Canadian Gaming Business October 2006

Canada's Premier Gaming Industry Magazine

Vol. 1 No. 2

October 2006

Let’s Eat at the Casino!

Food and beverage is a major amenity and powerful marketing tool.

Inside:

Sports betting, the Criminal Code and the Internet

Growth, and change, for First Nations gaming

Smoke-free gaming: Coping with province-wide bans

Official Publication of the Canadian Gaming Summit

October 2006

Volume 1 Number 2

Publisher

Chuck Nervick

chuckn@mediaedge.ca

Editor

Fred Faust

ffjr@swbell.net

Advertising Sales

Patrice Hall

patriceh@mediaedge.ca

Senior Designer

Annette Carlucci

annettec@mediaedge.ca

Designer

Ian Clarke

ianc@mediaedge.ca

Circulation Manager

Selina Rahaman

selinar@mediaedge.ca

contents 5

Editor’s Note

Fred Faust discusses some of this issue’s stories.

7

Message from CGA

Bill Rutsey says Canada must deal with the “elephant in the room” – Internet gaming.

9

Gaming News Roundup

Quebec’s racetracks are privatized and will get more VLTs, Edgewater Casino has a new owner, several executives take new positions, and other gaming news.

Proudly owned and published by:

14

Expanding Sports Betting Options

Gaming lawyers Michael D. Lipton and Kevin J. Weber examine how the Criminal Code treat sports betting, and how the Internet may force changes.

President Kevin Brown

President & CEO Bill Rutsey

17

kevinb@mediaedge.ca

wrutsey@canadiangaming.ca

Vice President, Strategic Development Chuck Nervick

Vice President, Public Affairs Paul Burns

chuckn@mediaedge.ca

pburns@canadiangaming.ca

River Cree Resort and Casino in Edmonton becomes Alberta’s first First Nations casino and changes are underway for First Nations gaming in Manitoba.

22

Food and beverage is a major amenity and powerful marketing tool.

28

For advertising information, Contact Chuck Nervick 416-512-8186 ext. 227

30

Province-wide bans make policies consistent, but long-term impact is still unknown.

Racinos Keep Racetracks Alive, But are not Panaceas

Gaming machines are necessary at most tracks; some are also looking at nongaming development of their excess real estate.

33

fredf@mediaedge.ca

Guest editorials or columns do not necessarily reflect the opinion of Canadian Gaming Business magazine's advisory board or staff. No part of this issue may be reproduced by any mechanical, photographic or electronic process without written permission by the publisher. Subscription rates: Canada $44.94 per year, $80.79 two years. All rates are payable in Canadian Funds only.

Postmaster send address changes to: Canadian Gaming Business Magazine 5255 Yonge Street, Suite 1000, Toronto, Ontario M2N 6P4

Smoke-Free Gaming: What the Industry Faces

chuckn@mediaedge.ca

Copyright 2006 Canada Post Canadian Publications Mail Sales Product Agreement No. 40063056 ISSN 1911-2378

Let’s Eat at the Casino!

Canadian Gaming Business is published six times a year as a joint venture between MediaEdge Communications and The Canadian Gaming Association

For editorial information, Contact Fred Faust 866-216-0860 ext. 271

Growth, and Change, for First Nations Gaming

Canadian Gaming Education Forum

Director Judith Hayes describes this unique Canadian resource for continuing education in gaming.

35

Lottery and Gaming Corporation Highlights

The provincial lottery and gaming corporations keep us up-to-date on their jurisdictions.

Volume 1 No. 2 Canada's Premier Gaming Industry Magazine

Vol. 1 No. 2

October 2006

Let’s Eat at the Casino!

Food and beverage is a major amenity and powerful marketing tool.

Inside:

Sports betting, the Criminal Code and the Internet

Growth, and change, for First Nations gaming

Smoke-free gaming: Coping with province-wide bans

Official Publication of the Canadian Gaming Summit

On the Cover Food and beverage: Major amenity, powerful marketing tool with unique challenges for gaming.

Official Publication of the Canadian Gaming Summit

Canadian Gaming Business |

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For exhibiting information contact Patrice Hall 416-512-8186 ext. 246.

For conference information or speaking opportunities contact Debbie Dollar-Seldon 416-512-8186 ext. 223.

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editor'snote

Editorial Advisory Board Howard Blank, Vice President Media & Entertainment / Marketing & Promotions, Great Canadian Gaming Corporation

Food and Beverage, Internet Gaming, Smoking – Challenges Everywhere!

Lynn Cassidy, Executive Director Ontario Charitable Gaming Association Robin Drummond, Senior Director Spielo, GTECH Nick Eaves, Vice-President Woodbine Entertainment Group Art Frank, President Niagara Casinos Brian Fraser, Marketing Manager IGT Canada Jordan Gnat, President & Chief Executive Officer Boardwalk Gaming Muriel Grimble, Executive Director Gaming Products & Services Alberta Gaming & Liquor Commission Lyle Hall, Managing Director HLT Advisory Inc. Zane Hansen, President & Chief Executive Officer Saskatchewan Indian Gaming Authority Brad Johnson, Vice President Marketing Aristocrat Technologies Inc. Ron Kelly, Executive Vice President Arrow Games Michael Lipton, Q.C., President, International Masters of Gaming Law and Partner, Elkind & Lipton LLP Eric Luke Eric R. Luke and Associates Alan Lyman, Senior Regional Director Scientific Games Margaret McGee, Director of Public Affairs & Communications Nova Scotia Gaming Corporation Jovica Perovic, Director Casino Product Development & Facilities British Columbia Lottery Corporation Michael Randall, Vice President Corporate Responsibility & Communications Atlantic Lottery Corporation George Sweny, Senior Vice President Lotteries OLG Monique Wilberg, Chief Operating Officer Gateway Casinos

As the Canadian gaming industry matures, amenities become more and more important.

Last issue contained a feature story on live entertainment at Canadian casinos. This issue, we delve into food and beverage service at gaming venues. (See “Let’s Eat at the Casino!” on page 22.) We plan regular coverage of this critical subject of amenities.

There’s plenty of talk these days about changing federal law to permit the lottery and gaming corporations, or even racetracks, to offer more competitive sports betting products.

Gaming lawyers Michael D. Lipton and Kevin J. Weber have prepared an insightful analysis of how the Criminal Code came to deal with sports betting in the manner that it does, and how “illegitimate” Internet sports books may force some changes. (See “Expanding Sports Betting Options” on page 14.)

In my years of covering the gaming industry, I’ve always been impressed about how similar the issues, the controversies, usually are from one country to another. Take smoking bans, for example. As Aaron Todd explains (see “Smokefree Gaming: What the Industry Faces” on page 28), gaming operators in Canada are now coping with strong, province-wide bans.

In Europe, smoking prohibition has recently arrived or is on the way.

The J.D. Wetherspoon chain of pubs in Scotland reported interesting results after a smoking ban went into effect there: drink sales declined 3.4 per cent, food sales increased 7.7

per cent, and gaming machine revenue declined 11.3 per cent. A smoking ban hits England next year, and Rank Group Plc is reported to be worried about the impact on its bingo halls and casinos. Even the country that is perhaps most identified with smoking, France, is moving towards a ban that would include casinos.

And Internet gaming brings controversy everywhere. There are several references to it in this issue of our magazine, in part because the U.S. just put in place a long-threatened ban on this form of gaming. As a prelude, in two separate incidents at airports earlier this year, U.S. authorities arrested an executive of a major online gaming company. In September, France also cracked down, arresting the joint chief executives of an Austrian betting site. In October, the European Commission censured France, Italy and Austria for their restrictive gaming laws that allegedly violate the free market principles of the European Union.

I appreciate all of the comments on our first issue, but I’m still seeking more feedback from our readers. Please let me know what needs improvement, either in what we cover or how we cover it. If you do take the time to write, be sure to indicate whether you want your comments published.

Fred Faust Editor fredf@mediaedge.ca 866-216-0860 ext. 271

E-mails to the Editor Editor: Canadian Gaming Business is here! Wonderful. The gaming industry has now a ‘voice in print’ after the successful establishment of the Canadian Gaming Association last year. “Audiatur et altera pars,” as the Romans said. The gaming industry in general, and casino gaming in particular, have to be heard. Casinos in Canada have become an integral part of the entertainment industry and of the social infrastructure as well. It is ample time to present the industry in its many facets and what gaming has to offer.

Congratulations and all the best for this new voice.

Christian Marfels, Marecon International Research, Bedford, N.S.

For readers who – like the editor – never studied Latin, “Audiatur et altera pars” means “Let us hear the opposite side.” – Editor Policy Canadian Gaming Business welcomes e-mails to the editor. E-mails should include the name of the sender, business or professional affiliation, and city and province of the sender’s office or home. A phone number should be included for contact purposes; the phone number will not be published. We reserve the right to edit e-mails for purposes of brevity and clarity.

Canadian Gaming Business |

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Internet Gaming – ‘See No Evil’ Just Isn’t Working

By Bill Rutsey, President and CEO

The “elephant in the room” that Canadian law enforcement, regulators and government don’t seem to want to talk about is Internet gaming. Canadian law is quite clear – Internet or online gaming is illegal unless operated by a provincial government or agency. Limited, legal, lottery-style games are available online in Atlantic Canada, Quebec and British Columbia.

The reality is that I-gaming is thriving in Canada and available to anyone with an Internet connection. Online poker, casino-style games and sports betting are widely available and openly advertised across the country.

Canada’s “Illusionary Prohibition” contrasts with both the prohibition and enforcement model of countries such as the United States and France, and the license, regulate and tax model followed in more than 80 jurisdictions around the world (developed initially in smaller locations such as Antigua, Isle of Man and Alderney and more recently in larger jurisdictions like the United Kingdom). This “see no evil” approach has led to Canada being the host of one of the largest I-gaming server parks in the world – just outside of Montreal at Kahnawake Mohawk First Nation.

Over the past five years internet gaming has almost tripled – emerging as a significant industry segment. Current worldwide annual internet wagering is estimated at $14.2 billion and is forecast to reach $21.3 billion by 2010

– over 40 per cent from North America. That’s $9 billion just disappearing into the ether – the Canadian share estimated at approximately $1 billion (just over 10 per cent of the North American share).

Any industry is only as strong as its weakest link. While we as insiders may debate over who is “in” or “on the edges” of the gaming industry, it’s clear to the customers who are engaging in online gaming in larger numbers every day, that I-gaming is becoming a mainstream product.

Consumer acceptance is not the issue any longer. What customers care about is technology, including payment solutions. Integral to this is regulation – including who does and does not regulate.

To be fair, the I-gaming industry (particularly in Canada) has taken significant steps to ensure the fairness of games and the integrity of suppliers. However, the combination of inaction by law enforcement officials to enforce the law and the unwillingness of Canadian government regulators and policy makers to establish a framework where the regulation of I-gaming can occur has lead to a situation negatively impacting the gaming industry as a whole. For example, current estimated Internet gaming revenues in Ontario are equal to the combined annual net incomes and “Win Contributions” (20 percent of the win paid to the province) for the Niagara Falls, Windsor and Rama casinos – more than $400 million.

Estimated Internet Gaming Revenue ($US billions) 2001 2002 2003 2004 World-wide $5.2 $6.0 $6.7 $9.2 Growth Rate % 18.8 16.9 37.9 30.2 North America $3.0 $3.3 $2.9 $4.2 (Source: HLT Advisory & Dresdner Kleinwort Wasserstein)

It’s time for us to get off the fence in Canada – either to start applying the current law or to begin developing a framework for regulation of I-gaming – for two very good reasons: • It is only fair to those who finance, supply and operate the I-gaming market, including many Canadian companies.

• More important, it just isn’t fair to the bricksand-mortar gaming industry – the people who expend great effort and dollars to earn gaming licenses in multiple jurisdictions in an effort to ensure the highest level of integrity for the industry.

The bricks-and-mortar gaming industry has worked diligently over several decades to build a strong reputation for fair games offered in safe and secure environments. Through government regulators conducting independent background checks, audits and continued due diligence, the industry has fought back the image (and the reality) of being “the bad guys”. It’s all about delivering fair games in secure environments to the customer and creating a level regulatory playing field.

Internet gaming should be the subject of increased attention from governments and regulators. We can only hope that we arrive at a solution that takes into account what is at stake, and develop a coherent response that’s seen as appropriate by a majority of Canadians.

2005 $12.1

2006 $14.2

2007 $16.3

2008 $18.1

2009 $20.1

2010 $21.3

19.8 $6.1

13.9 $6.9

11.0 $7.6

11.0 $8.1

6.0 $8.6

$8.9

Canadian Gaming Business |

gamingnewsroundup

Quebec racetracks: New private ownership, and more VLTs Attractions Hippiques Quebec was poised to assume ownership and management of Quebec’s four harness tracks, as this issue went to press. The deal includes an increase in the number of video lottery terminals at each track, with Loto-Québec planning to install a total of 1,900 machines at the four tracks.

Senator Paul Massicotte, who owns 100 per cent of Attractions Hippiques, said his company had a binding agreement with the provincial government and was just waiting for permits to be issued before the deal could close. The government selected Attractions Hippiques in December 2005 from among five bidders for the tracks. There have been numerous delays in closing the transaction.

Meanwhile, the tracks remain open.

Massicotte said one of them, the Hippodrome de Montréal, will celebrate its 100th anniversary next year.

Quebec has lost scores of millions of dollars operating the tracks since 1993, according to The Gazette, a Montreal newspaper. The province wants to get out of the business, and Attractions Hippiques has promised to make major investments in an attempt to revive it.

A government press release earlier this year said the company’s commitment includes $75 million to relocate the Montreal track to an area north of the city and $24 million to renovate the other three tracks, which are in Quebec City, Trois-Rivières and Aylmer.

In addition, Attractions Hippiques must spend $5 million annually for five years on marketing, and put up more than $100 million in race purses over five years. The money for

purses will be an increase of about 40 per cent above pre-closing levels, Massicotte said.

Massicotte told Canadian Gaming Business that these figures represent his company’s contractual obligations, but he expects the actual investment to be even larger. In return, Attractions Hippiques will get 22 per cent of the net revenue from the 1,900 VLTs. The new number of machines represents an approximate four-fold increase over the previous total.

This change is part of Loto-Québec’s new strategy of consolidating VLTs into fewer locations, with more machines at each location.

“Conceptually, they’re creating major gaming halls, removing the VLTs from the bars and local access, putting them into centralized areas, [with] higher supervision, hopefully higher levels of entertainment,” Massicotte said.

“That’s the concept. Studies would indicate that’s socially more responsible.”

The new distribution of racetrack VLTs will have 1,300 in Montreal, 300 in Quebec City, 200 in Trois-Rivières and 100 in Aylmer. Aylmer is near one of Loto-Québec’s major casinos – LacLeamy in Gatineau – so the lottery corporation has no interest in a major gaming hall there, Massicotte said. His company will manage the VLTs at the Aylmer track, while at the other three tracks, Loto-Québec is responsible for building, owning and operating the gaming halls.

Massicotte is convinced that, with his share of the increased numbers of VLTs, he can turn around Quebec’s harness racing industry.

“We’ve worked real hard on this for a year now,” he said. “We’ve had focus groups.

“We think the horse racing business, particularly in Quebec, needs to be re-launched and completely re-focused on the customer.

There’s a major, major reorganization – or a workout if you wish – that has to take place, and we hope to be able to do so. There’s some good examples of good operations, but not in Quebec.

“We’ll probably make mistakes, but we’ll keep on trying until we get it right. The pari-mutuel betting [turnover, handle] per capita in Quebec is approximately 20 per cent of that in Ontario.

I guess I’m quite bullish [that] if we spent over $100 million in improvements and $5 million annually in marketing costs, we can certainly close some of that gap to make this operation be more successful and more profitable. Ontario

has done a reasonably good job. We hope to learn from their successes and their mistakes, and other people’s successes and mistakes.”

Second chance for Edgewater Casino in Vancouver Paragon Gaming bought Edgewater Casino, on the downtown Vancouver waterfront, in early September. Paragon paid $42 million for the troubled casino, which had been under bankruptcy protection since May. Among Edgewater’s problems are poor exterior signage and inadequate parking. Paragon said in a statement that it will improve signage and increase parking facilities, including the use of a shuttle. The company also plans to host comedy festivals and other new entertainment options at Edgewater.

Barry Pritchard is the new vice-president and general manager of the property. Pritchard

Edgewater Casino on the Vancouver waterfront.

is now competing with his former employer, Great Canadian Gaming Corp., owner of River Rock Casino Resort in nearby Richmond, B.C. Edgewater opened in February 2005, in the former B.C. pavilion of Expo 86, under the ownership of Len Libin and Gary Jackson. Its 30,000-square-foot casino, with 600 slots and 48 table games, marked the consolidation of two older Vancouver casinos.

But, according to a report in the Globe and Mail based on court documents in the bankruptcy case, Edgewater lost money from the start. It was losing $157,000 a week, the Globe’s Aug. 30 story said. The Paragon purchase ended the bankruptcy case, with all creditors being paid in full.

Under the deal with Libin and Jackson, the British Columbia Lottery Corp. received 75 Canadian Gaming Business |

gamingnewsroundup per cent of the revenue [money taken in after payouts to winners] from slots and electronic table games, 60 per cent of revenue from traditional table games and 25 per cent from poker and craps. The Globe said Paragon was expected to seek a new operating agreement with the BCLC. Paragon, which is based in Las Vegas, has two other projects in Canada. In partnership with the Enoch Cree First Nation, it planned to open the River Cree Resort and Casino near Edmonton, Alta., late in October. And it’s building the Alexis Casino and Travel Plaza in Whitecourt, Alta.

Photo Credit: Casino Regina

Lighting up the Saskatchewan sky

The exterior of Casino Regina is bathed in changeable coloured lights all night. During the light shows in the early part of the night, the lights move in sync with the music.

Casino Regina launched an LED light show in October that it said would rival the lights of Times Square and the Las Vegas Strip.

Casino Regina Sky Lights is a sequence of multi-coloured lights that are programmed to change with the rhythm of the music that’s part of the show.

With more than 16 million colour combinations, each show is different. And 10 | October 2006

inside the casino, there are special lights that illuminate the interior architecture of the historic Union Station.

The light shows runs every night, on the half hour from 7:30 to 10:30 p.m.

Mergers and acquisitions Fun Technologies, a Toronto company, says it’s the largest provider of fantasy sports in North America, following its acquisition in August of a U.S. firm. Fun Technologies bought CDM Fantasy Sports of suburban St. Louis, Missouri, for $5 million in cash and stock, plus another $5 million in stock that’s contingent on achieving revenue and profit targets.

CDM claims about 200,000 customers for the fantasy sports leagues that it operates on the Internet, covering eight different sports.

Fun Technologies’ stock was hurt after the U.S. Congress unexpectedly passed an online gambling prohibition bill on Sept. 30. But one analyst predicted that Fun Technologies would actually benefit from the ban. The law specifically exempts fantasy sports, under certain conditions.

The company’s main business is in “skill games,” which are low-stakes contests that are not usually considered betting games, for legal purposes. Players compete at word games, puzzles, arcade games and board games like chess and checkers. They pay a small fee, and the operator of the site charges a portion of the fee.

Fun Technologies says its skill games are legal in most U.S. states, and the new law doesn’t change that status.

Chartwell Technology, based in Calgary, and Parlay Entertainment, based in Oakville, Ont., agreed in August to merge.

Chartwell would be the surviving company, issuing stock for all of Parlay’s shares. The companies planned to have co-CEOs. Chartwell develops and licenses software for Internet gambling and Parlay does the same for Internet bingo. In early October, they extended the deadline for completion of the merger from Oct. 31 to Nov. 27. They blamed the delay on tax implications and the need for further due diligence.

But the deal may also have been complicated by the new U.S. law that effectively prohibits Internet gambling. Chartwell’s stock lost 15 per cent of its value on the first day of trading

after Congress passed the law. Parlay issued a statement saying that it was confident of continued growth outside the U.S. market, but conceding that 60 per cent of its revenue came from customers who did business in the U.S. As we went to press, the companies terminated the merger, blaming the new U.S. law.

U.S. ban on online gambling: “sneaky election ploy” Everybody was surprised, probably even many of the Congressmen who voted for it, by the U.S. action on Internet gambling. In the wee hours of the morning of Sept. 30, a House-Senate conference committee added language to essentially ban Internet gambling to a completely unrelated bill on port security.

Congress, in a rush to its election recess, passed the bill. Reportedly, even some of the conference committee members had no chance to read the bill, which President Bush later signed into law.

The impact on publicly traded companies in the online gambling business was immediate and drastic. Stock in CryptoLogic, the Toronto company that’s a major provider of software for online casinos and poker sites, fell almost 20 per cent. Shares in the publicly held British firms that operate the biggest Web sites that take U.S. bets suffered even bigger hits. PartyGaming, for example, lost 56 per cent.

Interestingly, just a few days before Congress acted, CryptoLogic announced that it would move its headquarters to Dublin, Ireland. Only the top dogs will be located there, the company indicated, with most staff remaining in Toronto.

The Interactive Gaming Council, based in Vancouver, denounced the U.S. bill as “a sneaky election ploy,” noting that a ban on Internet gambling was part of the “family values” platform of the extreme right wing, and predicting unintended, negative consequences. The Council said the law will “drive the industry further underground,” and prevent the most responsible companies from participating in it.

Such a stance was hardly surprising from a trade organization, but who would have predicted the strong condemnation from the Globe and Mail? In an editorial on Oct. 3, the newspaper concluded: “The best way to deal

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Canadian Gaming Business | 11

gamingnewsroundup with the issue [of Internet gambling], however, is not to try and ban the practice outright, but to regulate it, just as the government does now with gambling that doesn’t involve the Internet.

To do otherwise is a blatant infringement of the personal liberties the U.S. purportedly holds to be self-evident.”

Poker action at Niagara Fallsview Niagara Fallsview Casino Resort was scheduled to host the first-ever World Poker Tour Canadian Open from Oct. 22 to Oct. 24, just prior to the WPT North American Poker Championship in Niagara Falls.

“Players taking part in the WPT Canadian Open will experience everything the professional WPT players experience – the bright lights, the TV cameras, the pressure – everything,” said Greg Medulun, communications manager at Fallsview. “Playing online and in regular casino games is one thing, but sitting where the stars sit with all eyes on you is quite another.”

“We recognized the need for a major national televised poker event that Canadians could call their own,” said Steve Lipscomb, CEO and founder of WPT Enterprises, Inc. He noted that two Canadian pros – Gavin Smith and Daniel Negreanu – have been winners on the WPT circuit.

Satellite tournaments will be held in poker rooms at other participating OLG commercial casinos and charity casinos.

Execs on the move Art Frank took over as president of Niagara Casinos on July 1. The job gives him responsibility for both Fallsview Casino Resort and Casino Niagara.

To t a k e t h e position, Frank left Casino Rama, where he had been president and chief Art Frank, executive. He spent more than eight years there. Previously, he had been in charge of gaming for Carnival Resorts and Casinos.

Larry Gregson followed his boss from Rama to Fallsview. Late in August he was named

12 | October 2006

vice-president of marketing for Fa l l s v i e w a n d Casino Niagara.

He held the same post at Rama for six years. Gregson began his career in the entertainment business, and has worked in Larry Gregson marketing and entertainment for many casinos in Canada and the U.S. Both of the Fallsview positions had been open for awhile. The previous president, Larry L. Lewin, left in August 2005. The top marketing job had been held by Peter Pleckaitis, executive director of marketing, who departed in April 2006.

To r e p l a c e Fr a n k , C a s i n o R ama promoted Harry Oshanski to president and chief executive. Oshanksi had b e e n v i c e Harry Oshanskii president of resort operations at Rama since 2000. His previous background was in the food and beverage side of the hospitality industry.

A spokeswoman for Casino Rama said Gregson will not be replaced right away.

In the meantime, Jeff Craik is handling marketing.

Great Canadian Gaming Corp. has a new chief operating officer. Vincent Trudel was slated to take that position on Nov. 1, pending regulatory approval.

Ross J. McLeod, the company’s chairman and chief executive, had also been serving as COO since February.

Trudel has spent 25 years in the casino and lottery business, including stints in Spain and Quebec.

Casino Windsor has appointed Patricia Nicholl as director of hotel and convention sales. She’s in charge of sales for the existing facilities as well as sales

for the expansion, which will add 400 hotel rooms and 100,000 square feet of meeting space by early 2008.

Nicholl has worked in management positions at numerous four- and fiveDiamond properties, including the historic Chateau Laurier in Ottawa.

For Catholic schools in Alberta, more conflict over raising funds through gambling Shortly after the board of the Calgary Catholic School District agreed to a timetable for its schools to stop using casino and bingo events to raise funds, parents and officials of the Edmonton Catholic schools found themselves in similar controversy.

As we discussed last issue, Bishop Fred Henry, head of the Roman Catholic Diocese of Calgary, stirred things up in June with a pastoral letter that criticized the district for permitting individual school councils to decide whether to raise money through gambling activities.

He threatened to blacklist schools that practice “immoral” fundraising.

Henry called the policy “a failure in Catholic leadership.” But the school board refused to change its policy. The Calgary Herald reported that parent groups at 59 of 97 Catholic schools in the city raised more than $2 million last year through gambling events.

According to the Herald, in late September the board gave in to the bishop. Gambling fundraisers will be phased out after the current school year.

In Edmonton, the Catholic school board began a review of the use of gambling as a fundraising tool, and was planning to meet this fall with Archbishop Thomas C o l l i n s t o d i s c u s s t h e m a t t e r. T h e Edmonton Journal reported that most of the city’s 84 Catholic schools hold casino events, raising about $3 million annually.

As in Calgary, parents in Edmonton are worried about how they would replace the funds that are generated from gambling, which are used for computers, libraries and field trips.

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Proposed Amendments to the Criminal Code

Casino Windsor, which began offering sports wagering in September.

Canadian pari-mutuel horse-racing associations and provincial lottery corporations have begun floating the idea of petitioning the federal government to bring forth a bill amending the Canadian Criminal Code (the “Code”)1 to remove restrictions that make it harder for provincial lottery corporations to compete with offshore online gaming and betting establishments in the area of sports wagering. 2 Removing these restrictions would benefit Canadian bettors as well, offering them more wagering options and better odds. However, it is important to note that prior to the influence of online gaming being felt in Canada, the provincial lottery corporations used these Code restrictions to their advantage, increasing their revenue by “stacking the odds” against a captive market of sports bettors. Canadian institutions, which the Code favours with government monopolies on gaming and betting, frequently decry online gaming operators as predatory and inherently untrustworthy. However, in this instance

By Michael D. Lipton, Q.C. and Kevin J. Weber

it is the “legitimate” providers of gaming and betting services who are tilting the odds against the Canadian betting public, and it is the “illegitimate” offshore online gaming and betting enterprises that may soon force them to stop.

The Code provisions which set out what kind of betting services the provincial governments and their licensees may legally offer Canadians were enacted in 1985.

Specifically excluded from those services were betting on: (i) single sport events or athletic contests; (ii) any fight; and (iii) any race. 3 The primary reason for the prohibition against betting on single sport events or athletic contests was historical. When the federal government was negotiating the 1985 amendments with the provinces, it took great pains to establish that the amendments would not “expand” the gaming and betting available in Canada. To that end, it was determined that the provinces would be

permitted to offer every type of gaming and betting service that was then being offered, or which had in the past been offered, by any of the provinces. To that point, the only sports betting services which had been offered in Canada were “sports pools” in which the bettor had to predict the outcome of more than one sporting event or contest.

As a result, the 1985 amendments to the Code “froze” sport betting offerings in a multiple-sport format.

When provincial lottery corporations began offering “sports betting lotteries” in early 1990, they obeyed the law by offering all sports betting in a “parlay” format, whereby the bettor had to predict outcomes on a minimum of three sporting events, and all of the predictions had to be correct before the bettor could win.

These requirements were, and remain today, considerably more than what the Code requires of the provincial governments: (i) the Code requires that a minimum of two events be wagered upon, but the

R.S.C. 1985, c. C-46, as amended.

Toronto Star, Sports section, May 16 and 17, 2006; David Wilmot interview with the FAN 590, May 17, 2006 3 Section 207(4)(b) 1 2

14 | October 2006

lottery corporations impose a minimum of three events; and (ii) the Code does not require that the result of the bet be on an “all-or-nothing” basis – it is open to the lottery corporations to pay a person something for getting five of six predictions correct, or four of five, or even one of two.

There are no legal reasons for these additional restrictions, but one can easily surmise that they were imposed to maximize revenue for the lottery corporations by tilting the odds against the bettors. Parlay betting offers the bettor some of the worst odds in sports wagering. By choosing the parlay model, the lottery corporations made a virtue of necessity – from their point of view.

However, what was a virtue from their point of view was a definite move against the interests of the sports bettors of Canada.

The model described above worked as long as Canadian sports bettors could not take their sports betting dollars elsewhere; the Code prohibits provincial governments from offering gaming and betting services to the residents of other provinces, and in part because of this the lottery corporations all offered the same

poor deal. The nearest available sports betting alternative involved hopping a flight to Nevada.

Now, however, technology has done what technology does best: eliminated the obstacles posed by distance. The advent of online commerce turned the tables on the lottery corporations; their no-longercaptive audience could avoid all restrictions on their betting (both those imposed by the Code, and by the self-interest of the lottery corporations) with the click of a mouse.

Had the Internet existed in 1985, there is no doubt that the 1985 amendments to the Code would not have imposed restrictions against “single-sport betting.” Had the provincial governments been forced to compete with the real world of sports wagering from the outset, they never would have entered the market using a “sport pool” model, and the Code would not have frozen this unwieldy model in time.

There is no reason for Parliament not to grant amendments to the Code that would allow the lottery corporations to offer the public a full menu of betting options.

However, we have noted the behind-the-

scenes public relations offensive they have embarked upon in order prepare the public to accept their desired amendments. It makes heavy use of rhetoric designed to demonize online betting and gaming. In that context, we believe the debate could use a salutary dose of perspective, one that acknowledges that if Canadian (nononline) sports bettors are soon to enjoy better odds, it will not be because the provincial lottery corporations wanted to give them better odds. It will be because the democratizing influences of the Internet allowed free market forces to intrude upon the government monopoly.

Michael D. Lipton, Q. C. is a senior partner and head of the Gaming Law section of Elkind & Lipton LLP in Toronto and the current president of the International Masters of Gaming Law. Kevin J. Weber is an associate with Elkind & Lipton LLP and a member of the Gaming Law section.

A Winning Philosophy.

The fundamental goal of the Canadian Gaming Association is to create balance in the public dialogue about gaming in Canada.

Our members are the largest and most established gaming operators, suppliers and gaming equipment manufacturers in Canada, including provincial lottery corporations, casino and race track operators, and makers of slot machines and other related equipment.

Our mandate is to create a better understanding of the gaming industry through education and advocacy. Visit our web site at www.canadiangaming.ca and find out more about who we are and what a CGA membership can do for you.

www.canadiangaming.ca

Canadian Gaming Business | 15

Win Big! on just one chip

16 | October 2006

www.ca.gi-de.com

Growth, and Change, for First Nations Gaming

By Fred Faust and Albert Warson

The huge River Cree resort opens in Edmonton, while aboriginals in Manitoba seek casino expansion.

Manitoba discusses major regulatory reform, and, like Ontario, shares more gaming revenue with

Photo from Ledcor Construction Ltd.

First Nations. And a Yukon First Nations chief grows impatient with casino impasse.

River Cree Resort and Casino on the outskirts of Edmonton, Alta.

This photo was taken a few weeks before the complex was scheduled to open in late October.

Canada’s answer to the wildly successful Native American Foxwoods Resort Casino in Connecticut was scheduled to open in late October on the outskirts of Edmonton, Alta., an area accustomed to doing things big, like the 5.5-million-square-foot West Edmonton Mall, which is in fact nearby.

It’s the River Cree Resort and Casino on the Enoch Cree First Nation reserve.

Alberta’s first aboriginal casino will be on the 20-hectare site. The $178 million, 362,600square-foot project includes the 62,000square-foot circular casino with 600 slots, 40 table games and 12 poker tables.

The resort just announced the hiring of three prominent chefs to oversee the four restaurants, which include a 24hour café/buffet and a steakhouse. Its 255-room, full-service Marriott hotel has 20,000 square feet of meeting space, an indoor pool, hot tub and fitness equipment. The facility has two NHLsize hockey rinks, which are operated by

Canlan Ice Sports. There are more than 1,500 surface parking places.

The development is a partnership between Paragon Gaming and Enoch Community Developments Corp. Paragon is a small gaming development and management firm based in Las Vegas. This is its first project in Canada. River Cree is larger than Yellowhead Casino, which had been Edmonton’s biggest. As a First Nations business, River Cree also has the advantage of being able to permit smoking, which its competitors are not allowed to do.

According to a story in the Edmonton Journal, Paragon will keep 15 percent of the gambling revenue. The Alberta Lottery Fund gets 30 per cent, and 45 per cent will go to the Enoch Cree Nation. Ten per cent will accrue to Alberta’s other First Nations. The paper said that 30 of the construction workers on the project were members of the Enoch Cree band.

Unemployment rates on the reserve have been as high as 65 per cent.

Manitoba – more slots, more casinos?

In Manitoba, the South Beach Casino at the Brokenhead Ojibway Nation, near Winnipeg, hopes to increase the number of its slot machines. It now has 300. Band councillor Paul Chief acknowledged to the Winnipeg Free Press that the seven First Nations communities that own and operate the casino realize they have to be patient, given a moratorium on additional machines.

But they must in fact be optimistic, because they’re building a 4,000-squarefoot addition in anticipation of being able to install the new machines. The casino doesn’t lack for players, not with more than 430,000 patrons coming through its doors during its first year, which ended in May. Chief told the Free Press that visitors often have to wait to get on a machine, and that many just leave instead of waiting.

The casino, the only one in southern Manitoba that allows smoking, employs 150 to 200 full-time and part-time employees, Canadian Gaming Business | 17

most of whom are aboriginal. It has 12 gaming tables, a restaurant and lounge, and parking for nearly 400 vehicles.

Manitoba’s first aboriginal casino opened in February 2002, in the northern part of the province. The Aseneskak Casino is on the Opaskwayak Cree Nation reserve, near the town of The Pas, some 500 kilometres north of Winnipeg. Owned by a consortium of six First Nations, the 20,000 square-foot casino has 350 slots, a few table games, a restaurant and lounge.

A report in 1997 recommended that the province have five aboriginal casinos. But only Aseneskak and South Beach were built; the sites planned for the other three casinos were voted down in local elections. The idea was to create “urban reserves” to put the casinos in cities, where they were likely to get more business than if they were placed on the actual reserves.

That required local votes, however, and the three sites lost.

Chief Dennis Meeches of the Long Plain First Nation told Canadian Gaming Business that a marketing study is underway to determine whether there’s a market for additional Indian casinos. The study is supposed to be completed in December.

“We’re waiting anxiously to see the outcome of that,” Meeches said. “If the study says there’s room for another casino, wherever, then we’ll begin negotiations on how to acquire that.”

Meeches is one of two chiefs, representing the Assembly of Manitoba Chiefs (AMC), who sits on a committee to negotiate gaming agreements with the province. The province is represented

by Dave Chomiak, Manitoba’s gaming minister, and Oscar Lathlin, the minister of aboriginal and northern affairs.

First Nations have in any other province.

They would regulate the Aseneskak and South Beach casinos, as well as bingo halls and VLTs that are on reserves. “The gaming authority would assume the role that the province now holds under the Criminal Code,” Meeches said. He described a final decision on this concept as “a little ways away.”

In Ontario, Premier Dalton McGuinty signed an agreement in principle in late March with the Ontario First Nations Limited Partnership that defines a new arrangement for the sharing of more gaming revenue with First Nations.

The premier said the agreement, which will be approved, or not, by Dec. 31, “provides the foundation for a stronger partnership with First Nations as we work together to invest in their communities in a number of areas such as the education, skills and health of First Nations peoples.”

It is designed to provide more than 130 Ontario First Nations with greater financial stability and arises from discussions between former Premier David Peterson and these First Nations about a new approach to the distribution of gaming revenue to Ontario First Nations.

The current arrangement continues until 2011, under which Ontario First Nations receive provincial gaming revenue only from Casino Rama, which is on aboriginal land near Orillia, north of Toronto. The proposed new agreement would give First Nations 1.6 per cent of gross revenue from all provincial gaming when the current agreement expires.

Yukon: First Nations leader wants gaming Changes proposed in revenue sharing and regulation The committee agreed on a deal to finance a new First Nations economic development fund with money – $20 million over five years – from the lottery commission. The deal was narrowly approved by the AMC at a meeting in late August; some chiefs thought the amount of money was inadequate.

Meeches expected the agreement to be signed in mid-October.

Another change that the committee is discussing is the creation of a First Nations gaming authority that would give Manitoba’s First Nations more regulatory control than 18 | October 2006

In the Yukon, James Allen, chief of the Champagne/Aishihik First Nations, is frustrated that the territorial government appears unwilling to consider letting the First Nations have their own gaming operation. He was hoping that things would change after the Oct. 10 election, but he wasn’t holding his breath.

“For the last 12 years, with every change in [territorial] government, we’ve approached them with this idea and we’ve been shut down,” Allen told Canadian Gaming Business. A few years ago, he said, several bands spent “good money” to hire a consultant to help with a presentation to the

territorial cabinet, but nothing came of that.

“The red flag that the government keeps putting up is that we would be creating new problem gamblers,” Allen said. “But the problem gamblers are already here, and they are just taking the proceeds from the existing gaming events without dealing with the social problems that they’ve caused. If we were to establish a casino, I know for sure that we would be looking after the social problems of First Nations.”

Service clubs such as the Elks run bingo games that do not offer any benefit to the Yukon First Nations, Allen complained. “Yet 80 percent of the people in those bingo halls are First Nations people,” he said. “We also have Softball Yukon. They were holding giant radio bingos every Friday. We don’t see the proceeds from that, either.”

Allen believes there is plenty of demand for gaming in the territory. It only has one casino, a small facility in Dawson called Diamond Tooth Gerties that’s owned by the non-profit Klondike Visitors Association.

Calling itself “Canada’s oldest legal and most unique casino,” Diamond Tooth Gerties has a regular season that lasts only from May 11 until Sept. 23.

“But that little casino draws people from all along the Klondike Highway and over into Alaska,” Allen said. Patrons come from settlements like Carmacks (population 410), Pelly Crossing (population 294) and Mayo (population 401) to gamble there. “People will go a long ways, even driving all night, to go to that casino,” he said.

Allen said Whitehorse, the largest city and the capitol of the Yukon, would be the best location for a First Nations casino.

Whitehorse has about three-fourths of Yukon’s 32,000 residents.

The only recourse for the First Nations, Allen said, might be to build and open a casino, and then negotiate with the government. He noted that several Indian tribes in the U.S. have taken that route, some successfully. Asked if financial backing was available for such a speculative venture, Allen said, “Oh yeah, I think so. There are private people who have already called about that.”

Albert Warson is a freelance reporter based in Toronto.

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The Market Buffet, with its Marché-style stations,

Turf Lounge, 330 Bay Street in Toronto, is Woodbine Entertainment’s

at Casino Windsor (left and far right).

restaurant, lounge and off-track betting facility.

Let’s Eat

! o n i s a at the C Food and beverage has evolved into a major amenity and powerful marketing tool.

But there are issues and challenges unique to the gaming context.

By Fred Faust

22 | October 2006

At the bottom of the food chain, so to speak, are Canadian gaming facilities with a bare minimum of food and beverage service. Their approach, as one consultant put it, is that “food and beverage is basically a convenience that I would put in the same category as supplying washrooms: If you didn’t have to, you wouldn’t do it.”

Not many operators still think that way.

Jag Nijjar, operations manager of Gateway Casinos, which has casinos in British Columbia and Alberta, commented on the change in attitudes: “When we started in the casino industry, in the early 1990s, food and beverage was a snack bar. As the size and complexity of the facilities increase, food and beverage has taken on more and more prominence. It completes the entertainment experience for our players. Thinking back now, it’d be unimaginable to have no food and beverage beyond a snack bar.”

Food and beverage has evolved as an amenity to the point that some of Canada’s most highly rated restaurants are in casinos. Not surprisingly, Quebec led the way. Nuances, at Casino de Montréal, has received the CAA/ AAA top designation, Five Diamonds, for six straight years. It’s one of only 11 Five Diamond restaurants in the entire country. Le Charlevoix

at Casino de Charlevoix in La Malbaie, Que., has held a Four Diamond rating for five years.

17 Noir at Niagara Fallsview achieved Four Diamond status a year ago, and its wine list was recently saluted by Wine Spectator magazine.

Casino Windsor’s Caché will be on the new Four Diamond list in November, for the first time. It’s the only restaurant in the WindsorEssex County area to rank that high. In fact, the only Four Diamond restaurant in Detroit – whose casinos are the main competition for Casino Windsor – is at the Motor City Casino, a dining room called Iridescence.

Top ratings thrill a casino’s public relations staff, but chasing CAA diamonds or Mobil stars can be a mistake. Some experts say that certain casinos, especially in smaller markets, have wasted money on expensive restaurants that don’t get enough business.

Their regular customers don’t want to spend the money, or the time, on gourmet meals.

“The key is understanding whether or not it’s a casino that’s focused primarily on the local

market, that is the ‘repeat market,’ and that’s what the majority of Canadian casinos are. You want to put food and beverage offerings in the casino that appeal to a repeat customer,” said Lyle Hall, managing director of HLT Advisory in Toronto. “If you make it a special-occasion restaurant, i.e. the type of restaurant somebody wants to go to once or twice a year, you’re not going to maximize your potential.”

But Brian Munson, vice president of food and beverage at Casino Windsor, doesn’t necessarily agree. “I think there’s always a market for fine dining,” he said. “It just may be smaller in some areas. But with everybody watching the Food

Canadian Gaming Business | 23

17 Noir at Niagara Fallsview

Channel and Hell’s Kitchen and all these TV shows, fine dining and cooking is more and more a mainstream thing.”

After his casino upgraded its buffet to a Marché-style presentation in December, Munson said, he noticed that office workers from downtown Windsor were coming in for lunch. It used to be, he said, that “you had food because people need to eat if they’re gaming, but now it’s part of the lure.”

The comp component Any discussion of the food and beverage aspect of gaming moves quickly into consideration of complimentaries, or “comps.”

“If you eliminate the food and beverage operations that are just for basic core service, everything else has a potential comping component to it,” Hall said. “Virtually every frequent-player card has food service as a basic benefit. The first benefit that’s given away is a meal in a restaurant.”

Even for gamblers who have never been to Las Vegas, that city is the source of almost mythic expectations about comps. “We get compared to Vegas a lot,” said Jason Pechet, vice president of Mayfield Hospitality, which is based in Edmonton. Mayfield has handled food and beverage operations for several casinos in British Columbia and Alberta, and owns the Medicine Hat Lodge in Alberta, as well as dinner theatres in Calgary and the Toronto area.

“It’s been so ingrained in the casino customer that drinks should be free, that there should be a lot of free stuff going around,” Pechet said.

This idea persists even though Las Vegas has changed with the advent of high-end, gourmet restaurants headlined by celebrity chefs, where most of the diners are paying full price. An executive at Wynn Las Vegas estimates that for the restaurants at the most upscale resorts, like Wynn and Bellagio, only 10 to 20 per cent of the business is comped.

There are still plenty of meals being given away at Canadian casinos, however. Michael Heeb, executive director for food and beverage at Niagara Fallsview and Casino Niagara, said about half of his overall restaurant business is comped. Harry Oshanski, chief executive of Casino Rama, which is in a rural area about two hours north of Toronto, estimated that 70 percent of his food and non-alcoholic beverage service is comped. Munson declined to give a percentage for Windsor. “I’ll just say that a fair portion is comped, like any other casino,” he said.

24 | October 2006

Caché at Casino Windsor

Alcohol still flows freely – literally – on the gaming floors of Las Vegas, but not in Canada. The provinces, with the exception of Nova Scotia and Alberta, ban comps of alcohol at casinos, or even drinks at reduced prices.

British Columbia has very strict rules about alcohol in casinos: Patrons cannot be served doubles, no shots are allowed, and one person cannot be served two drinks at the same time.

Las Vegas operators can afford to be more generous with comps, Pechet said, because of Nevada’s low gaming tax. Canadian provinces, by contrast, are taking a large share of the revenue of most casinos.

Some of the provinces greatly restrict player tracking, which complicates the creation of a rational comping structure. The British Columbia Lottery Corp. runs its own player card program, and doesn’t share most of the data with casino operators. The Alberta Gaming and Liquor Commission permits casino loyalty programs, but a spokeswoman said the programs must be based on attendance and not on play.

Leased out or in-house?

Most Canadian gaming facilities manage their own food and beverage service, but some lease it out to a third party. The argument for keeping that department in-house usually boils down to control, and of course the matter of sharing revenue from the operation.

At Casino Rama, where none of the food and beverage service is leased out, Oshanski said, “You keep control of your own product that way. If you want to change the type of offering, hours, portion sizes, or prices, you’re in 100 per cent control.”

Eddie Stutz, vice president of operations at Woodbine Entertainment in Toronto, said there’s not enough money in food and beverage at racetracks to lease out the service. “The people you would contract it out to want to make money,” he said.

“How many ways can you split the penny?

“Food and beverage at the racetrack is the hardest food and beverage to make a dollar on. The reason is that the customer comes in and doesn’t leave for five hours! You have to leave the damned buffet out for at least three hours. There’s no turnover of chairs.”

Stutz said his fixed costs are the same as those of a regular restaurant, but he doesn’t have the advantage of two or three turnovers in a night. “A racetrack restaurant doesn’t have to lose money,” he said, “but it’s hard to make a profit on it.”

The question of leasing out food and beverage is closely related to the issue of comps. A casino that comps patrons to a restaurant that it doesn’t own is giving away hard dollars. It’s one thing to give away a meal that your own employees are preparing and cleaning up after; it’s another thing to pay your tenant for that meal, because you’re also paying the tenant’s profit margin.

Pechet can be expected to make the case for contracting out casino food and beverage service, and the management of a hotel, because that’s what Mayfield does. The company’s lengthy background in managing these areas gives it an advantage over casino operators, he said, especially in an era when gaming regulators are pushing their licensees to offer more amenities like hotels and fine dining.

“We’ve found, especially in Canada, there are very few casino operators that have experience in hotel and food and beverage,” Pechet said.

“It’s very different from the casino business.

I’m not saying it’s harder to run, but there’s a lot more gray area in food and beverage. It’s not 19 or 20 or 21, it’s 1,000 different variables working with 1,000 different customers.

“Whereas casinos by their nature have very set rules, there are no rules in the food and beverage industry. While one person will love an apple pie with cinnamon in it, somebody else is going to hate cinnamon. It’s a very different culture between hospitality and casino. It’s not necessarily that the customer is wrong in a casino. It’s that the customer has accepted very specific rules when they go into a casino.”

Pechet finds that casino patrons tend to be

more demanding than customers of regular restaurants. “They feel that a loss in the casino gives them certain privileges,” he said. “And that’s not even losses, that’s wins, that’s plays, whatever. We get a lot of customers coming in saying, ‘What do you mean the restaurant’s busy? Don’t you know I’ve been playing here for five hours?’ ” Hall, of HLT, said the casino operator needs to determine if spending the money to find, train and retain the food and beverage expertise that is required is a fair trade-off for bottom-line results, including the net cost of comped food and beverage.

Otherwise, leasing out the food service may be an option. Lease arrangements can work well, he said, as long the operator can be assured that “whatever they’re selling to your best customer is what you want that customer to enjoy.”

If a casino goes to an outside source, Hall said, “make sure you’ve got a good contract. The worst possible outcome of an outsourcing decision is not being able to remove the operator if a problem develops.”

who’s looking for cashiers or dealers. Part of that pool is the local hospitality industry.

Staffing is notoriously difficult in the West.

Pechet said restaurant managers in Alberta and even British Columbia have all encountered situations like this: “You have a dishwasher or demi-cook or some other very junior person.

You’re paying him $15 an hour for work that until two years ago was paying $9 an hour. One day he’s drunk when he shows up for work.

You fire him, and before the day is out, before he’s even sobered up, he’s gone across the street and is working there.”

Heeb, at the Niagara casinos, said that for casino food and beverage, the best model outside the gaming industry is a cruise ship. He worked for Holland America before going to Fallsview, and he recently hired an executive chef, Frank

The work environment Hiring all those food-service workers, of course, can be a major headache. The casino is not only competing for employees with outside restaurants, but as Hall notes, “you’re competing with yourself.” The same pool of potential employees will be tapped by both the restaurant manager who’s seeking servers or hostesses and the casino manager

The Weirs is the 24-hour, casual dining restaurant at Casino Rama.

Regulations on Complimentaries, by Province BC

AB

SK

MB

ON

QC

NS

PEI

Full Service Casinos First Nation Commercial

Source: HLT Advisory Inc.

Charity Slots Only Racinos

Community Gaming Centres Food and non-alcoholic beverages

Alcoholic beverages

Player Club Loyalty Program

Not Applicable/do not offer this form of gaming

Hotel rooms

Other items such as tickets, free parking, merchandise, etc but excludes lottery and tobacco Canadian Gaming Business | 25

Selg, who came from Norwegian Cruise Lines.

“People who go on cruises, the first thing they mention is the food,” Heeb said. “I want to get that same kind of feedback from patrons that come to our casino. I want them to leave talking about the food.

“The volume is the biggest thing. It’s very difficult to find somebody in Canada that’s got the experience of doing 8,0009,000 meals a day, every day, 365 days a year.

You’ve got big hotels in Toronto and other cities, but compared to casino operations, the volumes just aren’t the same. That’s true from both the standpoint of food service and beverage service. Every two weeks we serve about 90,000 drinks on the gaming floor.

And that’s just the non-alcoholic stuff.”

Early in October, the River Cree Resort and Casino near Edmonton, Alta. – which was scheduled to open at the end of the month – announced the hiring of Oliver Heupel as executive chef. Heupel had been corporate executive chef for Norwegian Cruise Lines, where he was responsible for 14 ships.

Most casinos no longer relegate the food and beverage department to the category of loss leader. It’s become a major profit center at Las Vegas resorts, and Canadian casino operators also try to make money on this segment. But at best, it’s never as lucrative as the gaming.

“We want customers on the casino floor sitting at a table or a slot machine,” Oshanski said. “From their standpoint, that’s often their mindset as well. If they can get in and out of the restaurant in 40 minutes, even in the finedining restaurant, great.” When contemplating menu changes at Casino Rama’s nine food and beverage outlets, he said, management focuses on preparation time as well as the quality.

Nuances at Casino de Montréal.

But some customers, especially nearby residents or business people, do come to eat and drink, and not to gamble. The trick, Oshanski said, is to tell the difference. “The service staff needs to discern between the customer that wants a dining experience and the customer that wants good quality food in a hurry,” he said. “They try to pose a few questions to get the customer to talk a little.”

One of Casino Rama’s restaurants is brilliantly designed to feed players and get them back to the casino floor – in only eight minutes.

Oshanski said the Noodle Bar, which features Cantonese soup and noodles, is positioned near the high-limit table games area, where the casino’s many Asian customers play baccarat.

The menu is simple, and the price for every item is the same, $7.84.

“This was designed so that when the dealer is ready to start to shuffle a shoe, a player can leave, order, eat, return to the table and only miss one shoe of play,” Oshanski said. The result of this clever design must be a record in restaurant revenue per seat. He said the Noodle Bar has 18 seats and does $2.1 million a year in gross revenue. That includes comps as well as cash business, but is still an amazing volume. The room has handled more than 1,000 covers in a day many times, he added.

Food and beverage as a marketing tool

The Noodle Bar at Casino Rama has only 18 seats and grosses $2.1 million a year.

Munson said Casino Windsor markets its restaurants and bars locally, and successfully. It keeps prices competitive with other restaurants in town. From the large number of tourists in Niagara Falls, Heeb said, Fallsview draws plenty of non-casino business at its restaurants.

He said the buffet at Fallsview gets more cash business than most casino buffets, because it offers a view of the falls.

Casinos have always used their best restaurants to reward their best players, but Casino Windsor is adding an innovative

twist to that practice. For premium players, it will soon have a two-day, invitation-only event based on Hell’s Kitchen, the Fox TV reality show that puts amateur chefs through a gruelling workout run by a famous, real chef.

“They’ll put on whites, and cook under the supervision of our chef, actually cook,” Munson said. “They’ll do their prep on the first day, and on the second day they’ll feed their spouses and friends out in the dining room. We’ll give them a commemorative apron and menu to take home.”

Probably no gaming operator has gone further in using food and beverage for marketing than Woodbine Entertainment, which established two bar and restaurant complexes well away from its racetrack, which is in the northwest suburbs of Toronto. It opened the Turf Lounge in June 2003 and WEGZ (which stands for Woodbine Entertainment Gaming Zone) Stadium Bar in November 2004.

The Turf Lounge is on Bay Street, in the heart of Toronto’s financial district. WEGZ is in Vaughan, a rapidly growing suburb north of Toronto. The menu at the Turf Lounge is upscale and sometimes experimental; WEGZ, which has a sports bar theme, offers food to match its theme. Both are different from the food at the company’s racetracks – Woodbine and Mohawk – which is 90 percent buffet, Stutz said.

Woodbine created Turf Lounge and WEGZ to market its racetrack to new audiences. “What I wanted to do,” Stutz explained, “was to bring the experience out into the field, bring it to the public in a non-intimidating environment.

“Any racetrack by itself is very intimidating, because you don’t know how to bet, or you think you know how to bet, but then when you get to the teller, you might make a mistake.

Then the teller yells at you, and the guy in line behind you yells at you. And you think, ‘Hey, I’m not coming out here to bet my money just to get abuse’!

“At both Turf Lounge and WEGZ, the first thing you see is the bar. Everybody has been in a bar. You walk up to the bar, you order a drink.

You take your time, familiarize yourself with the facility, and the next step and the next step.”

Both places are also licensed OTBs, so one of those next steps might be a wager on a race.

“These are just a softer way of distributing your core business,” Stutz said.

Canadian Gaming Business | 27

Smoke-free Gaming: What the Industry Faces

By Aaron Todd

Canadian gaming operators have had to cope with smoking bans for a number of years, but most of them were on the basis of one city at a time. Now as the most populated provinces enforce province-wide bans, operators are finding that different forms of gaming experience different effects from the bans.

And the jury is still out on whether a smoking-related decline in business is temporary or long-term.

The Smoke Free Ontario Act went into effect on May 31, 2006, and while the first quarter of the OLG (Ontario Lottery and Gaming) fiscal year (April 1 – June 30) contained only one month under the new smoking ban, Casino Windsor’s gross revenue was down nearly $20 million compared to last year’s first quarter revenue, a drop of over 17 per cent. Just three weeks after the smoking ban went into effect, Casino Windsor announced layoffs totaling 329 employees.

Smokers’ rights groups are using that data to argue that Ontario’s smoking ban is bad for business, but the truth is that the drop in revenue and corresponding layoffs at Casino Windsor are the result of a combination of factors.

A strong Canadian dollar, skyrocketing gas prices and the increased hassle (whether real or perceived) of crossing the border have all reduced the incentive for Americans to venture into Canada to gamble. Casino Windsor, which has a heavy reliance on American business, is also undergoing a $400 million expansion project with a total renovation of the inside of the casino.

That can disrupt business as different areas of the casino are closed and new areas are opened.

For American smokers in the region, there is now another reason to stay in the U.S., as all three Detroit casinos still allow smokers to puff and play.

“We’ve got a real convergence of issues,” said Holly Ward, director of communications at Casino Windsor. “All these things have happened at once.”

With so many factors involved in the declining revenue, it’s difficult to determine how much of 28 | October 2006

the drop can be linked to the smoking ban. But few deny that the ban plays a role in the decline.

With similar provincial or municipal bans either already in place or looming in the future across the country, the Canadian gaming industry will need to learn to find ways to deal with the restrictions in order to continue to prosper.

A Closer Look at the Numbers While Casino Windsor’s gross revenue was down more than 17 per cent in the first quarter of this fiscal year, the average number of patrons who walked through the casino’s doors fell by less than one half of one per cent.

Those numbers may not seem to make sense on the surface, but according to Art Frank, president of Niagara Casinos, smoking bans really don’t keep that many people away from casinos.

“The bigger problem is that we’re losing time on the device,” Frank said. “The smokers are still coming, but instead of getting four hours of play, maybe you’re getting three hours and 15 minutes now because they’re spending 45 minutes outside smoking.”

While the commercial casinos in Ontario have been trying to find ways to cope with the changing legislative landscape, nearly all of the racinos (the OLG prefers the term “slots at racetracks”) and the charity casinos (the OLG’s term for the smaller, regional casinos) had already been operating under municipal smoking bans.

Only two of 17 racinos and one of six charity casinos allowed smoking prior to the enactment of the Smoke Free Ontario Act. And while total revenue at racinos has increased by more than 4

per cent, the numbers are dramatically down at the two racinos which allowed smoking before the ban was in place.

The slot revenue at the Windsor Raceway is down 16.7 per cent with an 8.2 per cent drop in the number of patrons. The Fort Erie Race Track has actually seen stable numbers of patrons, but slot revenue is down 15.5 per cent.

While it is impossible to predict whether the revenue drop-off will be permanent, with all OLG facilities operating under the same rules patrons now know what to expect from every site, resolving what OLG spokesman Don Pister called a “patchwork quilt of different regulations across the province.”

“Yes, there’s been an impact,” Pister said.

“But now it’s a consistent model.”

Will revenue rebound?

While most gaming executives are naturally quite concerned about the short-term loss of revenue, the long-term impact of smoking bans is harder to forecast.

Great Canadian Gaming’s casinos in British Columbia were among the first in Canada to go smoke-free on gaming floors, following provincial legislation in 1999.

After suffering an initial drop of 15 per cent in foot traffic, the casinos eventually saw an overall increase in visitors.

“A lot of non-smokers who normally wouldn’t have come to our facilities started coming, and we actually saw a really nice lift,” said Howard Blank, vice president of media and entertainment.

The increases, however, were possible only because everyone in British Columbia competes on a level playing field.

“Smokers adapt,” Blank said. “I think it’s a matter of getting used to anything new. You adapt and you don’t mind, but when you can go somewhere else and they can offer you all the conveniences you had before, of course business is going to suffer.”

Commercial casino operators in Alberta face exactly that problem. Gamblers can’t smoke in their facilities, but they can light up in First Nations casinos. Patrons of First Nations casinos in Saskatchewan are also permitted to smoke.

In Manitoba, a court ruled in August that the province could not exempt First

Nations casinos, bars and restaurants from its smoking ban. Casinos and VLT sites that are owned by First Nations will have one year to enforce the ban.

While not required to do so until May 31, 2006, Casino de Montréal hasn’t allowed smoking on the gaming floor for over three years. The casino did have designated smoking rooms, which were outlawed in the recent legislation, but the decision to go smoke-free on the gaming floor was a proactive move made by casino management, not the law.

“Non-smokers were elated,” said JeanPierre Roy, director of media relations for Loto-Québec, which owns Casino de Montréal. “And even some smokers admitted that the quality of air improved greatly. Certainly our employees were very pleased.”

Roy conceded that there was an immediate 7 per cent drop in table game revenue, but the losses were temporary and the numbers returned to normal after just a few months.

“In our casinos about 75 per cent of revenue comes from slot machines,” he said. “But the table game player [is typically] more of a middle-aged male, and I suspect there was probably a higher percentage of smoker there. That may be why there was a more dramatic decrease in revenue [on the table games].”

While Roy has seen business bounce back from a change in smoking policy on the casino gaming floors, he is more concerned about the Quebec legislation – effective May 31 – that eliminated indoor smoking in all public places. Loto-Québec operates video lottery machines in bars and restaurants, and Roy fears that the smoking ban will decrease traffic in those establishments, which will in turn decrease revenue.

“We aren’t sure if we have a short-term phenomenon, like we had in the table games in the casinos,” Roy said. “We feel that the decrease is much smaller in the casino industry than in bars where people play video lotteries.”

The revenue hit hasn’t been a short-term phenomenon for Edmonton area bingo halls, which saw revenue dip more than 27 per cent after the city adopted a municipal

smoking ban in June 2005. Three of the area’s 15 bingo halls have closed since the ban, and the charities associated with the bingo halls saw their take decrease from $12.9 million in the fiscal year ending June 30, 2005, to $6.1 million in the following fiscal year, a drop of nearly 53 per cent.

“If they were going to venture back, I think they would have done it by now,” said Ian Taylor, executive director of Alberta Satellite Bingo.

The nature of bingo makes it more vulnerable to smoking bans, a consultant to the gaming industry pointed out. “You have to sit there until the event is done. You can’t stop and take a break to smoke. That’s probably why bingo is more impacted than say if you’re at a slot machine, where you can always pop outside for a cigarette.”

Catering to Smokers’ Needs While Alberta Satellite Bingo has tried to accommodate smokers by building smoking breaks into the game, Taylor noted that the breaks can only go so far before the game is broken up into “a whole bunch of 15-minute segments.”

The commercial casinos can do a little more for their customers, since patrons play machine games at their own pace. Niagara Fallsview has two outdoor smoking patios available for use, with further renovations underway. The law prevents businesses from constructing anything with more than two walls and a roof, so smokers will be somewhat exposed to the elements. But the patios will have heated floors and radiant heating to keep smokers as warm as possible.

While the long-term impacts of smoking bans still remain to be seen, the key issue for gaming businesses remains trying to keep all gamblers satisfied, whether they smoke or not.

“Being in the service and entertainment industry, our goal will always be to serve all of our customers as best we can,” the OLG’s Pister said. “Certainly the large majority of adults today don’t smoke, so we have to consider that there’s an audience there as well.”

Aaron Todd is a gaming industry reporter based in suburban Boston for Casino City Times, www. casinocitytimes.com.

Canadian Gaming Business | 29

Racinos Keep Racetracks Alive, but are Not Panaceas

By Fred Faust and Albert Warson

Some track owners look at commercial development of their excess real estate, for an income stream beyond horse wagering and even gaming machines.

Assiniboia Downs in Winnipeg was the first racetrack in Canada to get video lottery terminals to supplement its revenue from wagering on horse races. That was in 1992. Last year, the track reached another milestone: For the first time in its history, according to the Winnipeg Free Press, revenue from machines ($36.5 million) exceeded revenue from racing ($32.4 million).

30 | October 2006

This is how Paul Wiecek, who covers horse racing for the Free Press, put it in a Sept. 21 story: “Such is the state of horse racing in Manitoba – and North America generally – that today the singlelargest source of wagering at the province’s only thoroughbred racing facility isn’t horse racing, it’s video lottery terminals (VLTs).”

Clearly, the rooms of VLTs or slot machines at racetracks – often dubbed “racinos” – have kept tracks like Assiniboia in business, as the popularity of horse racing has declined. Does it follow then, that the more VLTs or slots that a track has, the more successful its racino will be? Not necessarily.

“It depends on your demographics, your customer base, the number of visitors per day, etc.,” said Howard Blank, vice president of media and entertainment for Great Canadian Gaming. In the last two years, the company has purchased five tracks in British Columbia and Ontario. Three of them have racinos.

“Obviously you want to reach proper supply and demand,” Blank said. It’s possible to have too many machines, as well as not enough, he noted. “It’s easy to quantify that based on your spend per machine.

We look at a machine ratio, and that’s how we can tell how we’re performing.”

As extreme examples, Blank suggested, if a racetrack’s slots were generating $1,000 per day per machine, that would indicate a need for more machines. But if the revenue was only $25 per day per machine, the track probably has too many.

By this measure, Assiniboia Downs certainly does not have too many VLTs. The 2005 revenue for its 140 machines works out to $714 per machine per day. One of Great Canadian’s tracks, Fraser Downs in Surrey, is the only British Columbia track with slots. Its 406 machines produced revenue of $317 per machine per day last year.

Photos courtesy of Assiniboia Downs

The British Columbia Lottery Corp., which installs and manages the slots at the racetrack and shares the revenue with the track owner, wants to put 600 machines at another Great Canadian facility, Hastings Racetrack in Vancouver. The city approved the plan, but installation has been delayed by legal action from a conservancy group.

Ontario leads the country in the number of racinos. The OLG first put slots at Windsor Raceway late in 1998, and now has them at 17 tracks, with one more on the way. Last year, the 10,089 machines at the 17 tracks generated nearly $1.5 billion in revenue, or $407 per machine per day.

Not all racinos are instant success stories. The only one in the Maritime provinces opened in August 2005 at the Charlottetown Driving Park, a harness track in the capitol of Prince Edward Island. The Atlantic Lottery Corp. spent $25 million on the racino, installing 225 VLTs. According to reports in the Charlottetown Guardian, the racino’s performance has not met expectations. Some employees were laid off earlier this year, and others had their hours reduced, because revenue was more than $2 million less than forecast.

The problems at Charlottetown have prompted New Brunswick’s government to think twice about racinos at its tracks. The harness industry has long wanted a racino in Saint John, and other proposals have surfaced in Moncton and Miramichi. The N.B. government hasn’t ruled them out, and awaits the outcome of a current gaming policy review before it makes up its mind on the subject.

Quebec has four racinos, and the government is adding more VLTs at them, bringing the total inventory for the four tracks to 1,900 machines.

It’s part of a strategy to relocate many of the VLTs that are in bars and restaurants to larger “gaming halls” such as the racinos. (See Gaming News Roundup, page 9).

The theory behind racinos is that some of the revenue from the gaming machines will be used to augment purses for the horse

races, thereby attracting more horses and better quality horses to the track. That in turn should increase wagering – either at the track or through simulcast – and ideally, attendance at the live racing.

Racinos are usually open 365 days a year, so even when the track is not running a race, the machines are pumping out revenue.

Generally, the formula works. But even a huge racino, such as the 56,000-squarefoot building with more than 1,900 slots at Woodbine Racetrack in suburban Toronto, doesn’t solve all of racing’s problems.

Jane Holmes, vice-president for corporate affairs at Woodbine Entertainment Group, said illegal Internet gaming is ripping off about $100 million a year from Woodbine’s revenue from race wagering. That revenue, she said, “is showing a downward trend. We have had a decline last year and expect one this year as well.”

Like other gaming operators, Woodbine has felt the impact of smoking bans, which Holmes said have hurt attendance and therefore revenue.

“We constantly need to respond to changes in legislation,” she said.

Track owners are not real estate developers by training or inclination, but they are turning to development as a way around the predicament of unpredictable income. Many have one vital ingredient – surplus land, often in what used to be rural, and are now suburban, locations. They could sell the land, likely at very high prices, but mixed-use development is often a better longterm bet.

Woodbine Entertainment plans, with a U.S. partner, to develop a 48.5-hectare mixed-use, entertainment/residential project on unused land at the Woodbine track. It is also planning a 216-room hotel, 55,000 square feet of meeting and exhibition space, and an 18-hole championship golf course and clubhouse at its Mohawk Racetrack, about 55 kilometres west of Toronto, where OLG operates 750 slots.

Baymount Inc., of Toronto, is getting into the racino business, because as its CEO

The racino (far left) at Assiniboia Downs in Winnipeg.

Graham Simmonds puts it, “the market is quite fragmented. We see opportunities in rural markets to consolidate some of the smaller tracks.”

The company is spending $20-$30 million on the new Quinte Exhibition and Raceway on a 55-hectare site off a main highway near Belleville, about 190 kilometres east of Toronto.

It will have the 18th, and for now the final, racino in Ontario. OLG has not yet indicated how many slots it will put at the track, which Simmonds hopes will be ready for the racing season next year.

Simmonds said there is enough surplus land at the new Belleville track – about 24 hectares– to allow for future residential and commercial development. “It needs to be more than just horse racing,” he said.

Baymount also plans to develop a standardbred track and racino in Brandon, Manitoba, the province’s second-largest city.

Simmonds said his firm has been working on the project with the local and provincial governments for two years, and hopes to have an announcement in the near future.

In August, Great Canadian Gaming bought about 30 hectares of land around Georgian Downs, the track its owns in Innisfil, Ont. OLG operates 450 slots at the track.

Blank said the company had no plans for the land “at the moment. We thought it was a good fit for a business model for us, a good opportunity,” he said.

Canadian Gaming Business | 31

ANDREA BOCELLI, UP CLOSE AND PERSONAL

� Fourteen-time Grammy Award winner David Foster and OLG cordially invite you to the David Foster and Friends Charity Gala – a spectacular evening of celebrity entertainment in support of Ontario families with children requiring organ transplants. Andrea Bocelli will headline this exclusive event at the Niagara Fallsview Casino Resort, November 25th, 2006. ..................................................................................................................

This exclusive charitable event will benefit The David Foster Foundation. David Foster established The Foundation in 1986 as a means to provide financial and emotional support to families with children in need of life-saving organ transplants.

YOUR PACKAGE INCLUDES: � One table of eight for a gourmet dinner. � Eight seats for the incredible concert, featuring Andrea Bocelli with David Foster and a star-studded

line up of friends.

� Four luxury hotel rooms on Saturday evening.

Currently there are less than 100 tables available, so early booking is highly recommended. For further event information and sponsorship opportunities, please contact Heller Productions Inc. at 416.483.8333 ext. 228 or by email at kirsten@hellerproductionsinc.com

..................................................................................................................

Visit us at www.olg.ca/davidfosterandfriendsont

..................................................................................................................

Canadian Gaming Education Forum This is one way for professionals to keep up-to-date.

By Judith Hayes, director, Canadian Gaming Centre of Excellence

Education and training are the keys to remaining competitive in the Canadian gaming environment. Gaming professionals need to develop a wide range of knowledge in gaming operations, including expertise in products and services, advances in technology, innovations in customer relationships, impact of gaming legislation and regulations, and strategic use of human capital, to name just a few. And all of this within a responsible gaming framework.

The Canadian Gaming Centre of Excellence (operated through the Manitoba Lotteries Corporation) addressed the limited educational opportunities for Canadian gaming professionals, with an eye toward developing expertise in gaming for our unique Canadian industry. Considerations included education that was state of the art, delivered by leading industry experts, recognized through an accredited institution, cost effective and of course available in Canada. With these objectives, the Canadian Gaming Education Forum was born.

The Forum was launched in 2004 to build capacity and expertise in the Canadian gaming industry by offering world-class gaming education in partnership with the University of Nevada–Reno. Annually, gaming professionals from across Canada come together in Winnipeg for four days of education, information, networking and fun. They gain practical knowledge, share best practices on the gaming floor, and earn

continuing education credits towards the Certificate in Gaming Management from the University of Nevada–Reno and/or recognition through the Canadian Gaming Centre of Excellence.

The Forum offers a wide variety of educational opportunities. Although anyone can take the courses, they are designed to be most valuable to gaming professionals.

The education focuses on gaming floor operations, finances and risk management, and human resource management functions. Over the past three years, gaming professionals have had the opportunity to attend 16 credit courses to broaden their knowledge in areas critical to successful operations. Some of the most popular courses have been Surveillance and Security Operations in the Casino, Identifying and Preventing Cheating in the Slot Operation, Customer Relationship Management and Table Games Management.

In 2006, Dr. Larry Barton facilitated a two-day session entitled Crisis and Risk Management for the Gaming Industry.

Participants came from eight provinces to learn from Dr. Barton, a world renowned presenter on the topic. They left with knowledge and strategies to manage risk at their respective properties.

In 2007, the Canadian Gaming Education Forum will join forces with the Canadian Gaming Summit to present another accredited course focusing on Responsible

Gaming in our Canadian context. The program will provide University of Nevada–Reno continuing education credits.

People from across the country will meet at the Summit in Toronto on April 25-27 to network and share successful strategies around this important topic. This unique program will highlight Canada as a leader in the implementation of responsible gaming best practices.

Human Resource Management for the gaming industry presents unique challenges and this will be the focus of the May 28, 2007, session of the Forum.

From Talent Management and Workforce Planning through to Compensation and Wellness Initiatives, this Forum will present educational and networking opportunities for the HR gaming professional. Participants will examine distinctive challenges, best practices and innovative strategies.

The Forum allows gaming professionals the opportunity to complete a prestigious certificate program from UNR, customized to include the unique needs of the Canadian gaming industry – all within Canada. In the increasingly competitive business of gaming, our business edge often relies on having upto-date knowledge and business skills.

For more information, contact Judith Hayes at hayesj@mlc.mb.ca, phone 204-987-1456 or (cell) 204-793-0739.

Canadian Gaming Business | 33

Lottery and Gaming Corporation Highlights The following summaries of news and activities were submitted by the provincial lottery and gaming corporations.

Atlantic Lottery Corp.

New initiatives at retail Atlantic Lottery has installed a dozen monitor screens at nine retail locations as part of a pilot test aimed at providing a new and effective way to communicate with players. The digital signage allows ALC to provide players with information about games, winners and corporate initiatives.

The pilot is part of a larger project, which is aimed at testing ways to better satisfy today’s consumer, who is seeking an enhanced experience when purchasing lottery products.

Another initiative that will be piloted under this initiative over the coming months is a new design of lottery kiosks.

New sports game launched Atlantic Lottery launched a new pool sports game called Game Day on Aug. 28. Game Day features sports pools such as Football, Hockey, Baseball and Basketball. Most pools will have 10 to 16 games.

Game Day complements Pro-Line, which has been available since 1994, and Over/Under, which began in 2003.

New vendor agreements ALC is entering into new vendor agreements with its video lottery suppliers, IGT and Spielo, for the sale of video lottery terminals.

These multi-year agreements, which map out the ongoing release and replacement of video lottery games over an extended period of time, have been useful in the past for ALC to keep its game offering fresh and relevant with players.

Follow-up on staffing changes It was announced in the last issue of Canadian Gaming Business that Atlantic Lottery had recently made changes to its senior management structure. ALC is now being led by a six-member team headed up by President and CEO Michelle Carinci. Adrienne O’Pray is now Senior VP Customer Relations and Operations.

The others on the senior team are Pierre La France, VP Entertainment Gaming; Patrick Daigle, VP Finance and Corporate Services; Pierre LaPlante, VP Organizational and Corporate Development; Mike Randall, VP Social Responsibility and Communications; and Larry Doherty, Director of Internal Audit.

As Senior VP, Adrienne O’Pray leads a team comprised of three other Vice-Presidents: Joel Irvine, VP Retail Gaming; Brent Scrimshaw, VP Marketing; and Peter Price, VP Business Technology Services.

A part of Pierre La France’s portfolio also falls under the Customer Relations and Operations division.

Nova Scotia Gaming Corp.

Launch of Support 4 Sport NSGC, with its ticket lottery operator Atlantic Lottery Corporation (ALC), launched a new program on Aug. 29 to enhance sports funding “from playground to podium.” Support 4 Sport is a suite of ticket lottery products where 100 per cent of profits will go to sport in Nova Scotia.

It will raise at least $2 million a year, which represents a 50 per cent increase in current annual provincial sport funding.

The first ticket in the Support 4 Sport series is a Commonwealth Games-themed package of scratch tickets being sold across Atlantic Canada to raise $500,000 for the Halifax 2014 Commonwealth Games bid.

The next ticket in the series of Support 4 Sport products will be introduced in Nova Scotia in 2007.

Charitable gaming: Bingo success Superstar Bingo is an electronically linked bingo game that connects participating bingo halls across Nova Scotia and allows charitable organizations another opportunity to use bingo to fund community projects and return more money to Nova Scotia’s charities.

A pilot test of Superstar Bingo was launched in 15 halls and with 27 charities in Nova Scotia in January 2006. Based Canadian Gaming Business | 35

on its success (as of Aug. 31, more than $290,498 has been returned to charities and almost $555,000 in prizes has been awarded to players), expansion into phase II has now been approved. More than 140 charities across the province will be invited to participate in this fall’s province-wide roll-out of the game.

Video lottery program changes: The results are in NSGC released a report in July 2006 that shows the VLT program changes are having an initial impact on player behaviour. The reduction in hours, removal of 1,000 VLTs, disabling of the “stop button” feature, and reduction in the speed of play by 30 per cent have had an effect on Nova Scotia’s VLT player base. , Almost one third of players reduced their spending. , The drop in play time ranged from 70 to 211 minutes per week. , T he “stop button” feature disabling and slowing of speed of play had the biggest impact with 16 per cent of players decreasing their time played. This change also caused a 14 per cent decrease in spending.

Hospitality

The financial impact of these measures was a reduction of $28 million in VLT revenue, with an additional $32 million reduction expected in 2006-07.

Online Hold ’em poker comes to NS On Sept. 1, NSGC’s lottery operator ALC added Hold ’em poker to Nova Scotia’s interactive offerings. This product will be played through the PlaySphere website. It was launched in the other three Atlantic Provinces in May and Nova Scotia is now pleased to offer the game to its players.

Loto-Québec Lotteries Online lottery sales terminals With an aim to replace its 8,500 online lottery sales terminals, Loto-Québec has just awarded a $57 million contract to the French firm SAGEM Défense Sécurité, supplier to the national Française des Jeux lottery corporation and the Ontario Lottery Corp.

The units will be assembled at Montréalbased Positron Technologies, thus enabling the contract to generate maximum benefits within Québec.

Originally installed in 2000, the existing terminals will start to be replaced

Leisure

at the end of 2007, with the new units to have an approximate lifespan of seven or eight years.

An interactive convenience store for the Lotto 6/49 online lottery Based on the “Always be nice” Lotto 6/49 television campaign, the Alwaysbenice. com and Soyeztoujoursgentils.com Web sites offer consumers an opportunity to stop by “Mark’s Place,” a virtual, interactive convenience store.

On average, consumers spend approximately 13 minutes at this productassociated Web site, while the television spot was 30 seconds in duration.

Since Sept. 13, a Web campaign has been running in support of this initiative.

The innovative site is scheduled to remain online for a period of one year (until the summer of 2007).

Casinos The Cabaret du Casino de Montréal celebrates its 10th anniversary Since first opening its doors on Sept.

13, 1996, the Cabaret du Casino de Montréal has treated more than one million enthusiastic spectators to some of the most outstanding entertainment

Tourism

Lyle Hall and Robert Scarpelli have been providing consulting and advisory services to the Canadian and International hospitality, leisure and tourism industries for over 15 years.

Areas of specialization: Gaming Lodging Attractions

36 | October 2006

Travel and Tourism Public Assembly Venues Recreation and Sports

HLT Advisory Inc. 384 Adelaide St. W. Suite 200 Toronto, ON M5V 1R7 (416) 924-7737 www.hlta.ca Please contact us: lylehall@hlta.ca robertscarpelli@hlta.ca

showcasing the talent and passion of hundreds of Québec artists performing in dazzling shows, dinner theatre, matinees, brunch and corporate events, and a host of other activities.

Over the years, the Cabaret has delighted close to 1.5 million spectators with over 3,700 shows, including many musical revues. These types of shows, in particular, have often served as major springboards for local artists to establish their names beyond provincial borders.

T h i s p a s t S e p t e m b e r, f o r e x a m p l e , Danse Sing, the popular Québec musical directed by Sophye Nolet, played to highly responsive audiences in Paris.

Under the banner of this special 10th anniversary milestone, numerous exciting activities and special promotions were organized between Sept. 13 and Sept. 17.

Network Bingo On June 26, Loto-Québec launched Tour 2e chance, a new network bingo promotional tool aimed at boosting the profits remitted by the Société des bingos du Québec to participating non-profit organizations.

The initiative involves offering a second chance to individuals who have played

network bingo at one of the participating halls but did not win a prize.

In order to participate, players must be in possession of their non-winning network bingo card and must log on to the letour2echance.com Web site within 48 hours of playing the game at the bingo hall.

The prizes to be won are valued at up to $100 and must be claimed at a participating hall.

On average, more than 15,700 Tour 2e chance games are played online each day, thus testifying to the promotion’s tremendous success.

Loto-Québec Loteries Te r m i n a u x d e v e n t e d e l o t e r i e s informatisées Dans le but de remplacer ses 8 500 terminaux de vente de loteries informatisées, LotoQuébec vient d’octroyer un contrat de 57 000 000 $ à la société française SAGEM Défense Sécurité, fournisseur de la Française des Jeux et la société des loteries de l’Ontario.

Les appareils seront assemblés chez Positron Technologies, une entreprise située dans la région de Montréal, ce qui permettra de maximiser les retombées du contrat au Québec.

Datant du début de l’année 2000, les terminaux seront remplacés à compter de la fin de 2007. Leur durée de vie est d’environ de sept à huit ans.

Un dépanneur interactif pour la loterie informatisée LOTTO 6/49 Visitez le site Soyeztoujoursgentils.com ou Alwaysbenice.com et vous entrerez virtuellement dans le dépanneur interactif « Chez Marc ». Un concept basé sur la campagne télévisée du Lotto 6/49 « Soyez toujours gentils ».

En moyenne, les visites des Internautes durent environ13 minutes sur ce site Web identifié au produit, alors qu’un message publicitaire est de 30 secondes.

Depuis le 13 septembre, une campagne Web appuie cette initiative. Quant au site même, il restera actif pendant un an, soit jusqu’à l’été 2007.

Casino Le Cabaret du Casino de Montréal célèbre son 10e anniversaire!

Le 13 septembre 1996, le Cabaret du Casino de Montréal ouvrait ses portes. Depuis, plus d’un million de personnes y ont découvert le talent et la passion de centaines d’artistes du Québec dans le cadre de spectacles, soupers-

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Canadian Gaming Business | 37

spectacles, matinées, brunchs-spectacles, événements corporatifs et autres activités.

Au fil des ans, le Cabaret du Casino de Montréal a présenté, à près de 1 500 000 spectateurs, plus de 3 700 représentations dont plusieurs de facture « revue musicale ». Pour ce type de spectacle, les planches du Cabaret représentent un tremplin formidable qui donne aux artistes une opportunité de s’imposer à l’extérieur du Québec. À titre d’exemple, la revue musicale québécoise Danse Sing, signée Sophye Nolet, a été jouée à Paris, en septembre dernier.

Dans le cadre de ce 10e anniversaire, plusieurs activités et promotions se sont tenues du 13 au 17 septembre.

Bingo en réseau Le 26 juin 2006, Loto-Québec a lancé un nouvel outil de promotion du bingo en salle, dans le but d’accroître les profits versés aux organismes sans but lucratif participants.

Il s’agit du Tour 2e chance qui est réservé aux personnes ayant préalablement joué au bingo en réseau de la Société des bingos du Québec dans l’une des salles participantes et qui n’ont pas gagné.

Pour participer, le joueur doit avoir en main sa lisière de bingo en réseau jouée et non gagnante et accéder au site Internet www.letour2echance.com, dans les 48 heures suivant la partie jouée en salle.

D’une valeur allant jusqu’à 100 $, ces lots doivent être réclamés dans une des salles participantes.

En moyenne, plus de 15 700 parties Tour 2e chance sont jouées quotidiennement sur le site Web. Un succès inespéré!

OLG (Ontario Lottery and Gaming) Sports wagering begins at Casino Windsor The introduction of OLG sports wagering to Casino Windsor attracted a high level of attention from Detroit and other American news media. Launched one year after similar gaming products were introduced at Casino Niagara, Casino Windsor unveiled its new “Legends” sports lounge to the media on Sept. 7, just one day before the public opening.

Timed to take advantage of the start of the American professional football season, “Legends” offers four sports wagering games that are variations of existing sports

lottery wagering games – such as Pro-Line – that are designed for casino patrons.

The games Casino Odds, Casino Over/ Under, Casino Point Spread and Casino Props offer specific events, odds, higher wagering limits and earlier redemption items than their lottery counterparts.

Food and beverage services are also important as patrons wager on sports events occurring that same day, while enjoying a luxurious sports-themed lounge with sports-themed menus, 36 video displays, rich leather seating, and Canada’s longest sports ticker.

Quest for Gold Summer Edition launched The second edition of Quest for Gold, OLG’s lottery to raise funds for amateur athletes, was launched in August against the backdrop of the Ontario Summer Games held in Ottawa. The first Quest for Gold lottery generated $2.9 million in net proceeds and helped more than 880 of Ontario’s amateur high-performance athletes cover living, training and postsecondary tuition costs.

Like the winter edition, all proceeds from the sales of the second Quest For Gold will be used to support athletes and promote Active 2010, Ontario’s sport and physical fitness strategy. Media coverage of local athletes now being financially assisted with Quest proceeds has provided positive exposure for the game.

Pollard Banknote is new supplier of instant tickets; will add plant in Sault Ste. Marie After an extensive request for proposals process, OLG announced Pollard Banknote as its new preferred vendor for instant ticket printing and related services. On the completion of a formal contract, the agreement will be for 10 years with OLG options for up to an additional five years.

Pollard, which is based in Winnipeg, will establish a 20,000-square-foot facility in Sault Ste. Marie that will be in operation as soon as six months following contract signing.

An initial complement of 40 employees — expanding to a total of more than 60 — in positions ranging from machine operators to office support will be responsible for converting rolls of printed tickets into finished books of tickets ready for distribution and sale across Ontario.

OLG appears at legislative committee As with two other major public revenuegenerating provincial enterprises, OLG appeared before the Ontario legislature’s Standing Committee on Government Agencies on Sept. 6. Chair Michael Gough and CEO Duncan Brown presented an overview of OLG’s gaming businesses and plans, and answered questions regarding revenue projections, long-term business plans and responsible gaming practices.

Some opposition committee members criticized the OLG’s re-branding, which is designed to create a consistent public image of integrity and service across all of its gaming and lottery businesses.

Manitoba Lotteries Corp.

Manitoba Lotteries is responsible for the management and operation of Club Regent and McPhillips Street Station Casinos, the video lottery terminal (VLT) network, and the sales and distribution of lottery products, bingo paper and break-open tickets.

Casino highlights , M anitoba Lotteries has introduced a corporate sales division, to promote and sell meeting and event space at both Club Regent Casino and McPhillips Street Station Casino. The team includes manager Gary Willis and casino sales agents Ken Johnson and Richard Halliday. , The Casinos of Winnipeg are dedicated to providing fun and entertaining gaming, offering the newest in technology. Club Regent Casino recently introduced several new games: Bally Hot Shot Progressive, IGT Party Time and Men in Black Galactica; IGT Party Time and Men in Black Galactica were also introduced at McPhillips Street Station Casino. , Robert Magnifico has recently come on board as the food and beverage director for the Casinos of Winnipeg. Robert brings with him considerable years of experience in the industry.

Video lotto highlights , Manitoba Lotteries has purchased a new VLT central computer and validation terminals from GTECH, which includes a five-year support agreement. This replaces the IGT system that had been in use since 1991.

Canadian Gaming Business | 39

Strategic business partnership highlights , I n M a r c h 2 0 0 6 , t h e C a s i n o s o f Winnipeg Air 680 Traffic Chopper took to the skies in the Winnipeg area. In partnership with radio stations CJOB and Power 97, this unique sponsorship opportunity not only benefits the public by providing up-to-the-minute traffic reports, but also offers MLC daily onair title mentions, and promotional appearances at community events in the province.

the gift shop to include a coffee shop area, renovating the Coach Room to become a poker tournament facility, construction of a new Player Relations office, renovation of the CPR Lounge to a sports bar theme, and more. , Casino Moose Jaw celebrated its fourth anniversary in September, holding a pancake breakfast to thank players, suppliers, and the community for their outstanding and continued support. , C asino Moose Jaw welcomed its two millionth customer this past spring.

Sponsorship highlights , Manitoba Lotteries is a presenting sponsor of the first Manito Ahbee Manitoba Aboriginal Festival, which will be held in Winnipeg from November 2-5, 2006. This five-day festival will include the Aboriginal Peoples Choice Music Awards, Pow Wow competitions, international artists and a celebration of aboriginal recording artists and industry professionals from around the country. , In November, the “Big Game” comes to Winnipeg – the 2006 Grey Cup. Manitoba Lotteries will be a major supporter and participant in Grey Cup Festival activities.

Celebrity blackjack tournaments, national cheerleader competitions and Grey Cup parties will attract many fans to the Casinos of Winnipeg for the week leading up to the CFL’s title game.

Promotional highlights , Casinos Regina and Moose Jaw are the promotional partners for Regina’s recent Rolling Stones performances (Oct. 6 and 8), and have launched a series of promotions. Slot and table players have the opportunity to win the Ultimate VIP Experience, which includes onstage tickets, transportation, and a pre-show event, by playing specially marked games. Food and beverage and entertainment guests may also enter to win these in-demand concert tickets.

Saskatchewan Gaming Corp.

Casino highlights , T h e S a s k a t c h e w a n G a m i n g C o r p . released its annual report July 26.

Highlights included net income of $29.2 million, based on revenue of $94.6 million, including $80.9 million in slot revenue and $8.6 million in table revenue, and expenses of $65.3 million. The total economic impact of Casinos Regina and Moose Jaw on Saskatchewan’s economy is equivalent to hosting six Grey Cup events every year for the past decade, bringing over $829 million to the province’s gross domestic product. , Casino Regina is undergoing renovations to enhance product offerings and services to its guests. These include the construction of a new box office/ guest services kiosk, renovation of 40 | October 2006

Slot highlights , C asino Moose Jaw became 100 per cent ticket-in/ticket-out in July. This project primarily required hardware and software upgrades; however, a handful of existing games were replaced outright. , C asino Regina was expected to be 100 per cent ticket-in/ticket-out by the end of September. The conversion was a mix of upgrades to existing games as well as game replacements.

A number of new product offerings were brought to the gaming floors of both properties. Party Time, Fort Knox, I Dream of Jeannie and Twilight Zone were among the new themes introduced this spring. Hot Hot Penny slots from WMS Gaming went live in Casino Regina in July, and a new Three Card Poker multi-station game from Shuffle Master was installed at the end of August; it has become very popular. In September, the addition of a new multi-player horse racing game from Unidesa was planned.

For more information on Casinos Regina and Moose Jaw, visit www.casinoregina. com or www.casinomoosejaw.com.

Alberta Gaming and Liquor Commission , A three-month pilot test of 100 slot machines with ticket-in/ticket-out (TITO) technology came to a successful end June 30 at the Palace Casino in West Edmonton Mall. As a result, the AGLC, with support from casino operators, began a province-wide implementation of the cashless technology starting with Edmonton casinos on July 31. Each of the province’s 8,016 slot machines will have a printer installed, enabling players to print out a cash-out ticket. Players will be able to redeem the ticket with a cashier, at a TITO redemption kiosk or use it to play another slot machine.

The implementation is expected to take about 18 months, moving on to Calgary and then out to the rest of the province after Edmonton. , T h i r t e e n A l b e r t a l o t t e r y r e t a i l e r s recently participated in a six-week pilot test of new ticket lottery terminals in conjunction with the Western Canadian Lottery Corp. (WCLC) and GTECH Corp. The pilot, which wrapped up mid-August, is the first step in replacing Alberta’s 2,305 Spectra II terminals.

Preliminary results from the pilot test show retailers and patrons alike are pleased with the new terminals. The WCLC will begin replacing terminals in late summer 2007 and complete that task by Dec. 31, 2007.

British Columbia Lottery Corp.

Lottery highlights BCLC became the first lottery jurisdiction in the world to offer a monetized, monitor-style game with a poker theme when it launched Pacific Hold ’em Poker in early September.

The game, which replaced Racetrax and operates on the same lottery system and equipment, provides a realistic representation of playing a poker game through computer-generated graphics presented via television monitor.

Just prior to launch, BCLC trainers and merchandisers visited about 500 bars and pubs and select lottery retail locations province-wide to train retailers on how to sell the new game. Retailers received free-play coupons to distribute

to players, as well as a consumer promo kit where the prize is a trip for two to the Super Bowl in Miami.

In a number of select accounts, ambassadors are helping facilitate the sale of Pacific Hold ’em Poker and other hospitality network products.

Ambassadors engage customers, teach them how to play poker, and ask for and facilitate the sale.

Locations that sell Pacific Hold ’em Poker are eligible to win the top prize of a trip for 10 to Las Vegas.

Game information is available at www. b c l c . c o m / c m / Pa c i f i c H o l d E m Po k e r / Home.htm. , I n June, B CLC announced a new addition to the SportsFunder suite of lottery products: the $5 SportsFunder Instant Win ticket featuring hockey legend Wayne Gretzky. For the first time ever offered on an Instant Win ticket, players can win an entry into a draw to spend a Great Day with Gretzky.

Throughout September and October, TV commercials, print advertisements, radio giveaways and new rink-boards

are supporting this ticket, before the draw in November.

Casino highlights , B CLC and B.C. casinos were the Presenting Sponsor of the 2006 David Foster Star Search and once again supported the David Foster and Friends Charity Gala. This year’s gala raised $2.9 million for the David Foster Foundation, which helps families with children in need of life-saving major organ transplants.

Bingo highlights , To enhance entertainment value for bingo players, BCLC recently launched KaChingo, a province-wide linked bingo game that replaced Big Link Bingo. KaChingo offers greater variety in pattern changes and prizing options, as well as flexibility to deliver promotions. , In July, BCLC and Great Canadian Gaming Corp. opened Chances in Dawson Creek, the fourth Chances Gaming Entertainment in B.C. The Chances brand builds on the community gaming centre concept of providing a broader array of entertainment

Index to Advertising Pages

choices in an entertaining social setting.

Bingo is the cornerstone of these facilities.

Other gaming options may include lottery games, pool tables and a limited number of slot machines.

Corporate highlights , B CLC ’s 2005/06 annual report was released in July. For the fiscal year ended March 31, the Corp. achieved total revenue of $2.26 billion and total net income to government of $922.7 million.

Nearly 6,000 community and charitable organizations received $137.7 million in community gaming grants. The report is available at www.bclc.com/cm/ aboutbclc/corporatereports.htm. , I n J u n e , B C L C a n n o u n c e d t h e selection of five advertising and marketing communications partners to support a wide range of business and marketing opportunities. Cossette Communications Group, DDB Canada, TBWA/Vancouver, SplashDot and Phoenix Group were selected for the agency roster through a requestfor-proposal procurement process.

Company

Web site

Arrow Games

arrowgames.com

19

Artistocrat

aristocratgaming.com

26

Battlefield Graphics

battlefieldgraphics.com

38

Bluberi

bluberi.com

IFC

Canadian Gaming Association

canadiangaming.ca

15

Champagne Showgirls

champagneshowgirls.com

37

CIBC World Markets

cibcwm.com

13

Gary Platt

garyplatt.com

20

Gasser Chair Company, Inc.

gassergaming.com

IBC

GE Security

gesecurity.com

6

Giesecke & Devrient

ca.gi-de.com

16

hcareers

hcareers.ca

37

HLT Advisory

hlta.ca

36

IGT Canada

igt.com

OBC

Loto-Quebec/Ingenio

ingenio-quebec.com

8

OLG

olg.ca

32

Progressive Gaming

progressivegaming.net

34

Scientific Games

scientificgames.com

41

TCSJohnhuxley

tcsjohnhuxley.com

11

42 | October 2006

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