1. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Gaming Entertainment Chapter 11 John R. Walker Hospitality, Lodging and Food Services Operations 1

2. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Chapter Objectives Outline the History of modern casinos Describe the various components of modern casino hotels Explain how casinos have been integrated into larger hospitality operations Appreciate the spread of casino gaming throughout the world Understand the basic principles of casino operations Discuss the different positions within the gaming industry 2

3. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved The Casino Resort: A Hospitality Buffet Twenty of the thirty largest hotels in the world are casino resorts on the Las Vegas Strip Today, many casino resort presidents and key executives have come up through the lodging or food and beverage side of operations 3

4. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved What is Gambling? Gambling is the act of placing stakes on an unknown outcome with the possibility of securing a gain if the bettor guesses correctly. wagered randomizing event payoff To be considered gambling, an act must have three elements: something wagered (the bet), a randomizing event (the spin of slot reels or the flip of a card), and a payoff 4

5. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved What is Gambling? Social gambling mercantile (or commercial) gambling. There are two basic categories of gambling: Social gambling and mercantile (or commercial) gambling. Social gambling is conducted among individuals who bet against each other In mercantile or commercial gambling, players bet against the house, 5

6. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved What is Gambling? The house edge is what makes casinos possible The house edge allows casinos to offer their customers honest games, fairly dealt, and still remain in business. The house edge is defined as a mathematical formula that allows the house to keep a small percentage of every bet made by a player. The player may have some luck in the short run but the house advantage usually prevails over the long run. 6

7. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved What is Gambling? handle The handle is the total amount of money bet at a game. win The win is the handle minus the money paid out on winning betsessentially, what the casino keeps. hold percentage The hold percentage is the percentage of the total handle that is retained as win. 7

8. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved What is Gambling? 8

9. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved What is Gambling? volatility Just because the casino department is reporting a net loss for a shift does not necessarily mean that the department is inefficient or incompetent; it may just be an expression of volatility. Over time, gaming wins will tend towards their historical average (house advantage). Because of volatility, even a busy casino can end up in the red for a shift or even a weekend if one high-stakes player has a run of good luck. 9

10. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Comps: A Usual Part of an Unusual Business complimentary Comps are complimentary goods and services offered to casino patrons in order to attract their business Comps Comps are distributed as a usual part of a casinos operation. higher-producing players The value of comps varies; generally speaking, higher-producing players are given higher- value comps 10

11. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved customer loyalty programs Casinos, with thousands of guests on any given day, rely on customer loyalty programs to track patron play Casinos use the information they gain about a players gambling patterns to offer him or her comps, based his or her expected levels of play. rewards structures Most loyalty programs have tiered rewards structures, giving patrons an incentive to play more and unlock more rewards. Comps: A Usual Part of an Unusual Business 11

12. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Types of Casino Operations Nevada-style gaming tavern Nevada-style gaming tavern, which is a typical bar and restaurant that has less than sixteen electronic gaming devices Stand-alone casinos Stand-alone casinos usually consist of only slot machines Indian reservation Indian reservation may be bingo parlors in prefabricated buildings to fully functional casino resorts Riverboats are usually permanently moored casinos with F&B facilities, and a hotel 12

13. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Types of Casino Operations 13

14. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Components of Casino Resorts Destination resorts, such as those found in Las Vegas, are centered on casinos that have several types of games available: – Slots – Table games (21, craps, roulette, baccarat, etc.) – Race and sports books – Poker rooms 14

15. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Components of Casino Resorts slot machines In most parts of the United States, slot machines produce the bulk of the revenue blackjack Among table games, blackjack is most popular nationally Casino resorts also include the following components: – Lodging – F&B – Entertainment – Retail shopping – Convention facilities – Nightclubs 15

16. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Evolution of Gambling and Casinos Gambling is among the oldest of human behaviors 7,000 years ago Purpose-built dice have been discovered at sites dating back to 7,000 years ago dating back only to 1941 Casino resorts, as they are currently operated, are much younger, dating back only to 1941 16

17. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Evolution of Gambling and Casinos outlawed By 1910 gambling had been outlawed in the United States Nevada legalized gambling In the midst of the Great Depression, in 1931, Nevada legalized gambling in order to increase tourism El Rancho Vegaswas the first casino become the Las Vegas The El Rancho Vegas, was the first casino resort on what would become the Las Vegas Strip 17

18. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Evolution of Gambling and Casinos 18

19. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Evolution of Gambling and Casinos 19

20. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Evolution of Gambling and Casinos corporations In the 1970s casinos were being purchased by corporations, integrating them into the national economy and initiating new regulatory scrutiny Atlantic City In 1976, New Jersey voters legalized casino gambling in Atlantic City Riverboat gambling Riverboat gambling debuted on the Mississippi in 1991 20

21. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Evolution of Gambling and Casinos bingo or card In the 1987 Cabazon decision, the Supreme Court affirmed that if a state allowed betting on bingo or card games, Indian tribes could offer these games without limits imposed by state regulators 200 Native American tribes 30 states $25 billion Today, there are more than 200 Native American tribes operating casinos in more than 30 states with revenues of more than $25 billion 21

22. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Evolution of Gambling and Casinos Asia is an even more lucrative American-run casino operators have found that Asia is an even more lucrative market for casinos than the United States. MacauSingapore Both Macau (2004) and Singapore (2010) have become casino powerhouses Macaus casino industry Since 2008, Macaus casino industry has become a world-wide leading gaming center with increasing revenues surpassing Las Vegas by nearly 400% 22

23. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Macau 23

24. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Working in a Casino Resort Hotel operations: Hotel operations: – Much like the career opportunities in the full- service hotel industry, with the exception that food and beverage can be a division of its own and not part of hotel operations Food and beverage operations: Food and beverage operations: – High-quality food and beverage service in a wide variety of styles and concepts – Some of the best foodservice operations in the hospitality industry are found in gaming entertainment operations 24

25. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Working in a Casino Resort Casino operations: Casino operations: – Gaming operations – Casino service – Marketing – Human resources – Finance and administration 25

26. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Working in a Casino Resort Retail operations: Retail operations: – Increased emphasis on nongaming sources of revenues – Gaming entertainment business demands an expertise in all phases of retail operations From store design and layout to product selection, merchandising, and sales control 26

27. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Working in a Casino Resort Entertainment operations: Entertainment operations: – Because of the increased competition, gaming entertainment companies are creating bigger and better production shows to turn their properties into destination attractions – Production shows have climbed into the multi-million dollar range, with special entertainment venues built for superstars 27

28. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Casino Shows 28

29. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved The Mirage Effect rooms have become a major revenue center Since the 1990s rooms have become a major revenue center Gourmet cuisine 1992 Gourmet cuisine was introduced in 1992 when Wolfgang Puck opened Spago in Caesars Palace quality and cost of entertainment The quality and cost of entertainment has skyrocketed Full-fledged malls Full-fledged malls inside casinos have seen retail spending climb 29

30. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Sustainability in Gaming Entertainment green Gaming entertainment companies continue adapting their operations and practices to fitgreen standards. sustainable initiatives Many well-known companies in gaming entertainment are leading the way to establish sustainable initiatives energy, waste and water conservation, as well as climate control Harrahs Entertainment Inc. has undertaken a sustainable initiative in several areas of operation, including energy, waste and water conservation, as well as climate control 30

31. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Career Information variety of new job openings The growth of the gaming industry has resulted in a variety of new job openings. place people first employeescustomers People choose to work in the industry because it is known to place people first, whether they are employees or customers Most careers include impressive benefits packages and offer many career advancement opportunities 31

32. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Trends in the Gaming Entertainment Industry room, F&B, retail, and entertainment Gaming entertainment dependent less on casino revenue and more on room, F&B, retail, and entertainment converging Gaming and lodging are converging scrutiny Continued scrutiny (inspection) by government Exceptional service Exceptional service will drive the entire industry management Continued improvement in management career opportunities 32

33. Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 All Rights Reserved Chapter End 33