Sign up for a CDC Gaming Reports Premium Subscription trial!

Commentaries

From racetrack to casino: Plenty of challenges and a big learning curve

By Nick Sortal

In addition to lacking the name recognition that comes from being part of gambling’s epicenter, casinos outside of Las Vegas have an additional challenge: many of them had to convert from their pari-mutuel roots. And that isn’t easy.

State legislators across the United States who approve a foray into gambling usually award the licenses to existing horse tracks, dog tracks, and jai-alai frontons for three big reasons: (1) The pari-mutuels are often the ones doing the asking; (2) They have experience in gambling compliance and (3) They’re the best-connected with those who make the approval decision.

But the challenges can be daunting, with new marketing strategies, unfamiliar customer service protocols, general operations to learn, and slot tax rates well above what you see in Nevada and New Jersey.

“You can’t compare having an 8- or 10-percent tax they have with the challenge of paying what can be 50 percent or even 80 percent when you include purses and local taxes,” said Ronald Sultemeier, who was at the front of the pari-mutuel leap into casinos, helping convert a Wheeling, West Virginia, dog track in 1994.

Sultemeier said Wheeling started with 400 slots, then grew to 500, then 700, then 1,200, and eventually 2,300.

“We really didn’t know what we had and we just threw them into the race track and anywhere we could put them,” he said. “There was a big learning curve.”

Sultemeier said the biggest difference was marketing.

“We didn’t market race tracks. You’d have an occasional stakes race or wallet giveaway but we really weren’t much in racing in the way of true marketing,” he said. “I’d be at casino meeting and say ‘We need to increase marketing by $1.2 million;’ they’d look like I’m crazy. They’d say, ‘We’re doing really well. Why spend more on marketing?’

“In effect, you have to teach the senior management.”

Alex Havenick, whose father bought Flagler Dog Track in Miami in 1954, said the casino business is “a unique busineness model,” citing the regulatory structure. Havenick is president of Magic City Casino, which began offering slots in 2009. The casino leads Miami-Dade in win per machine, averaging about $275 per machine for its 800 machines.

“We developed the ability to market to our clientele,” said Havenick, whose customer base is in a largely Hispanic community within a 3-mile radius of Magic City. “But we inundated ourselves with material, visiting casinos all over the country.”

Doug Hoppe, who helped launch the Hard Rock Rocksino near Cleveland and worked for the Seminole tribe in Florida, said the other challenge for pari-mutuels has been marketing to the more lucrative customers.

“It’s old, old school,” he said. “They’re thinking of bringing in volumes of people because everyone is pretty much worth the same.

“They don’t understand the concept that some spend tens of thousands of dollars and others spend $20 and some absolutely nothing.”

He said the key for the casinos was to be “surgical” with a database of customers, noting that “If you’re not good at database marketing you won’t have a good casino.

“You can’t just live and breathe by getting people in and out of the door, they go for 10,000 rather than the best 2,000 or 3,000.”

Hoppe joined the Seminole casinos in Florida in 2003 and served as vice president of marketing for the Seminole Hard Rock Tampa until 2013, then headed to the Rocksino. The Seminole casinos began as bingo halls in Hollywood and Tampa, then offered bingo-style slots and eventually Class III games.

“It was me and the director of security who had gaming experience,” he said. “Everyone else was a bingo hall person.

“But obviously, over the years we added people,” he said. “And if you’re a good leader and a good businessperson you pay attention to the new knowledge brought in.”