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Best of Chris Sieroty

Gaming Guru

Chris Sieroty
 

G2E a hit despite uncertain economy

18 October 2011

LAS VEGAS, Nevada -- Although you might think a trade show dedicated to the gaming industry might not be the most well-attended event after three years of recession, organizers of this year's Global Gaming Expo, G2E, would beg to differ.

Held Oct. 3-6 at the Sands Expo and Convention Center, the world's largest trade show and conference for the gaming industry attracted nearly 26,000 attendees and 440 exhibitors covering some 250,000 square feet of exhibit space.

The show included 70 exhibitors from overseas, according to American Gaming Association officials. In 2010, the event attracted 24,941 attendees and 520 exhibitors during the last year of its decade-long Las Vegas Convention Center run.

Despite the decline in exhibitors, "attendance was very strong," said Judy Patterson, senior vice president and executive director of the gaming association in Washington, D.C., which organizes the trade show in partnership with Reed Exhibitions.

"The gaming industry is on the right track and the show exhibited that recovery," Patterson said in a phone interview. She said the show benefited from a move to a new, smaller venue.

"We moved to this new venue and were able to reconfigure the show floor," Patterson said. "It worked well with all the exhibitors on the same floor."

She said the Sands Expo and Convention Center was small enough to allow the association to accomplish one of its "primary goals" of giving smaller exhibitors more viability during the three-day show.

Moving the show also allowed G2E to move its dates from mid-November to early October to give buyers a chance to investigate or sample new products before closing out their annual budgets.

Also, the International Association of Gaming Advisors and the National Center for Responsible Gambling met at the Venetian around the same time, making it easier for attendees to visit all shows.

Presentations by Rio headliner Penn Jillette and MGM Resorts International Chairman and Chief Executive Officer Jim Murren highlighted keynote addresses during G2E.

Murren said MGM Resorts, which has 10 casinos on the Strip, is looking at Asia and the Internet for future growth for the company. He said "two or three" new gaming markets are expected to open in Asia in coming years and MGM Resorts "will be there."

While the potential for Internet poker legalization in the United States was a large topic of conversation during G2E, Murren said MGM Resorts would continue to explore social media as a way to attract customers and possibly prepare for the legalization of Internet gaming.

The newest slot machines, table games, security systems and casino amenities were on display on G2E's trade-show floor. The slot machine technology allowed developers and designers to create games that are part amusement park ride, part gambling device.

"For the second consecutive year, suppliers have made a concerted effort to produce games focused for a younger generation," Macquarie Securities gaming analyst Chad Beynon said. "With more themed games and entertainment-developed games than we've seen in years past, suppliers have spent a significant amount to attract a broader crowd."

But will they also attract sales from casino operators?

The number of licensed participation games seemed to have increased. Slot makers displayed games themed with the music and videos of Michael Jackson, the movies "Grease" and "Ghostbusters," and popular board games, such as Battleship and Clue.

"These (slot machines) of course come at a price as suppliers generally pay a one-time license and daily royalties throughout the life of the product," Beynon said.

A franchise hit, such as International Game Technology's slot machine themed on HBO's "Sex and the City," which has become a top-selling product, "can certainly pay off from a return-on-investment standpoint," Beynon said.

Panel sessions during the conference focused on recruiting more women to the industry and the future of tribal gaming. Native American casinos have come a long way from the time, some 20 years ago, when tribes began offering casino-style gaming. Today, the business has matured into tribes offering full-service, hotel-casino destinations that generate millions of dollars annually.

That income has helped tribes fund health clinics, schools and other services.

While the changes within the industry have been extensive, a question lingers: Has the tribal gaming market become saturated with too many casinos?

As with most questions, the answer depends on whom you ask.

"The market has reached a certain level of saturation," Rochanne Hackett, managing director of national gaming development with Wells Fargo Bank N.A., said during a panel discussion on Oct 6 at G2E.

"There are still pockets out there to be developed," Hackett said.

Even in a crowded tribal market like Oklahoma, Charles "Chief" Boyd sees opportunity.

"We have matured a great deal with over 130 casinos in Oklahoma," said Boyd, a partner with Thalden Boyd Emery Architects in Tulsa, Okla. "We are doing very well, especially if your casino, resort or bingo hall that borders Arkansas, Texas or southern Kansas."

The issue now, Boyd said, is not building new resorts, but remodeling and expanding current casinos to keep customers coming back. He described the effort as a "constant battle to keep the coffers full."

Gaming industry executives and analysts also explored mobile gaming, adapting to a new world that includes social media, and a case study of The Cosmopolitan of Las Vegas.

The Cosmopolitan, which cost $3.9 billion and opened in December, was the last major resort to open on the Strip. The unique resort was conceived during the Las Vegas boom, when developers proposed high-priced, luxury resorts and banks were willing to invest billions of dollars in those projects.

Although other projects were stopped by the recession, The Cosmopolitan kept going.

Even when its owners, including New York real estate developer Bruce Eichner, ran out of money, Deutsche Bank AG continued to fund construction.

"Seven years ago, we were retained to identify a site where the project could be built," said Brad Friedmutter, president of the Las Vegas-based Friedmutter Group, during an hourlong panel discussion Oct. 4.

He said the owners considered several locations before making the final decision.

"We could have chosen a traditional size (lot) between 20 acres and 25 acres," Friedmutter said. "We would have created a traditional casino. The money was available (at the time) to build a 3,000-room hotel, and a large casino."

What attracted Eichner and Friedmutter to the 8.5-acre site between CityCenter and Bellagio was its prime location on the Strip. He said with property on the Strip going for $25 million to $35 million an acre at the time, purchasing the property becomes "quite justifiable."

Friedmutter said the biggest challenge was the lot's size, which "didn't follow the norm for what casino builders and owners look for."

More G2E tidbits from the GamingWire:

THEY MAKE THE GAMES YOU PLAY BETTER

As a manufacturer of slot machine cases, Cole Kepro International will never attract the public attention of the flashing and ringing game on the inside.

"People who play in the casinos don't know who we are, but the people who work in the casinos do," CEO Frederick Cook Jr. said.

In this position, the company is emblematic of a prosaic yet essential part of the gaming industry in Las Vegas, the figurative nuts and bolts that often involve physical nuts and bolts. These companies frequently rent just the standard-size booths on the Global Gaming Expo's exhibit floor and leave the extravagant displays to others. But they help fill the office and industrial parks around the valley and even manufacture and ship products to customers elsewhere, a rarity in the local economy.

Here's a sampling of the Las Vegas-based exhibitors.

COLE KEPRO INTERNATIONAL

Cook led a group of investors that bought the North Las Vegas company in September for an undisclosed price. Although many at the convention talked about a gradual recovery of gaming equipment orders, Cook predicted Cole Kepro's sales could triple in three years because of fresh capital brought in by the buyers to increase marketing and production. All the designs are ready to go, he said.

An adjunct to the standard slot cabinet configuration are small boxes attached to each side with slits and a curved shape similar to the profile of an airplane wing. Inside the boxes are fans that create air currents to cool the games, drawing air from vents at the bottom of the cabinet and pushing it out the top. This creates a more efficient system than older techniques, he said.

Also, he said certain techniques have lowered the cost of production, such as buying one type of high-capacity wiring harnesses to get volume discounts instead of several types.

FORTUNET

As bingo tries to draw younger adherents, FortuNet has added new technology to its cards.

No, not the mobile devices that have made their way into bingo halls, but cards with a small perforation through the number so players can punch it instead of ink it with a dauber. The reason, said CEO Yuri Itkis, is to keep track of a game while dancing.

"This is for cosmic bingo," he said, referring to the trend of turning down the lights, turning up the music and turning the bingo hall into a club. "If you drop a dauber on the floor, it is very hard to get the ink out of the carpet."

Slowly, other updates have been working their way into a game noted for a gray-haired demographic. Three years ago, for example, FortuNet rolled out laser-printed cards with bar codes so that the casino can help prevent counterfeit cards from being brought in.

"Now it's a game as accountable as slot machines," he said.

RYE PARK GAMING SUPPLY

What was new did not draw as much attention as how it was packaged.

For eight years, Rye Park has made and supplied casino basics such as chairs, gaming tables, tabletops and beverage carts. But at the convention, it had a woman clad in black leather and lace dancing on a 5-foot-high platform to highlight how all of the company's products parts could be assembled in a gaming party pit.

"Casinos are going this way, so we want to be in that market," President Randy Ying said.

On the less sensual side, Rye Park showed customers its newest poker chair, with a reclining back that has a hump on the bottom for lumbar support.

"We think that if you keep players comfortable, they will stay longer and bet more," he said.

TECHART

A maker of hole-card readers for blackjack, TechArt used G2E to unveil its own wrinkle on the game itself.

Approved by the Nevada Gaming Control Board in September, the company's innovation is a "bet the bust" bar on the tabletop, where a player can bet as much as the original bet that the dealer will bust. Joe Baseel, who came up with the idea, likes to call it a "bet within a bet" instead of a side bet.

Either way, he will have to get in line with the numerous other game makers that have come up with the next surefire winner that will bring the house bigger handles and bigger earnings.

How will bet the bust stand out in the crowd?

"It's what people want," Baseel said. "I see a need and I fill it."

ASTROSYS INTERNATIONAL

Like about a dozen other companies at G2E, Astrosys International embodies a large component of international trade in Las Vegas, with headquarters across an ocean but the U.S. main office here. The company is based in Hong Kong and has a large presence in Australia.

But bill acceptors built into slot machines, such as the ones it manufactures, have been on a slow decline as more casinos turn to plastic cards. Astrosys does not sell coin acceptors in the United States as it does elsewhere in the world.

However, group marketing manager Robert Bird said, cash is not dead yet.

"As long as cash is in people's wallets," he said, "you will need to give casinos the ability to serve that market."

-- Tim O'Reiley

COURT RULING NOT SEEN AS CURBING TRIBAL GAMING

Rochanne Hackett doesn't expect a court ruling favoring a Wisconsin Indian tribe in a case over its default interest payments related to $50 million in bonds to have a lasting impact on the tribal gaming industry.

"It did cause a lot of institutions to take pause," said Hackett, managing director of National Gaming Development for Wells Fargo Bank N.A.

Hackett, who participated in an Oct. 6 panel discussion about the future of tribal gaming at Global Gaming Expo, said that when the tribe defaulted last year on $50 million in bonds, Wells Fargo Bank was not the lender but acted as the bondholders' trustee.

Wells Fargo asked a federal court to appoint a receiver to oversee the tribe's revenues, payments and profits.

In response, the Lac du Flambeau Band of Lake Superior Chippewa Indians argued that the deal should be nullified because the National Indian Gaming Commission hadn't reviewed it.

The tribe, which owns the Lake of the Torches Resort & Casino, issued the bonds in 2008.

U.S. District Judge Rudolph Randa found that because the agreement had been "executed without prior approval from the (NIGC) ... the entire contract is void."

Nevertheless, tribal officials have said the tribe will meet its financial obligations.

"The ruling didn't shut down the capital markets at all," she said. "The recession had a bigger impact."

Since the ruling, Hackett said, financial institutions began looking for a limited waiver of tribal sovereignty to protect themselves from future defaults.

Panel moderator Roger Gros, publisher of Global Gaming Business magazine, asked her about the willingness of banks to lend to tribes for the construction of offices or health care clinics.

Hackett said there are large financial institutions that will lend so tribes can build infrastructure projects, such as health care clinics. But she said community and regional banks were a better option for tribes seeking financing for those projects.

She declined to discuss Wells Fargo's policy for approving loans for tribal projects beyond casinos.

-- Chris Sieroty

SURVEY SHOWS OPTIMISM ABOUT INDUSTRY'S FUTURE

A survey of more than 1,150 gaming industry professionals at Global Gaming Expo 2011 found most participants are optimistic that 2012 will be a better year for the industry.

"These survey results indicate that there are exciting times ahead for the gaming industry," Courtney Muller, senior vice president with G2E producer Reed Exhibitions, said in a statement.

According to the survey, 77 percent of respondents feels positive about the direction of the casino industry in 2012, and 80 percent believes the company at which they work will be stronger next year.

The survey said 76 percent are not concerned about their future employment situation.
G2E a hit despite uncertain economy is republished from GamingMeets.com.