Century Casinos Looks Westward

Rebounding from the pandemic, the international operator eyes more U.S. opportunities. By David McKee

efying adversity, Century Casinos is

Dfirmly on the comeback trail from the Coronavirus pandemic. It recorded its best-ever quarter this spring, even without a full repertory of operational casinos, thanks to health-related closures in Canada and Poland. Century also did it without anything like a full cohort of international players. Fortunately, Century’s bedrock is a loyal core of gaming-centric local customers and they have helped the company rebound in record time, recording an all-time level of cash flow between April and June of this year.

The two men steering the Century Casinos ship are the company’s founders and CEOs Erwin Haitzmann and Peter Hoetzinger, who have helmed it past the rocks and shoals of Covid-19, and set the course into the brave new world of U.S. sports betting, which is expanding as fast as Century. Shortly after Century’s landmark second-quarter earnings call on August 6, we sat down with Hoetzinger, who generously gave of his time to look back on Century’s recent successes and share his vision of the future.

Congratulations on a great second quarter, including record EBITDA. How did you accomplish it?

Century Casinos is focused on empowering the operational teams at each property to make decisions that best serve our customers, our team members and our business. The closure of our casinos due to Covid gave our management and operational teams a chance to re-evaluate our business model and make adjustments that would have been very challenging to do pre-Covid. Adjustments were made to our cost structure which have had a positive impact on margins, and we believe are sustainable long-term. We continue to evaluate promotional offers, marketing incentives and property amenities to determine what is truly important to our most valuable customers.

It’s early days yet for Canada and Poland, but what kinds of consumer trends are you seeing?

Since our Polish casinos reopened on May 28, 2021, we can see that most of the local guests are visiting our casinos again. We are still waiting for the return of international tourists who are currently absent and for the resumption of conference tourism. But even without this additional business, the operating result is currently already at the level of before the pandemic. As a trend, we are currently observing a very strong performance of slot machines, while the table game action has been starting up more slowly. Our Alberta, Canada, properties successfully reopened on June 10, 2021. All slot and table gaming seats are available for play with occupancy rates increasing steadily. Since reopening, guest visitations have been robust, and play volumes on both slot and table games have been great, with records being broken during the month of July and it seems to continue to be trending well into the third quarter.

Did the Canadian and Polish shutdowns materially damage Century?

No, not at all. The shutdowns in Poland and Canada forced operational breaks but we were able to keep the economic impact very low through consistent cost control. At the same time we saw a strong performance from our operations in the USA. We look back on our second quarter as the most successful

period in the company’s history to-date, even though our operations in Canada and Poland were not allowed to operate most of the time.

How long do you feel the stimulus-fed wave of play will last? Will this be sustainable long-term or will the current wave of gaming revenue crest at some point?

While some properties saw significant increases in revenue immediately following the stimulus payments in the first quarter, our U.S. properties as a whole have demonstrated sustained growth in revenue. With the short-term peaks having normalized, we are confident our U.S. properties will maintain significant increases over pre-Covid levels.

How have you revised your marketing and promotions for a post-shutdown world?

Since re-opening from Covid, a focus has been made on higher-worth, high margin customers. Rather than structuring marketing offers and promotions around bringing high volumes of guests into the casino, we center these marketing activities around our most profitable customers. In addition, the company has focused on shifting from physical direct-mail offerings to digital delivery. An app was launched in the first quarter at our Missouri properties and will be rolling out to other properties throughout 2021.

What is “the right customer” for Century?

Century strives to be the destination of choice for gaming-centric customers within each of our markets, providing the best selection of slot machines and table games in a friendly and convenient environment.

Century properties draw most of their players from within a 90-minute drive. How does this shape the kind of games and amenities that are on offer, since these are not tourist-oriented casinos?

Our regional markets allow us to focus on profitable

amenities which attract gaming-centric customers. Less profitable amenities, such as buffets, may be necessary in more tourist-oriented markets, but do not necessarily attract gaming-centric customers.

What kind of amenities remain offline or are likely to be eliminated?

Any amenities that are unprofitable and do not attract gaming-centric customers will remain offline. A prime example of this would be all-you-can-eat buffets, which tend to attract customers who are more focused on food offerings at a value price as opposed to gaming.

Sports betting, Internet gambling and parimutuel winnings have just surpassed F&B as revenue drivers. How was this accomplished and what is the current scope of your online presence?

We have been operating online and retail parimutuel horse betting for many years, thanks to the three horse racetracks in our casino resorts portfolio. Parimutuel betting is well established; and while it isn’t a dynamic business, it is an essential source of revenue for the horse racing associations, the horse racing regulators and us as racetrack operators. Online sports betting, as you know, gained momentum quickly in the last few years. We made good use of the sports betting licenses available to us in West Virginia and Colorado through market-access deals. These deals have initially been appealing to us because of the one-time fees and the guaranteed minimum payments we were getting.

With future expansion of sports betting to more states, some of those providing untethered (to casino licenses) access to sports betting—like Tennessee— and our own future growth through potential acquisitions in more states, there could potentially be a time when our own branded sports betting offering tied into the Century Casinos loyalty program, may make sense. We also have an iGaming license through our Mountaineer Casino, Racetrack & Resort in West Virginia, and we have access deals for the three skins—which come with the iGaming license—in place.

We also look forward to the State of Missouri legalizing online sports betting (and perhaps iGaming as well), hopefully in 2022. We have two licenses in that state and a very loyal customer base which could result in great revenue and cash flow upside for Century Casinos.

a new land-based casino at Century Casino Caruthersville? What’s the condition of the existing facility?

The existing facility in Caruthersville is the last freefloating riverboat casino in Missouri. A riverboat casino presents multiple challenges, including the safety of guests and employees, the risk of high water and loose barges, and the high cost of insurance. The proposed conceptual design of the new, land-based facility will transform Century Casino Caruthersville to a premier gaming and hotel facility that will provide a first-class experience to customers. It will be modern, attractive, very convenient, much more efficient to operate and will be insulated from the operational and economic disruption that occurs during the river-flood stages.

Casino smoking bans are a hot topic in the U.S. right now. What is your position on the issue?

These are local issues which will be decided by local governments and voters.

Does Century have any smoke-free properties in Canada or Europe?

Although there are certain restrictions on smoking in our Polish casinos, it is possible to smoke in any of our establishments. All of our Century Alberta, Canada, properties are smoke-free as per provincial- and municipal-government policies.

Why are you choosing to sell your Polish casinos and when do hope to close a deal?

We have decided to concentrate our business activities on markets in North America. The sale of our Polish investments would be a step in this direction and we are talking to several interested parties. At the moment, however, we do not know if and when a sale will take place.

What are your hopes for revised sports betting in Canada, now that single-event wagers are legal?

In Alberta, Canada, the Provincial Regulator is responsible for the oversight of managing and conducting single-event sports wagering at our two casinos and two racetrack casinos. It would be reasonable but not guaranteed that the regulator will allow the gaming industry, including Century, to partake in retail sports book offerings within their establishments and potential mobile extensions. We should have more clarity in the first half of 2022.

to year and a half. What makes a casino a good fit for Century?

We focus on stable U.S. locals and regional markets with predictable risk of additional competition.

You’re building employee housing in Cripple Creek. Why? What will it be like? Are you likely to emulate this at other properties?

We are building workforce housing in Cripple Creek due to the critical need of both staffing and affordable housing in the Cripple Creek market. The plan includes three new buildings on property we currently own, a block away from our casino and hotel, and directly across the street from the community recreation center, picnic area, playgrounds, skate park and sport utility courts. Each building will have two three-bedroom, two-and-a-half bath and two two-bedroom, two-and-a-half bath for a total of 12 units. We believe the housing will attract both families and individuals looking to work and live in Cripple Creek, giving Century a competitive advantage in hiring and maintaining quality staff. Although there are no immediate plans to emulate this concept at other properties, we certainly will if there is the need and the opportunity to provide housing for our employees and communities we operate in.

Speaking to F&B, why are buffets a lower-priority item for Century customers than in, say, Las Vegas?

Century’s core, regional customers are gamingcentric customers who are looking for a best-inmarket selection of slot machines and table game offerings. By comparison, a destination market such as Las Vegas is much more driven by non-gaming amenities such as buffets, unique food venues, or retail offerings.

Are you worried about Covid-19 making a comeback?

Century has proven to be able to get through a Covid situation without sustainable economical damage and to come back even stronger. There is no reason to be worried about a potential comeback of restrictions.

Where would you like to see the company a year from now?

Our latest acquisition, which we closed in December 2019, pretty much doubled us in size and it would be great if we could repeat something like that in the next 12 to 18 months.