “integrated resorts” with increased family-friendly attractions, high-tech visitor experiences, and abundant retail and dining (in a telling development, Macau was recently designated a UNESCO Creative City of Gastronomy). There’s a greater emphasis on mass players and mainstream entertainment; some of Macau’s newer resorts on the Cotai Strip have even opened without VIP rooms.

Global Gaming Business DECEMBER 2017

Mass vs. VIP While there’s a greater respect today for Macau’s mass market, VIP is also back. “The higher-net-worth players’ regained comfort to visit Macau is on sound footing,” according to Alex Bumhazny, senior director at Fitch Ratings. “That said, we do not expect the crackdown to relax. Zhao Leji, who will replace Wang Oishan as Macau’s top anti-corruption official, will likely uphold Xi Jinping’s focus on fighting graft, which was reconfirmed at the recent party’s congress.” “The crackdown continues,” Klebanow agrees. “But those tourists who made their fortunes legitimately are no longer fearful of possible repercussions.” Meanwhile, “there remains a tremendous amount of pent-up demand” among mass tourists. “With the upcoming openings of MGM Cotai and Lisboa Palace along with the tourism developments on Hengqin Island, the mass market will continue to grow, and form the foundation of a sound and diversified tourism economy,” Klebanow says. As Angela Leong, an executive director at SJM Holdings, has said, VIP play will always be vital to that company’s success, but it will concentrate on mass play at the Grand Lisboa Palace, due to open in 2018. “The direction we’re going is that we have to make the hotel residents here spend more at the property,” Leong said in August. “We cannot really go always for the very high-end customer.”

Vegas of the East? Will non-gaming ever be as big a factor in Macau as it is in, say, Las Vegas, which now derives about 60 percent of total revenues off the casino floor? Not likely, though the Macau government has a set a non-gaming revenue target of 9 percent per year. Macau’s gaming revenues are “six times the size of the Las Vegas Strip’s,” says Bumhazny. “Material revenue diversification would be hard to achieve given the sheer size of the gaming revenues—$32 billion over the past 12 months.” New hotel supply in the city has had “only a modest impact on the average length of stay, which moved from 1.0 day before the last wave of Cotai supply to 1.2 days in recent quarters,” he says. “This speaks to the mainlanders’ tendency to look at Macau as a day-trip gambling market.” The openings of MGM Cotai and Grand Lisboa Palace “will further solidify the critical mass on Cotai,” drawing more players from downtown, says Bumhazny. “Longer-term, the buildout of Cotai will make Macau a more desirable travel destination in the region, which will help to increase the visitors’ length of stay and diversify Macau away from gaming.” Pansy Ho, vice chairman of the city’s Global Tourism Economy Forum, believes Macau must continually create new experiences for tourists, otherwise “people will come once and go elsewhere the next time.” “We need to reinvent ourselves,” Ho said at the forum in October, adding that the city should court more young, middle-class families. “They are more affluent, more educated. They have demand for leisure and entertainment. It

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would be enough to have them revisit Macau and become our stable customer source.” Fitch Ratings expects mass to grow at a slightly higher rate than China’s GDP, which it forecast to grow slightly above 6 percent through 2019. “The higher-than-GDP growth will be driven by China’s shift towards a more consumer-oriented economy, new hotel supply in Macau and new transportation infrastructure in and around Macau,” says Bumhazny. “Our forecast for VIP is the same, but obviously VIP tends to be a lot more volatile—it may well outperform mass or vice-versa.” While VIP will remain above 50 percent of total gaming revenues for some time, he says, “mass and premium mass, being a more stable and profitable business, is the foundation for Macau now in terms of how operators plan their development spending.”

Futurecasting Despite its recent strong-arm approach to Macau gaming, the central government is strongly invested in the jurisdiction’s success. The Big 6 gaming concessionaires—all of whom have been responsive to Xi’s demand for a more balanced local economy—are likely sitting pretty for renewals over the next few years. “Stability benefits all parties,” notes Klebanow. “Beijing probably doesn’t want to rock the boat too much in Macau,” says Bumhazny. “Unrest there may challenge the special administrative region model, which is arguably already strained by tensions with Hong Kong.” The coming Japan casino industry should not have a marked impact on Macau, Bumhazny says. “Japan will draw more from northern Asia, while Macau draws heavily from Hong Kong, Guangdong and the surrounding provinces. As a side note, Macau’s revenues continued to grow in the high double digits when the Singapore casinos opened.” According to Secretary for Economy and Finance Lionel Leong, GGR in Macau for the year should see “positive double-digit growth” over last year, and 2018 gaming revenues “will be even higher.” Lawrence Ho, CEO of Melco Resorts & Entertainment, has pointed out that the crackdown was not on gaming but corruption. In a May interview, he pronounced himself “extremely bullish” on Macau. “Definitely within the next five years, it will grow back to the $45 billion gaming market,” said Ho. “Macau is the best market in the world.” Earlier this year, the Macao Government Tourism Office estimated that visitors to the city could top 40 million by 2025, with revenues growing accordingly. MGTO Director Helena de Senna Fernandes said the goal is to “establish Macau as a world center for tourism and leisure” in the next 15 years—a goal that is both ambitious and thoroughly optimistic.

Making a Spectacle:

MGM Cotai

Sarah Rogers, Senior Vice President, Strategy & Corporate Responsibility GGB: Sum up the experience of MGM Cotai. Sarah Rogers: It’s spectacular! We have a space

called the Spectacle, the central hub of the property and one of the world’s largest areas of LED screens and green walls. With over 2,000 plant species, it’s also the largest interior art garden in the world, about the length of a football field. It’s programmed with an incredible collection of 1,000 meters of ultra-high definition LED displays and more than 700 LED lights combined with 125 high-performance speakers. The space will seem to be alive, continually evolving, and responding to changing conditions such as visitor behaviors, weather, time of day or season. The MGM Theater, Asia’s first dynamic theater, can change into 10 different seating configurations to host a variety of entertainment offerings. Beyond this, MGM Cotai is home to a unique art collection of over 300 pieces of contemporary art with a theme of bridging the East and West, tradition and technology, and is also one of the largest permanent art collections in Macau. The resort will become Macau’s most creative culinary destination with never-before-seen-inMacau dining concepts curated by world-renowned celebrity chefs including Chef Graham Elliot at Coast, Chef Mauro Colagreco at Grill 58, Chef Mitsuharu Tsumura at Aji and Chef Janice Wong at Janice Wong MGM, our pastry offering. How does the new resort reflect the “new Macau?”

MGM has always supported the diversification of Macau, and MGM Cotai will allow us to expand on that. In the past 10 golden years, we’ve contributed to the city’s development of cultural and creative industries with over 20 art exhibitions at our permanent art space and a variety of cultural events, such as the International Lion Dance Competition and Oktoberfest. In Las Vegas, MGM is the leader in entertainment. At MGM Cotai, we’ll have the MGM Theater allowing us to do what we do best with our three resident shows.

You’re opening without VIP tables. Explain that strategy.

We’ll be opening with only mass tables, as we believe this is the basis of the future of Macau. However, we’re developing relationships with junket operators for MGM Cotai and will bring on inhouse VIP operations over time. What has MGM learned from watching its competitors open up in Cotai?

We’re in a neighborhood of already very successful resorts—across the street from Wynn Palace, next to City of Dreams and backing up to Sands Cotai Central. Our opening should add another great house to an already great block. What sets MGM Cotai apart goes back to innovation. What we’ve built is not replicated anywhere else in the world. There’s been a lot of upheaval in Macau in the past few years, but the recovery seems solid. Are you confident Macau will continue to lead the gaming world?

Macau is certainly well positioned to continue to be the leading global gaming destination. Tourism has been growing steadily. From January to August, Macau welcomed more than 21 million visitors, more than 4 percent year-over-year growth. According to the recent tourism master plan, non-gaming spend by visitors to Macau will more than double to US$12 billion-$14 billion by 2025. MGM Cotai is determined to drive greater product diversification and bring more advanced and innovative forms of entertainment to Macau as it further solidifies its position as a global tourist destination.

DECEMBER 2017 www.ggbmagazine.com

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MONEY

Changers

Getting money into the hands of casino players is essential By Dave Bontempo

ashless. It once implied vulnerability, like facing a blizzard with no winter coat. Yet the term slowly gained traction, denoting innovative payment methods across several spectrums. It graces the retail world via grocery stores, pharmacies, restaurants and gas stations. Cashless also means paying bills with a cellphone keystroke, a text or a click. Or buying show tickets on a tablet. Bing, bang, paid. Gaming runs a parallel cashless route. From ticket-in/ticket-out (TITO) to enhanced kiosks and the mobile-phone tap, it features the groundbreaking, instant reconciliation world. Casinos grasp a win-win. Immediate funds enable patrons to avoid play gaps, while new EMV safeguards (Europay, Master Card, Visa) reduce their exposure to fraud. Juggling increased funds and security becomes a multimillion-dollar task for operators. This is one high-wire act they must master. Companies offer a wealth of solutions, and those that help casinos balance this equation will probably wind up “cash full.”

Touting NFC Alpharetta, Georgia-based Agilysys, a stalwart in the hospitality industry, steadily increases its gaming footprint. The company also serves the hotel, resorts and cruise, food service management and health care sectors, from offices throughout North America, Europe and Asia. Spotting a technological upgrade, Agilysys combined the mobile-friendly world of near-field communications (NFC) with deployment of its rGuest Pay solution in Pennsylvania. It was a sensible fit. “Hershey Entertainment & Resorts Company was looking to reduce enterprise-wide data security exposure for their nearly 500 payment processing terminals,” says Robert Sadeckas, director of product management for Agilysys. “The company implemented Agilysys rGuest Pay as its payment gateway for their point-of-sale transactions, which has helped Hershey

“With NFC, access to the payment networks is achieved by virtually any object embedded with a chip and antennae.” —Robert Sadeckas, Director of Product Management, Agilysys

Global Gaming Business DECEMBER 2017

Entertainment protect sensitive card data and save PCI security assessment costs. rGuest Pay also provided EMV. “With NFC, access to the payment networks is achieved by virtually any object embedded with a chip and antennae.” NFC has gained momentum in the cashless realm. It is a form of contactless communication between devices like smartphones or tablets. The contactless communication allows a user to wave the smartphone over an NFC-compatible device to send information without needing to touch the devices together or go through multiple steps setting up a connection. Sadeckas says that as merchants are mandated to upgrade to EMV (chip/insert), the new terminals typically are delivered NFC-enabled, which addresses the acceptance issue. Furthermore, since chip transactions are viewed as being time-consuming and slowing, consumer preference is favoring the speed of tap-and-pay. “RFID, as the predecessor to NFC, simply communicated the magnetic stripe information in a contactless method,” he indicates. “However, poor implementations ended up deploying card numbers into the RFID and were prone to compromise by criminals with RFID readers. In the NFC environment, payment tokens (card aliases) are deployed in the device, which if compromised provide no value to the criminal.” “NFC also is an important interactive technology that engages guests using their mobile phones,” Sadeckas adds. “It can be two-way, where NFC readers are deployed to sense an NFC resource on a guest’s phone and launch a transaction or, as we see in payments, the phone launches a transaction that is sent to the payment terminal.” Sadeckas says that while near-field communication is not new, the application of it is improved. “The key benefit to it is that it enables the industry to transcend a card form-factor which previously was rather limiting,” he asserts. “Another advantage with mobile phones is that it can transmit multiple pieces of data in the transactions,” Sadeckas adds. “So, instead of presenting coupons for discounts, loyalty cards for points and bank cards for payment, a simple tap of the phone can complete all three functions.”

Recalling A Banner Campaign Vantiv, the Cincinnati-based multibillion-dollar merchant giant, brings a significant aspect to gaming. It provides the connectivity to enable transactions for anyone wanting to use a card to fund gaming purchases. The company’s involvement reflects gaming’s large upside via card transactions. Vantiv has steadily increased its commitment in this area to include back-end reporting, significant partnerships and new products. And 2017 has been a blockbuster. “This will be looked back upon as the year cashless gaming ceased to be

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Vantiv’s Vivid Data Engine

regarded as technology of the future,” says Joe Pappano, senior vice president and managing director of Vantiv Entertainment Solutions. “While you may not have been able to experience cashless gaming on your favorite casino floor this year, I can assure you that the most prominent casino operators in North America have either expressed interest in integrating the various technologies within their operation, or are already under contract to do so in 2018. “The sheer revenue will be realized in the years to come, but 2017 will be regarded as the year cashless gaming became an adopted concept within the U.S. casino and lottery industry.” Pappano says it would be tempting to equate the trend with a technology product or solution. But he credits the mindset of operators. “They have shifted and are heading toward the prioritization of embedding cashless gaming—card acceptance at slot devices and table games,” he says. “Operators realize the long-term cost savings these products offer, not to mention the convenience it provides to their players.” Given what they’ve realized, there is at least one Vantiv product that has fit nicely into this space. Pappano touts the company’s data engine, most recently dubbed Vivid Data Engine. “For years we have had the vision of productizing our data mart, but, due to what is naturally a very sensitive area of our business, it required immense time and effort to ensure the ongoing security of every individual consumer,” he says. “We had to do that by providing a level of anonymity to their purchasing behavior while also grouping or drilling down far enough to provide our merchants/operators with an extremely valuable tool for their ongoing

mission to better understand the consumer. “While I cannot discuss the current accounts which are leveraging this product or the ‘imminent installs,’ I can say with extreme confidence that every single operator across every market which we serve has expressed an immediate interest in leveraging this, and rightfully so.” Pappano sees a strong connection between cashless gaming, Vivid Data Engine and an emerging spike in the gaming and entertainment markets. “In the casino market we’ve partnered with industry pioneers such as NRT Sightline and ACS whose Play+ and PlayOn solutions, respectively, bring not only modern technology to the gaming floor but provide long-term cost savings,” he says. “Most importantly, they remove the anonymous nature of cash. Card acceptance on the casino floor was the last piece to the puzzle, if you will... By better understanding your consumers not just on the casino floor or even within the parameters of your property/properties, you will realize not only operational cost savings but will significantly reduce marketing costs by increasing their ability to retain current customers and lower the cost of acquisition. “A big part of this is modernizing gaming regulations.” he adds. “We will continue to focus on helping educate the industry to modernize gaming regula-

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Your Personal aTM tions, that ultimately allow for cashless technologies to be consumed seamlessly. We did a lot of heavy lifting in 2017, which led to consumers deserving a frictionless environment, and there is still work to do in 2018.”

Unfurling a New Lineup Everi Payments, credited with a surge in the Everi Holdings Corporation’s stock price over the past year, maintains that faster and safer are not mutually exclusive. The company has put significant effort into stabilizing the technological platforms for all of its cash-access offerings, allowing the addition of enhanced security features and integration with Everi Compliance, its AML compliance product. The timing is important. With Everi being in more than 1,000 properties, the cash concept is championed. Money reaches customers faster straight out of the ATM than by other means, in this viewpoint. Yet that dynamic needed to be augmented by compliance expertise. Kiosks bring more potential revenue into the mix at the point of play, given their enhanced flexibility, while compliance mechanisms and remote funds access areas like phones figure into the picture. Into this environment, Everi has unfurled an array of products. Many of them were displayed at G2E. CashClub Wallet is a sophisticated, interactive wallet that consolidates payment options for players when integrated with Everi’s CashClub software and full-service Xchange kiosks. CashClub Wallet allows players to store multiple payment methods, easily move funds in and out of the casino, and manage their spend limits, thus supporting responsible gaming initiatives. It also creates consistency across payment types through a convenient and efficient patron interface. CXC 5.0 is Everi’s newest full-service kiosk, offering enhanced security features including self-frosting glass and a real-time rear-view camera to give casino patrons a more private and secure cash-access experience. The CXC 5.0 kiosk provides ample branding and marketing space on the second screen as well as on custom-fit LCD panels between each kiosk in wall or pod configurations. Everi’s newest kiosks offer the same functionality as ATM, bill break, ticket redemption, QuikTicket and Giving Module with a more sophisticated, secure and appealing look. CXC 5.0 L offers smaller properties similar security features and marketing opportunities on a smaller-footprint device. AML Intelligence for Everi Compliance combines the company’s deep experience in gaming AML with VizExplorer’s industry-proven analytics platform to help operators quickly identify potentially suspicious activity. Everi Payments also is showcasing QuikTicket, which expands the funds-tothe-floor options provided by Everi kiosks by allowing operators to dispense gaming tickets in lieu of cash. Another innovation is CashClub Concierge, which offers personalized cage access services for VIP customers, table games players and high-limit room players that are fully integrated with Everi’s CashClub software, eliminating the need for a player to stop playing to access additional funds for play. So how do you want your cash? The service end of this industry has grown substantially. Money needs to be everywhere, accessed instantly. Bing, bang, paid. For vendors, the beat goes on. A cashless cash-in beckons them. 44

Global Gaming Business DECEMBER 2017

on’t scurry around for an ATM when cash becomes scarce. Bring your own ATM with you. That’s one take on a revolutionary solution pioneered by Reno-based Automated Cashless Systems. Its PlayOn product keeps players in the action. And the company is on the cusp of finding a vast pool of new customers. “Our table solution is the only true cashless, debit system provided to a player at a gaming position in the market today,” says Stephen Warner, the company’s co-founder and chief operations officer. “PlayOn is not a prepaid debit or gift card, nor is the patron required to sign up for an additional rewards card. The patrons use their own bank-issued card. ACS PlayOn has been approved in various jurisdictions throughout the country and is up for approval in Nevada.” Warner says the solution has simple yet effective implications for the customer. During a hand break/buy-in session, the patron is handed the PlayOn wireless terminal by the dealer (if no other buy-ins are present, the dealer proceeds to deal the next hand, no stoppage). The player swipes his debit card, enters the amount, enters his PIN number and accepts the nominal fee. Upon approval, a controlled voucher is produced at the game, and during the next hand break/buy-in session the dealer will exchange the voucher for chips to the player. PlayOn allows patrons to utilize their own debit card at the gaming position, with funds converted to gaming chips or a TITO ticket. There are no 31 reporting requirements, no cash is extended for any PlayOn transactions and no debt is incurred by the patron. “In today’s marketplace, everyone has easy electronic access to their funds no matter where they are—checkbooks aren’t as prevalent as they once were,” Warner says. “You can travel around the world and get electronic access to your personal funds. ACS has taken the initiative to provide PlayOn, a wireless technology for the customer while at the gaming position in a safe, secured and controlled manner.” The company has also annexed some major partners, like Vantiv, which has helped in the area of marketing and compliance regulations, among other things. “We’re developing and progressing as rapidly as we can with our PlayOn slot solution,” Warner indicates. “The interfacing to the slot systems is quite detailed and unique, but by 2018 we hope to be granted approval for trial. Operators are biting at the bit for the PlayOn slot application.” Some have already “tasted” the rewards in nearby California. “ACS PlayOn has quickly become an invaluable asset to Thunder Valley’s AAA Four Diamond resort experience,” says Dawn Clayton, general manager of Thunder Valley Casino Resort. “Our guests appreciate the convenience of safe and secure transactions without having to step away from their favorite games.” Ken Harvey, the director of table games at Red Hawk casino, also touts it. “As an add-on product for table games, the PlayOn platform has been instrumental in providing guests with a convenient and affordable at-thegame solution for their buy-in transactions,” Harvey says. “We continue to see acceptance and increased utilization from our players and believe PlayOn to be a positive addition to any floor.” “What makes our system novel and unique is the ACS gateway we created to route transactions so that regulatory limits can be enforced and an audit trail for operators and regulators is provided,” says Michael J. Sackrison, CFO of ACS. —Dave Bontempo

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EMERGING LEADERS Making the Sauce Shannon Keel CEO and General Manager, Akwesasne Mohawk Casino Resort o Shannon Keel, millennials represent a critical piece of gaming’s future. “But no one has the secret sauce about millennials just yet,” jests Keel, CEO and general manager of Akwesasne Mohawk Casino Resort. She surmises the key lies in the experience. Indeed, that approach speaks to any generation, Keel adds. Experience means gambling, plus food and beverage, entertain“Learn what you can from ment, social interaction, the hotel room, pool, nightclub and more. “Being able to track the guests’ experience along as many people as you can. the way and what they are spending their money on is paraLearn from cooks, mount. However, we can’t be too intrusive. It’s got to be housekeepers, the finance organic.” The future for Keel unfolded when she took a position team, dealers, slot with Hyatt Hotels in college. She worked the front desk, as attendants. Learn how a concierge and as an executive administrative assistant. At they do their job, the urging of her employer, she got accepted into the corporate management trainee program. She trained at the what they like and Hyatt Regency Chicago, the company’s flagship property. what they don’t like.” “I worked in all departments, and then focused on the rooms division,” she recalls. “I was assistant front office manager, housekeeping manager and renovation manager. That experience led to a move to the Hyatt Regency Lake Tahoe, where I got my introduction to the gaming industry as casino services manager.” Keel managed the VIP office for gaming guests and was the liaison between the casino and hotel divisions of the property. From there, she joined Golden Gaming (now Golden Entertainment) in 2006 as assistant general manager. “I oversaw various departments, which helped me to really understand the intricacies of a casino,” she says. She rose to vice president and general manager for Golden before joining Reserve Casino Hotel in 2013 as general manager. In 2015, Keel assumed her current position at Akwesasne in upstate New York, not far from the Canadian border. The steady rise of Keel’s career owes much to her mentor at Golden, Jef Bauer. “He gave me my first shot at upper management even with my limited gaming experience,” Keel says. “He told me, ‘I have always looked at potential over experience. Building strong managers has been most effective when working from a clean slate.’ He taught me casino marketing. He also taught me to have fun at work. If you are not enjoying what you are doing, you won’t do it well.” Keel spends a lot of time responding to emails, walking the floor and attending meetings. But the ideas that arise change daily. “You encounter something new each day.” The future is bright for newcomers to the industry, she says. “Learn what you can from as many people as you can. Learn from cooks, housekeepers, the finance team, dealers, slot attendants,” Keel says. “Learn how they do their job, what they like and what they don’t like. “Talk to guests. Listen to their concerns. Know how to read a financial statement and use your learning to make the numbers better. “But don’t act like you are better than anyone else. Pick up trash, bus tables, pay a jackpot, help make a bed. Respect what the team members do and they will respect you.” —William Sokolic

Global Gaming Business DECEMBER 2017

Scientific Mind in the Gaming World Justin Carter General Manager, Hollywood Casino Tunica, 1st Jackpot Casino Tunica and Resorts Casino Tunica ustin Carter came to the gaming industry with a solid scientific background: years of experience as a drug discovery chemist for Abbott Laboratories. The intriguing conversion of a scientist to a gaming operator took place when he was approached by Caesars Entertainment for the President’s Associate Program at a National Black MBA convention in San Diego. From that point on, Carter started developing and rapidly expanding his professional horizon in the gaming world. At Harrah’s Casino St. Louis, Carter was a President’s Associate before being promoted to a pre-opening leadership role with the company’s Bahamian project. Soon after that, he was appointed to fill in operational leadership roles at Caesars casinos in Atlantic City and Kansas City. He considered it a giant leap in his career to join the Emerald Resort and Casino, a Caesars property in South Africa, as operations executive, covering the casino, hotel, zoo, safari, water park and entertainment center. “When I was provided the opportunity to leave the country and go to South Africa during the 2010 World Cup for the Emerald Resort and Casino, it completely transformed my career and essentially put my growth on steroids,” says Carter, adding, “The sheer scale of the resort I was responsible for, along with the vast cultural differences, really helped build me as a leader.” Further expanding his international prospects, Carter served as general manager of Manchester235 in Manchester, England, and as regional director of Caesars provincial casinos in the United Kingdom after his stint in South Africa. In 2015, Carter joined Penn National Gaming as assistant general manager of the company’s property in Charles Town, West Virginia. Shortly after joining the company, Carter advanced to general manager of Holly-

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“No experience is a bad experience; it’s all a learning experience.”

Bridging the Gap from Past to Present “With our customer base becoming more diversified and our competition intensifying, I see gaming operators paying much more attention to its fullfledged offering of resort-style amenities and services.”

wood Casino Tunica. Subsequent to Penn’s acquisition of more properties in Tunica, Carter is now the “Tunica general manager,” commissioned with responsibility for all three Penn National Gaming properties in Tunica, Mississippi. With his scientific mind, Carter views the further expansion and advancement of non-gaming amenities to gaming operations as a significant trend in the industry. “With our customer base becoming more diversified and our competition intensifying, I see gaming operators paying much more attention to its full-fledged offering of resort-style amenities and services,” says Carter, who is dedicated to leveraging his scientific mind and continuing his advancement in the industry to become part of the prospective leadership that ensures a strong and bright future for the gaming world. In Mississippi, Carter serves as the chairman of the Mississippi Gaming and Hospitality Association. As a total CrossFit junkie, he can routinely be found in the gym at 6 in the morning to undertake his daily exploitation. —Michael Zhu, The Innovation Group

Gina Vorgiatzidis Casino Marketing Analyst, Boyd Gaming ne of the first things Gina Vorgiatzidis will tell you about herself is, “I’m Greek!” She’s proud of her heritage, loud, bubbly, exceedingly bright and one of GGB’s youngest Emerging Leaders of Gaming honorees to date. And it’s no wonder. With only four years of experience under her belt, she has already worked for some of the industry’s biggest players in two of the largest casino markets. As she explains, it all started with one internship and a few great mentors along the way. While many people cautioned Vorgiatzidis during her undergraduate studies that gaming was a dying industry, she saw potential in the changing landscape—and more specifically, career opportunity. She landed her first role through a hospitality internship program at Harrah’s in Atlantic City. Although she came to realize that housekeeping was not her niche, Vorgiatzidis is quick to point out, “No experience is a bad experience; it’s all a learning experience.” Vorgiatzidis was determined to utilize her time at Harrah’s. Every day, she would talk with someone new, from table game dealers to front desk representatives, all the while picking up crucial details that go into resort operations. Then one day, after shadowing the casino host, her path was clear. “I fell in love with the green felt,” she laughs. It wasn’t long after a strategic move to Las Vegas the following year that she was recruited to work on a casino bid in Cyprus, her dream job. As a native Greek speaker, she became the lead associate on development for the integrated resort-casino with an emphasis on nongaming amenities. After the project ended, she returned to Las Vegas, took on a role as casino host with Caesars and began her master’s program in hospi-

tality management, casino and gaming operations at Drexel University. There she met her current mentor, Robert Ambrose, a longtime gaming professional and casino and hospitality instructor at Drexel’s Center for Hospitality & Sport Management. “Bob really believed in me,” Vorgiatzidis says. As with most good mentors, he continues to make himself available and has been invaluable to her career development. Despite her relatively few years in the industry, she is already making the leap from mentee to mentor. She supports Greek students through the National Hellenic Student Association program and also mentors students from her alma maters interested in pursuing careers in gaming. As a recent graduate herself, she assures students that, “It’s OK to settle for something that’s not your dream job. The important thing is to get your foot in the door.” It’s a strategy that worked well for her. She learned a lot from her first internship in housekeeping, things that she still finds relevant in her position today. Vorgiatzidis recently stepped into a role as marketing analyst for Boyd Gaming, a company long known for its integrity and family-oriented culture. With two undergraduate degrees in science-related fields, her inquisitiveness consistently drives her to think about the processes at work in the casino. She likes to see the effects of her job play out on the casino floor, and more importantly, in the company’s bottom line. As a millennial, she is keenly aware of trends in gaming and is quick to point out tremendous strides that the industry is making in attracting younger generations. As it turns out, Vorgiatzidis was right. Not only is there potential in gaming, but the industry, like her, is thriving. — Angela Slovachek, The Innovation Group

DECEMBER 2017 www.ggbmagazine.com

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NEW GAME REVIEW by Frank Legato

Qorex Gameball TCSJohnHuxley

his unique twist on the electronic table game from leading supplier TCSJohnHuxley was initially developed as a custom product for the Sands Group. It is an automated dice-based version of baccarat in a multi-player carousel, with electronic play stations surrounding a center device featuring six “Gameball Spinners”—dome-covered wheels which shake and spin each die into one of five colored ports. Three of the Spinners are in an area marked “Banker” with the other three in the “Player” area. The automated roll of the dice for each play determines the card-value outcome in hands that progress in a manner identical to traditional baccarat, with players making Player, Banker or Tie bets before each dice roll. Two Spinners in each section are randomly spun in the first round, with the additional third covered Spinner being revealed and shaken if the first two spinners dice in the respective section equal five or less, as in the traditional game. Players select a bet denomination at the start of each round, triggering a 10-second countdown to start the game. Players then win on the Banker, Player or Tie bets just as in traditional baccarat. There are separate bets for Pair, winning when the dice in the two initial Gameballs have matching numbers or symbols, a well as Natural 8 and Natural 9, winning when the hand results in exactly eight or nine. Finally, additional side bets include Fortune 7, winning when the Banker hand has a total of six; Golden Glory, paying off for wins when three or more dice establish the final point totals in the gold segment of the Gameball wheel;

and Golden Fortune, winning if all six Gameball dice have values of zero and land in the gold segments of the Gameball wheels. Qorex Gameball was awarded the Silver Medal for the Best Table Game Product or Innovation in this year’s GGB Gaming & Technology Awards at Global Gaming Expo. Manufacturer: TCSJohnHuxley Platform: Qorex; GFL Gaming Module Format: Multi-player automated baccarat Denomination: Multi-denomination Max Bet: Operator-configurable Top Award: Operator-configurable Theoretical Hold: Banker Bet—1.06% Player Bet—1.24% Tie Bet—14.36%

China Shores Great Stacks Konami Gaming

his new video slot takes full advantage of Konami’s Concerto Crescent cabinet, featuring a 43-inch curved screen. On this game, the vertical field is a double-height, six-byfive reel array—six reel spaces on each of five reels. In this format, the standard 40-line, 50-line and 60-line arrays of the legacy China Shores game are doubled, with the new game available with 40, 50 or 60 paylines. The “Great Stacks” portion of the name plays out in the primary game. Each reel contains a number of adjacent positions that are randomly replaced with the same symbol before the reel spin is initiated. Wild Panda symbols appear on all but the first reel. A free-game feature offers the player a wealth of choices as far as volatility of the free-spin round. Initially, three, four or five ball symbols trigger eight, 10 or 15 free games, respectively. All free-game wins pay double. When the free-spin round is triggered, the player is presented with a choice of several different volatility setups in a second screen dubbed “Balance of Fortune.” If “Free Game” is selected, the feature proceeds with free games similar to primary-game spins, but with wins doubled. Alternatively, the player can “exchange” the free games for “Credit Prize,” “Green Super Free Game,” “Red Super Free Game” or “Yellow Super Free Game.” Credit Prize yields a random award, which, on average, is greater when

Global Gaming Business DECEMBER 2017

more free games are exchanged. During the Green Super Free Game, every three free games are converted into one Green Super Free Game, with only Ball or Mark symbols appearing as Action Stacked Symbols and random 2X o 3X multipliers for each winning spin. During the Red Super Free Game, every five free games are converted into one Red Super Free Game, and 7X, 12X or 18X is randomly chosen for each winning spin. During the Yellow Super Free Game, every eight free games are converted into one Yellow Super Free Game, with only Panda, Ball, Mark, Turtle, Pot and Lantern symbols appearing and 2X or 3X as the random multiplier. Provided the player has eight or more free games remaining, the player may recommence playing free games by selecting Free Game or exchanging the games for one of the special free-game scenarios.

Manufacturer: Konami Gaming Platform: Concerto Crescent Format: Five-reel, 40-, 50- or 60-line video slot Denomination: .01, .02, .05, .10, .25, .50, 1.00, 2.00, 5.00 Max Bet: 1, 2, 3, 4, 5, 8, 10, 20 or 50 per line Top Award: 18,000 times line bet Hit Frequency: 48% Theoretical Hold: 4%-18%

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FRANKLY SPEAKING by Frank Legato

Nobody’s Driving ple and demanding money. This time, he made away with almost $30,000. After reviewing the surveillance video, casino officials easily identified Bolusan, because he had worn the same black ninja-style clothing that he wore in the first robbery, and wore a similar backpack, and pointed a similar gun. He also used the same vehicle, which, like the robbery itself, was caught on surveillance cameras. (Casino surveillance people would have had a harder time identifying Yosemite Sam.) After reviewing his first two attempts, our man decided wearing the same clothes had been the sole flaw in an otherwise perfect plan. He went back to the M on October 28. Only this time, he wore different clothes. Apparently, what must have been a very stylish outfit threw authorities off their game. He left the M that night with $33,480 in cash. But damn, the car! He had used the same vehicle that had been the subject of surveillance-video binge watching at the M, and he parked it in the same spot as the first two times, and just to ensure the security of his plan, entered the casino through the exact same doors as the first two times. Bolusan was arrested and booked into the Henderson Detention Center on several counts of attempted robbery and burglary. He avoided an armed robbery charge because it turns out he had brandished a fake gun. I hear he was apprehended in Downtown Las Vegas after he inadvertently tried to get away on the driverless shuttle. An alert human attendant stopped the shuttle, after being awoken by a policeman. Yes, I made that last bit up. But be careful out there. You never know when these shuttles are going to rise up and eliminate humans altogether. So, is there a “drunk-in-the-street sensor” on the shuttle? If not, it might be something to look into. VIC TOR RINAL DO

ell, the much-anticipated driverless shuttle was unveiled to much fanfare last month in Downtown Las Vegas. The 15-foot shuttle, built by a French company and named “Arma,” uses LiDAR technology and GPS to navigate. It can detect obstacles and automatically brake to avoid collisions. It goes around 12 mph, but can get up to 27 in a high-speed chase. Rides are free among three stops on Fremont Street. Don’t worry. There’s a human attendant there at all times, ready to take control of the vehicle if needed. What could go wrong? Personally, I don’t trust a driverless shuttle. It’s like a headless horseman. The pilot project is being conducted by transportation company Keolis and AAA of Northern California Nevada and Utah. “From the horseless carriage to the driverless car, AAA has built its legacy on making travel safer, easier and more enjoyable,” AAA President and CEO Tim Condon told Forbes. “AAA believes autonomous technology has the potential to save lives and improve traffic safety.” Naturally, there was a crash in the first hour of service. It was a “minor collision with a delivery truck that was backing up,” according to Forbes. The shuttle, according to an official statement, “did what it was supposed to do,” in that it stopped to avoid the accident. The only problem was that no one told the human truck driver to stop. No one got hurt, and the collision only “grazed the fender” of the shuttle. In a statement, the partners said they were not surprised at the incident, since “the biggest problem with autonomous auto safety is largely in the hands of humans on the wheels of non-self-driving cars.” In other words, to be completely safe, the self-driving vehicle needs to operate only where there are no humans. We’ll keep our eyes on this project. Particularly when we’re walking along Fremont Street. This other Las Vegas casino news comes, as always, from station WXYZ in Detroit. According to the ABC affiliate’s website, a man named Gregory Bolusan has been using the M Resort in Las Vegas as sort of a training ground for casino robbery. So far, it’s not going so good. According to the report, Bolusan has staged three daring robberies at the M Resort, successfully making off with a grand total of... Well, ultimately, nothing. He got caught. On August 24, our man allegedly entered the M Resort at 3:54 a.m. with a handgun and a backpack. He demanded that the cage employee hand over all of their money. The employee looked at him, and bolted. After what must have been an awkward silence, Bolusan himself bolted. According to the report, Bolusan returned to the M a few weeks after his aborted robbery, again pointing a gun at the casino cage peo-

DECEMBER 2017 www.ggbmagazine.com

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GOODS&SERVICES

Planet Hollywood GM Ryan Hammer and Gamblit VP Marketing Darien Lowenstein pose in front of the new TriStation games

GAMBLIT RELEASES NEW GAMES IN LAS VEGAS

amblit Gaming, which last year released the first skill-based gaming machines on the Las Vegas Strip with its Model G multi-player table, last week unveiled a new lineup of six skill-based games on single-player machines. The games, housed on Gamblit’s new TriStation three-game pods, were launched at Planet Hollywood. The TriStation is the latest game to receive an accelerated approval process under Nevada’s New Innovation Beta Process, adopted last year by the Nevada Gaming Control Board. The six new games are: • “Into the Dead,” a zombie shooter game that was originally a smartphone game with 72 million downloads; • “Catapult King,” also first a smartphone game, in which players use a catapult to topple knights and castles; • “Lucky Words,” in which players must quickly put together letters to form words; • “Match 3volution,” in which players create creatures and match them; • “Smoothie Blast,” in which players swipe fruit to make smoothies; and, • “Slice of Cake,” in which players slice ingredients to bake a cake. Minimum bets range from 50 cents on most of the games—there are $1 or $2 minimums on “Into the Dead”—to $10, with top payouts as high as 300-to-1 on the max bet.

DUETTO LAUNCHES ‘PLAYMAKER’

uetto, a leading supplier of cloud-based revenue strategy software for the hospitality industry, has introduced PlayMaker, the industry’s first application tackling true personalization of the booking path. 50

The new cloud application addresses the industry’s greatest challenge by providing consumers a better and more personal shopping experience, increasing their likelihood to convert. By serving both known and unknown shoppers customized merchandising content on direct channels, PlayMaker enables hoteliers to offer guests what they want and drive more direct bookings. With PlayMaker, properties connect browsing behavior, demographic information, past stay history and third-party data to make instant, intuitive decisions that serve up the most enticing room types, packages, offers and upsells. Duetto’s Revenue Strategy Platform delivers those “plays” to the booking engine via an integration with the RESTful API, allowing the hotel to offer personalized experiences that increase conversion. When paired with GameChanger, Duetto’s open pricing application, PlayMaker provides the unprecedented ability for hoteliers to match the right content and the right price to the right consumer, providing a completely personalized offer that increases conversion and revenue.

INTERBLOCK INSTALLS DIAMOND STADIUM AT CYPRUS CASINO

uxury gaming manufacturer and ETG provider Interblock has announced the installation of a 20-seat Diamond Stadium at the Merit Royal Hotel & Casino in Cyprus.

The deal is an extension of Interblock’s current Organic Roulette product offerings on the casino floor bringing the casino’s Interblock footprint to 41 seats, the company said in a statement. The new Diamond Stadium is composed of 20 27-inch play stations, five wall-mounted high-definition LCD displays and two generators offering automated roulette and dealer-assist roulette. According to Interblock, this configuration allows players to easily toggle between both roulette games

Global Gaming Business DECEMBER 2017

from a single play station, giving players more opportunities to place bets and providing the operator with incremental revenue.

EVERI LAUNCHES ‘EVERI CARES’ CHARITABLE MODULE

lot and payment equipment supplier Everi Holdings announced the debut of the “Everi Cares Giving Module,” following the recent successful completion of a 30-day beta trial at a Las Vegas casino. Designed to make social consciousness a convenient priority on the casino floor at the time of a kiosk-based voucher redemption, Everi Cares Giving Module allows players to easily donate funds to fully vetted charities and enables casinos to give back to their communities, enhance their own corporate responsibility programs, and better engage with players looking to donate to charities. “We are delighted to add this innovative new capability to our world-class payments product suite and make it available to our customers for the first time,” said Michael Rumbolz, president and chief executive officer of Everi. “The Everi Cares Giving Module offers a completely new and convenient way for casinos and their players to make a powerful positive impact on their local community by creating a direct link between the casino floor and worthy local charities.” Everi Cares Giving Module provides an opportunity for players redeeming a gaming voucher at an Everi full-service kiosk to donate all or part of their ticket to select charities. Casino operators are also positioned to benefit in their operations and community relations when implementing the Everi Cares Giving Module in their full-service kiosk footprint. Operationally, it helps reduce the amount of abandoned vouchers and lowers coin-handling expenses by pushing coin redemption awards towards charitable donations and, potentially, eliminating the need for coins on the casino floor.

STATION EMPLOYS IGT CARDLESS CONNECT

nternational Game Technology announced that its Cardless Connect technology will be launched at several Station Casinos properties in Las Vegas by the end of the year. Now deployed at a single Station Casinos property for testing, IGT’s Cardless Connect technology enables players to participate in the My Re-

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wards Boarding Pass loyalty program by simply tapping their smartphones on a slot machine card reader. Based upon the initial success of the Cardless Connect technology, Station Casinos plans to implement it at two more locations in Las Vegas later this year with the remaining properties to follow shortly after. “We are committed to continuously delivering new benefits to our My Rewards Boarding Pass that bring value and convenience to our new and existing members,” said Staci Alonso, Station Casinos executive vice president and chief marketing & innovation officer. “IGT’s Cardless Connect technology adds meaningful value to the STN mobile app by allowing guests to use their phone to card in at their favorite slot game if they prefer a digital experience.”

To use Cardless Connect technology at featured Station Casinos properties, players can simply download the STN app from the App Store or Google Play Store, sign in and tap their phones on the card reader to “card in” to a slot machine. The phone will simply connect the player just as a physical loyalty card would so the player can experience all of the benefits of the loyalty program.

JENA CHOCTAW PINES CASINO TO ADD 72 AINSWORTH GAMES

insworth Game Technology announced that the Jena Choctaw Pines Casino in Dry Prong, Louisiana, will add 72 incremental Ainsworth games in late 2017. The 72-game order will expand on a 24-game presence. Ainsworth will make up nearly 15 percent of the Jena Choctaw Pines Casino floor. A full array of Ainsworth’s state-of-the-art gaming cabinets will be on the casino floor, including the A600, A600 Slant Top and A560SL Noir, along with an extensive library of available games. “We are thrilled to be increasing our presence at Jena Choctaw Pines Casino,” said Ainsworth President-North America Mike Dreitzer. “This agreement shows that Ainsworth continues to have an increased footprint in North America. We are looking forward to providing tremendous game content and world-class service to ensure our customer partners see a significant return on their investment in Ainsworth.” DECEMBER 2017 www.ggbmagazine.com

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PEOPLE WILMOTT NAMED CHAIRMAN OF AGA

he American Gaming Association Board of Directors last month announced it has elected Tim Wilmott, CEO of Penn National Gaming, Inc., as the casino industry group’s Tim Wilmott next chairman. Wilmott will serve a two-year term beginning in January 2018. He succeeds outgoing AGA Chairman Jim Murren, chairman and CEO of MGM Resorts, who has led the AGA board since 2014. Wilmott has been actively involved in AGA leadership since 2015 as an executive committee member and director of the board, as well as chair of the Finance and Investment Committee. “I’m immensely proud of the progress we have made in establishing our industry as mainstream entertainment, a source of strong jobs and a crucial economic engine of the U.S. economy,” said Murren. “Tim is a chief executive of the highest caliber and has been an engaged and invaluable member of the AGA Board and Executive Committee and a strong partner to me personally. He has contributed greatly to our past successes and has my full support as he leads us into the future.” Wilmott joined Penn National Gaming in February 2008 as president and chief operating officer, and was named chief executive officer in November 2013. Prior to joining Penn National, Wilmott was with Harrah’s Entertainment from 1987 to 2008, where he served finally as chief operating officer. “I am excited to continue working with Geoff Freeman and the AGA team to advance issues critical to the gaming industry’s success,” said Wilmott. “I certainly have big shoes to fill following Jim’s tenure as chairman, but I look forward to continuing the momentum that he initiated.”

HARD ROCK NAMES TRACY CEO OF ASIA

ard Rock International, with presence in more than 73 countries, last month announced the promotion of Edward Tracy to chief executive officer, Asia. Currently, Tracy is focused on Hard Rock Japan LLC

in its efforts to develop a signature Hard Rock integrated resort. Tracy’s most recent appointment is a strategic move designed to support the company’s growth plans in the region. “As the former CEO of Sands China Ltd. and CEO of the Trump Organization, Tracy brings more than 30 years of proven gaming, hospitality and integrated resort experience to Hard Rock,” said Jim Allen, chairman of Hard Rock International. “We are confident in Tracy’s ability to lead the company’s efforts in Asia and we look forward to seeing our business continue to grow under his leadership.” Tracy joined Sands China Ltd., a subsidiary of Las Vegas Sands Corp., in July 2010 as its president and chief operating officer, becoming the company CEO in July 2011. Prior to Sands, Tracy served as president and CEO of Capital Gaming, a multi-jurisdictional manager of regional casinos. He also served as president and CEO of the Trump Organization.

LEVINSON OUT AT NEW JERSEY CCC

n a surprise move, Matt Levinson, the chairman of the New Jersey Casino Control Commission, is stepping down after not being re-nominated to the position by Governor Chris Christie. News reports say James Plousis, the chairman of the New Jersey State Parole Board, will replace Matt Levinson Levinson. Levinson is the son of Atlantic County Executive Denny Levinson, and reportedly was a victim in a feud between his father and Christie. The senior Levinson is involved in a case challenging the PILOT (payment in lieu of taxes) program for the Atlantic City casinos designed to stabilize the city’s taxes. With dramatically lower payments to Atlantic County under the PILOT program, Denny Levinson was challenging the legality of the measure. The elder Levinson said his son was “collateral damage” in the fight against the PILOT measure.

MARTIN, GILLAND NAMED GOLDEN EXECUTIVES

L Edward Tracy

as Vegas-based Golden Entertainment Inc. announced that Ned Martin has been named chief administrative officer and Phyllis Gilland has been named general counsel.

Both previously worked at American Casino & Entertainment Properties LLC, which Golden acquired on October 20. Martin had served as chief operating officer and chief financial Phyllis Gilland officer, and Gilland as senior vice president, general counsel and compliance officer. Martin brings to Golden 23 years of experience in gaming and other industries. He will assist in integrating into Ned Martin the former ACEP Las Vegas properties Stratosphere Casino, Hotel & Tower, Arizona Charlie’s Decatur and Arizona Charlie’s Boulder, plus the Aquarius Casino Resort in Laughlin. Martin also will also oversee Golden’s human resources, security, information technology and design and construction departments. Prior to joining ACEP, Gilland served as general counsel and chief financial officer for Taylor Construction Group Companies. She will report to Golden Chief Legal Officer Sean Higgins.

GGB

December 2017 Index of Advertisers

AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 AGEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 Agilysys . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 AGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Akwesasne Mohawk Casino Resort . . . . . .39 Crane Payment Innovations . . . . . . . . . . . .15 Everi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 FABIcash . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Fantini Report . . . . . . . . . . . . . . . . . . . . . .51 Fox Rothschild . . . . . . . . . . . . . . . . . . . . . .21 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 GGB Publications . . . . . . . . . . . . . . . . .12, 25 Global Gaming Women . . . . . . . . . . . . . . .43 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 ICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Interblock . . . . . . . . . . . . . . . . . . . . . . . . . .13 Konami Gaming, Inc. . . . . . . . . . .Back Cover San Manuel Casino . . . . . . . . . . . . . . . . . . .17 Scientific Games . . . . . . . . . . . . . . . . . . . . . .9 TCSJohnHuxley . . . . . . . . . . . . . . . . . . . . . .2

DECEMBER 2017 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Ramesh Srinivasan President & CEO, Agilysys

amesh Srinivasan was named president and CEO of Agilysys in January. Before joining Agilysys, he spent nine years with Bally Technologies, where he was instrumental in building a small systems unit into a $300 million annual powerhouse. He was later promoted to president, COO and finally CEO. At Agilysys, he is keenly focused on leveraging his comprehensive background in the gaming industry to drive the company forward as the industry’s leading hospitality technology provider. He spoke with GGB Publisher Roger Gros at the Agilysys offices in Las Vegas in October. GGB: Agilysys has a lot of technology solutions for the gaming industry. But there’s other companies that do that, too. What is it that differentiates Agilysys from your competitors?

Ramesh Srinivasan: Especially with respect to gaming, our history includes a lot of gaming DNA. For example, our InfoGenesis POS solution started with casinos as the primary users, and shortly after that, we added LMS property management with a large gaming customer base. In fact, nearly all our products have some measure of the gaming industry’s needs built into their DNA. This gaming-centric focus is not just evident in our products, but also in our people. You will find a lot of the Agilysys team has 10, 15, 20 years’ experience in gaming, and that includes me. Of course, this deep industry experience also applies to the non-gaming hospitality industries we serve. In addition, Agilysys is the perfect size for our markets. We’re in the $100 million to $300 million annual revenue bracket, which means we provide a higher level of customer service than very large vendors. We are very close to our customers, and they each get a personal level of attention that only a company of our size can provide. Lastly, the breadth and depth of the products and services that we offer also sets us apart. 54

Global Gaming Business DECEMBER 2017

Many of our solutions have been in the marketplace for well more than a decade, and we are constantly adding new features and capabilities. This, combined with the fact that Agilysys is the only comprehensive solution provider to focus exclusively on the hospitality industry, is how we provide a clear advantage for our customers. Even before you left Bally, there was a strong trend toward non-gaming revenue. How important do you think that is today?

It is no longer only about gaming spend; it’s about non-gaming spend as well, and that has always been the key area in which we play. Between our solutions for the non-gaming parts of the casino resort and our robust integration with casino systems, we understand what our casino customers need in order to track and grow non-gaming revenue. To accomplish this, our customers tell us they need a single view of the guest. They need to understand how much the patron plays in the casino, and how much the patron spends outside the casino. At Agilysys, we offer not only hotel property management and point-of-sale systems, but we also have software solutions for managing golf, spa, retail and food service. So, we are in a position to bring all that patron data together to facilitate the desired single view of the guest. In addition, we have integrations with casino management systems, and other solutions that our customers use. With a product like rGuest Seat, for example, we can help customers to better understand the guest. When a patron comes to the restaurant, we provide the ability to address them by name, to understand their preferences, their allergies, their favorite table, and the food they prefer. So, as non-gaming is becoming more and more important, our role becomes more and more important as well. In evaluating gaming and non-gaming spend, profit margins in a restaurant are smaller on food, but larger on alcohol. How do you balance that, and give the casinos a good picture

of their non-gaming spend?

It’s about understanding the guest’s behavior, understanding their preferences, and thus their value. The casino industry—as is true of other industries—is only scratching the surface to address this challenge today. We have not yet taken it to where it needs to be. With our products, we already provide a lot of information about guests, but we plan to do a lot more. Currently, the value of the guest is directly proportional to their spend. Agilysys’ technology is capable of providing insight into whether a guest normally stays in your hotel on a discount day, or even on a premium day. Customers also want to know more about their guests. How often they play golf, for example. And what they prefer to do after golf. Access to this data is available, but the way each operator wants to look at it varies. We are progressing toward helping more of our customers access and analyze this information. That said, we acknowledge there’s still a long way to go. Agilysys has been very good at buying companies, and also partnering with companies. How important is that to Agilysys that you acquire and partner with these other top-line companies?

We have very good partnerships with solution and service providers in every area. And we are good partners with competing companies as well. Not only companies that compete with each other, but also partner companies that compete with some of our ancillary products. Our philosophy and vision clearly is that we want to help our customers improve their guest experience and guest loyalty. That’s why we are in business. In fact, where we provide our own solution in some of those areas, but the customer happens to choose another product, we gladly integrate with them. We will do whatever we must to provide value to our customers so that they can increase their guest experience and loyalty. That is the only reason we are in business.

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P L AY O N

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When it comes to your casino floor, keeping players excited and engaged is everything. No one knows this better than Konami Gaming, Inc. With Fortune Cup™ players experience the thrill of a day at the races, on the industry’s most advanced multi-station horse racing game. An astounding mechanical track, combined with real-time digital animation of the events, puts players right in the action as they cheer on their stallion to final victory. Better yet, every round gives players the enjoyment of traveling to different race events and selecting picks for win, place, and quinella through personal touchscreen betting stations.

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