Global Gaming Business Magazine interviews Seth Makowsky in “Making Sense of Non-Gaming Spend”
By Rodric J. Bradford Fri, Jan 23, 2015
Casino Cooking Culture
Guy Fieri. Gordon Ramsay. Rick Moonen. Giada de Laurentiis.
Now, when you walk on the Vegas Strip, you often don’t know if you are in the iconic Sin City, or a fantasyland for the Food Network.
“Las Vegas is about extraordinary experiences. Before, gambling was the sole focus. Now, it is equal parts dining and entertainment as well,” says Seth Makowsky, chief executive officer of the Makowsky Restaurant Group, a food and beverage management and consulting company. “Guests are becoming even more discerning, and celebrity chefs, savvy restaurateurs and bold food and beverage directors have transformed Las Vegas into a dining and entertainment mecca. With so many celebrity restaurants centralized on the Las Vegas Strip, there is opportunity to band together and attract national tourism and increased revenue.”
Las Vegas Restaurant Week has evolved into a national event that draws foodies and visitors from around the world, with the help of top chefs like Moonen at Mandalay Bay’s RM Seafood. It fills the hotels and casinos during an off-peak time of year, which is extremely valuable. The event set new attendance and revenue records in 2014, and with a portion of the proceeds going toward the Three Square Food Bank, it creates excellent public relations for the city to tourists from all over the world.
“MGM Grand on the Las Vegas Strip is a fine example of this trend,” says Makowsky. “The entire front façade has been rebuilt to showcase the restaurant and nightclub Hakkasan. At Hakkasan there is a celebrity in the kitchen and celebrity DJs at the nightclub. The result is the highest-grossing restaurant and nightclub in the world.
“The future will bring increased focus and pressure to perform at higher standards. Heightened expectations will lead to more and more investment and greater focus and pressure to perform.”
With dozens of national restaurant chains to accompany the celebrity chef trend, the future seems as full of satisfied dining tourists as one of the trendy entrées on the menu.
“Most of the national restaurant big brands that have entered the Las Vegas market have made money, along with the television personality restaurants,” says Paul Heretakis, owner of Westar Architectural Group. “The casino operators know a big brand operator will not close because they have the corporate financial backing.”
According to Heretakis, a potential downfall of the dining trend is a lack of diversity and uniqueness that Las Vegas is known for.
“I think it is good for the short-term gain, but with these brands you do not get a lot of change over time, and one of the best things about Las Vegas is that it always changes,” he says. “You can end up with many brands past their prime but stuck in the middle of a 20-year lease.”
Estimated earnings are between $10 million and $20 million per year for the most popular restaurants, validating the revenue potential for both traditional and tribal gaming properties. The long-term financial stability they provide equals revenues for casinos, but it may also ultimately cost the Las Vegas Strip originality.
“Right now we have an oversaturation of the same product because something worked well and now we have too many dining options,” says Heretakis. “In many ways casinos like to play it safe with many national brands that have deep pockets to add revenue to their property.”
How amenities add to a casino’s bottom line
The sounds associated with the casino used to be the jingle of a slot machine, the spinning ball on the roulette wheel and a card dealer yelling “blackjack” to a lucky player. However, for a new generation of casino visitor, the sounds they associate with their experience are the loud thumps of electronic dance music at a nightclub, the buzzing of a cash register at a retail store or the tinging of utensils on the plate at a trendy celebrity chef restaurant.
Sounds good, but is it making the casino money?
The answer is “yes,” because it is bringing a new generation of casino visitor who is not mesmerized by the spinning reels of a slot machine or a spinning ball on the roulette wheel like their parents or grandparents.
“It is a great story to tell when almost 20 years ago the city had to reinvent itself from a gambling destination to the world’s top entertainment destination,” says Chuck Bowling, president and chief operating officer of MGM Resorts’ Mandalay Bay Hotel & Casino, known for its Mandalay Place dining and retail attraction, as well as hosting internationally recognized sporting events at its event center.
Bowling also represents Mandalay Bay on the Las Vegas Convention & Visitors Authority board and acknowledges the trend toward attracting non-gaming visitors, and their revenue. It is what has made Las Vegas relevant in the 21st century—not the handful of casino games that stretch back to the city’s origin.
“Our job is to evolve to create and generate revenue,” he says. “The recession allowed us to fine-tune and sharpen our tourism tools that were already best in class. Now they are a lot sharper and more in focus by listening to our customers and building the proper amenities based on that feedback.”
A Focus on the Future
A large part of that focus is on the millennial generation, a generation that looks at cassette tapes, VHS machines and AM/FM radio like the older generation looks at a dinosaur. Because of that, both traditional and tribal casinos have had to change the “sound of the times” to match demand, and to add to their bottom line.
“Las Vegas always has to be a great destination that continues to evolve and continues to reinvent itself,” says Bowling. “The younger generation likes celebrity chefs, nightclubs and DJs. And our job is to give them what they want.”
It’s the same job that is being carried out on tribal gaming land across the country, from California to Connecticut to Cliff Castle Casino in northern Arizona.
“We create our own non-gaming projects and events to generate a significant amount of revenue for our property,” says Gene Stachowski, marketing director for Cliff Castle Casino Hotel, which hosts unique events like the “Big Boy Toy Show” that features vendors of RV dealers, boats, and fishing and skiing accessories. “From over 20 years of experience at a casino, my idea of marketing is to create fun, and the people will come.”
Part of that fun at the casino is the Big Boy Toy Show in March, and hosting auditions for the iconic game show Wheel of Fortune in May.
“I meet with all of our media contacts to let them know that I am going to bring a cool factor to our casino,” says Stachowski. “If the cool factor is there, the people will come, and that will generate revenue.”
There are now more ways than ever to generate revenue from entertainment on a casino property—high-priced production shows, value-driven comedy and magic shows, concerts and of course, the popular nightclubs. These offerings have become destinations in their own right, with advertisements and marketing campaigns that often neglect their location inside of a casino, and instead focus on the entertainment experience the guest will receive.
“We have our Stargazer outdoor amphitheater where we bring in five or six national acts a year,” says Stachowski about the Cliff Castle in Arizona. “Our goal is to break even on the tickets and make our revenue on the food and beverage side. Bringing an additional 1,200 to 3,000 people to the casino who normally would not have gone doesn’t hurt either.”
Stachowski combines traditional events like concerts with non-traditional events like wine tastings to cater to different demographics to generate even more revenue. It is a formula that has been very successful for regional casinos.
“You will continue to see these casinos use entertainment to entice new crowds in local markets,” says Steve Rittvo, chairman and chief executive officer of the Innovation Group, a consulting firm that specializes in food and beverage, sports and entertainment and interactive strategies and campaigns. “They are investing more in non-gaming amenities, and their investments are paying off.”
Perhaps no location demonstrates the shift from gaming to non-gaming revenue more than the Fremont Street Experience and Downtown Las Vegas as a whole. The area built its reputation on hard-core gamblers, loose slot machines and low-limit card and roulette tables. In the past five years it has transformed itself into a hotbed for live music, value-driven entertainment, and new food and beverage options.
“When I started five years ago it was difficult to draw crowds here, but now 90 percent of my customer base comes from the Strip,” says Mike Hammer, headlining act of a comedy magic show at Four Queens Hotel & Casino, and who is widely recognized as one of the best young talents in Las Vegas. “I also have reports that state 20 percent of my audience is staying and gambling at the casino afterwards, so it benefits them, too.”
Hammer represents two trends that transformed Downtown Las Vegas into the dynamic destination it has become to the younger generation—non-gaming entertainment and value-driven promotions. His deeply discounted $9.95 promotional ticket price also comes with a complimentary beverage, knowing that customers saving money on the ticket purchase allows them to spend more on beverages at the show.
“I am an added bonus for the hotel, and I always see my guests in the casino floor after the show, so it is a seamless transition,” says Hammer. “We offer player’s club sign-ups and promotions at the show so we can generate revenue from all areas.”
Downtown Las Vegas is also home to another non-gaming event trend that has created substantial revenue—the outdoor festival. Whether it is music, food or sports, the outdoor festival trend is the newest non-gaming attraction that tourists are clamoring for in both major and mid-market casino properties.
“Twenty years ago the goal was to keep people indoors at casinos as much as possible so they could play,” says Bowling. “What we have realized is that we are a weather destination, too. That is why we use our MGM Resorts Village for a three-day country music festival.”
This spring MGM is also hosting the Rock in Rio Music Festival for the first time, in a similar manner as the Life is Beautiful outdoor music festival has become a signature event for Downtown Las Vegas each fall. Halfway across the country in Mississippi, MGM Resorts has partnered with the city of Biloxi to develop a baseball park that will be home to not only a minor league baseball team, but also to special events and outdoor concerts.
“At MGM, we learn about the communities we serve and how that fits into what the younger generation wants so it drives revenue,” says Bowling, who was equally excited about the 20,000-seat MGM Resorts arena on the Las Vegas Strip currently being built. “We are developing whole new reasons for people to visit our properties, and it does not have to be centered around the casino.”
A longtime component of non-gaming revenue has been retail, but it has received a facelift in recent years by experiencing an outdoor trend itself, making more use of a property’s real estate while not being tied to some of the same labor union laws that govern inside a casino.
Foxwood Resorts outlet mall in Connecticut and the Linq outdoor retail complex in Las Vegas demonstrate that this trend is occurring from coast to coast in the United States.
“Everyone is understanding that the nature of the visitor is changing, and that helps the industry as a whole,” says Rittvo.
It also changes roles for the casino operator.
“Now you have casino operators acting as mall developers and operators,” says Heretakis. “There definitely is a learning curve that is happening; now they just need to adjust to maximize revenue for the long term.”
Retailers at casinos are usually limited to clothing and accessories, but the increased popularity of art galleries is giving casinos in major markets another retail tenant willing to pay for the exposure, adding to the bottom line of the casino and the artist.
“Our galleries offered opportunity to not only play and dine, but also be entertained and inspired with music, dance and of course, art,” says world-renowned artist Vladimir Kush, who operates the Kush Fine Art Galleries at Caesars Palace and Planet Hollywood Las Vegas Resort & Casino. “My style uses universal themes metaphorically, and is cross-cultural so it brings a diverse crowd through the casino, which adds value and revenue to each property.”
The Social Sale for the Future
When it comes to the future of non-gaming revenue, the 800-pound elephant in the casino is connecting social casino play to non-gaming revenue from those online experiences. Online players can receive awards and incentives to non-gaming entities by purchasing apps online, as well as playing games.
“The casino brand has to use the online experience to identify what type of incentives motivate that player,” says Dana Takrudtong, vice president of North American sales with GameAccount Network, a leading provider of internet gaming systems. “Identifying the player’s preferences could be the difference between them spending $1,000 at the casino or $15,000 on bottle service at a nightclub.”
The data analysis that all casinos are performing on online players has shown that just because someone plays countless hours of a social casino game on their phone does not mean they are going to make a beeline to the slot machine or card table as soon as they enter the casino.
“Online gaming can offer real-time marketing that you do not have in traditional media, which can directly correlate to non-gaming incentives and increasing non-gaming revenue,” says Takrudtong.
With the future of non-gaming revenue being driven by the online experience, the customers of celebrity-chef restaurants, bottle buyers at nightclubs or ticketholders at a comedy show are just as likely to be inspired by staring at their phone screen for free as a multimillion-dollar print or television advertising campaign, allowing more money to be put into the casinos’ bottom line by saving on advertising expenses.
“If casino operators do not jump in the social play segment now, the industry will evolve without them,” says Takrudtong. “It is not too late to enter the space and strategize on how to capture that vital non-gaming revenue. If you are considering it as an operator, 2015 is the year to jump in or get left behind.”