The gaming and hospitality industries are becoming increasingly intertwined, and this will create an entirely new, integrated sector, writes Spectrum Gaming Group’s Michael Pollock.
Here is a riddle to be solved: What does the casino industry have in common with automobiles?
The answer can be found in 1893, when the first motorized vehicle traveled 700 yards before it broke down. The headlines of the day did not herald the birth of the automobile. They portended the advent of something quite different: the horseless carriage.
Effectively, that world-changing moment was not defined by what it was, but rather by what it was not: A carriage that traveled without a horse. Horses were the four-legged definition of transportation, and thus their absence defined the future, at least temporarily.
We are at a similar moment in the growth of gaming. Dining, entertainment, spas, nightclubs and other forms of entertainment are their own subsets of hospitality, industries unto themselves. But in the context of casinos, they are more often defined by what they are not: All these services are lumped under the catch-all title of “non-gaming.”
When we define something by what it is not, rather than by what it is, we capture a mindset and create a self-fulfilling prophecy: What can non-gaming do for gaming? Which vertical is more important?
Put it in terms of individuals and divisions within a gaming organization. If you work in the gaming industry, where can you find the shortest path to the corner office? Gaming or non-gaming? Such answers should clearly be self-evident.
That mindset of dividing an industry into what it is and what it isn’t misses the larger question: How can gaming be harnessed to capture the widest impact, and to increase revenues, investment and employment in multiple verticals?
This mindset is not limited to the corporate boardrooms of gaming companies or of Wall Street, as I need to confess that consultants are culpable as well in the creation of this semantic prophecy (I’m looking at you, Spectrum Gaming Group).
Most significantly, this is also the dominant view in state capitols. When state legislators ponder setting the tax rate or licensing fees for casinos or sports betting or digital gaming, how many of those legislators take the time to ponder the other cash registers that will – or will not – be ringing?
The gaming industry’s growing embrace of hospitality, in one sense, is hardly news. Gaming has always been a subset of hospitality, even if few within gaming would acknowledge this common DNA. However, that shift in nomenclature from “non-gaming” to “hospitality” is evolving, in no small measure because it has to. “Hospitality” – which is arguably the world’s second oldest profession – is the new buzzword in boardrooms, among investors and at conferences.
Several global trends are converging to force this change. One is the global push toward integrated resorts, a force that continues to gain momentum in several continents. By definition, an integrated resort defines gaming as one of its essential amenities, but not the only one.
Las Vegas has long provided verification of this trend, as major gaming resorts along the Strip have shown that gaming is not the only source of profitability. Resorts in Singapore have further advanced this, and at this writing, countries from Africa to South America to Europe and Asia are looking toward integrated resorts as the economic salvation of everything from tourism to employment growth. Quite candidly, many of those hopes cannot possibly be fulfilled by the authorization of resorts, but at the very least, policymakers are at least turning their gaze in the right direction.
Another trend gaining momentum, particularly in the US, is the view of those who are clearly segments of hospitality but have never had an association with casinos or gaming. This group, which now has its nose pressed against the gaming glass, includes sports bars, restaurants, stadiums, sports team and others.
This notable trend is an offshoot of the sports-betting revolution that is still roiling the political landscape across the United States. Sports betting is bringing new players on to the field, and these rookies (to keep the sports analogy going) are not steeped in the history, nor do they understand the issues behind licensure.
Gaming is not simply a regulated industry, but is rather an industry that depends for its very existence on its reputation. Since the 1970s, the very definition of a gaming license is that it is a privilege, not a right, that is granted only to those who meet universally accepted standards for good character, honesty and integrity.
Gaming operators and suppliers – ranging from IGT and Scientific Games to Penn National and Las Vegas Sands – have amassed those licenses in multiple jurisdictions. Those licenses are not only badges that signify corporate character, but also serve as barriers to entry. Those who cannot meet those standards cannot operate in the industry.
Meanwhile, as lotteries become players in more forms of gaming – particularly sports betting and online gaming – most lotteries have never had to either implement or enforce the gaming standards that are rather routine among gaming regulatory agencies.
If the new breed of gaming participant elects to enter through the lottery door, perhaps as a retailer or an affiliate, which traditional will, or should, take hold? The answer to that question is hardly academic, but could determine the long-term future of gaming.
If, as it seems inevitable, that all forms of gaming will converge in some fashion, the choices are either a level playing field or one that is anything but level. Casinos and lottery retailers have never really competed, but if sports bars become sports-betting venues, that will change.
The core question then is, do states raise the standards for entry for such new forms of retail gaming or, in the interest of fairness, do the standards for gaming licensees – including such requirements as tax rates, submissions of internal controls and other pillars of gaming regulation – get lowered?
The former would be preferable for many reasons, particularly because the high standards for gaming licensure have led to widespread public acceptance of casino gaming as an economic engine. The question remains unanswered, but it will not go away.
Neither will the convergence of gaming and hospitality. This convergence reflects the urgent need for both gaming operators and those in the public sector who license those operators to move outside their comfort zone and turn what we have historically referred to as “non-gaming” into something else: pillars of hospitality.
This change in mindset means that all gaming operators will have to expand their portfolio of offerings, and at the same time, they will have to work with other segments of the hospitality industry to achieve one unified goal: Creating one seamless policy to achieve success in business while advancing all aspects of public policy.
Horseless carriages became automobiles when society recognized that an irreversible change was taking place, and it involved more than putting horses out to pasture. Transportation became a new industry, even though people had been transporting themselves for centuries. Hospitality is in the same position today.
Michael Pollock is managing director of Spectrum Gaming Group and the founder of the Spectrum Gaming Hospitality Group.
Michael will be speaking in the Hospitality & Brick and Mortar content stream on the first day of ICE North America, on May 13 in New Orleans.