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WHAT I LEARNED AT G2E 2014

by Stu D. Hoss

Stu D. Hoss is a retired Air Force officer and aviator. He has visited and served in over 40 countries including flying combat missions in the Balkans, Afghanistan, Iraq, and the Horn of Africa. Most of it under the guise of keeping the world safe for democracy, better blackjack, and for a few other personal reasons. He has been playing blackjack for over 20 years, and cut his teeth on the tables of South Lake Tahoe during flight training in Northern CA. Mr. Hoss uses basic strategy and the HiLo count method to give himself a chance against the house edge. He currently resides in NV and is weighing his options for a second career.

I had the opportunity to attend the Global Gaming Expo (G2E) at the Sands Expo and Convention Center in Las Vegas earlier this month. This was my third venture to G2E. My previous adventures and observations at G2E are immortalized in the December 2012 and November 2013 issues of Blackjack Insider. This year I listened to keynote addresses from Steve Wynn and Sheldon Adelson, attended a number of sessions on a myriad of topics, toured the exhibit floor, reunited with some "friends" from previous events, and met a super heroine.

In the following paragraphs, Iíll give a brief description of the event and share some of my observations and things I learned. Weíll discuss whatís keeping the casino decision makers up at night and what that might mean for the blackjack and overall gambling community. For the record, I didnít find this yearís event as informative as G2E 2013, but it was certainly a positive experience. I encourage any and all of you to check it out in future years. Worst case, itís a trip to Las Vegas, plus if you pay attention, you just might learn something! Read on and I hope you enjoy my summary as much as I enjoyed attending G2E 2014.

Introduction

For those of you who arenít familiar, G2E is the premier conference event and trade show for the global gaming industry. Attendees included company executives, corporate managers, tribal leaders, industry employees, and buyers from various functional departments within gaming entities. Other professionals such as analysts, consultants, security experts, software developers, and sales staff from companies working within the industry or trying to expand into the gaming industry were there. Also, at least one struggling writer and gambler was among the 25,000+ attendees. CNBC even reported live from the show floor for the first time.

All told, over 500 companies from the United States and around the world were on hand to display their products and services. The exhibition floor featured everything from gaming devices to video gaming technology to gaming security to slot ticketing innovations to marketing solutions. Seminars included topics such as compliance, law and regulation, security and surveillance, iGaming, and how to increase non-gaming revenue. The diversity and sheer size of the gaming industry was on full display.

"Are You Experienced? Or We Need More 55-Year-Old Women!

A common refrain I heard quoted in multiple seminars was that the "average slot player" was a 55-year-old woman. Slot revenue, and more importantly margins, is a major concern for casino executives. Just like any other business with an aging demographic as their core customer, casinos are trying to figure out how to drive demand for their product among a more diverse segment of the population, specifically millennials. Pew Research defines this group as those born between 1977 and 1992. Others simply define it as the demographic cohort following Generation X. For casinos, it means the 20-something and early 30-something crowd.

Casinosí brain-trusts and those that follow these kinds of things note that the millennials donít play slot machines with the same vigor as previous generations. However, according to the American Gaming Association, 39 percent of adults, ages 21-35, visited casinos in 2012. These visitors are gambling less and this is cause for concern going forward. I attended a seminar, as well as, a panel discussion focusing on reaching the next generation of customers and how millennials are shaping casinos. Some of the data presented noted that millennials are impatient and are always "connected" thanks to mobile internet and social media. They like to be interactive, collaborate, and expect their data and experiences "now" Ė no more than two clicks.

The panel session mentioned above was moderated by David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas. The panel was comprised of David Chang, CMO of Gamblit; Lawrence Vaughan, founder of Real Gaming; and Matt Wilson, senior vice president of Marketing at Aristocrat. The panelists agreed that companies must be genuine in their game development and marketing efforts to reach millennials and successfully evolve with the emerging demographic.  Data suggest that millennials have a fondness for current pop culture icons, as well as, retro icons from their childhood. This is reflected in a number of new slot machine releases with retro and pop culture themes. Iíll mention some of them I ran across later in this article.

Online gambling continues to be a controversial topic in many circles, but appears quite popular with the younger demographic. Mobile sportsí betting is legal in Nevada and appears to be gaining in popularity. Online poker sites are legal in multiple states and international jurisdictions. These options appeal to millennials. Present-day casinos in the United States have a challenge in presenting them as viable options for its tech-savvy customers. Also, along these lines, many casino marketers are reaching out with smart phone applications and text messaging offers. An example of this is Station Casinos in Las Vegas recently released a downloadable application allowing users to receive special offers. Expect an expansion in social gaming and perhaps even slot machines with a skill-based component in the future. The social gaming aspect could lead to increased interest in table games, including more "carnival games" with low expected value for the player. Table games are social, interactive, and skill based. As far as actual iGaming, many casino executives remain divided on the topic.

A "Glimmer Twins" Production or the Chairman and CEO Has Spoken

No, I didnít see Mick Jagger or Keith Richards, just the Rolling Stones slot machine released by Aristocrat earlier this year. However, I heard two icons in the gaming industry deliver keynote addresses. Tuesday afternoon, Chairman and CEO of Wynn Resorts, Ltd. Steve Wynn addressed a packed house, delivering his insight on the gaming industry. Sheldon Adelson, Chairman and CEO of Las Vegas Sands followed Wednesday afternoon.


Among the variety of subjects he explored, Mr. Wynn pointed to casinos as part of a multi-faceted tourism industry and the cause for a positive effect on job creation and tax revenue. "Itís about bringing people from over there to over here," he said. Wynn has done this by emphasizing a comprehensive, larger than life experience for his guests.

"The non-casino was always the story. It was never the slot machine or roulette wheel. Whatís a baccarat table? Four legs and some green felt," Wynn told the audience. "What do people want most? A chance to live big! Youíve got to give people something theyíre willing to pay for; to get on an airplane; to submit to a body search," he said.

"Thereís a pent-up demand for the good life," Wynn said. "In the 1950s that was a mink stool, a diamond ring, a Cadillac, and a trip to Las Vegas to see Sinatra in the Copa Room." Wynn used this backdrop to explain his and other casino developerís successes in Macau. "Look at China through that prism. There is no old money in China."

Adelson also expressed his optimism in Macau and shared his initial vision for the Cotai Strip, "If you brought the Las Vegas Strip to Asia, would it work?" Adelson reminisced about seeing his plot of land for the first time and realizing it was underwater. Government officials in Macau told him that was not a mistake and heíd have to fill in the approximately 2.5 kilometer area between the two small islands of Coloane and Taipa. "We had to bring in barges of sand, but we did it," Adelson said.

The Macau experience reflects the business philosophy Adelsonís used to build his casino resort company. "The only way to get ahead was to do things differently. If you do things differently, success will follow you like a shadow," he said. Adelson feels that U.S. casinos should continue to concentrate on non-gaming amenities, especially meeting space, conventions, and exhibitions. He also noted that building arenas will lose money.

Despite a penchant for doing things differently, he remains vehemently opposed to online gambling saying itís "not a stateís right issue." Adelson even accused Statesí attorneys general of not enforcing the Wire Act (the Interstate Wire Act of 1961 is a federal law prohibiting the operation of certain types of betting businesses in the United States). "Whatís the purpose of putting the casino in everyoneís hands?" he said. Adelson told the crowd his father was a gambler and he saw the results of gambling losses on a family growing up. Opposing iGaming is a "matter of principle."

To keep from turning this into a political treatise, Iíll refrain from commenting on some of Adelsonís political dialogue or his views, as this is not the place. However, am I the only one that notices any irony in that last paragraph?

"Sleep with One Eye Open" Or "Itís the Economy, Stupid!

G2E 2014 marked the first time Iíve heard casino industry representatives mention the Great Recession and its impact. Granted Iíve only been to G2E three times, but I read and watch my fair share of CNBC. It stock market terms, it seemed that capitulation had finally occurred and the powers that be finally realized that perhaps their customersí changing gambling and spending habits had something to do with a lack of discretionary income and a greater aversion to risk. The theme was mentioned at multiple seminars I attended.

Study results indicate that many slot players feel there is a lack of value for their money. They lose too fast and slots are expensive. Some of these elements are prevalent in table games as well. The average wager size for penny slots has grown from 25-cents in 2004 to 40-cents in 2014. Players have experienced a 137% increase in their average loss during that time period. Four reasons were cited for increased player losses: 1) volatility (24%); 2) speed Ėfaster games (21%); 3) hold Ė programed returns on average have dropped from 92% to 87% (20%); 4) cost to play Ė as mentioned above (35%).

No numbers were presented with regards to video poker or table games, but suffice it to say Iíd surmise they are similar and definitely trending in the same downward direction against the player. Short-pay video poker schedules can play havoc with your bankroll over the long-term. Likewise, itís important to play blackjack games with the best possible rules to reduce the house edge. This is something I always try to include in my reviews for BJI. Little things make a difference. It was noted that blackjack offers good value for the gaming dollar Ė about 1% if you play well and at a full table.

It was almost comical to finally hear the impact of the Great Recession and its ongoing aftermath acknowledged. Iíve been incredibly disappointed in the Las Vegas Strip properties over the years and gave up playing on the Strip for the most part many years ago. As the economy weakened and people lost their jobs or saw their wages and investments decline, prices on the Strip continued to escalate and comps (expect for the largest whales) began to deteriorate. Iíve been screaming for years that when people have to pay $200 a night for a hotel room, $10 for a beer, $75 for a meal for two, $100 a ticket for a show, and so-forth, that you shouldnít be surprised when your gambling hold dips. With an emphasis on attracting convention attendees and aggressive marketing to foreign visitors that can take advantage of a weaker U.S. dollar, the "masses" have been largely ignored or left out of the equation. I understand all the business arguments and buzzwords, just donít act surprised when people spend less in your casinos, at your property, or donít bother to even visit at all. Thereís a business model developed in the 1950s that worked just fine in Las Vegas for many decades. Vegas used to be about value. Sadly those days are gone. At some point a casino resort operator becomes just another fancy hotel with expensive restaurants and a nightclub. Can you say Atlanta, Dallas, Miami, or New York?

Speaking of nightclubs, they are also causing some sleepless nights for casino property operators. Due to security risks and expensive costs, many Las Vegas properties have outsourced their nightlife venues and they are operated by large entertainment companies from New York and Miami. This creates a complicated dynamic and a bit of a "love-hate relationship." Casino properties are making money on the club arrangements, but the high costs of cover, drinks, and VIP service takes money and people off the casino floor. However, the current popularity of electronic dance music played at the clubs draws the previously mentioned millennial crowd that otherwise might not set foot inside the casino at all. The frustrating challenge is to turn those visitors into casino players. All I can say is look at what it costs for a night out at some of the big clubs in Las Vegas. Itís called discretionary income and people, especially millennials, are choosing to spend it at the club instead of at the casino.

"Iíve Got Friends in Low Places" or "Yaba Dabba Doo, Itís the Invisible Jet"

The exhibit floor at G2E is a showcase for new slot machines, table games, software, hardware, and pretty much anything you can think of that goes into a casino property Ė and maybe even some you canít. This year several new slot machines were introduced. Most, if not all, have a pop culture or retro theme. Remember the discussion above about reaching out to millennials, as well as, trying to keep the interest of 55 year-old women? Examples I encountered include Aristocratís "Game of Thrones," "Sons of Anarchy," and the "Big Bang Theory" Ė all popular television programs. On the retro side, WMS introduced "The Flintstones" and Bally Technologies held an unveiling of their new "Wonder Woman" slots, complete with an appearance by Lynda Carter. I stopped by to say "hello" to the 1970s television series Wonder Woman (and donít forget Miss World USA, 1972). Suffice it to say, she is as beautiful as ever!

Speaking of beautiful women, slots machines, and bright shiny objects, I ran into Jacklyn Swedberg again. To refresh your memory, sheís the 2012 Playboy Playmate of the Year. I wrote about our first encounter in 2012 in BJI. She was appearing for Harley Davidson. Sheís a calendar girl for them and still doing projects and assignments for Playboy. Guess what? Harley Davidson had a slot machine and motorcycle on display, imagine that! We talked about her first G2E appearance in 2012 and I teased her about going from Playmate to "biker girl" in two short years. Jacklyn again posed for a pic and signed an official photo to "Stu D. Hoss, Still My Favorite Struggliní Writer." For the record, Ballyís unveiled another Playboy themed machine and Raquel Pomplun, 2013 Playmate of the Year, made an appearance. She drew a crowd and we didnít get a chance to talk, but I still made the effort to say "hi" and get a photo with her. Never pass on an opportunity to meet a Playboy Playmate. Itíll make you a better gambler and a better person, allegedly.

Conclusion

From security to customer service and everything in between, there seems to be a sense of uncertainty in the casino industry, maybe for the first time. Soaring profits are no longer guaranteed. Multiple casinos have closed in Atlantic City this year. I heard one panelist question if Indian gaming isnít a mature market and isnít perhaps overbuilt. The effects of the Great Recession in 2008 and the damage it has done to the middle- and lower- class of the United States may be taking its toll as people spend less and are more risk-averse. Also, questionable business decisions and practices have put many casino companies at risk in the current economic environment. I sense the fear and loathing isnít solely on the playersí side.

The need to reach out to millennials and gamblers of all generations is an acknowledged and current challenge not only for this quarterís balance sheet, but for sustained viability. Donít get me wrong, people are still visiting casinos in droves, but what do they do when they get there? I asked the question above, at what point do you become just another fancy hotel, gourmet restaurant, family buffet, or concert venue? Much research and money is being spent trying to define the customer experience. Remember, CEOís like Steve Wynn and Sheldon Adelson will do it for you, if you let them. That means, big, grand, and fantastic; but at what price? In Adelsonís case, his Las Vegas properties, the Venetian and the Palazzo, now pay 6:5 on all player blackjacks on tables with less than a $50 minimum bet. Howís that for telling you that you arenít welcome unless youíre a sucker or have a five- or six-digit bankroll!

Based on my experiences at G2E, now is the time to let your voices be heard and tell casino operators what you want in terms of more and better blackjack games, better video poker pay schedules, better comps, and even what kind of slot machines and in what denominations you prefer to play. Technology works both ways. Todayís player is smarter and more "casino-literate" than ever before (which may not be saying much). I challenge you all to not let casino management treat you like an ignorant rube or take your business for granted. Speak up whenever possible, and of course, speak with your play. Donít just play whatever games the casino has on the floor, no matter how bad it is. Continue to search for the best odds and the best playing conditions. Reach out and try to define your own casino customer experience via social media, internet forums, email, phone calls, and talking to casino staff.

Thanks for taking the time to read about my G2E experience. As usual, I left out a lot. In closing, let me share this final story. I played a few hands and talked with a game developer of some convoluted table game variation of poker that told me his game was already on one casino floor in Iowa. I sarcastically told him that was a good place for it (with all due respect to the good people of Iowa). He looked confused and told me it was consistently returning 81% (thatís a 19% loss for the players) and people were lining up to play it. "Isnít that amazing?" he beamed. A blackjack table with good rules could instead be in its place I thought to myself. Anyway, thatís what weíre up against people. Enough said.

Make your plans to head to Las Vegas for the 2015 Global Gaming Expo. The event is scheduled for 28 September Ė 1 October at the Sands Expo and Convention Center.


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