The recession and global competition has not been kind to table games on the Las Vegas Strip, but the category is showing plenty of life at regional facilities, where less competition is a decided blessing.
The differences extend right down to floor operations, where philosophies on pooling tips or having dealers go for their own vary, not to mention receptivity to new games and whether or not to chase the volatile high-end market.
Those were among the insights gained from a panel discussion on table games operations that took place last month at Global Gaming Expo (G2E). The panel was superbly led by Debra Nutton, senior vice president, casino operations, Bellagio, who recently shifted from the same position at MGM Grand Hotel & Casino. Other speakers were London Swinney, vice president, casino operations at MGM Grand, who was most recently vice president of table games at Luxor and Excalibur Strip casinos; Dawn Clayton, assistant general manager, Thunder Valley Casino, Lincoln, Calif.; and Dallas Teerlink, director of table games, Running Aces Harness Park, Columbus, Minn. Here’s some of what they had to say:
HIGH-END PLAYThe volatile and globally ultra-competitive high-end table game player market is an essential part of the Las Vegas Strip, but the segment is not for everyone. “High end is very expensive,” said Swinney. “We now compete with Macau and Singapore; the customers are more demanding in terms of discounts, promo chips and comps; a more expensive customer than you would have at a regional property. We’ve seen our margins in table games decline as a result.”
Las Vegas started incentivizing high-end international table game players about 15 years ago, said Nutton. “It can be very difficult to collect on a debt; it really comes down to the relationship between the host and the customer. You have to believe your host when he says a player with $3 million in credit is going to pay.”
Nutton said a high-end player with $1.5 million in cash might be offered $1.5 million in credit. If he paid the $1.5 million in so many days, he’d get 3 percent quick-pay break. Additionally, the player could receive 20 percent on his losses, $50,000 to $75,000 in promo chips, and 40 percent of all theoretical losses in comps.
“If you’re all gaming people and you do the math, there’s nothing left,” said Nutton. “We all got so competitive in Las Vegas-between MGM, Caesars, Wynn and Venetian-for the same pool of limited business; we went after it like gangbusters to our own demise. Nowadays they don’t have to fly for 20 hours; they can go to amazing properties in Singapore and Macau. The only incentive we could really give them to leave their neck of the woods was more and more [money].”
At Thunder Valley Casino, table game margins are much higher, said Clayton, in no small part because the property avoids the top of the high-end table game market. “We answer to the tribal council of the United Auburn Indian Community and they opted not to book that high-end business,” she said. “We have tribal distributions that we are committed to each and every month, so the volatility and the swings of this market is not the business that they’re after. They like to know exactly what their margins are going to be each month.”
Clayton added that the $1 million to $3 million customer is extremely educated about how far they can go with deals. “When you look at the bottom line, it’s really not worth it.” She added the property is “very comfortable with the $100K-$200K cash or credit equivalent customer.”
Challenges on the high end are not limited to volatility. Aligning incentives for marketing and operations is a work in progress, acknowledged Nutton. “If you come in with a passport from Taiwan and $400,000 in front money, we’re going to give you $17,000 in airfare,” she explained. “If the same player brings his daughter, son and wife and they each have $100,000 and they say they’re not related, they get $7,000 each, or $28,000. So now it’s our job as operators to police all this and work with marketing. On the other side of that, our incentives are tied to the bottom line. But marketing, at least in Las Vegas, is paid strictly on theoretical. They may very well know that this is the father, mother and two sons and we’re actually giving them $28,000 instead of $17,000, but their motivation is just to drive theo. It has become this tough environment where we work together but we don’t work together.”
Swinney said one way to manage risk was to start marketing to high-end players based on what they did in a year, not try to discount them on one trip. “If they come in for one week and lose $2 million and we discount them on $2 million, they can come back in a few weeks and kill us for $3 million and we never recoup what we gave them back on the $2 million,” she said. “We have to get more strategic as far as what this customer brings to us in a year. Where they used to make three of four trips to Las Vegas, they may now spend one or two of those trips in Macau or Singapore. On the debt and what they owe in markers, they will normally pay when they come back to Vegas. So, obviously, if they’re not coming back to Vegas as frequently, we’re not getting paid as quickly as we did before.”
MANAGING THE GAME MIXNew games are a tougher sell on the Strip than in regional markets for some basic reasons. One is the economic environment. The great recession forced operators on the Strip to delete non-performing games, and fewer tables makes it tougher to take a flier on something new, especially if it comes at the expense of a tried-and-true blackjack table.
“With a new game, by the time you spread that on the floor and reduce your staff, you’ve got guests looking for blackjack,” said Swinney. “There are also challenges for the dealers; the hands aren’t dealt as quickly, they’re teaching guests how to play, whereas with blackjack the hands can be dealt quickly, the dealers can engage with the guests and that’s what they look for in this market.”
Swinney said she has vendors who tell her, “’I have ten of these in Barona, 12 of these in Pechanga.’ I say that’s great if you have a captive market. Our players will play them if they have learned them somewhere else, otherwise, I’ll have players saying, ‘where’s your blackjack?’ You can literally, on a graveyard spread in the middle of the week, get down to five or six blackjack games because you have roulette, craps, three-card poker, blackjack switch, pai gow poker and baccarat. At our core, mid-range properties, three-card poker and the games that people are really familiar with still do really well. I just haven’t been receptive to the risk that’s involved with putting a game on the floor if it means I have to displace a blackjack game which is really my bread-and-butter.”
Thunder Valley, whose nearest competitor is 45 minutes away, takes a comparatively aggressive approach to new games. Clayton said the property works closely with vendors, citing SHFL Entertainment in particular, to identify new games and puts them through an intensive testing and development process.
“We take three or four games that they would like us to take a look at and do a focus group with our dealers, table games supervisors and some of our gamblers who analyze the games,” she said. “The supervisors make sure it isn’t too labor intensive and the dealers really feel like they have buy-in. Then we’ll take people from our F&B and housekeeping departments, demo the games and ask them for their feedback. We’re looking for ease for the dealers to run the games and for them to communicate how the game is played to our guests. If it’s a cumbersome process that takes five or ten minutes, we’re going to lose decisions per hour and it will affect the win/loss rate.”
Clayton added that every time Thunder Valley adds a new game to the floor, they don’t make it optional for dealers. “Every dealer gets trained and we’re very big on the training part so that when we change shifts or downsize the floor we don’t have to change the game mix,” she said. “We also educate the departments when we add a game to tell customers about it, like when they leave restaurant.”
DEALER TIPSThe question of whether to pool tips or to let dealers go for their own is an enduring one. The stronger case, in this panel at least, was made for the latter, entrepreneurial approach.
“Going for your own makes for a very hard working staff,” said Teerlink, whose Minnesota race track property is entirely reliant on table games for gaming revenue. “They get hands-per-hour up because they are in business for themselves. If you’re not on top of things, they will try to do things that they shouldn’t do. But, for the most part, we have a real warm, cozy place because our dealers are engaged. You walk in the door and you have every dealer trying to get you to come to their game. Our dealers average tips of $250 to $300 per day, they work three days a week. Just recently we had a big progressive go off and the winner gave two racks of $100 chips, which was a $20,000 tip. Going for your own makes you want to come to work and make what you need to make.”
Clayton said that Thunder Valley pools tips, including in the poker room, but starting in 2014, “we probably need to split that out. The thinking was that we brought baccarat dealers in to deal poker and since they didn’t have the skill set we would pool them together. But we’re seeing a tendency not to push hands if you’re not going man-for-man. Right now, dealers are going an hour-and-a-half in the poker room without a break. After an hour-and-a-half, they’re raising their hand and saying they want a break. When you go man-for-man, after three or four hours, you’re pushing them to take a break. Also, the friendliness and the guest service that we really try to instill as part of our culture goes up when we all take ownership for it. If you don’t produce, you’re going home with no money in your pocket, so we think it will be catalyst for us to make that change.”
Nutton traced the history of pooling dealer tokes back to the opening of the Mirage in 1989. “It didn’t take long for us to put all of those tips on a paycheck and I think it changed the whole mentality of a dealer,” she said. “When I started as a crap dealer we went for our own. I think the idea was to take your craps and 21 dealers and hope they eventually became a host. Our biggest fear today is that they will hustle and ask the customers for money. But the truth is your dealers really did become some of your best salespeople. Today, you go around any casino and, say they split tips 300 or 400 ways per day; you’re going to get a lot of dealers who just don’t care.”
“Now is a very tough time for tips in Las Vegas; tips have probably gone down 25 percent or more,” Nutton added. “If you take a dealer who was living on $200 in tips a day, that is probably down to $150 now. I say to every dealer if you think you should be making $300 a day, you better be putting $300 a day in that toke box.”