Casino Enterprise Management

As usual, CEM Publisher Peter Mead and his staff did a great job hosting CasinoFest3, which was held May 14 – 16 at the Mystic Lake Casino Hotel in Prior Lake, Minn. All the attendees I spoke to thought the high-quality presentations were well worth the time involved. If you have a chance to attend one of the CasinoFest conferences, I think you’ll find it beneficial.

I made the keynote presentation at CasinoFest3, and described my vision of what our industry will be like 10 years from now. Predictions are based on a long-anticipated event — the era of a “saturated” marketplace. I’ve erred on this topic before, believing in the late 1980s that The Mirage was one more casino than the Las Vegas Strip could support. Of course, I was stunningly wrong — as were a lot of other people. Still, our “build it and they will come” philosophy will eventually meet disappointment — nothing grows forever.

Our supply of gaming machines and tables is growing far more rapidly than our population. Less than one third of all adults in the United States gamble on a regular basis, and our population growth rate is less than 1 percent annually. Pennsylvania, for example, may soon offer more than 60,000 machines, making gambling management in Connecticut, New Jersey and New York much more difficult.

At the same time, the cost of a new gaming property is rapidly escalating. Governments place ever-increasing tax burdens on our casinos, and labor costs continue to rise. Under these conditions, even a small drop in net win due to excessive competition will severely impact profits and our industry’s economy.

Fortunately, solutions are within reach. We have huge opportunities to improve marketing efficiency, game quality and customer service; however, to accomplish these goals, we’ll have to change our attitude. Many in our industry are confused as to what the gaming business is. They think customers are stupid, saps, suckers or marks. They believe we’re at war with customers and the only thing standing between us and ruin is the mathematical edge our games provide.

Thankfully, this attitude is losing favor. However, we are still more concerned about next quarter’s earnings than whether or not our best customers will want to visit us again in six months or a year. We have survived this shortsightedness so far only because gambling opportunities were in short supply — and, as I’ve already said, that advantage is rapidly disappearing.

Shortly after the opening of The Mirage — the very place I thought was redundant and excessive to the needs of Las Vegas — Steve Wynn explained to me that players must be treated as a scarce, but renewable, resource. Wynn claimed we had to delight and entertain players, providing exciting places to shop, sleep and eat. We also had to give them challenging games, and help them leave town with dreams of returning again soon. I took that counsel to heart and developed the concept of bonusing — giving players something more than they expected — and it worked.

You see, our players don’t really gamble to win money; they gamble to enjoy a winning experience, and they’re willing to pay for it. A typical casino customer will gladly spend $800 to enjoy one or two $100 jackpots, which they’ll gladly give back to the games. Far from stupid, most gamblers are well aware the house has a mathematical advantage, but they’re happy to pay to chase a winning opportunity anyway. We just have to heighten the emotional experiences of winning and losing —  something far different than simply changing a payback percentage or giving triple loyalty points.

The world outside is changing, too. Gaming is now an accepted industry. Many states and Native American tribes count on gaming revenue to meet the everyday needs of their constituencies. Simultaneously, these constituencies seek enhanced protections from fraud and even from their own inadequacies. As unfair and unreasonable as this may seem, it is a fact of life in the 21st century, and we’ll have to adapt.

Here are the highlights of what I believe the next 10 years will bring.

The Internet is Here to Stay
I believe Internet gambling will become legal and subject to federal and state regulation and taxes. Regulation will not be as extreme as it is now, simply because there will be many more Internet gaming providers, and the government will not be willing to budget the money to regulate as strictly as it does now now.

While legal Internet gaming will account for a big percentage of the marketplace, it will actually increase the overall demand for casino-style gaming. People introduced to gaming by wagering at home will seek the excitement, escape and challenge of the casino’s social environment.

Casinos will learn how to use the Internet to reach new players and strengthen bonds of loyalty with existing gamblers. We’ll have games played in segments: parts at home, on the phone or at the office, and other aspects completed on the casino floor.

Whether we like the Internet as a gaming venue or not, there’s little we can do to stop it. We can either regulate and participate, or be annihilated. Legislation, such as the Unlawful Internet Gambling Enforcement Act, will simply slow the expansion of Internet gambling while the best ways to tax and regulate the activity are figured out.

Games Become More Diverse
No one accuses the gaming industry of being overly innovative. The vast majority of our games are but minor variations of concepts that have been around for hundreds, even thousands, of years. In fact, our most recent, truly revolutionary game introduction occurred in San Francisco in 1895, when Charlie Fey invented the slot machine. Most everything since has been a variation on dice, cards or slots.

Today’s technology can support vastly more intriguing games than we currently offer. (Please don’t confuse intriguing with intricate.) True innovation carries new offerings that are simple to understand and intuitive to operate. We’ll soon see gaming machines that appeal to couples by allowing them to play together, or at least wager side by side.

We’ll see more tournaments, team games, bonuses and games of accomplishment that require multiple visits, or even sessions at home via Internet, followed by play at the casino. Tomorrow’s customers will certainly be more computer savvy, but they’ll still seek opportunities for the emotionally meaningful winning — and losing — experiences that only casino gambling can offer.

Customerization
We can no longer afford to think about what “the player” wants. Instead, we must divide the universe of players into segments and build offerings for each constituency. Most of today’s games only offer choices regarding denomination and theme. We consider the elimination of coins from the gaming floor as highly innovative — we’ll have to do a lot better. Tomorrow’s games will have personality and won’t be limited to a specific box. We’ll see a merging of game and tracking systems. When players identify themselves, the game will automatically reconfigure to offer those gaming propositions that are most appealing, based upon player history or projected desires.

We’ll access external databases and compare known customer information to project what the customer is most likely to enjoy. If I live in ZIP code 89102, for example, tomorrow’s game will fetch psychographic information about my neighborhood and use my age, gender and other personal data to better guess what my wants, needs and interests might be. My play will be monitored not only for play history, but also to refine my profile according to my ongoing play patterns and wager tendencies. The game will take on characteristics related to my favorite color, interest in sports, etc.

In other words, each game will be instantly customized for each customer — that’s customerization.

Problem Gambling Detection and Protection
The world of tomorrow expects each of us to presume an ever-greater responsibility for the actions of others. Bars are liable to customers for the alcohol served, auto makers must guess how their products will be misused, and we’ll have to do far more to prevent compulsive gambling. We won’t escape with 1-800 numbers and contributions to addiction centers; we’ll have to take a proactive approach to detecting when a person is spending too much, and take steps to discourage additional wagering.

We’ll allow players to self-banish or set limits on wagering by the day, week, month or year. We’ll develop mechanisms by which family members, and even government agencies, can limit or deny a person’s ability to gamble.

For those of us brought up in times of “self-responsibility” (myself included) this will be hard to accept. It is too bad, but today’s society expects us to do more to protect those who cannot — or will not — protect themselves. Ours is a privileged industry, and we have no choice but to accept this responsibility. Once we do, our industry will be viewed with higher regard and we’ll see more, not fewer, players.

Mandatory Identification Checks
Sometime in the next 10 years, in at least one casino in the United States, people will have to show ID in order to enter the gaming floor, and again to wager at any game.

Long the concern of privacy advocates, mandatory ID checks have already appeared in other aspects of daily life. When I was a kid in the ’60s, it was nothing for a father to send his 10-year-old son to the store for cigarettes. Today, I have to show my ID to buy cold medicine.

Driven by fears of terrorism, illegal immigration, money laundering, drug abuse and illicit underage activity, mandatory ID checks are becoming more acceptable. Passed on Oct. 27, 2001, the United States Patriot Act removed many of the legal barriers to mandatory identification checks, and modern technology has made reliable identification fast, cheap and accurate. The federal government’s demand for “real ID” from the states has fueled debate, anger and legal action — not over of loss of privacy, but over who will pay for it all.

On the bright side, mandatory ID checks will provide an unprecedented level of player tracking and target marketing ability.

Industry Reorganization
The way we fund, build, supply and operate our gaming properties today is not efficient. What worked when competition was limited — gaming tax rates at 7 percent and important properties built for under a billion dollars — is no longer valid.

Today’s casinos are more about real estate, dining, shopping and entertainment than gaming. Already we see properties with outsourced management for their hotels, shops and restaurants. Our hotel rooms are becoming condominiums. Casino operations will soon follow suit, leasing casino floor space to management companies for a fixed fee plus a percentage of profits — exactly as stores do at the mall.

Game suppliers will provide modular platforms for electronic and mechanical technology, upon which game creators will build games and share royalties. While today’s game suppliers perform at least a part of their own manufacturing, this too will be outsourced within the decade.

We’ll also see streamlined regulation. As governments become more dependent on gaming taxes, they will look for ways to reduce regulatory costs. We’ll see a common set of rules and a singular testing policy that will be valid in all jurisdictions. After all, why should a slot machine that is perfectly honest and reliable in New Jersey require an additional set of licenses and approvals for use in Indiana?

People
While these changes bring additional burdens, they also provide efficiencies and opportunities for unprecedented growth and profit. Of course, these opportunities can only be acted on by people, and this next decade will bring greater empowerment to those willing and able to apply themselves to better serve players and improve efficiency.

More than anything, we’ll see a change from our current technological orientation — in which we often seem to be slaves to our computers, policies and cell phones — to a place where we think more about the ultimate experience we deliver to our neighbors, employees and customers.

You’ll know we’re on the right track when talk about the future of gaming ceases to discuss issues of networks, processors and the ubiquitous “server-based gaming,” and instead focuses on the real opportunity of “player-based gaming.”

John Acres is CEO of Acres-Fiore and a Director of Game Logic Inc. He is the Founder of EDT, Mikohn, and Acres Gaming, and holds a number of U.S. patents relating to the gaming industry. He can be reached at john[at]acresconcepts.com or (541) 738-4301.