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Building a Company

New management transforms Pinnacle Entertainment into gaming powerhouse

Building a Company

If you trace the roots of Pinnacle Entertainment, you wander back in time as far as any other gaming operator. While Bill Harrah may have been taking bets a few years before the Pinnacle predecessors, the glitz of the original owners is hard to beat.

Legendary movie mogul Jack Warner (one of the Warner brothers) established the Hollywood Turf Club. Many of his stars and high-powered friends were among the 600 original shareholders, including Al Jolson and Raoul Walsh (two of the original directors of the board), Joan Blondell, Ronald Colman, Walt Disney, Bing Crosby, Sam Goldwyn, Darryl Zanuck, George Jessel, Ralph Bellamy, Hal Wallis and many others.

The storied history of what would become Hollywood Park Racetrack includes many firsts: wins by Seabiscuit and Citation in the Hollywood Gold Cup, simulcasting in California, electronic wagering, the pick-six invented here and many more. And when respected racing executive R.D. Hubbard assumed ownership of the track in 1990, he began an expansion program that included an entry into the casino industry. Later, former Mirage Resorts executive Dan Lee took over and moved the company to Las Vegas, into

casinos and out of horse racing, re-named Pinnacle Entertainment.

But after controversial departures by both Hubbard and Lee, the board of directors brought in former Harrah’s executive Anthony Sanfilippo, then president of slot manufacturer Multimedia Games, to transform the company.

Despite such an interesting background, Sanfilippo says he purposely does not focus on that history.

“We don’t celebrate the genesis, or the line of ownership of the company,” he says. “We really focus on today, and the type of company that we want to be today—the best casino entertainment company in the world. Through acquisitions, the linkage has been varied, so there really is not a tie to how this company started in the 1930s, to today.

“I really look at the company as a start-up company, and I try to infuse into everyone’s attitude that even though we’re a company with over a billion dollars in revenue, I want our team members to think about ourselves as a new company, a young company, an innovative company. So let’s celebrate who we are today.”

Being the Best

To Sanfilippo, “the best casino entertainment company in the world” isn’t just a slogan; it’s a mission statement.

“When I first joined the company, I wrote everyone a letter, to talk about being the best casino entertainment company in the world,” he explains. “And a lot of people asked me what that meant. Does that mean to be the biggest? Does that mean to be the most profitable? And I said, ‘No, it means to be the best. That no matter what you do, whether it may be parking a guest car in valet, or serving a guest in our restaurant, or in the casino, or doing work in the accounting office, that you do your best work.’

“People get that. When we have a concert, and it’s a terrific evening, and everything worked well together, they get that. They see we did everything we could to make this a wonderful evening for our guests, and people understand, today, to be the best at what you do, each and every day you have to put forward your best effort.”

Sanfilippo approaches every decision with a simple test.

“There are three groups we focus on when we talk about who it is that influences our decisions. One are our team members, two are our guests, and three are our shareholders. And so with everything we do, we ask, ‘Who is this going to impact? And what kind of impact will it have on guests, shareholders, or team members?’”

Before he arrived, Sanfilippo says the company was disjointed and didn’t make those considerations.

“When I joined the company in March of 2010, most people operated in a silo,” he says. “There wasn’t a collaborative effort within the company. I would tell you today that the culture is such that people work to support one another.”

He believes the properties are the lifeblood of the company, and that the corporate offices should do everything they can to support them.

“The corporate organization was much different back when I first arrived,” he says. “It didn’t spend much time at the properties. And from day one I let our corporate team members know that their role is to support the operating properties. And that’s what we do. If you’re not playing a role in supporting the core of our business, then you really have to question why you’re doing what you’re doing.”

Choice Words

While the Pinnacle rewards club, mychoice, predates Sanfilippo’s arrival, he says his marketing team, including Harrah’s veterans Ginny Shanks and Matt Ryan, have transformed it into a very unique program.

“We set out to design a program under the mychoice brand that is meaningful to our guests,” he says. “And I’m proud to say, in fairly short order, we’ve been able to do that. We thought about benefits that would be exceptional to our guests.”

Like many players clubs, mychoice is divided into tiers. But maybe unique in the industry is the top tier. Shanks, Pinnacle’s chief marketing officer, explains:

“When you think about most loyalty programs, they give you comps, they give you cash, they send you on trips if they have properties in Las Vegas. That’s kind of the net effect of it,” she says. “So we wanted to do something different, something that would really have value for our guests. One day we were talking and Anthony asked, ‘What if we were to give our best guests Pinnacle stock so they were true owners of the company? And what if we were to call that group the Owner’s Club?’ So we set out to do just that. Owner’s Club members receive 100 shares of Pinnacle stock when they reach that top tier.”

Sanfilippo says that program has created a higher level of loyalty than you see in traditional players clubs. He recalls Shanks and Ryan pitching an idea in which Pinnacle would partner with Mercedes to offer every member of the Owner’s tier a leased vehicle each year.

“My first thought was, ‘I can’t imagine we’d be able to do that,’ but I just didn’t say anything,” he says. “So I let them go out and do the work to find out if we could form a relationship with a luxury-brand automobile company, and to the credit of Ginny, Matt and other people here at Pinnacle Entertainment, we were able to strike an alliance with Mercedes-Benz.”

Players are given a choice of three models of Mercedes-Benz, and are able to customize the car to fit their tastes. Shanks says it has been a very successful benefit of the mychoice program. 

“Owner’s Club members now have a tangible reward they can enjoy every day. You could imagine them saying: ‘I have this great car and when I arrive at a Pinnacle property, my Mercedes gets staged in valet so people know I’m a special guest. Customers have choices, and we’d like to believe they will choose our properties more often if we reward their play with meaningful benefits. It’s these type of rewards that begin to create an emotional connection with our guests.’”

Property Focus

Even the best customer reward program wouldn’t work without superior product, and Pinnacle has spent the last several years developing what may be the top properties in the regional markets. That point was recently demonstrated by the August debut of L’Auberge Baton Rouge, the third and clearly the most luxurious casino experience in that market.

“It is a beautiful property,” says Sanfilippo. “We set out to create a regional destination and focused on a high level of quality that would compete with the best casino resorts that are in the Biloxi and New Orleans areas. And we’ve done that. We have a terrific casino, well laid out. It’s very comfortable for our guests. We have multiple food outlets that our guests already love. We have a lounge called the Edge, that we have live entertainment in. We have a special events center that has seating for over 1,600. And we have a first-rate hotel, with a little more than 200 rooms, and a pool that’s on the top of the building. And the feedback that we’ve received has been just very positive on the quality of the property.”

Shanks says the internal debate on what the property would be called and what features it would offer became clear when they defined the quality they wanted in the property.

“We thought about Baton Rouge and about what this property was going to deliver. We called it ‘accessible elegance.’ We wanted it to be much like L’Auberge in Lake Charles. As you come in to Lake Charles, there’s a stone fireplace; it’s very welcoming. You’re not seeing crystal chandeliers, but it will feel elegant. It feels more like an upscale brand. And when we started to talk about Baton Rouge, there were many elements that were going to be replicated at that property, from Lake Charles. So we thought rather than create yet another new name for our portfolio, let’s extend this brand. And so we did. There’s an opportunity, if we were to build properties of similar quality and amenities, that we could extend the L’Auberge brand as well.”

Pinnacle only entered the St. Louis market a few years ago, but it already plays a major role. First, the downtown casino opened, Lumière Place, which includes a five-star Four Seasons Hotel. And in south St. Louis, the company opened River City Casino a couple of years ago, drawing more of a locals market. Shanks explains the difference.

“When River City opened in March 2010, it somewhat competed with Lumière,” she says. “And there were quite a few Lumière customers that went over to River City, so they weren’t positioned in a complementary manner; the two properties were, in some ways, competing with each other. These properties each have unique offerings. At Lumière, you have the Four Seasons, a great downtown location with close proximity to major sports arenas. At River City, we appeal more to a suburban St. Louis resident.

“At River City, the positioning is quite simple: It’s the best place to gamble, the best place to eat, where you’ll enjoy the best service. Now, some casinos may tout similar attributes, but we really set out to offer just that. We focus a great deal on our restaurants and we offer a great gaming experience with the newest slot product and best odds. 

“Lumière had not previously focused on its downtown location. We turned things around a bit and decided to celebrate its downtown location. Lumière has a more diverse customer base. We have St. Louis residents and we have tourists that visit St. Louis. We also have quite a few of our guests from Belterra visit Lumiere when they travel to St. Louis.”

Expansion Options

One of Pinnacle’s first major projects, Indiana’s Belterra, is facing new competition from Ohio, where four casinos have been approved. In Cincinnati, Horseshoe Casino, owned by Rock Ohio Caesars, will debut next year. But Sanfilippo has a plan.

At roughly the same time the four casinos were approved, Ohio also OK’d VLTs at racetracks. So to combat the loss of market share from Horseshoe Cincinnati, Pinnacle purchased River Downs in the same town for $45 million. The company will pump up to $290 million into the property to create a locals’ convenience gambling product.

“We’re looking to develop a gaming entertainment complex that will also have, at the center of it, thoroughbred horse racing,” Sanfilippo says.

The proximity to Belterra will allow Pinnacle to protect its market while adding a new exciting venue.

“Belterra will continue to be a destination resort,” he says. “It’s a wonderful property. We have 606 rooms there, a golf course, a spa, multiple restaurants and bars and more. We think that they’re going to complement one another very well.”

The situation in Louisiana is very similar. With two major properties in the state now, Pinnacle was concerned about talk of gaming expansion in Texas, the major market for Lake Charles. So the company recently took a 75 percent stake in Retama Park, a racetrack outside of San Antonio, which, along with Houston, accounts for much of the Lake Charles market.

“I believe that the likelihood of Texas in the nearer term legalizing gaming is probably low,” he explains. “But if they do, it could be at Class 1 racetracks, which would be the one we will own in San Antonio. Sam Houston Park in Houston, and Lone Star Park, in the Dallas-Fort Worth area, are the only other tracks in the state. We are in the gaming entertainment business, so I think it’s important that if there’s an opportunity to participate in gaming in a state, then we should be looking to participate. And that’s what we’re doing with Retama Park.”

Eying Asia

Farther afield, a recent move by Pinnacle has demonstrated that the company plans to explore any jurisdiction that legalizes gambling, even if it’s beyond the borders of the U.S. home company. That’s what happened in May 2011, when the company surprised investors by announcing a $95 million investment in Vietnam’s Ho Tram Strip, owned by Canadian-based Asian Coast Development (ACDL). Pinnacle now owns 26 percent of the company and has an option to develop a second hotel casino there. The first, MGM Grand Ho Tram, will open in early 2013. MGM Resorts is branding and managing the property, but has no equity stake.

Sanfilippo says he’s been very involved in the development of the project. In addition to being an equity partner, he sits on the board of ACDL and has actively been participating in planning discussions. While the opening of the MGM resort is the priority, he says that planning for a Pinnacle resort will proceed once MGM is open.

Sanfilippo isn’t concerned about the Vietnam government’s refusal to allow its citizens to gamble.

“We did not believe, when we made this investment, that locals would be part of the equation,” he says. “But there is a high population of individuals in that part of the world that like to gamble. Ho Chi Minh City is a wonderful community. It has a huge population base, with a number of people who have foreign passports. So if you have a foreign passport, you’re able to come and play there, at the casino. The government is focused on South Vietnam becoming a tourist destination. So we believe this is somewhat the beginning of developing the coast of South Vietnam into a tourist destination. There’s already a number of resorts that are there. It’s beautiful. The site itself is on a pristine beach, and this is a long-term investment for our company.”

He also downplays the difficulty in traveling to Ho Tram, which isn’t that far from Ho Chi Minh City as the crow flies, but could take hours because of inadequate road infrastructure. That is changing rapidly, he says.

“Two years ago, it took three hours,” he says. “The government has been putting infrastructure in place to improve, from Ho Chi Minh City to the coast. And they’re putting in a six-lane highway. A couple of years ago it would take three hours; today it’s under two hours to get there, and there’s even more work being done to improve the infrastructure for people traveling to the Ho Tram Strip.”

The Pinnacle Culture

Operating in competitive markets, with other gaming companies also upping their games, Shanks says the company tries to go above and beyond what might be considered a typical customer service program.

“It’s really not a program; it’s a culture,” she says. “It’s about empowering our team members to make it right for the guests. And it’s about not having this robotic kind of service, where you have to say six things and you get checked off the list. Ours is really about letting our great team members be themselves. We give them the tools that if the guest isn’t having a great time, they can take care of it right there. They don’t need to go find a supervisor and do all kinds of paperwork.

“It’s really about hiring the right people and letting their personality shine through. If a guest isn’t having a great experience, we encourage our team members to take care of the situation to the extent that they can. When we hire team members, everybody, regardless of the position, goes through a culture audition. It’s really about making sure we hire the right people at the beginning, and it’s about how those individuals will fit into our culture. It’s important for us to maintain the type of culture we’ve created not just for team members but also for our guests.”

Sanfilippo says it’s imperative to create a winning atmosphere for guests, team members and shareholders.

“I feel like we are in that sweet spot right now,” he says. “When I go to our different properties and see the leadership we have at our properties, I’m very proud of the people that are running them. I’m very proud of people like Ginny Shanks, Carlos Ruisanchez, Jack Godfrey, Geno Iafrate and Neil Walkoff and how they lead. People frequently tell me that they enjoy the culture that we have here, and that it is different than anything they’ve ever experienced before.

“You won’t survive in our company if you treat people poorly. And I believe we’re there. I think people who are part of Pinnacle Entertainment today, their heart’s in it, their soul’s in it, they enjoy what they do every day, they enjoy coming to work. And that’s all part of being the best casino entertainment company in the world.”

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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