Gaming Entertainment

1. 11 Gaming Entertainment

2. Chapter Objectives • After reading and studying this chapter, the student should be able to do the following: • Outline the history of modern casinos. • Describe the various components of modern casino hotels. • Explain how casinos have been integrated into larger hospitality operations. continued on next slide

3. Chapter Objectives • After reading and studying this chapter, the student should be able to do the following: • Understand the basic principles of casino operations. • Discuss the different positions within the gaming industry.

4. Gaming Entertainment • While the gaming entertainment industry is a global industry, there are five types of legal gambling in the Unites States. • This includes charitable gaming, commercial casinos, lotteries, Native American gaming, and pari-mutuel gaming. continued on next slide

5. Gaming Entertainment • Some form of legal gaming exists in 48 of the 50 states, with commercial casinos representing the largest part of the domestic gaming market. • While gaming revenues vary by state, the industry contributes billions of dollars in tax revenue to these local governments on an annual basis. continued on next slide

6. Gaming Entertainment • The gaming entertainment industry has seen development not only in the United States, but also internationally, particularly in the Asian destinations of Macau and Singapore. • The size and scope of the global gaming industry are expected to reach $117.9 billion dollars in 2015. continued on next slide

7. Gaming Entertainment • Gambling is playing a game of risk for the thrill of the action and the chance of making money. • This product, gaming entertainment, has evolved over the past decade. continued on next slide

8. Gaming Entertainment • Gaming entertainment serves a customer base of social gamblers, customers who play a game of risk as a form of entertainment and social activity, thus combining gambling with other activities during their visits. continued on next slide

9. Gaming Entertainment • Social gamblers, by this definition, are interested in many gaming entertainment amenities and take part in many diverse activities during a stay. continued on next slide

10. Gaming Entertainment • Gaming entertainment refers to the casino gaming business and all its aspects, including hotel operations, entertainment offerings, retail shopping, recreational activities, and other types of operations, in addition to wagering on the gaming floor. continued on next slide

11. Gaming Entertainment • Gaming entertainment is the business of hospitality and entertainment with its core strength in casino gaming. • According to this definition, a gaming entertainment business always has a casino floor area that offers various games of risk that serve as the focal point for marketing to and attracting guests. continued on next slide

12. Gaming Entertainment • Next in importance to the guests are high-quality food and beverage (F & B) operations. • Gaming entertainment offers a place where guests can gamble (the casino floor), eat and drink, sleep and relax, and maybe do some business. continued on next slide

13. Gaming Entertainment • But there is much more—the entertainment ranges from live performances by the most famous entertainers to production shows that use high-tech wizardry. • Gaming entertainment includes theme parks and thrill rides, museums, and cultural centers. continued on next slide

14. Gaming Entertainment • The most popular gaming entertainment destinations are designed around a central theme that includes the hotel and the casino operations. • Nongaming revenue comes from sources that are not related to wagering on the casino floor. continued on next slide

15. Gaming Entertainment • As the gaming entertainment concept continues to emphasize activities other than gambling, nongaming revenue is increasing in importance. • This is what gaming entertainment is truly about—hospitality entertainment based on the attraction of a casino. continued on next slide

16. Gaming Entertainment • Casinos are also operated by Native American tribes on their reservations and tribal lands. • These are land-based casinos and are often as complex as any operations in Las Vegas. Gaming entertainment is also popular on cruise ships. continued on next slide

17. Gaming Entertainment • There is strong support for gaming in the marketplace as an entertainment activity. • Patrons are required to be 21 years of age to gamble in the United States, and research shows that more than a third of Americans have visited a casino in the last 12 months, and 32% of them have actually gambled in those 12 months. continued on next slide

18. Gaming Entertainment • According to the market research, more than 85% of U.S. adults say casino entertainment is acceptable for themselves or others. • 86% of Americans report having gambled at least once. continued on next slide

19. Gaming Entertainment • Commercial casinos account for 36% of gaming revenue. Indian casinos and state lotteries tie for second place at 26%. • The demographic makeup of the typical gaming entertainment guest has remained consistent during the past several years. continued on next slide

20. Gaming Entertainment • In comparison to the average American, casino players tend to have higher levels of income and education and are more likely to hold white collar jobs.

21. Historical Review of Gaming Entertainment • The precise origin of gambling is still unknown today. • However, according to Chinese records, the first official account of the practice dates back to as far as 2300 B.C. • The Romans were also gamblers: they placed bets on chariot races, cockfights, and dice throwing. continued on next slide

22. Historical Review of Gaming Entertainment • Since the state of Nevada legalized gambling in 1931, Las Vegas has been transformed into one of the most elaborate cities in the world and one of the hottest vacation spots. • From the early 1940s until 1976, Nevada, and predominantly Las Vegas, had a monopoly on the gaming entertainment business. continued on next slide

23. Historical Review of Gaming Entertainment • Casinos had no hotel rooms, entertainment, or other amenities. • The hotels that existed were just places to sleep when guests were not on the casino floor. • Las Vegas is rich with tales of Benjamin Hymen Siegelbaum, better known as Bugsy Siegel. continued on next slide

24. Historical Review of Gaming Entertainment • After developing criminal associations his entire life, Siegel moved on to build the well-known Flamingo Hotel and Casino in Las Vegas. • During the 1970s, Atlantic City was in an impoverished state, with high rates of crime and poverty. continued on next slide

25. Historical Review of Gaming Entertainment • In an effort to revitalize the city, New Jersey voters, in 1976, approved casino gambling in Atlantic City. • Later casino gambling was legalized in the state of New Jersey by the Casino Control Act.

26. Native American Gaming • In California v. Cabazon Band of Mission Indians, et al.(1987), the Supreme Court decided 6 to 3 that once a state has legalized any form of gambling, the Native Americans in that state have the right to offer and self-regulate the same games without government restrictions. continued on next slide

27. Native American Gaming • Congress responded to these court decisions by passing the Indian Gaming Regulatory Act of 1988 (IGRA). • The IGRA provides a framework by which games are conducted in a way that protects both tribes and the general public. continued on next slide

28. Native American Gaming • There are over 400 gaming facilities on reservation lands in 28 states, and Native American gaming has been one of the fastest growing sectors of gaming in the United States.

29. The Casino Resort: A Hospitality Buffet • Twenty of the 30 largest hotels in the world are casino resorts on the Las Vegas Strip. • The size and scope of the global gaming industry is expected to reach $117.9 billion dollars in 2015. continued on next slide

30. The Casino Resort: A Hospitality Buffet • Today, many casino resort presidents and key executives have come up through the lodging or F & B side of operations.

31. What is Gambling? • In its broadest definition, gamblingis the act of placing stakes on an unknown outcome with the possibility of securing a gain if the bettor guesses correctly. continued on next slide

32. What is Gambling? • To be considered gambling, an act must have three elements: something wagered (the bet); a randomizing event (e.g., the spin of slot reels or the flip of a card); and a payoff. • Some of the best-known games, poker, blackjack, and baccarat, are played with cards, and craps with dice. continued on next slide

33. What is Gambling? • Slot machines, which were originally mechanical (but now are electronic) devices, award prizes based on the random stopping of reels, are also popular, and are typically the most-played games in most casinos today. • There are two basic categories of gambling: social gambling and mercantile (or commercial) gambling. continued on next slide

34. What is Gambling? • Social gambling is conducted among individuals who bet against each other; mathematically, each player has the same chance of winning. • In mercantile, or commercial gambling, players bet against “the house,” a professional gambler or an organization that accepts wagers from the general public. continued on next slide

35. What is Gambling? • Mercantile games have a mathematical advantage for the casino, or a house edge, that lets professionals profit from them while still offering fair games. • The house edge is what makes casinos possible; without it, the only way to offer games of chance to the public that can generate an income would be to cheat. continued on next slide

36. What is Gambling? • The house edge allows casinos to offer their customers honest games that are fairly dealt, and still remain in business. • The “handle” is the total amount of money bet at a game. • The “win” is the handle minus the money paid out on winning bets—essentially, what the casino keeps. continued on next slide

37. What is Gambling? • The “hold percentage” is the percentage of the total handle that is retained as win. • As a manager of a casino resort, it is important that you have an appreciation of the nature of volatility. continued on next slide

38. What is Gambling? • Just because the casino department is reporting a net loss for a shift does not necessarily mean that the department is inefficient or incompetent; it may just be an expression of volatility. • Over time, gaming wins will tend toward their historical average.

39. Comps: A Usual Part of an Unusual Business • Comps are complimentary goods and services offered to casino patrons in order to attract their business. • The value of comps varies; generally speaking, higher-producing players are given higher value comps. • Casinos, with thousands of guests on any given day, rely on customer loyalty programsto track patron play. continued on next slide

40. Comps: A Usual Part of an Unusual Business • Patrons who wish to receive comps and other offers join the casino’s player loyalty club. • Casinos use the information they gain about a player’s gambling patterns to offer him/her comps, based both on theoretical wins by the player and his/her expected levels of play. continued on next slide

41. Comps: A Usual Part of an Unusual Business • Loyalty programs are an essential part of casino marketing; many guests base the money they spend gaming around where they receive the best comps, so good casino managers know they must send out good offers to qualified players. continued on next slide

42. Comps: A Usual Part of an Unusual Business • Recently, some casinos have begun tracking and rewarding nongaming spending as well, a reflection of the broadening of the casino resort revenue stream.

43. Types of Casino Operations • At one end of the spectrum is the Nevada-style gaming tavern, which is a typical bar and restaurant that has less than sixteen electronic gaming devices. continued on next slide

44. Types of Casino Operations • At the other is a fully-developed casino resort, with (on average) a 100,000-square-foot casino featuring thousands of slot machines and dozens of table games, approximately 3,000 hotel rooms, at least a dozen bars and restaurants, meeting and convention facilities, entertainment venues, retail shopping, and pool and spa facilities. continued on next slide

45. Types of Casino Operations • Stand-alone casinos are not very common in the United States or elsewhere in the world. • Where they are found, they usually consist of only slot machines; this type operation might be called a slot parlor. continued on next slide

46. Types of Casino Operations • In the United States, casinos on Indian reservation can take many forms, from bingo parlors in prefabricated buildings to fully functional casino resorts with lodging, dining, and entertainment that are indistinguishable from resorts on the Las Vegas Strip. continued on next slide

47. Types of Casino Operations • Some states allow gambling only on riverboats; other states allow slot machines at racetracks (called “racinos”); and finally, many cruise lines have casinos as part of the amenities for guests on their ships.

48. Components of Casino Resorts • Destination resorts in Las Vegas are centered on casinos that have several types of games available: slot machines, table games, race and sports books, poker rooms, and live keno games. continued on next slide

49. Components of Casino Resorts • In most parts of the United States, slot machines produce the bulk of the revenue; on the Las Vegas Strip, it is closer to a 50/50 split. • Among table games, blackjack is most popular nationally, while on the Strip baccarat has recently become a favorite. continued on next slide

50. Components of Casino Resorts • In Macau casinos, nearly all revenue comes from high-stakes baccarat. • Casino resorts also include lodging, F&B, entertainment venues, retail shopping, convention facilities, nightclubs, pools, and spas.