Global Gaming Business Magazine

Collecting Smiles

By Tue, Aug 19, 2008

The first thing you notice when you enter an Olympic Casino property is that the personnel are smiling at you. A lot. So much so that you start to wonder if you aren’t suddenly much better-looking than life up until now has led you to believe.

Armin Karu, chairman of the three-man management board of Olympic Entertainment Group—OEG—laughs good-naturedly as he de-mystifies the phenomenon.

“They are collecting smiles,” said Karu, who founded the company in 1993. “Our people are trained to smile at the customer in an attempt to get the customer to smile back. When they succeed, they mark it down, and it counts towards their monthly total. Then, when it comes time to divide the tips, the number of smiles they collected during that pay period is part of the equation.”

So what stops an employee from just writing down a big number of smiles collected for a bigger share of the tronc? Social control: the employees keep a friendly eye on each other, just to keep it honest. The result is that visitors feel more welcome, while the employees with all that smiling end up creating a better work environment for themselves.

The practice of collecting smiles is just one of the things that have allowed this innovative casino operator from Estonia to prosper. OEG has managed to spread its particular brand of gaming throughout eight contiguous countries in eastern and central Europe, stretching from the Baltic to the Black Sea. And the corporate strategy calls for that number to grow to 10 countries in the next two years.

In general, the Olympic Casino is a very different product than most of its current competition.

“We have always represented what we call a Las Vegas-style gaming concept, where the slots and tables and bars and entertainment are all together,” said Karu. “In Europe it’s traditionally just gaming clubs with tables, quiet and smoky, and not fun. So we try to implement venues that are more enjoyable. Most of our casinos are slots-only casinos, but we still call them casinos because the environment that is created, the design work and craftsmanship are all done according to casino standards.”

The inspiration for the expanded gaming concept came from Karu visiting Las Vegas in the early 1990s. In June, Karu spoke with the Slovak Spectator in Bratislava, just days before the opening of OEG’s newest full casino there and the company’s first in Slovakia.

“I saw that casinos are about much more than simply gaming,” Karu said of his Las Vegas experience. “It is sophisticated, multi-level entertainment for people who value their free time. All the casinos in Estonia (in the early 1990s) were focused only on gaming. The quality of service was mediocre, no added entertainment was offered and the games themselves were outdated. This is when the idea was born to create casinos that offer an entirely different level of quality.”

One important element of all Olympic Casinos is the thought and effort put into the interiors. All of the company’s full casinos, no matter in which country they operate, are designed by the Estonian firm Meelis Press Architects. The company carries the name of lead architect Meelis Press and has worked on projects such as the Radisson SAS Hotel & Business Centre City Plaza in Moldova and the headquarters of Baltic ferry operator Tallink Group.

Press has worked both on full casinos and slot casinos for OEG. His work ranges from subtle, elegant interiors such as that of the Reval Park Hotel & Casino renovation in Tallinn, Estonia in 2005, to imaginative marble mosaics and hanging-garden effects of the Casino Sunrise in Warsaw, Poland. Press has also created fanciful interiors for some of the local Olympic slot properties, including exotic tropical and pirate themes, and a French cabaret style for the Moulin Rouge casino.

The interiors of Olympic slot casinos in other countries are often created by local architects, designers and contractors. The Olympic management team, coordinated by Chief Development Officer Meelis Pielberg, works closely with the outside firms on themes, floor plans and exterior elements.

David Kranes, a U.S. casino interior design expert, has said of the company’s approach, “Olympic Casino interiors are winning interiors. They are both beautiful and emotional. Their sensuous and delight-promoting designs enable strong experience and pleasure for their customers. They are, at the same time, contemporary and classical.”

More than Arcades
The investment in the interior design of the slot casinos in particular is a huge departure from the minimal effort that goes into the standard slot arcade. Each property features an attractive, full bar prominently situated in the room, where players and non-players alike can relax with a drink, listen to recorded music and socialize.

The machines in the Olympic slots-only casinos are not to be confused with AWP machines. These are modern, cutting-edge casino devices, with linked jackpots and state-of-the-art accounting and player tracking systems. A full 70 percent of the collective floor is occupied by IGT machines, with the rest a mix of Novomatic, Atronic, Aristocrat and others. And, we are not talking about $50 jackpots, either. The regulations regarding limits on stakes and jackpots differ per country, but stakes can be as high as €400 per game and jackpots up to €250,000.

The Reval Park Hotel & Casino was the first in Europe to launch a pilot project with the IGT EZ Pay IVS cashless system in early 2004, just months after the technology had been introduced in Las Vegas. Soon after that, the system was used in a new casino and eventually adopted throughout the Olympic Casino network.

Said Karu at the time, “Our main principle that has helped us to achieve the leading position in the casino market in the Baltic States is basically simple: You have to provide the client with the best games and the best technologies.”

A Growing Enterprise
Growth and expansion have been the watchwords of OEG in the area of business development. The first Olympic Casino was opened at the Tallinn Olympic Yachting Center in 1993. Ten years later, OEG was operating 14 casinos in Estonia, four in Lithuania and one in Latvia. Then, over the past four years, the pace picked up.

By 2008, OEG had 122 casinos operating a total of 202 tables and 4,690 slots in Estonia, Latvia, Lithuania, Poland, Romania, Ukraine and Belarus. Employees numbered around 4,000. Gross gaming revenue reached €148.3 million, which on December 31 was equal to $218.4 million.

To give an idea of how rapidly OEG is expanding, at the end of 2006 the group had 79 casinos in operation with a total of 125 tables and 2,912 slots. Revenue for 2006 was €98.4 million, about $130 million.

In 2007, new casinos were being opened at the rate of one every eight or nine days. OEG increased its properties by 54 percent, the number of gaming tables by 62 percent, slots by 62 percent and gaming revenue by 51 percent. Investment in the new properties totaled €92.4 million for the year. That might be a straightforward task-and-result for a single expansion project, but for OEG it involved adding new properties in four jurisdictions where the company was already operating, and starting from scratch in two others.

By the end of the first quarter of 2008, through an array of around 30 subsidiaries, OEG was operating 131 Olympic Casinos with a total of 5,228 slot machines and 216 tables.

In the second quarter, growth continued with four casino openings in Ukraine, two in Romania, one in Poland and one in a new jurisdiction for OEG, Slovakia. Some of these are new properties developed from scratch and some are existing properties acquired by OEG and given complete makeovers to rebrand them as Olympic Casinos. The third quarter kicked off with yet another opening, the 22nd Olympic Casino in Ukraine, and by the time you are reading this there will undoubtedly have been several more.

As the numbers show, the Ukrainian market has been a recent hotbed of OEG activity. The company has been active there with slot casinos since late 2004 and acquired five additional locations from the locally popular Eldorado group in September 2007. The €9.2 million acquisition opened the way for OEG to start operating table games inside the country.

Activity started early this year with the opening of a new slot casino in the train station of Kiev, the capital of Ukraine, on January 2. An investment of €1 million produced a 232-square-meter casino with an underwater theme—one of OEG’s go-to styles—and 44 slots, plus a bar.

The first of the rebranded, former Eldorado casinos was opened in late February. Now going by the name Olympic Casino Opera—owing to its location near the Ukrainian National Opera, in Kiev—it was the first Olympic Casino in Ukraine to have table games as well as slots. The €2 million project features nine tables and 37 slots, plus a full bar, in a space of 432 square meters spread over two floors. The interior has a tropical theme, which is another favorite of OEG.

The biggest project of the first half of 2008 was undoubtedly the opening of the Olympic Casino in Slovakia. The casino is situated in the 168-room Radisson SAS Carlton Hotel, in the center of Bratislava, the capital of Slovakia. The €4.7 million investment marked OEG’s entry into its eighth jurisdiction.

The new Olympic Casino features 11 gaming tables and 61 slots. The casino includes a stage and a spacious bar in a total area of 1,000 square meters.

Within days of the casino opening, it was the scene of a major media event. The occasion was the launch of Fashion TV Slovakia, which was ushered in with Fashion TV Week Bratislava, in cooperation with the Carlton Hotel, Bratislava River Center and Olympic Casino. Events included four days of pre-selection for the Miss Slovakia FTV 2008 competition in the Carlton Hotel, the grand opening of Fashion Club in the Carlton Bar, and a fashion party inside the casino. It was a good opportunity to announce that a new type of casino was in town, one which values the fun of entertainment.

Entering the Slovakian casino market was a coup for OEG. There were previously only two casino operators in the country—Casinos Slovakia with six properties and Regency Casinos International with one. The gaming license for the Olympic Casino in the Carlton was the first new casino license to be issued in Slovakia in the last 10 years.

Slovakia’s gaming industry, both public and private, saw €1.8 billion wagered on all forms of gambling in 2007, according to a report in the Slovak Spectator. Only €54 million of that was gambled in full casinos. However, €672 million was wagered on slot machines. Gaming companies in all sectors combined had a collective win of €415 million. The country has only 5.4 million inhabitants, but Bratislava is less than a one-hour drive from Vienna and two hours from Budapest.

Total Transparency
In October 2006 OEG decided to go public. Listing on the Tallinn Stock Exchange, the casino operator became the first of its kind on the Eastern European and Baltic stock exchanges. The IPO presented 14 million ordinary shares in a range between 63 and 75 Estonian kroons—EEK—the equivalent of €4.026 and €4.793 per share at the time. An additional 1.4 million shares were allocated should the original offering be oversubscribed. This represented 20.4 percent of the share capital of OEG. Depending on the final number of shares in issue and the final share price, the total value of the company on the first day of listing was expected to be between €298 million and €361 million.

The IPO ran from October 2 through October 17. As it turned out, all 15.4 million shares were sold at EEK 73, equal to around €4.66555, raising €71.8 million in total.

What surprised everyone, though, was the interest in the IPO. Institutional investors subscribed 94.26 million shares, an oversubscription of around 7.5 times. These investors were allotted 12.6 million shares.

“This is a historic result,” said Lauri Lind, head of the equity market department of Hansabank, the lead manager of the IPO. “No Baltic companies have until now received subscription orders worth around €479 million in the course of an IPO.”

Karu saw the overwhelming success of the IPO as a vote of confidence in the company and in the Baltic gaming and entertainment business in general.

“In a little more than a decade, we have developed an entertainment service whose good quality and modernity is recognized by all colleagues from countries that have much longer casino traditions,” said Karu.

At the time of the IPO, OEG was operating 74 properties in five countries: the core Baltic States, plus Ukraine and Belarus. The company had already announced its goal to enter another five markets within the next three or four years.

“Our ambitions are notably higher than our current success,” said Karu. “This is the main reason we decided to list our shares.”

In September 2007, OEG shares began to trade as well on the Warsaw Stock Exchange. OEG had been present in Poland since acquiring the Casino Polonia group in April of that year, and following that up with the opening of the Olympic Casino Sunrise, Poland’s largest casino, inside the new Warsaw Hilton in May. The listing was significant, because now shares of OEG would be available to a wider range of foreign investors, including Polish pension funds, which were not allowed to invest in companies not listed on the
Polish market.

Going public positioned OEG for rapid expansion. Now that the company has almost completed its first major goal—to be operating in 10 countries—the energetic Karu has posed a new challenge.

Bigger and Better
At the OEG website, on the main investor relations page, Karu states his goal clearly and unambiguously in an open letter to investors, in a piece titled simply: “On the road to becoming a global casino and resort operator.”

Karu explains in the letter that OEG will now focus on developing destination hotel-casino resorts, with entertainment and other services, as well as on its existing business.

Karu said he is not talking about mega-resorts. He said that at this point, hotels with a maximum of 300 rooms would be manageable, with the appropriate scale of entertainment and amenities such as retail shopping. Karu gives a rough time frame of three to five years if the company has to develop a casino resort from the ground up, with a shorter period needed if OEG simply acquires an existing property.

On completing the original goal of being in 10 countries by 2010, Karu said they are studying a short list of three to five countries. Without identifying them, he said “some are in the region and some are not.”

Certainly challenges remain in the existing markets as well. Smoking bans, changes in operating regulations and potential increases in tax rates—which in OEG’s markets are nowhere near the crippling variety imposed in most Western European jurisdictions—are always just over the horizon. But looking at the methodical, sensible, smart progress the company and its management have engineered over the past 15 years does inspire confidence in many.

Tough Crowd

By Frank Legato Tue, Aug 19, 2008

For nearly two decades, the revenue split for the typical casino in the United States has been logged in the decided favor of the slot machine. Anywhere from 60 percent to as much as 80 percent of gaming revenue in a given U.S. casino comes from the slot floor.

Not so in Macau.

In Macau—which generated more gaming revenue last year than the Las Vegas Strip and is poised to out-earn the entire state of Nevada this year—slot machines account for less than 5 percent of gaming revenues. Tables are king, and more specifically, the reigning monarch is baccarat, long a mainstay of Chinese culture.

The lifeblood of Macau’s casino industry is a steady stream of players from mainland China and Hong Kong, many of whom have never played a slot machine in their lives. Factor in the lucrative VIP junket market, and slot machine operators and manufacturers face a steep, uphill battle in gaining precious floor space from the table games, let alone any significant market share.

“Competing with table games is difficult when you’ve got games like baccarat, which is really a part of Chinese culture and tradition,” said Matthew Ballesty, general manager of casino planning and development for Crown Macau Casino. “When they walk into a casino and see a slot machine, it might be the first time they’ve ever seen one; or, they see a game they’ve grown up with (in baccarat). It becomes very difficult to get those people onto a seat playing a slot machine.”

According to Lindsay Stewart, vice president of electronic gaming for Sociedade de Jogos de Macau, this low level of interest in the games leaves little incentive for operators to clear out tables to make room for slots. “Every gaming floor only has a certain amount of premium play space,” Stewart said. “The main difficulty here is to get that space. Table games, obviously, have a far greater yield here than in any other gaming precinct in the world. It’s difficult at times to get the space you need to market and promote your product the way you’d like to. That means your game selection has to be all the sharper, all the more cutting-edge, to maximize whatever space you do have.”

Ballesty, Stewart and other slot operations and manufacturing executives addressed the subject of growing the region’s slot market in two separate roundtable discussions at the recent G2E Asia conference.

While all of the professionals at the sessions agreed that growing the slot market is a tall order—at Crown, the number of slot machines has actually dipped in the past six months, from 550 to 200, due to what Ballesty calls a “change in business model”—the coming of the more tourist-based mega-resorts like Venetian Macao and Wynn Macau has improved the outlook for slots a great deal.

Stewart pointed to rapid progress at Sands Macao, where he assembled the pre-opening slot team. “When I arrived here in 2003 to set up the Sands floor, we started on day one with 419 machines; three weeks later we had 520 machines; three months after that we were up to 660.” He said that while the Sands offered a lot more overall slot space than other casinos in Macau, the upward trend did spill over to many other casinos.

“In Macau during those four years, slots went from 0.4 percent of the slot floor to 4.6 percent,” Stewart said. “That may not sound huge, but when you consider that the overall market has grown by several hundred percent, it’s a pretty remarkable take-up rate.”

Peter Johns, director of slot operations for MGM Grand Macau, added that player’s club statistics show the increase in slot play is coming from repeat customers. “The numbers we see coming from rated play are staggering,” he said. “We’ve been open four months, and we’re looking at 70 percent rated play, which is quite a good pickup. One-time play represents only 30 percent of our market. There is a lot of repeat play, and that’s growing rapidly.”

Moving Forward
Sustaining this rapid growth is the puzzle to be solved not only by the slot operators in Macau, but by slot manufacturers as well.

Manufacturers say building a mass market for slots is a balancing act between proven game programs and localized themes; for operators, it means the right mix of first-time appeal for the games and relationship-building on the slot floor.

As the market for slots in Macau expands, operators are listening closely to their customers, and manufacturers are listening to the operators. “The variables are different from property to property; what brings a player to a machine or what sends him away can change,” said Rossi McKee, vice president of marketing for Bulgarian slot-maker Casino Technology. “It is important to talk to our customers, and to get feedback from our players.”

As far as the game features that are most likely to build the mass slot market in Macau, manufacturers say that by and large, what works in other parts of the world works in the Chinese enclave.

“We develop our games for international markets, not necessarily for Macau or Asia,” said Alon Englman, vice president of game design and strategy for WMS International. “We really think long and hard about the players, and what really excites them. And, you’ll find that players are pretty much the same the world over.”

That said, some game features with worldwide appeal play particularly well in Macau, says Englman. “One thing that separates players in Macau is that they want a high sense of anticipation building up to a result; you can tell that by the way they squeeze their cards when they play baccarat,” he said. “The other aspect you’ll see players here very much concentrate on is community. When you go past table games, you’ll notice a lot of them are empty, but others are completely full. People want to play together.”

“We find that some of our games that are very successful in other parts of the world are the games that are successful here (in Macau),” agreed Ken Jolly, general manager-Asia Pacific for Aristocrat Technologies. “We have a number of Asian-themed games in this market, but I can tell you those are the games that are very successful in other parts of the world.

“Do we design specifically for Macau? No, but we try and bring the best games to the market, and we listen to our customers to work out what their customers, the players, are telling them, to glean some research and direct our marketing and sales.”

Customizing for the Culture
Listening to the operator, in fact, is key in bringing the most popular features to bear in pleasing Asian gaming customers.

Johns stressed the importance of manufacturers tailoring their proven game features to the Chinese market.

“Manufacturers should listen to the operator, and not try to dictate what they think will work on our floor,” he said, “and listen to the feedback we give them on what is working in the different venues. What works in other jurisdictions and in other parts of the world—you can’t necessarily say it’s going to work in Macau.”

Stewart added that all of the manufacturers have listened to this advice over the past few years in Macau. “Most manufacturers are on the ball now where Macau is concerned,” he said. “They’ve gained the same experience we have over the years. They know what works, what doesn’t—what’s got a chance of working. They’re far more receptive to feedback and design concepts.

“It’s a lot easier than it was. A lot of people tried to sell me a lot of junk five years ago. Now, there’s a lot more communication and mutual understanding of needs. There was a time when we couldn’t even get glass translated into Chinese. Those of you whose language is English should go to Russia or some similar jurisdiction and try to enjoy games when you can’t understand what’s going on. It was the same for the Chinese here. These issues were resolved quickly, and we’re thankful to the manufacturers for that.”

According to Kurt Quartier, vice president of
international casino markets for IGT-Asia, language and cultural particulars for Chinese markets are the
first step in designing effective games for Macau and nearby markets. Once that barrier is crossed, he said, the strengths of the math and game features take over.

“We’ve done quite a bit of work specifically on theming and language,” Quartier said. “As some of my counterparts have said, the math is pretty much the same; what works in one place will work in the rest. We had a similar experience in Russia before this market opened up. You would go and do Russian themes, and when you put the two math models next to each other, the original model still works better. We’re kind of seeing the same here, although we’ve also had some success with some of the Asian themes that were specifically aimed at this market.”

McKee noted, though, that successful math models must still take into account the specifics of each culture and language. “What has always been important to us is that we do develop games for specific markets,” she said. “Our experience has proven that yes, there are international games that tend to be successful more or less across borders, but there also are specifics that really need to be taken into consideration when you develop the games. That’s why our approach to games, especially for the Asian market, is to develop a specific library of Asian games.”

“It’s also a matter of keeping things simple when you’re dealing with a population coming from mainland China,” added Catherine Burns, vice president and managing director, Asia-Pacific, for Bally Technologies, “and of keeping a very open mind on your demographic. It’s one of those markets that involves trial, trial, trial, build on experience, learn from other markets, learn from what you see culturally, and go from there.”

Burns also cautioned against designing what she calls “American Chinese” themes. “Chinese people don’t eat fortune cookies!” she said. “Game developers need to get out to mainland China and feel the pulse.” She said that definitely extends to translating the games into Chinese. “None of us should be sitting here talking about language—we’re in China. Language should be something that’s automatic.

“But it’s difficult, because with language and character sets in Chinese, it’s such a rich, functional language that sometimes if you’re not using translators who are native, mainland Chinese, you can get the translations very, very wrong. We certainly found that out on a few of our early translations. We were using U.S.-based Chinese translation houses. We stopped that.”

The Right Mix
As the market matures in Macau and nearby Asian casino locations, slot-makers and operators alike are working to develop a game mix that will satisfy both the mainland Chinese who ferry over and the increasing numbers of international tourists.

Harmen Brenninkmeijer, CEO of Octavian International, commented that the varied nature of the customers coming to Macau has presented a challenge to game developers. “This is quite a difficult market to a certain extent, because on one side you have mostly tourist play, and on the other side you have the hard-core group coming over and over again from Hong Kong, or even locally from Macau,” Brenninkmeijer said. “To determine exactly what they like is, in principle, quite different. The education levels are very different for the different players… I still think we all have to find out what is really going to drive this slot market to where we can be truly successful.”

In the meantime, says Brenninkmeijer, “we’ve got to make money,” so the manufacturers look to what has been successful thus far. Multi-line video has been the mainstay for several years in Macau, although high-end reel-spinners enjoyed some success in the first year or two after gaming expanded.

Though the multi-line games are still pervasive, according to Quartier, reel-spinners are making a comeback, thanks to the five-reel versions of traditional video formats. “The new steppers play like video, so spinning reels are enjoying a resurgence around the world,” Quartier said. “It will be interesting to see how far they can go in this market. I think they can go a long way.”

SJM’s Stewart credits the manufacturers for responding to their feedback in making reel-spinners work. “Steppers originally worked very well in high denominations,” he said. “We had some spectacular performances from $10, $20, $50 and $100 denominations in the right quantities. But nothing was offered to us that really caught the players’ imagination, and a couple of manufacturers at that time were dead in the water.

“To their credit, the manufacturers sent teams out here, and they researched, restructured and rewrote, and now, a couple of the stepper games are quite spectacular—five-reel, with all the traditional video features, except for the reel setup. It’s to their credit that they saw where we were and addressed it. Of the top 10 games in Macau for the last five years, probably half of them are five years old—they are games we introduced up front when we first set up the Sands floor. The other half of the top 10 is that new product, from manufacturers evolving and developing their product to better meet the local preferences.”

Crown Macau’s Ballesty said communicating what works and what does not work to the manufacturers will be critical to the future growth of slots in Macau. That, he said, means talking to the customers. “The staff here is the best I’ve seen anywhere in the world,” he said. “They know the games, and they are excited by the games, and that rubs off on the customers.”

Most of the operators and manufacturers working in Macau feel the slot market will gradually expand to a ratio closer to the Western casinos, but no one expects a 50/50 mix any time soon. Brenninkmeijer calls recent projections that slots will match tables in Macau in seven or eight years “grossly optimistic,” but he adds, “you just never now. Right now, we know that a lot of the table business is from junkets. Is that going to expand or slow down? If it slows down, that’s going to move the slot percentage up quite quickly.”

“The problem at the moment is that most of the slot revenues come from very few people,” said WMS’ Englman. “The top 10 percent of players is making up probably 80 percent of the revenues, even in the slot area. What we need to develop here is a mass market, where there are a lot of people playing the slots. That’s really going to drive the market.”

When will that happen? The jury’s still out.

Pocono Potential

By Roger Gros Tue, Aug 12, 2008

The next generation in Pennsylvania gaming opened last month in Wilkes Barre when the Mohegan Sun at Pocono Downs debuted its permanent facility. The $209 million facility includes retail, branded restaurants and the latest, state-of-the-art slots.

The racino is the Mohegan tribe’s first commercial venture outside of its tribal casino resort in Connecticut and was the first gaming facility to open in Pennsylvania with its smaller facility in the racetrack. And it’s no coincidence that there are similarities between the two facilities.

Bruce “Two Dogs” Boszum, the chairman of the Mohegan tribe, says efforts were made to incorporate the natural geography, the culture and the history of the surrounding Pocono mountains into the design of the facility, very similar to the Mohegan Sun casino resort in Connecticut.

Ironically, Wilkes Barre was settled in the late 1700s by settlers from Connecticut, a fact that has joined the operators with the community.

“We’ve gotten tremendous support from the community for what we’re doing here,” says Bobby Soper, president and CEO of Mohegan Sun. “This is just part of the renaissance that is occurring throughout this region.”

Mitchell Etess, president and CEO of the Mohegan Tribal Gaming Authority, said the high Pennsylvania tax rate limited how much the company could invest.

“We would have liked to invest twice what we did,” he says, “but it was just impossible to get a return on our investment with the level of the tax.”

Still, says Etess, he’s proud of what they’ve built for the market.

“There’s nothing like it anywhere in Pennsylvania,” he says. “We wanted to give our customers something they could not find anywhere else in this market, and we think we’ve succeeded.”

The circular casino, designed by JCJ Architects, has a similar feel to the original Mohegan casino in Connecticut, and the “journey” begins when approaching the casino. A “torchere” features a “smudge pot” at the top, a lighted simulated fire that can be seen for miles. The undulating exterior is reminiscent of the surrounding mountains, and the arrival gives visitors a sense of what the region is known for, including a sculpture that celebrates the original natural resource that attracted immigrants, coal.

The Mohegan Sun’s principal competition has been the Mount Airy Casino Resort, less than one hour away, which opened in October last year and immediately took market share from Mohegan Sun. Soper expects to regain those customers and more.

“While I can’t talk about numbers because of financial disclosure restrictions,” he says, “I’m confident that once the word gets out about what we’re offering here, there will be no reason to go anywhere else.”

One of the places Mohegan’s Pocono customers can go is Atlantic City, which offers the full casino experience. Pennsylvania casinos are still limited to only slots.

“We’re pretty confident that tables will eventually be approved,” says Soper. “We’ve got plans about how we’ll implement table games, but of course we defer to the views and opinions of the commonwealth’s regulators and legislators.”

Still, the Mohegans’ most serious competition will come online in about one year when the Sands Casino Resort in Bethlehem opens. The $350 million first phase is designed to be a multi-use development that will be less about gaming and more about the entire entertainment and leisure experience. While Mohegan Sun at Pocono Downs offers about half a dozen shops, the Sands will have dozens of upscale shops and restaurants.

Despite some complaints about the state gaming board’s procedures and decisions, Soper says he’s been consistently impressed with its professionalism.

“The commissioners and the staff of the gaming board have been nothing but supportive of our efforts here to make gaming in Pennsylvania work. And we could not have done it without them.”

Etess said the facility could become a template for other projects currently being considered by the tribal gaming authority, including a casino in Kansas and at Aqueduct racetrack, in New York City, where the company is a finalist in the slot-operator sweepstakes.

He says the high tax rates in all those jurisdictions don’t scare him away.

“When you consider the rate we pay in Connecticut, which is effectively around 20 percent, that’s higher than most commercial land-based rates in the United States,” he says. “In Pennsylvania and other states, we’ll build what the market will bear, but we’ll build a quality facility that fits the market.”

A New World of Bingo

By Judith Shapiro Tue, Aug 12, 2008

National Indian Gaming Commission Chairman Phil Hogen has announced a new twist in the labyrinthine process toward a “bright line” defining Class II gaming under the Indian Gaming Regulatory Act. The struggle among competing interests over the proper scope and regulation of Class II games has become a spectacle requiring close attention to the players and their positions.

Since the summer of 2004, the NIGC has labored over increasingly arcane rules it proposes to govern the definition, scope, technological standards and minimum internal control standards (MICS) for tribes offering technologically aided games of bingo, pull tabs and games similar to bingo under IGRA.

The commission has pressed forward for years over objections by tribes and the Class II industry, which insist the proposals flatly contradicted the statute, judicial decisions and prior NIGC regulations. The NIGC was equally undeterred by objections from the U.S. Department of Justice and some states that its proposals were too permissive, and subject to challenge on that basis. Indeed, even when the NIGC’s own economic study forecast billions of dollars of adverse impact on the tribal economy, should its then-proposed regulations take effect, the commission seemed set on its regulatory course.

But that course has now taken an abrupt turn. A roomful of tribal leaders and others gathered in Oklahoma City for the Oklahoma Sovereignty Symposium were surprised—and then pleased—to hear the chairman state that the commission was going to set aside the proposed definition and classification rules that would have extinguished the viability of Class II gaming.

According to Chairman Hogen, the commission now proposes to follow two paths to enlightenment, at the end of which he will be able to retire from the commission confident that Class II gaming is protected against the forces of darkness.

He expects very soon to proceed with final rules for technical standards and minimum internal control standards. He says that the commission will not move forward with the proposed definition of “facsimile” or the extensive classification rules. In their place will be an administrative appeal of the single issue of “one-touch” networked bingo play. The new strategy may entail less litigation—or more. It has certainly generated significant interest and discussion by tribal leaders and attorneys across the United States.

Escaping the Regulatory Quagmire
The proposed classification and definition regulations, if promulgated, would certainly have been challenged, and would have provided a rich source of legal issues likely to delay their taking effect for years. The many comments filed in opposition to the proposed rules argued the rules were unsupported by the language and intent of IGRA, as previously construed by federal courts.

Indeed, the commission was proposing to withdraw and replace a “facsimile” definition that had already received judicial approval. And then there were (and are) procedural flaws in the rulemaking procedure itself, offering even richer opportunities for legal challenge.

In setting aside the proposed regulations, the chairman seizes an opportunity to focus on an issue central to the definition of permissible Class II bingo systems: whether a Class II player may participate in a game in which the aid device automatically covers drawn bingo numbers for the player—the controversial “one- touch” or “autodaub” system that permits players to engage in linked bingo games that play quickly, and provide the “fast, fun and lucrative” qualities that the DOJ has argued defeats their Class II status, but which greatly advance the viability of Class II gaming. One tribe’s actions now raise that single issue before the NIGC and, potentially, before a reviewing court.

In late May, the Metalakatla Indian Community, located on the only Indian reservation in the state of Alaska, submitted to the NIGC a simple amendment of its approved gaming ordinance. With no Class III compact available, Metlakatla depends on a modest Class II facility to replace lost fishing and forestry revenues; it wished to enhance its operation beyond the two-touch games it was conservatively operating, but did not want to risk NIGC enforcement against one-touch games.

The Metlakatla Indian Community Council engineered a direct challenge grounded in its governmental authority. Based on its conclusion that IGRA permits one-touch play of Class II linked bingo systems, the council amended its gaming ordinance accordingly. The amendment reads as follows:

“Class II gaming includes an electronic, computer or other technologic aid to the game of bingo that, as part of an electronically linked bingo system, assists the player by covering, without further action by the player, numbers or other designations on the player’s electronic bingo card(s) when the numbers or other designations are electronically determined and electronically displayed to the player.”
Metlakatla Ordinance Amendment, § 4.2, May 28, 2008 (emphasis added).

The language authorizes a bingo system to provide technological assistance to a player asking that it “daub” numbers on a card when such numbers or other designations match those drawn or electronically determined. The tribe immediately submitted that amendment to the chairman as required by 25 C.F.R. § 522.3(a). The chairman wasted little time in disapproving it.

On June 4, the day before chairman’s public announcement in Oklahoma City, he issued a letter to the mayor of the Metlakatla Indian Community detailing his reasons for disapproving the amendment. The letter reiterated many of the restrictive arguments commission staff have developed and embraced in the last several years in opposition to tribal operation of one-touch bingo games. None of these arguments is new to those who have followed the commission’s public pronouncements.

The chairman once again claims that a one-touch game lacks the “competition” required to prevent a linked bingo game from being an impermissible Class III facsimile. He notes that a player in such a game could not “sleep” a bingo, and would therefore not be competing against other players to win the game. Finally, in his attempt to reconcile his conclusion with the existing facsimile definition, the chairman criticizes that definition and seeks to eliminate the permissive provisions with which he disagrees.

In essence, he seeks to make effective his own facsimile definition without the administrative formalities necessary to withdraw and replace the existing 25 C.F.R. § 502.8. Most significantly, the chairman’s letter reiterates positions previously taken in speeches, regulatory proposals or non-binding opinions of the Office of General Council—but now, for the first time, opens those positions to judicial review. The debate thus enters a wholly new phase.

The chairman’s disapproval of the Metlakatla Ordinance Amendment is subject to appeal to the “full” commission, and thereafter to review in federal court under the Administrative Procedure Act. The Metlakatla tribe’s July 7 appeal to the NIGC started that process. The subsequent schedule will be as follows:
   • July 28: Chairman’s response to the appeal;
   • August 11: Metlakatla reply to the chairman’s response;
   • August 21: Deadline for other tribes to submit amicus briefs to NIGC;
   • October 6: Deadline for full commission to decide the appeal.

The full commission’s decision on appeal will be subject to judicial review so long as the case is filed within the statutory six-year limitation period.

The Controversy Continues
In more recent meetings, the chairman has declined to commit himself to precise direction for further action on Class II regulation. He continues to indicate that the NIGC will not go forward with the classification standards or facsimile definition proposals.

He might, he says, announce withdrawal of those proposals at the same time as the commission announces its intent to move forward with the two remaining proposed rules—on technical standards and MICS. He continues to see a need for what he now describes as “a brighter line” distinguishing permissible Class II technological aids from facsimiles that may only be played pursuant to a compact.

There are widely differing reactions to the chairman’s recent pronouncements. While the technical standards and MICS as published last October are substantively more acceptable than the NIGC’s original proposals, as result of extended discussions and changes pressed by tribal and industry participants over a year-long collaborative process, the NIGC’s classification and facsimile proposals were not subject to similar examination.

Many believe that all of the regulatory proposals particularly suffer from insufficient consultation with tribal governments. There is little disagreement among tribal advocates that the previous package of proposed regulations would have devastated the industry, but there is significantly less agreement on how best to protect that same industry going forward. Many tribes are pressing the chairman to formally withdraw the set-aside regulations, and will not be comfortable until that is accomplished.

Class II remains vitally important to the future of all tribal gaming. Immediately after the chairman announced his determination to set aside the classification proposal, the state of Massachusetts showed renewed interest in discussing a compact with the Mashpee Wampanoag Tribe.

The significance of Class II gaming is not just the bingo game.

Judith Shapiro is a Washington, D.C., Indian law attorney who has been active in the Class II regulatory process. She can be reached at 202-723-6400 or by email at jshapirolaw@earthlink.net.

Hail Caesars

By Blaine DeGracia Tue, Aug 12, 2008

The Detroit/Windsor skyline changed dramatically with the opening of the first Caesars-branded international property in Windsor, Ontario, Canada. Caesars Windsor, formerly Casino Windsor, celebrated the official re-branded opening of its casino resort on June 19. Caesars Windsor is owned by the Ontario Lottery and Gaming Corporation, and is operated by Harrah’s Entertainment.

At the grand opening, over 1,500 guests were invited to celebrate the gala event in the new 26,000-square-foot Augustus Ballroom. The event featured many Canadian dignitaries and gaming executives, including: Kevin Laforet, CEO, Caesars Windsor; Gary Loveman, chairman, president and CEO of Harrah’s Entertainment (soon to be Caesars Entertainment); Kelly McDougald, CEO of the Ontario Lottery and Gaming Corporation; David Caplan, Ontario minister of public infrastructure renewal; Sandra Pupatello, Ontario minister of economic development and trade; and Eddie Francis, mayor of Windsor.

The gala opening was christened with an invitation-only performance by Billy Joel. In addition, the Colosseum has performances scheduled for later this year which include country stars Gretchen Wilson and Clint Black, comedian Chris Rock and the legendary Smokey Robinson.

Laforet said the new property and re-branding would help the casino property compete with MotorCity Casino, MGM Grand Detroit Casino and Greektown Casino, which are located across the Detroit River in Michigan.

“There’s a combination of things,” he said. “One, the Caesars name—because it is world-renowned and it’s recognized as the premier name in gaming. Along with Caesars and our affiliation with Harrah’s we’re hooked up with the Total Rewards player loyalty program, which is recognized as the biggest and best program in the industry. Specifically, on this property, to differentiate ourselves from the Detroit casinos, we have the entertainment element. We have a 5,000-seat entertainment center that the Detroit competition can’t match.”
Loveman acknowledged that the remodeled and re-branded Caesars Windsor is important to the city.

“I know this community (Windsor) has dealt with some hard times and fierce competition from across the Detroit River,” he said. “But that is about to change.”

The new 27-story Augustus Tower adds almost 370 rooms to the casino, bringing the grand total to 758 rooms. The newly built, 5,000-seat Colosseum entertainment center is the largest in the region, out-sizing even the Colosseum at Caesars Palace in Las Vegas. With over 20 rows of removable seats, the Colosseum adds an additional 40,000 square feet of convention space to the casino as well. Both additions make the new Caesars Windsor the largest convention resort in all of Canada, with over 100,000 square feet of convention space.

According to Dwight Duncan, minister of finance and member of the Provincial Parliament for Windsor-St. Clair, Canada, “This is a dream come true; this is a real convention center; it is in my view the premier convention center probably in the country; the conventions they are booking now are of such magnitude that we could never have considered this in the past. It is a huge opportunity in our tourism industry.”

The May 17, 1994 opening of the interim Casino Windsor was the first casino property to serve the Windsor/Detroit market. It was supplemented by the addition of the Northern Belle riverboat 15 months later, and both were replaced when the permanent Casino Windsor opened on July 28, 1998.

During Casino Windsor’s early years, it was the dominant casino property in the Windsor/Detroit market. Most estimates figure that 80 percent of Casino Windsor’s players have historically been from Michigan and northern Ohio, and thus it has had a strong dependence on American players that needed to cross the international border. In 2004, Casino Windsor’s market share was 34 percent, but according to governmental reports its share dropped to 19.3 percent in 2007.

The September 11, 2001 terrorist attacks on the United States produced an undesired ripple effect for Casino Windsor, resulting in lasting and persistent revenue drops. The increased American/Canadian border security created cross-border commuting issues, resulting in increased travel time and inconvenience. Consequently, a percentage of the tourists from the United States who visited Casino Windsor chose to stay closer to home and patronize the three Detroit commercial casinos.

In February 2005, Casino Windsor announced a C$400 million construction project which included an additional hotel tower, entertainment facility and convention center to be completed over the next few years.

In 2006, Casino Windsor announced the re-branding of its facilities to Caesars Windsor. Over C$430 million has been invested in the construction and renovation of the casino facility.

“This is a tremendous property,” remarked Laforet. “Combining this great facility with the world–renowned Caesars name makes Caesars Windsor a premier destination for world-class entertainment and getaways.”

The new additions and re-branding of Caesars Windsor came at a much-needed time, as the negative effects resulting from increased border restrictions, weak metro Detroit economy, competition from the three Detroit casinos, the strong Canadian dollar and prohibition of smoking at Caesars Windsor have all taken a heavy toll on Windsor’s gaming industry. The new additions to the casino resort have since enhanced the casino property, making it an attractive choice for potential patrons.

According to Holly Ward, director of communications and community affairs at Caesars Windsor, “Right now we’re at about 9,000-11,000 people a day, and we are expecting to see an increase. When you have a building of our caliber and all of the amenities that we can now offer, more people will come. There is so much cache in the Caesars brand name that the brand will bring people who will come visit because it is a Caesars property.”

To better compete with its chief rival, the MGM Grand Detroit, Caesars Windsor hopes to draw premium players with high-limit wagering up to $50,000 at some tables.

That’s 10 times higher than any casino in Detroit and higher than bets accepted anywhere else in Canada.

Craps bets will rise to $50,000 max on one roll of the dice, but bets on blackjack, which can be doubled down with two hands, will be capped at $25,000, or $50,000 for both.

Roulette limits will go from $5,000 to $25,000; baccarat and mini-baccarat from $5,000 to $15,000; and pai gow poker from $2,500 to $15,000. Minimum bets in the high-limit room will remain at $100 each.

Caesars’ U.S. casinos in Las Vegas and Atlantic City also introduced a $50,000 limit this year.

Blaine DeGracia is on the staff of Regulatory Management Counselors of East
Lansing, Michigan.

Interview with Larry Mullin, President, Borgata Hotel Casino & Spa

By Roger Gros

Interview with Scott Barber, Sr. VP & GM, Harrah's Atlantic City

By Roger Gros Wed, Aug 20, 2008

Casino Communications,

Paul Oneile

The European Commission means business when it comes to leveling the global playing field for gambling businesses. Brussels wants a fair, open market that encourages healthy competition, and no obstacles will escape the commission’s path of aggression. The loudest shots were fired in March in the direction of the United States, whose restrictive policy on internet gambling, the E.C. argues, violates international trade rules. The E.C. is investigating these policies and scrutinizing the United States’ unilateral removal of gambling services from WTO commitments.

While the European Union/U.S. clash is—and will continue to be—a real eye-opener, the battle on the home front could be about to turn white hot. The E.C. drew lines in the sands of seven E.U. member states in 2006 with the commencement of infringement proceedings into whether the states’ domestic policies protecting gambling monopolies violate the terms of the European Treaty, which opens up the internal markets of all member states to competition from all other member states.

Two years later, the individual battles are transitioning from the reason-opinion stage (in which the two sides either come to terms or go to court) to the final stage—a showdown in the European Court of Justice—and it looks as though some of the member states are showing signs of capitulation.

But for those holding out hope for an open European market, the states that appear to be considering commercialization are sending mixed signals at best. Here’s a synopsis of recent activity in five of these states.

France—A controlled opening?
France may finally be on the verge of turning a corner. Following a June 4 meeting with Charlie McCreevy, the European internal market and services commissioner, French Budget Minister Eric Woerth said France’s government has agreed to a “controlled opening” of its online gaming market. The country will tentatively begin licensing online betting and gaming operators in fall 2009.

Three weeks later the French National Crime Commission released a report calling for the creation of a new betting and gaming regulator authorized to conduct software and systems audits of remote gambling operators.

Sweden—Backing off a bit
Changes in the leadership of Sweden’s gambling monopoly, Svenska Spel, suggest that the government might want to reverse what seemed to be a promising trend toward opening the market. Jesper Kärrbrink stepped down in April as chief executive, stating that his philosophies on how the state-run company should be operated “don’t agree with the image held by the owner.” The commercial-minded Kärrbrink has been replaced by former Swedish Deputy Prime Minister Margareta Winberg, who is perceived to favor monopoly preservation.

The changeover was preceded in January by new European Commission infringement proceedings specifically into Svenska Spel’s poker operations. In June, the government denied Svenska Spel permission to create an international poker network with other state-controlled gaming operators.

Meanwhile, Swedish online operator Betsson opened a terrestrial betting shop in Stockholm on May 30. The Gambling Board threatened to fine Betsson, and Betsson responded by reporting the board to the Ombudsmen of Justice. Now, the government could be forced to enact new legislation to better define the boundaries of commercialism.

Italy—Commercialism… to a degree
The Italian government in early 2006 stood out as a leading advocate for the member states’ gambling monopolies when it issued blacklists of foreign internet gambling operators, but it has more recently shown signs of embracing competition—at least to a degree.

In December 2006, the government divvied up thousands of new betting licenses to five commercial ventures. In November 2007, the country’s regulatory authority, the Autonoma dei Monopoli de Stato (AAMS), approved a law legalizing online games of skill—including some variants of poker—in an effort to cut the country’s growing deficit. And, in February 2008, the government announced that it will tender 329 horse betting concessions to the public by the end of the year. Despite these developments, however, few commercial entities are finding the market penetrable.

The Netherlands—Still fighting
Dutch authorities don’t seem to be wavering in the face of an imminent showdown with the E.C. Tjeerd Veenstra, director of Dutch state-owned gambling monopoly De Lotto, remains Europe’s loudest voice in favor of preserving the restricted markets, and continues to call for solidarity among the investigated member states in their efforts to protect their laws.

The company has eagerly taken on any and all commercial operators seeking a piece of the Dutch market, and its most publicized legal battle made headlines again in June when the Dutch Supreme Court upheld a 2005 ruling prohibiting Ladbrokes from taking bets in the Netherlands. The case has been referred to the European Court of Justice in Luxembourg.

Denmark—Considering change
The Danish government is feeling the pressure from the E.C. amid the reason-opinion stage of the E.C. infringement proceeding pertaining to the country’s sports betting legislation. Tax Minister Kristian Jensen stated on Danish National Radio in April that he was considering breaking the country’s sports betting monopoly.

Like the Netherlands, Denmark is also engaged in a legal battle against Ladbrokes, which has challenged the Danish Gaming Act. The high court ruled against Ladbrokes in November 2006, and the case is now in the hands of the Supreme Court.

Mark Balestra is the director of publishing for Clarion Gaming. A veteran of 11 years in the online gambling business, Balestra is the editor and co-creator of Interactive Gaming News (www.iGamingNews.com) as well as the editor and co-author of Internet Gambling Report, a legal guide to interactive gambling.

Table Games: Optimal Utilization

By Andrew MacDonald Tue, Aug 12, 2008

Many gaming executives might mistakenly believe that optimal utilization of a gaming table is a simple function of getting as many people as possible to crowd around a single gaming table and wager as much as possible.

At first glance, this might appear to be the most efficient utilization of floor space and labor. This logic appeals even more in times when managers are being asked to trim their operating costs. This can occur when management is under short-term profit pressure and is looking wherever it can to enhance overall performance.

The major costs in most casino operations are gaming tax, labor and complimentary benefits to players. These often make up around 80 percent of direct operating costs in a casino’s table game operation and, as such, come into focus in times of economic downturn when greater efficiencies are being sought.

As gaming tax is generally unavoidable as a percentage of win, and player complimentaries—when properly administered—are a marketing cost that helps drive business, it is often direct gaming labor that receives the greatest scrutiny. It is the “most variable” of the variable costs.

However, though it may seem counterintuitive, optimal table game utilization is not necessarily a function of having every available position at every open gaming table occupied by customers. Indeed, that could quite possibly be a long way from the optimal outcome; the labor cost savings might be more than offset by foregone table game winnings.

Targeting 100 percent gaming position utilization may be the best way to reduce labor costs, but it may also sacrifice the highest possible yield in profit from a given set of customers. This might be paralleled to a farmer maximizing the yield per tractor in harvesting his fields, but leaving much of the crop to rot because the few tractors in use could not get to some of the farmland.

Reaching Optimal Utilization
Determining optimal utilization per table can be approached as a scientific question. This analysis attempts to do so by applying a relatively straightforward mathematical equation which can be estimated by carefully understanding and modeling certain important components of the mechanics of table game play.

An appropriate table games analysis needs to take into account time and motion aspects of table gaming processes, including the elements that control the speed at which dealers conduct the game. In the game of baccarat as it is played in Macau or Las Vegas, for example, the important elements are:

• the time the dealer takes to deal the cards;
• the time taken by the players of the Player hand and Dealer hand to expose
their results;
• the time taken by the dealer to take and pay individual wagers; and
• the time allowed for players to make subsequent wagers.

Issues like fills, credits, cash buy-ins, color changes, supervisor acknowledgements and dealer changes all have some impact on the time and execution requirements at the table. However, these are usually considerably less significant and perhaps less sensitive to variations in the number of players at the game over any reasonable time frame. For our purposes, we are going to concentrate on the number of players as the key variable in seeking out optimal table allocations under varying player demand conditions.

Using empirical observations to monitor, segregate and estimate the elements of the mechanics of the game under different playing conditions, especially with respect to the number of players at the table, will provide the basis for finding closer to true optimal solutions with respect to the table games labor question.

Such data would permit baseline calculations to estimate the average speed of the game under varying circumstances, and would allow analysts to determine how changes in the number of players affect the number of decisions per player and for the entire table over any given time period.

The game of blackjack can be used to illustrate this issue and how it might be addressed. Consider a situation where six $100 players, each planning on betting one box per round at $100 per hand, step onto the casino floor. Management’s alternatives at one extreme could be to cater to the players by having them all play at a single table with one dealer and one supervisor. At the other extreme, management could offer each player a private table with its own dealer and supervisor.

Suppose that the applicable gaming tax rate is 20 percent and the labor cost per gaming table per operating hour is $40. Which scenario provides the better return?

To be most efficient and maintain operating costs at the lowest level, management might opt for the single-table scenario. If that is the case then operating costs would be $40 rather than the alternative $240, and this is clearly more cost-efficient.

But is this solution the more profitable for the casino? Suppose that empirical observations yielded the following findings for the casino’s blackjack games. The casino’s dealers can deal a total of 350 hands per hour on average (including their own hand), and this number of hands is more or less independent of the number of players at the table. House rules are such that a perfect basic strategy player plays to a house advantage of 0.5 percent of handle. The average $100 player that the casino attracts plays a strategy about 1 percent inferior to the basic strategy, creating a 1.5 percent average house advantage for the casino.

Under these assumptions, the single table will generate 300 player hands per hour, with a total handle of $30,000 per hour, and an expected win of $450. After labor costs are computed, the contribution to income from the single table is $410.

On the other hand, the second alternative of one player per table would permit each player to make 175 wagers per hour, resulting in a handle per table of $17,500 and an expected win per table for the casino of $262.50. For the entire six tables, the expected win would be $1,575; after labor costs of $40 per table per hour are subtracted, the contribution to income for the casino from this option is $1,335 per hour, more than three times better than the one-table alternative.

In addition, players may be tempted to play more than one box. This increases the yield by increasing the proportion of the 350 of dealt hands which go the player. As will always be the case with taxes on win at a fixed percentage, the after-tax results will not change the optimal solution, and the one-table-per-player option remains more than three times better than the one-table option.

(If gaming taxes are accrued as a percentage of gaming win, it will not change the optimal number of players per table, but it will increase the required minimum average wager to make the game show positive income contribution.)

This type of simple example is often cited to demonstrate that optimal utilization is not the same as 100 percent table occupancy. In the above scenario, optimal utilization occurs with six-box blackjack tables when there would be a single player per table. (Given the assumptions, using three tables with two players each would result in hourly expected winnings per table of $350 and contribution per table of $310, for a total of $930, a third less profitable than the one-table-per-player option.)

Based on an algebraic model developed for the values assumed in the above situation, any average wager of $23 or more would call for one player per table. If the average wager was between $15 and $22, then the optimal number of players per table would be two; between $11 and $14 average wager, the optimal number of players per table is three; and at between $9 and $10 per average wager, the optimal number of players would be six. When the average wager per player drops below $9, the table cannot earn enough to cover its labor costs at $40 per hour.

What needs to be calculated for each game type and for each average wager level is the number of players at which profit per player is maximized. To do this for blackjack requires estimates of how the game’s speed of play and the number of decisions delivered to each player changes as more players join the game. For each average wager size, it is then conceptually possible to calculate the optimal utilization for that game, taking into account gaming tax rates and labor costs.

Assessing Player Skill
For blackjack, it is also necessary to assess the relative average skill for each classification of player by average wager size. For example, it is conceivable that low-limit players (with $10 average wagers) play with an average house advantage (player disadvantage) of 2 percent, whereas higher-limit players (with $100 average wagers) might play with an average player disadvantage of 1 percent.

To estimate the skill levels of different player categories, hours of observations with appropriate sampling strategies would be required to determine the average skill levels of players (based on their play strategy deviations from basic strategy).

Existing software in the casino’s surveillance department, such as the blackjack tracking tool “Bloodhound,” can calculate the casino house advantage against any player, based on actual player decisions. Such a tool could facilitate determining player skill by players grouped into average wagering level categories.

Calculations for the game of blackjack will be distinct for each market depending on tax rates, labor costs, player skills and game rules. These factors, along with dealer speed and procedural efficiencies, will affect the values of the parameters in the model. It is then a relatively straightforward task to apply the logic of the model to determine an optimal utilization rate as a function of average wager size.

Of course, players are not always so accommodating to be easily classified and segregated with respect to average wager size and skill level, so consideration needs to be given to the social aspects of table games. However, it is in the casino operator’s interests to consider how best to maximize returns in light of such realities. One simple solution might be to offer some higher-limit blackjack tables with a lesser number of playing stations than the standard six. In the same vein, the casino might change the size and shape of higher-limit tables and offer more luxurious and comfortable seating for each player.

Yet another solution might be to offer a dynamic (electronic) table with betting areas (boxes) that could be activated on demand. This could be achieved by LEDs embedded into the tables to delineate betting areas. The number of boxes could then be altered dynamically. When games are initially opened, it may make sense to have only three to five betting spots activated per table.

Betting areas could also be activated in circumstances where total demand exceeds supply at some average betting level, or where an individual higher-value player might want to play multiple boxes. Management can then get closer to optimal table utilization by considered alteration as playing conditions change. Alternatively, technology might allow the number of spots at the table to change as a matter of electronically observed playing patterns and carefully written algorithms.

Harking back to the example of six $100 players and a choice of operating either six blackjack tables or one, it was shown that it was more effective to operate six individual tables as long as the players chose to play on a single table each. However, what if the players instead chose to all play together on one table?

In the example, this situation would be sub-optimal not only for the reasons found in the analysis, but also because the five inactive tables would incur an additional operating cost in aggregate of $200 per hour. Thus, part of the management challenge is to encourage the right kinds of players to spread out while discouraging lower-betting and more highly skilled players from clustering together. To some extent, this can be influenced by opening or closing tables at various minimum betting limits.

Similar calculations to the blackjack example could also be made for any other table game. Each game should be analyzed by estimating its particular mechanical characteristics and direct cost components. Such estimates should also reflect the relative change in game speed that occurs when additional players are added to a single gaming table.

For example, in Macau baccarat, there will be substantial differences for squeeze or no-squeeze games and for commission versus no-commission variants. Within the Macau gaming market, baccarat is far more relevant to consider—compared to blackjack—because of the high preference for the game among players.

To illustrate the situation, and apply a slight variation of the model for Macau baccarat, the following assumptions might be made:

Gaming Tax = 40%
Labor cost = MOP$100
House advantage = 1.35%

Decisions per hour = 55 decreasing by 3 for each additional player
(to 37 then decreasing at a lower rate as player numbers increase).

Squeeze game with standard payout structure.

This would suggest that if game speed declines in the manner assumed—as more players are playing on the same table—then, as with blackjack, it is better to spread players out across a greater number of tables. Depending on the tax rate and labor costs per hour, the minimum average wager to make the game profitable is increased by the slower play with multiple players.

For such games, this suggests rituals that slow the game, such as squeezing the cards, might need to be eliminated for relatively low-limit games in the interest of efficiency.

As with the earlier discussion, this also suggests that some higher-limit baccarat tables in Macau should be redesigned to cater to fewer players per table; smaller tables with more comfortable and luxurious chairs and better player services might produce greater returns. What is also evident is that one needs to incorporate a number of important variables to approach the optimal utilization of tables in a casino.

One more area of consideration is the existing structures and customs in a particular gaming market. For baccarat tables in Macau, for example, almost all tables currently have nine boxes, even though optimal utilization—using the principles developed in this analysis—might suggest optimal numbers of players varying from one to nine players per table, depending on average wager size and speed of the game.

This may be difficult to manage, partly because of typical player behavior in Macau. Players tend to bet together against the house and seek situations where they feel they are on a run—or a hot streak—and cluster around a single table betting sometimes three deep, so that a nine-box table might have 27 wagers with back betting, all riding on the same outcome.

While it may be optimal to eliminate that situation from a profit maximization perspective, it may not be in keeping with the motives or desires of the players, and thus any attempt to do so must be balanced carefully with how players might react.

One lesson that comes from this exercise is the importance of segregation of gaming tables by the average wager size. If the optimal number of players for high-limit wagers is one per table and for low-limit wagers is six per table, there is no circumstance where the casino should permit low-limit players to slow the rate of play at high-limit tables.

Where one draws the line really depends on the cross-over points on the “optimal number of players per table” for a given set of parameter values, and it might be hard to get to that actual result. It is also crucial for accurate management reporting and analysis to not aggregate or average data from tables with different price points.

All of these complications noted, one can still conclude that management’s manipulation of the size, shape and congregation patterns around higher-limit tables, and its control over the average number of players per table at various wagering levels, should allow the casino to increase profitability.

That is better than allowing a lot of potential wagering to go unharvested by being too cautious in controlling the casino floor’s labor costs.

Andrew MacDonald is founder of urbino.net and is also executive vice president of gaming for Genting Berhad, based in Kuala Lumpur, Malaysia. He can be reached at andrew.macdonald@genting.com.

Bill Eadington is a professor of economics and director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. He is an internationally recognized authority on the legalization and regulation of commercial gambling, and has written extensively on issues relating to the economic and social impacts of commercial gaming. Eadington can be reached at eading@unr.nevada.edu.

AGA,

Travel Crisis

By Frank Fahrenkopf Tue, Aug 12, 2008

There is no doubt that recent headlines about the spiraling economy’s impact on the gaming industry have been sobering. Except for areas where industry expansion has occurred, our numbers are down, and our companies are absorbing the blow on the casino floor and in
the stock market.

In fact, the entire U.S. travel industry is hurting, compounding an already trying situation. Domestic and international air travel are down and—stating the obvious—that is bad for businesses like ours that rely on the leisure traveler. According to research, 41 million trips were avoided during the past 12 months, costing the economy $26.5 billion, including almost $6 billion to hotels and more than $3 billion to restaurants. When you throw in the costs of air travel delays, the cumulative cost to the economy of air travel woes exceeds $67 billion annually.

Looking at overseas travel to the U.S., we lost 2 million prospective U.S. visitors between 2000 and 2007 in the midst of a global travel market that grew 30 percent, amounting to 35 million new travelers. Had the U.S. market attracted its share of this increase in global overseas travel, our country would have earned an additional $137 billion in visitor spending and expanded our job market by 229,000 jobs.

In keeping with our mission to address matters affecting the commercial casino industry and protect its interests on Capitol Hill, the American Gaming Association has joined with a number of strategic partners to form a Policy Council that is focusing on the most significant public policy issues affecting our nation’s travel industry.

Organized by the Travel Industry Association and the Travel Business Roundtable, the Policy Council is developing plans to accomplish three goals:
   • grow the pie, by studying ways to increase the number of travelers to and within the U.S.;
   • solve problems, by proposing solutions to travel challenges; and
   • champion the traveler, by serving as a national advocate for the interests of travelers.

To meet these goals, the council has set specific public policy priorities, including facilitating domestic and international travel, increasing recognition of the benefits of travel as an engine for economic growth, and positioning the travel industry as a leader in environmental protection and sustainability. All of these areas could have significant positive impacts for casinos across the country.

As to the prospect of facilitating international travel, the AGA has been an active supporter of the Travel Promotion Act, a bill that would establish a nationally coordinated campaign to promote travel to the U.S. and address the frustrations of travel to our country.

Every other developed nation in the world has such programs and allots significant funding to support them. It is projected that a $100 million travel promotion program will yield millions of new visitors annually, bringing $8 billion in new visitor spending.

The act would promote domestic and international travel to and throughout the United States, which undoubtedly would equate to increased business for casinos across the country. As of this writing, the TPA has garnered 46 Senate co-sponsors and 229 House co-sponsors. This represents strong backing, and although the national elections and other legislative priorities likely will take precedence this congressional session, we expect consideration of the TPA when the new Congress convenes in 2009.

On the domestic travel front, the Policy Council is considering solutions to the challenges deterring air travelers, including suggesting solutions to reforming the air traffic control system and improving the Transportation Security Administration screening process. Members will also look to build alliances with many in the travel community to increase prospects for air travel reforms.

The AGA is also very active in efforts by the Policy Council to increase the appreciation of policymakers and media for the benefits of travel as an engine for economic growth. After all, this is an industry that generates more than 7.5 million jobs and is responsible for a $177 billion payroll. The economics of travel have a significant impact on how Americans live, and that is the message we are carrying to the nation’s leaders.

The AGA also anticipates a significant role in programs on the Policy Council docket that demonstrate the leadership of the travel industry in the fields of environmental protection and sustainability. The commercial casino industry already is a leader in this field, and we look forward to lending our expertise.

We can point to Las Vegas as the soon-to-be home to the world’s largest concentration of environmentally friendly hotel rooms. A total of 15 major new building projects there are currently seeking the U.S. Green Building Council’s Leadership in Environment and Energy Design certification.

Furthermore, some of Las Vegas’ most anticipated new projects are among those seeking LEED certification. MGM’s Project CityCenter, Echelon Palace and the Palazzo are all building projects that either are seeking or hold LEED certification. Each property features environmentally responsible construction and design, including low-water pressure showerheads, fluorescent light bulbs, super-insulating windows and walls, and the use of recycled building materials. Other properties are partnering with local organizations to better support green initiatives, such as the Horseshoe Casino in Hammond, Indiana, which has partnered with local waste management officials to promote sustainable practices.

The issues championed the Policy Council are essential as our industry and others relying on tourism weather the current economic storm, but they will continue to be central to the continued success of our business. A healthy tourism economy signals a healthy gaming business, and we will work hard to ensure that both are a reality.

Fantini's Finance,

Where to invest?

By Frank Fantini Tue, Aug 12, 2008

By GGB Staff Tue, Aug 12, 2008

Less than a week after a New York state judge determined that the Seneca Nation is not subject to the rules and regulations of Buffalo (a tacit approval of the tribal casino under construction in the city’s downtown), a federal judge ruled that gambling is illegal on the property.

State Judge Stanley Makowski said July 3 that by virtue of the Senecas’ sovereignty, the tribe’s $333 million Buffalo Creek Casino project—the largest private development in the city’s history—is immune from government infringement.

But on July 8, U.S. District Judge William M. Skretny ruled that casino gambling cannot take place on the nine-acre site, where gambling is already under way in a temporary gaming hall.

Though Skretny acknowledged that the parcel is Indian country, he said it is not gaming-eligible because it was taken into trust after the passage of the Indian Gaming Regulatory Act. IGRA bans gaming on lands acquired after 1988, but contains an exception for lands taken into trust pursuant to a land claim settlement.

The Buffalo Creek site, in the city’s Cobblestone District, was purchased with funds from the 1990 Seneca Nation Land Claims Settlement Act.

“Sovereignty and title are not the same thing,” said Neil Murray, of Citizens for A Better Buffalo, in the Buffalo News. “Congress never intended to carve out a parcel of property in the heart of a major American city and designate it as ‘Indian land.’”

Seneca President Maurice John reacted to Skretny’s decision by saying the Seneca Nation has faced many challenges “in our 1,000-year struggle for survival. This is but another. I am confident that we will be successful in achieving the destiny of the Seneca people.”

Buffalo attorney and casino opponent Richard Lippes replied, “They can build the casino; they just can’t operate it.”

Mayor Byron W. Brown of Buffalo backs the casino project, saying it will help revitalize the city. Plans call for a 22-story hotel, 90,000-square-foot casino, 2,000 slot machines and 45 table games plus restaurants, a spa and a 2,500-vehicle parking facility. The complex is expected to employ more than 1,000 people and contribute about $7 million a year to the host community. The temporary casino, which opened with 109 slot machines a year ago, generated more than $12 million in revenues its first six months.

Dateline,

Off the Tables?

By GGB Staff Tue, Aug 12, 2008

On June 30, all 14 Holland Casino properties in the Netherlands complied with the national smoking ban. In fact, the monopoly casino operator introduced the measure one day earlier than the required July 1 start date. The reason: Management considered it too unwieldy to ask clients to stop smoking at midnight on June 30, which the law mandated. It was deemed more practical to move up the start date.

That same practicality is at work among those looking at the future of the government-owned company, according to a recent article in the Dutch newspaper Algemeen Dagblad.

“We are currently too dependent on the games,” said Flip Doetsch, media relations manager at Holland Casino. “We need a more expansive product.”

According to Doetsch, the company is looking at moving more in the direction of—where else?—Las Vegas. The idea would be to develop more amenities for the gaming properties, such as hotels, spas, theaters, dance clubs and nightclubs. The group has long provided a well-developed restaurant and bar offering.

In recent years Holland Casino has experienced a trend toward more annual visits but lower spend per visitor. Now the smoking ban is expected to hurt the bottom line even more. Smoking is allowed inside special glass cabanas, but these are expensive. Plus, there is the constant pressure from the E.U. to open the market to competition.

Three think-tanks are currently working on solutions to the problems. This summer they will present their plans to the government for approval.

The Agenda,

Testing Technology

By Roger Gros

Remember the casino floor of 20 years ago?

Truth be told, it’s not that much different than it was back then. There are tables where tables once were (albeit a bit fewer) and slots where slots once were (quite a few more). There were and are lounges where players can relax and enjoy entertainment and libations. Lining the edges of the casino floor are the restaurants, which haven’t gone anywhere. Few things seem to have changed.

It’s only when you look closer and below the surface where you begin to note the radical changes that have transformed the gaming floor.

Every slot machine is connected via a system that collects millions of bits of data from each machine, telling casino operators how the machines are working, who is playing them and how much they are playing. By gathering this data and combining it with information gathered from the tables (and soon, non-gaming activity, as well), our understanding of the customer is becoming more clear with each passing year.

Table technology is improving, with state-of-the-art shuffling machines, RFID chips, and player tracking systems as good as those on the slots, giving casino execs more time to devote to customer service.

Even the lounges have recently taken great leaps forward. Check out the eyecandy lounge at Mandalay Bay or the i-Bar at the Rio. Both have “tables” that double as interactive entertainment centers that transform the entire lounge experience.

But for all that has changed in the last 20 years, the next 20 may deliver a transformation that will completely revolutionize the casino both above and below the surface.

The promise of server-based gaming will give casino operators the flexibility to cater to the wants and needs of every customer, regardless of wagering level.

The importance of non-gaming amenities and how they contribute to the overall value of a customer is just being evaluated. When we can effectively capture and interpret that information, who knows what will become the most important elements of a casino resort?

So that’s why it’s becoming increasingly important to recognize the trends and innovations brought by casino technology as quickly as possible.

To that end, we at Global Gaming Business are very proud to revamp our Gaming & Technology Awards for 2008.

For the first time, the industry’s most prestigious technology awards will be presented at the industry’s largest and most important trade show and conference, Global Gaming Expo. The sixth annual Gaming & Technology Awards will be presented at a special luncheon at the G2E Training and Development Institute on Monday, November 17. G2E runs November 17-20, at the Las Vegas Convention Center.

Global Gaming Expo is the place where technology companies debut their newest products and services. By presenting the awards at G2E, the Gaming & Technology Awards are able to convey “Best of Show” winners never before possible at G2E.

Nominations are now being accepted in four categories: Best Consumer-Service Technology, Best Productivity-Enhancement Technology, Best Slot Product, and a new category, Best Table-Game Product or Innovation.

Judges for the awards are: Claudia Winkler, president, GHI Solutions Inc. in Las Vegas; Rob Russell, gaming analyst, Regulatory Management Counselors, P.C.; James Wortman, director of the Gaming Education and Research Institute, at the University of Houston’s Conrad N. Hilton College; Charles Lombardo, consultant and former vice president of slot operations for Seminole Gaming; and Peter Johns, director of slot operations, casino division for MGM Grand Macau.

Because of this new association with G2E, the early October deadline for submissions is quickly approaching. You can submit your nominations to Global Gaming Business via email to GGB Sales Director David Coheen (dcoheen@ggbmagazine.com), via fax at 702-248-1567 or via mail at 6625 S. Valley View Blvd., Suite 422, Las Vegas, NV 89118.

And don’t forget our “Progressive Products” feature in our G2E Preview annual supplement, that goes out with the October issue of Global Gaming Business. Pick your one top product and submit it to Editor Frank Legato for evaluation and review.

Yes, the casino floor of 20 years hence will be something completely different. Help shape that casino floor by letting the industry in on your revolutionary products and services by participating in the 2008 Gaming & Technology Awards and our Progressive Products feature in G2E Preview.

Interview with Entertainer Wayne Newton

By Roger Gros Mon, Aug 11, 2008

Vol. 7 No. 8, August 2008

Collecting Smiles

Tough Crowd

Pocono Potential

A New World of Bingo

Hail Caesars

Interview with Larry Mullin, President, Borgata Hotel Casino & Spa

Interview with Scott Barber, Sr. VP & GM, Harrah's Atlantic City

Casino Communications,

Paul Oneile

Frankly Speaking,

Boutique Rooms

New Game Review,

Star Trek

New Game Review,

Ultimate 4 of a Kind Bonus Poker

New Game Review,

Mega Winner

New Game Review,

Diamond Time Bonus Game

Cutting Edge,

Distilling Data Quickly

Cutting Edge,

Enhancing Table Productivity

Online Gaming,

Europe Versus the U.S.

Table Games: Optimal Utilization

AGA,

Travel Crisis

Fantini's Finance,

Where to invest?

Nutshell,

Pinnacle Entertainmen

Nutshell,

Aristocrat Leisure Industries

Nutshell,

Choctaw Nation of Oklahoma

Nutshell,

Sky Ute Casino

Nutshell,

Isle of Capri Casino

Nutshell,

Ritzio Entertainment Group

Nutshell,

GTECH Corporation

Nutshell,

St. Gabriel Downs

Nutshell,

Casinos Poland

Nutshell,

Las Vegas Casino Lines

Nutshell,

Saskatchewan’s First Nations

Nutshell,

Australasian Casino Association

Dateline,

Canada province studies Nova Scotia VLT cuts

Dateline,

Chilean company acquires mountain resort

Dateline,

New controls for Norway

Dateline,

Thunderbird, others face changes

Dateline,

Star bright in Australia

Dateline,

Judge: Seneca casino illegal

Dateline,

Off the Tables?

Dateline,

Sibling rivalry surrounds SJM IPO

Dateline,

LVS, Wynn looking for cash

Dateline,

Manila Mystery

Dateline,

Cambodian opportunity

Dateline,

Red tape keeps Macau hotels closed

Dateline,