When the tribal gaming industry convened at the national Indian Gaming Association’s annual convention in April, sports betting was at the top of the conference agenda.
Packed rooms were the rule, including at a practical-minded, hands-on session called, “Beyond the Margin: What Else Does Sports Betting Do for Your Property?”
This session was about the additional benefits that sports betting brings to a casino, from smaller properties to integrated resorts. “You hear that this is a low-margin, high-volatility business and casinos should be very careful with this product,” said moderator Gene Johnson, executive vice president, Victor Strategies. “We’re here to talk about what other things sports betting does and why would you get into this business.”
Joining Johnson as panelists were Atlantic City-based Kresimir Spajic, senior vice president of online gaming, Hard Rock International; Vic Salerno, president, USBookmaking, whose recent work included the launch of Santa Ana Star’s sportsbook in New Mexico; Jay Kornegay, vice president race and sportsbook operations, Westgate LV Resort & Casino; and Max Bichsel, director, Kambi US, which has a dominant role in the new Pennsylvania sports betting market. A summary of their discussion follows.
Can you make money in sports betting?
KORNEGAY: Yes. It is a high-volume, low-hold game. I think some people get confused between the margins and the hold percentage. The margins in Nevada are relatively strong, in the mid- to high-40 percent range, which you will not be able to duplicate in other jurisdictions based on the tax structure. I would take a 6 percent hold; 5 percent is what we normally look at because of our type of clientele—we have a very skilled demographic in Las Vegas. They’re very sharp and they go to great lengths to identify any type of weakness. But the margins in Nevada are fairly strong though you will not see those in other jurisdictions.
SALERNO: In my experience, hold percentages will increase as you get away from The Strip. As you go out into rural areas, you will hold much more. In New Mexico right now, we see very strong hold percentages, probably double what we hold in Nevada. You’ve got to play to your market and its level of sophistication.
BICHSEL: Even in states with very aggressive tax regimes, you can still make a lot of money. As for volatility, it depends on the perspective you take. If it’s a weekend-to-weekend or month-to-month timeframe, it’s certainly going to be a very volatile business. But if it’s three-to-five years, you’ll see much more steady margins throughout the business.
But this discussion is about the other things sports betting does for a property. I’ve been at properties for the Super Bowl or March Madness and there’s a buzz around the casino; they’re able to promote other events. There are ancillary benefits that are very hard to monitor, such as seeing the lift on table games or slots or food and beverage and hospitality. But ultimately there’s a buzz around sports betting… most properties are in very populated areas where people love sports. It’s really not about competing with other casino operators, it’s about what you can do as a casino to set yourself apart from all the people who are out in the street operating in the shadows. It’s a massive market.
SPAJIC: I think margins will increase with the education of the market and the introduction of in-play products. In the future, I think you will be looking at 7 or 8 percent rather than the current 5 percent. It will probably take a couple of years, if not more, to educate the current customer.
How do you contrast the U.S. with sports betting in Europe? Is it easier to make money in Europe, are the holds higher there and why?
BICHSEL: I would say if you look at holds at Kambi from year-to-year, it’s growing and is now in high-single-digits. That being said, tax regimes have a huge impact. The markets are relatively similar. You’re basically substituting European football for American football, and we have the benefit of college football here as well. There’s also very little downtime in the U.S. where there’s not a major sporting event, apart from the mid-summer when baseball is the only show in town, and that helps to smooth out the margin differentials with Europe.
SPAJIC: Soccer makes all of the money in Europe and it is basically played year-round. Some of the leagues wouldn’t have a break without summer. Here you have professional leagues which last three-and-a-half months, like the NFL, which does 50 percent of the volume. So how you plan and organize things here is very different from Europe. Margins are different because of in-play products. In Europe, in-play does 60 to 65 percent of overall volume. When you see more in-play wagering and people expanding their bets beyond major professional sports to other sports, you will see higher margins here.
KORNEGAY: If you look at the Las Vegas market and what they hold on The Strip, it’s a different type of clientele. Moving forward, I think we’re going to attract a very immature market in these emerging jurisdictions, which is why I think we’re going to need a lot of American expertise to be flexible and look into the market you happen to be operating in.
What does the Westgate see as the main benefit to having a sports betting operation?
KORNEGAY: If you look at the biggest weekends in Las Vegas—there are about five or six of them—the majority revolve around sporting events; March Madness, the first weekend of the NFL, the Super Bowl, huge fight nights, whether it’s UFC or boxing. Those are our biggest days for the sportsbook, but, more importantly, those are our biggest casino days. The two biggest revolve around March Madness and the Super Bowl. It’s not just the casino that benefits; it’s everything. Rooms, the spa, bars and restaurants are all affected by the sporting schedule. There are incremental benefits across the property.
SALERNO: Just to follow up, for Native Americans, sports betting will draw people to your casino. It’s not just the big events, it’s Thursday Night Football, Monday Night Football. You can gear your whole operation around that and it will bring in a lot more people. Our experience at the Santa Ana Star is that food and beverage revenues have tripled. You have restaurants that are now open seven days a week that used to only be open on the weekends. Drop has increased in the pits… they attribute this to adding the excitement of the sportsbook. You can also utilize the sportsbook to advertise other kinds of promotions to bring new customers in from a different demographic. If you have exclusivity where your tribal casino is located it’s a great advantage and will increase your margins.
SPAJIC: There’s no one-size-fits-all approach. Does your property have additional amenities like a hotel and restaurants? The sportsbook itself is not enough to draw people. You will draw more people with food and beverage. Hotel rooms give you the potential for an event-driven business. How you position a sportsbook within your amenities matters. For us at Hard Rock, we are an entertainment and a lifestyle company, one of the biggest brands in the world and the sportsbook is just an addition to our portfolio. It attracts a different target audience that you won’t see every day at our property. It’s event-driven, so for the big games on the weekends or on the biggest events of the year, you’re going to draw that audience and they will drop money on other things. We see cross-promotional opportunities especially when it comes to table games. We also see high-volume spending on night life and food-and-beverage.
I used to work in Atlantic City and we’d do NFL-related promotions on the weekends. Do you have any data on what it brings to the Hard Rock when you have a sportsbook attached to those kinds of promotions?
SPAJIC: We just opened a couple of months ago, but I will tell you the property managers see high value in this. We haven’t used it to promote the property overall. Sports are engraved in culture… they are a main topic almost every day and can be used to attract people. We are putting a lot of effort to make this part of the property more engaging. We just opened Phase II of the project and our sportsbook is now a 4,000-square-foot area. It fits nicely into our overall portfolio. What we know is we have the biggest entertainment hall in the city—it can accommodate 7,000 people and we organize over 200 live events a year in Atlantic City—and the sportsbook is a great amenity. We see lots of cross-promotional opportunities and we also see it as a profit center.
One of our key goals is to create as many touch points as possible. Online sports is just another touch point and having our app on mobile phones means customers can engage with us 24/7 and this is very important to us.
BICHSEL: Kambi is fortunate to be working with the largest operator in Pennsylvania which has no hotel [Philadelphia-based SugarHouse Casino]. The sportsbook has driven other lines of business; table games and slots have both seen a rise. They understand they won’t make as much money on sports betting as they do with tables or slots, but they allocated resources to make sure people are at the sportsbook and it has been packed every night from 6:00p.m. to 10:00 p.m., and it has been at capacity every day the past few weeks with March Madness.
If you have a commitment to sports betting and take it seriously there are a number of ways to reap the rewards from other avenues rather than just worrying about the margins; to see if you can hit three or four percent is splitting hairs to an extent.
Casinos are meant to be exciting place. People hit a jackpot or you have crowds around a craps table getting excited. What kind of excitement does sports betting bring to a property?
KORNEGAY: We operate the world’s largest race and sportsbook; we’re just under 30,000 square feet and we really offer a 360-degree experience. We have a huge bar right in the middle of the book, a Drafts food outlet in the back of the room and, during March Madness and some of the bigger events, you can’t see the carpet in our place. And that’s not an exaggeration.
I just couldn’t imagine what our property would look like if we didn’t have a sportsbook during these times and our neighbor did. People are going migrate to wherever they can watch these games. And it not just March Madness; it’s all the other sporting events we have throughout the year. The excitement for the consumer is over-the-top because the value for sports betting is tremendous. Guys can bet $10 and be entertained for three hours. You might look at the dark side of that and say, ‘I don’t want that guy sitting in my property for three hours and spending $10.’ Well it rarely happens that way; they spend a lot more than that.
The excitement also gets the attention of media outlets; the media comes to our book, whether it’s local our national. They come and cover these events because that’s the thing that’s going on and people want to know about it.
SALERNO: During March Madness or the Super Bowl, there are companies that charge people to sit in the book; Caesars for one. The excitement is incredible. This last March Madness you had games going into overtime, everybody standing and cheering. It’s really a dynamic atmosphere. Go through your slot machines and look at how many people are smiling; I always do this at a casino. Nobody’s smiling. Once in a while you might hear somebody scream on the other side of the floor but that’s it. In the sportsbook, it’s continuous. People elsewhere in the casino ask, “What happened now, why is everybody cheering?” A sportsbook brings a lot more excitement to your property.
SPAJIC: My background is in sports—I worked for some of the big European sports organizations before coming into the casino business. The emotions and engagement that sports and sporting event bring to humans are just incredible. It’s not only about winning or losing, it’s about participating,
SALERNO: If you take a room of people watching a game and then they all have $100 riding on it, the interest level goes up. You don’t have to start gigantic with this. The Westgate has the greatest operation in the world; I have places that are kiosk-only. You start off and see what your customers demand and you can grow very easily from here and expand the operation. The start-up costs aren’t huge.
In the markets that Kambi is in, what kinds of new demographics or customers do your sportsbooks add to a traditional casino?
BICHSEL: The best way to describe it is youth. In New Jersey and Pennsylvania, if the Eagles are playing in Philadelphia and you walk into a sportsbook, I’d say 80 percent of them are under 40 years old. It brings in some younger segments that haven’t been seen in Nevada and other parts of the world where it’s the typical older guy with a sheet filling out his parlay card for $3. It’s people who haven’t really been exposed to gaming. They love sports and they see how other parts of the casino business work, such as blackjack and roulette. It’s definitely a younger crowd that we’ve been seeing which is something that operators have been searching for.
One of the successes we’ve seen with one operator in particular is not just having a traditional sportsbook with a teller where you walk up and place a bet, but self-service kiosks throughout the property, specifically in poker rooms. They’re not close to the actual sportsbook, but they’ll take a hand off and access the self-serve betting kiosk and bet on a live game, pre-match or futures without having to walk over to the teller.
KORNEGAY: What we’ve seen in our operation is demographics depend on the event. At the Super Bowl, you see an older, richer crowd, more females, more couples and all different generations. That’s true for the entire football season. March Madness is 99 percent guys—it’s like a fraternity party. It’s a very challenging demographic to handle for four straight days. It’s predominantly the younger generation but you will also see older customers; it’s really a unique event.
What about UFC?
KORNEGAY: That’s dominated by the more serious bettor. Males, all ages, but mostly younger because it’s a relatively new event compared with the other four major sports. But it can draw in huge crowds. When Conor McGregor fought Mayweather last August it changed our city’s landscape. Only 15,000 people could go to the fight, but it bought in hundreds of thousands of people to our city.
Do you see much action with sports like golf?
KORNEGAY: I think in-play golf is going to be the next hot thing. People are going to have a lot of fun with that, especially during the majors on Saturdays and Sundays. You have heavy competition and people are looking at each shot. Today’s coverage of golf is tremendous and it’s getting better. But those second- and third-tier sports have a little way to go when you’re talking about golf and NASCAR. But in-progress golf has a lot of potential.
SALERNO: If you’re going to do any kind of in-play, you really have to do that on a mobile device. Most of you might think that mobile devices might keep people out of your casino but, in fact, it really increases your over-the-counter business because you extend to people who would never place a wager. A lot of people are afraid to go up to a ticket-writer in a casino; they’re afraid they’re going to make mistakes. Any in-play requires a mobile app; things change so fast, you can’t go to a ticket writer or a kiosk. If there’s a guy in front of you, by the time you get there the shot will be made or the odds have changed.
BICHSEL: What golf has going for it is you have the luxury of Tiger Woods back and playing really well and you have events like the Dell Match Play, which is similar to March Madness in that there’s a bracket format and it’s head-to-head. That promotes an environment for sports betting and we’ve seen that grow significantly. What some of our operators have done successfully in jurisdictions that don’t allow mobile wagering, you can wager shot-by-shot through our kiosk product if there are enough available. Golf is similar to baseball; there are enough stoppages so you are able to get a bet down.
Do you see much crossover from the sports bettor to gaming?
BICHSEL: Our numbers show crossover is just north of 30 percent for those betting on race and sports who also spend money on slots and table games. SALERNO: The biggest crossover is with poker players. The poker player is more talented and educated about his game so he tends to like to bet on sports also. Crossover can happen with a couple when the husband watches a game while his wife plays the slots. We see a lot of that.
SPAJIC: We see the same with poker. These people know what they’re doing, or think they know what they are doing. Then we see a table game player, someone who is usually a high-level bettor and is interested in a particular team or a sport and will make a high-level sports bet. For now we see less crossover between our slot products and our sports bettors.
What kind of crossover do you see between sports betting and online gaming in New Jersey?
SPAJIC: Here the key is education and how you present the products between different verticals. We have something we call our omni-gaming product which is a deep integration between our land-based and online products. We have a single sign-off, meaning you can sign-off online and offline—it’s one account—a single loyalty program and a single wallet which enables you to move money from online to offline. If you do this well and communicate it well, you can be successful. But if you’re looking for some numbers, I would say 20-plus percent of players engage between brick-and-mortar and online.