King of conversions
King of conversions
Ron Sultemeier has mastered the art of transforming racetracks into racinos
At a time when racetracks across the country are lobbying hard to allow for the installation of slots and video gaming machines, Ron Sultemeier has logged a truly impressive track record of melding electronic gaming devices with racetrack operations in West Virginia and New York.
As president of Buffalo, N.Y.-based Sportsystems Corp. for Delaware North, one of the largest and most successful owners and operators of parimutuel racetracks, Sultemeier is responsible for seven racetracks (six greyhound, one thoroughbred) across the United States. The Delaware North Web site credits Sultemeier with "propelling West Virginia's Wheeling Downs into a new entertainment dimension with the introduction of a full-service gaming complex opened in June 2000 and the hotel/entertainment/ gaming expansion opening in June 2003."
He also propelled it to record revenues. After bringing the number of machines up to 2,200 and developing the additional amenities, Wheeling's revenues climbed by 33 percent to $23.7 million in the period ending March 28. That compared to $17.9 million for the first quarter of 2003.
"We've had a lot of growth there," Sultemeier said. "It wasn't a case of changing one thing and sitting back and it becomes routine. In Wheeling we went from 400 machines to 550 to 705 to 800 to 1,200 to 1,500 to now 2,200 and we had building additions and went from voucher out to coin out, and, of course, we're now going back to voucher out because it really is more customer friendly.
"Now we have a hotel and showroom and fine dining and buffets and all of that along with the racetrack."
Conquering New York?Recently Sportsystems moved aggressively into New York, where Delaware North owns one track and manages the video gaming business at two others.
"We've managed to start up the first three New York operations," Sultemeier said. "One is in Saratoga, another is in Finger Lakes and then Buffalo Raceway. The biggest challenge is operating those facilities within a very highly taxed environment."
Sultemeier estimated that 80 percent of the New York operations' revenues go toward taxes and purses, and that means pinching pennies in some areas the typical gaming customer might not be used to.
"It's night and day," Sultemeier said. "It's nothing like you're going to find in Delaware, West Virginia, Iowa or Rhode Island. It's by far the highest taxation in the country. Part of our challenge is being able to deal with that, seeing that it works and making sure that the customer has a good experience. At the same time we have to charge fifty or seventy five cents for a Coke or a cup of coffee on the floor and charge for valet parking. Those things may be free in other gaming environments, but here we've had to charge for it. That became part of our business plan, that we had to do that to make it work."
A second challenge in New York is the varying amount of competition Sportsystems' facilities face every day, Sultemeier said.
"It kind of goes in degrees," he said. "In Saratoga we have the least competitive environment. By that I mean the customer base has to drive the farthest to get to either [the Oneida Indian Nation's] Turning Stone [Casino Resort] heading West or going to [the Mohegan Indian tribe's] Mohegan Sun [Casino] or [the Mashantucket Pequot Tribe's] Foxwoods [Casino Resort] to the east.
"Then you have to go quite a ways north to get to the Montreal casino. So Saratoga has quite a market area, with no gaming right in that Albany region. Finger Lakes would have an hour and fifteen minutes to go to the Niagara Falls area and about the same distance to go to Turning Stone, whereas Buffalo-what we now call Fairgrounds Gaming & Raceway-has a lot of competition right in the Buffalo area.
"It has three major venues. Fort Erie, with 1,200 slot machines is the closest. Seneca Niagara and Casino Niagara are very close to providing full casino gaming opportunities."
Taxes, taxes, taxesConsequently, Saratoga has the highest net win of the three Sportsystems properties in the Empire State, with Finger Lakes following and Buffalo coming in third.
"Certainly there's an impact of operating in a highly competitive market, especially without a level playing field, when you look at the taxation rates.
"It's a little tougher to talk about Canada because of the way they operate, but they're certainly not operating in the same taxed environment. They run it differently with the province running it, but with full marketing and a very nice operation there.
"The Senecas are building nice facilities, with low taxation. So between the high taxation-which certainly presents some limitations for us-and the smoking ban, which their facilities don't have, there are some challenges for us. The nice thing is, we've made it work even in that environment."
The 55-year-old father of three grew up in New Mexico and graduated from University of New Mexico with a BBA in accounting. After moving to Phoenix for ten years (two with Arthur Anderson and eight with various racetracks in Arizona, in several capacities from controller to general manager of their flea market operations to CFO), Sultemeier became president of Tucson-based Tucson-Amato tracks.
Over the next decade or so, he opened several successful tracks, including The Woodlands in Kansas City and Fox Valley Greyhound Park in Wisconsin for Delaware North.
He didn't last long during that first stint at Delaware North, however. Not feeling at home in button-down company life, Sultemeier moved on to the Dairyland track, located between Milwaukee and Chicago, after only a few weeks with the company.
But eventually Delaware North called him back, and, Sultemeier said, "At that point I decided I was ready for a more corporate environment rather than life at the racetrack. It's worked out very well.
"I came here in 1994 as vice president of operations for Sportsystems, to manage their racing properties, and they all were purely racing properties at the time," he said. "After fifteen months I was made president of the racing division, which, at that point, already had the gaming component to it in West Virginia. We had added that the year before. It was a very quick startup. I've been president since March or April of 1995."
Hands-off approachToday, as Sultemeier moves through one of the most challenging periods of his career-the integration of gaming devices in New York-he attributes some of his success to his relaxed management style.
"I'm a lot more laid back than most executives," he said. "I certainly don't micromanage. But I like to be informed, even though I like everyone to run their own operations. When you look at our track operations, we really have a lot of good people and full operations in the field. I like to have people who can run their own operations. Certainly you need coordination and have to figure out where it makes sense to combine things on major contracts, to utilize that buying power. At the same time I realize that every area is different, every state is different, and I want people to build those relationships and work to oversee that rather than drive that myself."
The installation of gaming machines at tracks has taught Sultemeier to be more flexible, he said, and he's learned some interesting lessons along the way.
"When we've gone to the full operations, like Wheeling, or going into coin-out gaming, we had to get into larger staffs, get into higher levels of internal control needs and security needs," he said. "Those have certainly been new learning experiences.
"And with the marketing, you're really looking at better players, you're looking at rewards systems at a higher level than we've done in racing. So there's certainly some differences between the racing marketing and the gaming marketing. At the same time, we've had to learn where we can do a better job in the racing marketing end of the business."
Secrets of their success
Researched gambles have paid off for Sportsystems Corp. in New YorkIt may be tough to teach an old dog new racino tricks, but Sportsystems Corp. President Ron Sultemeier said that for a hardened veteran of the racing business, he and his staff have learned pretty quickly.
"Even though we're 'old timers' in the racing end of things and we're pretty new to gaming, I think both have learned from each other," Sultemeier said. "There's probably been more learning on the racing side than the gaming side. In a way we learned the way we should have been doing things in racing over the years. That's been good for us."
One thing he learned was that, even as the president of a conservative company, it made sense to take occasional chances. In New York, for example, the legalization of gaming devices at racetracks was hung up for several months by a lawsuit brought by anti-gaming forces. Sultemeier decided to move forward with his plans regardless.
"We took a chance on the lawsuit being settled favorably," Sultemeier said. "We went ahead and started even in light of the court challenge."
By taking that approach, Sportsystems was able to get up and running with the video machines faster than the competition. Another reason they were able to launch so quickly was the company's decision to start small, and avoid elaborate buildups, at least at first.
"We did lesser buildouts than some of the other tracks are contemplating," Sultemeier said. "We felt we had to do that based on the tax environment that we were operating under and, in Buffalo's case, the competitive environment coupled with that. In most cases we undertook what in most gaming circles would be considered very conservative buildouts. We didn't add in entertainment, fancy dining or buffets or anything. We kept them simple but still very pleasing environments.
"I think that's one of the keys to making it work."
Loto-Quebec's plans to socially control gaming growth may help N.Y. racino operatorsLike many nascent New York racino operators, Sportsystems Corp. President Ron Sultemeier realizes tracks face an uphill climb in northern portions of the state, where Canadian VLT operators have long enjoyed gaming machine dominance.
Some of these new operators may have caught a break, however, if Loto-Quebec adheres to its 2004-2007 development plan that stipulates the agency must manage the need for revenue in a way that pays more attention to social responsibility.
For those unfamiliar with Loto-Quebec, the company operates most forms of gaming in the province, including traditional and video lotteries, casinos, and bingo, and generated more than C$1.5 billion in revenues for the provincial government in the year ending March 31, 2003. Despite this record of success, gaming in Quebec has come under scrutiny the past several years as the casino and video lottery industries grew. As a result, the new development plan addresses the concerns with four fundamental objectives:
• Minimize the social costs associated with games of chance and adopt new measures to combat compulsive gambling.
• Improve the corporation's effectiveness and overall performance so as to maintain the level of net profits remitted annually to the government.
• Contribute to the development and success of the tourism industry, working hand-in-hand with the principal players in the sector.
• Refrain from increasing overall game offerings in Quebec.
One significant aspect of the plan is to reduce the number of VLT locations in the province by 31 percent over the next three years, removing a minimum of 1,142 sites from the network. About 2,500 machines would be affected, with 70 percent of those being relocated into five gaming halls to be established near high-density urban areas or in major tourist zones. Even though the number of sites will be reduced, Loto-Quebec officials think VLTs will remain widely available enough not to encourage the return of gray market machines.
It is also likely that one or more of the new gambling halls may be integrated with Quebec's racetracks, as the government has announced plans to help support the ailing racing industry. More than 1,470 of the relocated VLTs could be added to racetracks (which presently have 430 machines). However, Loto-Quebec is concerned that one of the tracks (Hippodrome de Montreal) is not in a good location to house one of the gambling halls, and is in favor of moving the track to the region north of Montreal.
Another aspect of the plan concerns Casino de Montreal, which will require some C$20 million in investment to bring the facility up to more modern standards of gaming and dining space. Being considered is a relocation of the casino to the Peel Basin, a site with access to Montreal where a complete recreational-tourist complex could be developed. Loto-Quebec anticipates making a proposal to the government regarding the various options by the end of this year.
Finally, Loto-Quebec has proposed the creation of an independent non-profit entity, responsible for all mandates related to problem gambling, to assure optimal effectiveness in the fight against compulsive gambling.