Casinos seeking sports betting boost need to prepare now

There are plenty of risks that casino operators face when it comes to the potential expansion of legalized sports betting in the U.S.

Implementing a sound compliance and risk management strategy, pricing products at a competitive rate and understanding your customers are critical, but those are overshadowed by the risk that comes with not doing anything at all.

That was the call issued by Dan Kustelski, chief executive of Chalkline Sports, during a webinar on sports betting opportunities beyond Nevada Wednesday hosted by the Innovation Group.

“If you want to be an early adopter, there are things you should be doing right now,” he said, such as consolidating your database, engaging customers on the issue or generally “doing something to understand your existing casino database and understanding [your customers’] propensity to gamble.”

“If you wait until legalization, you’re probably going to be too late,” he emphasized.

In the webinar, which was devoted to helping casino operators and industry practitioners better understand the breadth of opportunities presented to them by an expansion of sports betting, panelists reckoned that the activity is going to be available – in some capacity – in new jurisdictions within the next three to five years.

Operators seeking a piece of the pie that is the estimated 30 million Americans that bet on sports, they reckoned, would be wise to prepare themselves appropriately and put the right internal systems in place.
Dan Shapiro, vice president of strategy and business development at William Hill US, said that developing a proper sportsbook compliance program and culture is a critical preparatory step toward a smooth rollout and operations.

“We have a saying at William Hill that ‘Every customer is important, but no customer is too important.’ We spend a lot of time making sure we know who our biggest customers are and where they’re getting their money. We’re always monitoring for suspicious activity,” he said.

“If you don’t follow it very closely and put together the right compliance department and personnel and culture of compliance, it can get folks in trouble – and we’ve seen that in the industry,” he continued.
Shapiro also said that casinos must think long and hard about whether they want to operate their sportsbook on their own or contract it out to an experienced third party such as William Hill.

“They have got to realize this a business where you can lose money. It’s not like putting a few slot machines on the floor in a certain area and having a reasonably good idea what they’re going to yield over a certain period of time,” he explained.

“There are fluctuations in sports betting, and the result is it can be wildly volatile, so it’s really important to have a solid risk management strategy and be able to stomach the ups and downs,” Shapiro continued.

Another factor that will be crucial to the success of a new sportsbook in a new jurisdiction is that of offering competitively priced odds – which require both institutional know-how and a favorable taxation regime.

“Offering competitive pricing and competitive odds is one thing that will really be essential for domestic books,” said Will Green, director of research at the American Gaming Association.

If this isn’t accomplished or possible, Shapiro said, customers will have little incentive to shift their betting away from illegal offshore sites.

“The competition in these states opening up is going to be the offshore illegal bookmakers,” he said. “A lot of them have very good products and very good pricing. It’s very important that the product breadth and offering is competitive with what customers might be used to finding elsewhere.”

At the end of the day, casino operators looking for a cut of a nascent sports betting market need to be prepared to put acquiring and retaining customers a top priority, said Kustelski.

“When you’re in a hyper competitive market, it’s the value of the customer,” he emphasized. “Regulated books in Europe spend 25-30 percent of their net revenues on marketing. That’s a huge number, and it just goes to show you how hard it is to acquire customers and retain them.”