North America

Happy Employees Make Happy Customers

Leaders of many Indian casinos have long recognized the importance of providing outstanding customer service to their guests. They recognized that casino gaming is comprised of a unique suite of products and services and those products and services make up what is referred to as gaming entertainment. Gaming entertainment incorporates slot machines, table games, quality food products and lodging delivered in a fun, energetic and entertaining atmosphere. The linchpin of those products and services are the employees who deliver them to guests. They are the ones who
provide the service that makes the gaming entertainment experience memorable. The ultimate measures of success are happy customers who come back on a regular basis.

Making customers happy is not a simple procedure. It involves a complex process of getting the right products to satisfy their needs coupled with caring employees. This requires assembling the appropriate mix of gaming products, restaurants and other amenities and placing them in an attractive environment. Then it requires happy, upbeat employees to deliver great service. The hardest part of the equation is getting employees with the right disposition and keeping them happy so they in turn can make the casino’s customers happy. The ongoing question for all casino operators is how do you keep your employees happy?

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Making Nightclubs Work

For years casino operators from around the world have looked to Las Vegas in order to spot emerging trends that could be adapted to their markets. The opening of Caesars Forum Shoppes in 1993 inspired other gaming operators to add shopping malls in order to broaden their reach into new markets. For example, the Viejas Casino in Alpine, California and the Horseshoe Casino in Bossier City, Louisiana developed stunning factory outlet malls to broaden their appeal and casinos in Atlantic City developed first-class shopping malls appurtenant to their casinos.

The more recent phenomenon of so-called “celebrity chef” and “eatertainment” restaurants in Las Vegas inspired casinos in regional markets to also add locally and nationally recognized restaurateurs to their food product offerings. Mohegan Sun features a restaurant by Boston-based Todd English, who opened Olives at Bellagio in 1998 and dozens of casinos now feature nationally recognized brands such as Ben and Jerry’s, Hooters and Wolfgang Puck Café.

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“New and Better” works

The rapid growth of Indian gaming has created an unusual dilemma for the leaders of many tribes. In the years following the passage of the Indian Gaming Regulatory Act, many tribes attempted to develop casinos. Unfortunately, it was unclear how successful these gaming properties would ultimately be, particularly for those tribes whose reservations were far removed from major population centers. Access to traditional capital markets was difficult. Amidst this uncertainty many casinos were developed using low-cost construction techniques or existing commercial structures were converted to gaming space.

As the industry matured and as properties were able to demonstrate their viability to the investment community, the cost of capital dropped and many tribes were able to replace their temporary structures with more attractive, full-service gaming/entertainment properties. Conversely, other tribes chose to keep their original properties and gradually expand them, all the while continuing to employ low cost construction techniques. Many of these casinos generated outsized revenues relative to their invested capital. The logic for many in tribal leadership was, why
incur additional debt by replacing low-cost structures when revenue streams were growing? The emerging dilemma was, why spend the money if one did not have to?

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The Changing Role of the Casino Hotel

A hotel addition to a casino has long been recognized as an important amenity for any local casino that seeks to evolve into a regional gaming and entertainment destination. A hotel allows a casino to be more than just a daytrip destination. A well designed and well maintained hotel that is effectively marketed can generate a substantial amount of profit as a stand-alone revenue center. Also, the hotel allows the casino to generate incremental revenue through casino marketing programs.

Traditionally, hotels were developed at casinos as standalone profit centers where a portion of room sales (normally 20%-30%) were allocated towards casino marketing and the remainder sold to transient, group and commercial segments. However, this business model is changing. Casino operators have begun to realize that hotel rooms can be used to overcome locational disadvantages and drive greater revenues into the casino. The trend is to allocate a far greater percentage of hotel rooms to casino marketing, which are then offered to various segments of the database through demand stimulation programs.

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Striving for the Highest Standards in Casino Design

Indian casinos now dot the American landscape. They can be found in such diverse places as Wyoming, New York and California. Architecturally, these casinos range from stunning resorts that rival the most beautiful casinos in the world to modest facilities that were built as temporary gaming venues. Unfortunately, it can be the latter that defines the expectations of customers when they think of Indian casinos. The question that must be asked is, “why does an industry with some of the highest operating margins of any segment of the hospitality industry offer its customers gaming environments that are not always the most attractive or comfortable?”

It is important to understand Indian casinos in a historical context in order to appreciate how many of these gaming properties were developed. Wid1 the passage of the Indian Gaming Regulatory Act in 1988, tribes were able to open casinos. However, many states’ governors were unwilling to negotiate compacts with tribes or chose to severely restrict the types of games that could be offered.

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The Coming of the Entertainment Superstore

Casino development in Las Vegas has historically acted as a bellwether for the development of gaming and nongaming amenities in regional markets. Development trends such as the multi-station buffet, multiple dining options, casino food courts and showrooms were first introduced in Southern Nevada and eventually exported to other markets. Casino developers in regional markets have traditionally looked to Las Vegas to see what works and what doesn’t work; what is particularly appealing to gamers and what is not and adopted those development trends that hold the greatest promise.

While Strip properties often offer the most glamorous of amenities, it is Las Vegas’s locals casinos that have developed amenities that are most relevant to casinos in regional markets. Beginning with the opening of Sam’s Town Casino in 1978, followed by the Gold Coast Casino, the whole concept of a locals casino was first developed in Southern Nevada along with the suite of amenities that held appeal to local gamblers.

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Build Your House Out of Bricks

About fifteen years ago, Steve Wynn, then CEO of Mirage Resorts, gave a speech to an audience of alumni and students at a prestigious college of hotel administration. He began by reciting Grimm’s fairy tale of The Three Little Pigs. At first the audience collectively laughed as Mr. Wynn began his recitation but it soon became evident that Mr. Wynn was to recite the entire fable. And so he did.

Mr. Wynn later explained that the lessons taught in this fairy tale were important to the hospitality industry and equally applicable to casino developers as to children. Build a house out of bricks rather than straw or wood and you will be able to weather any storm or wolves that threaten your house. Since its opening in 1989 the Mirage withstood the introduction of more than a half dozen new competitors. Fifteen years later the Mirage continues to compete with the best properties in Las Vegas. In the coming months the Mirage will introduce new nightclubs, restaurants, a Beatles themed Cirque du Soleil show and an improved volcano attraction. Room rates and slot win per unit have and continue to remain well above the market average. After all,
the property was built out of bricks.

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Rising Gas Prices and the Possible Effects on Casino Visitation

The steady rise in gasoline prices over the past year and the possibility of further increases in the near future is a growing concern among gaming executives as well as financial analysts that watch trends in the gaming industry. While casinos in a number of jurisdictions have recently enjoyed steady increases in visitation and gaming revenue, the question that is on many peoples’ minds is, “how will rising gas prices affect the gaming industry?” The question is of particular concern to managers of Indian casinos since the majority of Native American gaming operations are located outside of metropolitan areas in rural locations that require patrons to drive further and expend more fuel than if they were to participate in other entertainment options closer to home.

A recently completed survey by a research company in Nevada attempted to gauge the effects that rising gas prices will have on drive-in traffic from Southern California. The study noted that 48 percent of respondents said higher gasoline prices would deter them from planning vacations to Las Vegas and that 57% said fuel costs are affecting their decisions to go on weekend trips. At first blush, the results of this survey would cause casino managers in all US jurisdictions to be concerned. However, the Las Vegas Sun newspaper reported that as gas prices rose earlier this year, auto traffic to Las Vegas increased. From January to August of 2005, gasoline prices in California increased by 40% but auto traffic on Interstate 15 at the Nevada-California
border increased by 30%. Las Vegas continues to enjoy historically high levels of visitation and gaming revenues. Even with gas prices hovering at $3.00, people continue to drive into the city from Southern California for gaming/entertainment vacations.

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Be The Best Locals Casino You Can Be

As casino markets mature, there is a propensity among gaming operators and, in particular, Indian tribes, to diversify their businesses away from simple casinos. For some, the logical next step in the development process is to build full scale resorts, complete with golf courses, spas, elegant hotel rooms, ultra lounges and other amenities that appeal to new and different
customer segments. The basic assumption is that the local gaming markets are reasonably served and, in order for revenue to grow, a tribe must bring in new, different and far wealthier tourist segments.

The fundamental problem is that resort hotels are expensive to build and difficult to operate. They require a highly trained staff and an experienced sales team. A resort hotel stands a better chance of being successful if it is located within a resort community but that often means they must compete with branded hotel chains with international reservation centers. In addition, a resort hotel may alienate the very customers that made the casino successful as it often holds little appeal to local gamers.

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E-Marketing to Casino Customers

Email and the Internet have quickly become an integral part of the lives of most Americans. Most readers of this publication rely on the Internet and e-mail for daily communication with both friends and business associates. This behavior is no different for the general population.

Currently, it is estimated that 61.2% of adults use tl1e Internet regularly. While it is generally assumed that younger age groups comprise the bulk of Internet users, usage among older demographic groups has increased significantly. Today, the 47% percent of the US population over the age of 50 uses the Internet regularly and their usage rate is increasing faster than younger demographic segments. In 2000,45.8% of people aged 55-64 used the Internet. In 2003 that number jumped to 56.7%.

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