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Casino Strategies for Growth
GamingIndustryStocks.com Reviews Revenue Building
Strategies from
Harrah’s Entertainment, Boyd Gaming, Shuffle Master,
and MGN Technologies
By: Ann-Marie Fleming
April 2006
The growth of Casino Gaming is expected to continue to increase globally as
new markets and new developments are explored. Companies in this arena are
looking both domestically and internationally for continued growth through
various channels such as new and existing property development,
consolidation strategies as well as technology and programs to improve the
overall gaming experience. Casino and entertainment companies Boyd Gaming, Harrah’s Entertainment (NYSE: HET), and gaming technology firms
MGN Technologies (OTCBB: MGNLF) and Shuffle Master (NASDAQ: SHFL) look to a
combination of revenue generating strategies to reach their growth
expectations.
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Worldwide casino gaming revenues are expected to reach over $100 billion in
2009, according to a report by PricewaterhouseCoopers. The report entitled,
‘Global Entertainment and Media Outlook: 2005-2009 predicts that the United
States will maintain its top ranking as the largest casino market reaching
approximately $64 billion in revenues in 2009, but notes that Asia,
especially with the development of the Macau region, will be the fastest
growing market moving from $8.8 billion in 2004 to near $18.5 billion in
2009. As these markets continue to develop, casino and gaming companies
evolve and diversify their growth strategies to reap the rewards of industry
expansion.
Improving the Gaming Experience
Increasing revenue from existing customers and growing this base to new
levels is a popular strategy amongst casinos. As competition tightens, many
casino resorts look to creative methods of improving the gaming experience
and increasing their overall customer draw. Mark Jensen, CEO of MGN
Technologies (OTCBB: MGNLF) describes their efforts to enable new directions
for casinos, “We offer a turnkey online marketing program to land-based
casinos to generate new customers and retain existing customers. We use
branded online and mobile games as the draw for players. We brand online and
mobile casino games such as slots and poker with the casino’s brand and
build an online marketing strategy around the new gaming site.”
Keeping in line with current legislation, with an eye on what the future may
hold in terms of new regulations, is important for companies in this
industry. In light of this MGN Technologies has developed a gaming platform
that provides legal options for casinos to explore the online gaming world.
“The games are play-for-free or play-for-prizes and not gambling so they are
legal. We don’t offer gambling in the United States. Players can win cash
and prizes from a casino by entering sweepstakes drawings from earning
points. It’s an opportunity for land-based casinos to get into online gaming
legally and compliantly. Some day in the future when land-based casinos can
host online gaming our customers will be uniquely prepared,” describes
Jensen.
Harrah’s Entertainment (NYSE: HET) has a significant focus on improving the
gaming experience for their customers through their loyalty and reward
programs, which have become an important part of the Company’s revenue
strategy, in particular with their acquisition of Caesars Entertainment.
Harrah's spokesman David Strow explains, “With the Caesars transaction the
flexibility of the Total Rewards program increases exponentially. We believe
that the system of Total Rewards will become much more appealing for
customers, which helps increase play, but it also means that the Caesars
properties will be generating more business than ever before because now you
have an expanded database of customers from around the country who are now
being drawn to these properties.” The implementation of the Total Rewards
program is currently being implemented across the Caesars properties and the
Company expects completion to occur over the next several months.
Property Development
A key driver of growth for many casinos entails the continued development of
new and existing properties in both domestic and foreign markets. Boyd
Gaming’s (NYSE: BYD), Rob Stillwell, Vice President Corporate Communications
explains, “At any given time we are expanding our existing product
portfolio, and building completely brand new products.” This dual strategy
has been recently exemplified by the January completion of their 18 month,
$170 million expansion of the Blue Chip Casino Hotel in Indiana, Boyd’s most
successful riverboat operation in the Company’s central region, as well as
their December 22nd opening of a brand new $600 million property in the
Company’s Las Vegas locals business segment, which is the SouthCoast Hotel
and Casino. In fact, according to Stillwell Boyd made the strategic decision
to further develop this property even before its completion.
Key factors to Boyd’s entrance into new markets and to development decisions
include: a stable tax environment, and a solid regulatory environment. “In
states that do decide to legalize gambling, we prefer to be in a situation
where the State is really excited about its opportunities as opposed to
controversy and opposition found in some regions,” states Stillwell.
Harrah's Entertainment Inc. looks to the identification and entrance into
new markets as a key component of their growth strategy according to David
Strow, “Harrah’s is primarily internationally focused which we see as our
largest potential growth channel. Currently Harrah’s is pursuing bids in
countries such as the Bahamas, Spain, Slovenia, with our largest proposal
planned for Singapore.”
Mergers and Acquisitions
The casino gaming environment continues to see consolidation as a method for
overall expansion. Harrah’s recent acquisition of Caesars is a solid example
of the potential benefits associated with acquisitions within this arena to
include access to a larger customer base, greater market presence, new
channels for revenue growth, along with the power behind a credible and
established portfolio. “We have two primary growth channels; one is derived
from our acquisition of Caesars. We believe that there is a tremendous
amount of synergy potential, not just in the traditional sense of cost
savings, but more in terms of revenue generation potential. We believe that
the tools and systems and strategies that Harrah’s has developed over the
years, such as our Total Rewards customer-loyalty program, once implemented
into the Caesars properties can generate an even greater revenue production
from these properties than ever before,” describes Strow.
Innovation in Gaming Technology
Technological innovation has played a key role in the evolution of casinos
and has contributed to the growing popularity of the gambling sector.
Kirsten Clark, Director of Marketing for Shuffle Master, Inc (NASDAQ: SHFL),
the top specialty casino game provider, sees two key drivers to the growing
participation in casino gaming; a resurgence in table game popularity and
the introduction of multiple content delivery systems. “Table games have
become much more popular over the last several years and Shuffle Master has
played a very important role in this not only through our shuffling
technologies that help casinos speed up game play and make it more secure,
but also by providing new table game content. The next generation of gamers
consisting of the younger demographics, are players who want a more dynamic
gaming opportunity at a table game. As a result there are a lot of new
proprietary games in the market that are protected by intellectual property
and Shuffle Master is responsible for approximately 70% of this content
including three of the top five titles,” explains Clark.
Another key factor driving the escalation in gaming participation has been
seen through the growth of multiple content delivery systems. Of particular
interest as of late has been the potential for wireless technology to be
introduced into the casino environment and with the Nevada legislation
recently adopted enabling the use of wireless gaming devices within public
areas of casinos, many are speculating as to the potential growth impact
this will create moving forward. While details outlining acceptable
technology has yet to be determined, it is understood that security systems
will be implemented to ensure that these wireless devices cannot be used
outside of casino boundaries and that they are capable of preventing the use
by minors. This legislation opens the doors for casinos, game developers and
players as it provides for new revenue channels, and new gaming experiences.
“In the future we feel wireless gaming will be a very important growth
driver as an alternative content delivery system providing both the casino
and player with benefits that are not currently available on a live game.
The wireless platforms that are currently being developed we feel will
become an important part of casinos of the future. This technology will see
all of the game activity automatically being recorded enabling the casino to
go in at any time and know exactly how many people are playing on their
wireless devices, what their win per day, per hour etc is. It gives casinos
so much more information at their fingertips,” explains Clark.
As the gaming industry continues to evolve casinos, resorts and game
developers are presented with a growing number of opportunities to expand
their existing channels and pursue new avenues both domestically and
internationally. While legislation is often a market barrier within the
gambling industry, companies have implemented flexible and adaptive programs
to take advantage of each new environment and each new challenge, with the
ability to adjust moving forward as laws change and markets develop. With
the introduction of wireless technology and online opportunities, what has
already proven to be a dynamic sector, appears to be headed towards
continued growth.
Ann-Marie Fleming
Ann-Marie Fleming completed her MBA in the United States, where she attended
Webster University. She also holds an Honors B.A from the University of
Toronto. She has over sixteen years of experience within the financial
industry to include retail banking and brokerage, investment banking, and
mortgage brokerage within the United States and Canada, with a firm
background in corporate research.
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