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Best of Liz Benston

Gaming Guru

Liz Benston
 

Global Cash exec remains optimistic

18 June 2008

LAS VEGAS, Nevada -- Global Cash Access, the world's largest operator of ATMs in casinos and the largest provider of cash advances and check verification services for the gaming industry, is a bellwether of the gambling business, perhaps a truer one than gaming companies that also depend on nongaming revenue sources such as hotel rooms and entertainment.

You might expect business to be down significantly at Global Cash, given that consumers are tighter with their money nowadays. Other facts to consider: Top Global Cash executives exited the company last year and it discontinued the first-ever credit card for gambling debts, initiated an investigation into accounting irregularities, and got hit with a slew of investor lawsuits related to the investigation. The abandoned card alone cost the company millions of dollars in profit, which fell 78 percent in the first quarter.

Chief Executive Scott Betts, who joined Global Cash in the fall from credit card processing giant First Data Corp., remains optimistic about the industry leader.

Revenue from U.S. operations fell only 2 percent in the first quarter versus a year ago — much less than the high single-digit and double-digit declines reported by major casino companies. The company expects revenue and profit to grow in the high single digits this year, primarily because of this year's buyout of competitor Certegy Gaming. The company said Monday it would acquire a money-losing competitor in Las Vegas, Cash Systems, for $33 million, in a deal expected to close next month.

The company acknowledged slightly more defaults on the Arriva card relative to typical credit cards, but says it wasn't defaults or the economy that ultimately killed it. The card simply wasn't popular enough to generate a profit for the company after marketing and other expenses, Betts said. The card probably won't be introduced again, even in a healthy economy, he said.

Company shares that were worth about $15 at the time of its 2005 IPO traded as low as $3 per share after the departures of top executives when the company was investigated in connection with miscalculation of revenue.

Shares have hovered around $7 per share for the past month.

•••

"My Station," the free monthly magazine Station Casinos distributes through the morning newspapers and mailboxes, says a lot about Station's new marketing strategy.

It doesn't tell you when to get free slot play, but it tells you who is playing at what showroom and offers lavish photo spreads of nightclubs and restaurants.

The magazine is Station's attempt to draw customers from farther afield as well as attract newcomers. The broadly cast net marks a departure for a company that usually teases local customers with gaming-related incentives.

"We've been catering to locals for over 30 years but we can never take that for granted," spokeswoman Lori Nelson said. "People have a lot of choices they can make."

•••

Mohammed Ali Al Hashimi, chief executive of Dubai-based Zabeel Investments, says three words are giving his company, which now owns half of Las Vegas nightlife operator Light Group, a bad name: "sovereign wealth funds."

Those funds, which include money accumulated by the banking systems of monarchies or dictatorships rich from natural resources and other types of development, have ballooned into a global financial force, snapping up enterprises in the United States and beyond.

Critics say these funds are profiting from the West's credit woes and will ultimately exert political pressure on foreign governments.

Al Hashimi says his company is a benevolent power that will add more than 2,000 employees by the end of the year and is part of a diversified, multinational business hub that's growing in Dubai, already home to the regional headquarters of Fortune 500 companies.

"These companies want transparency (of regulation) to protect their investments," he said. "At the end of the day it's about business, not politics."

Global Cash exec remains optimistic is republished from CasinoVendors.com.