Peering ahead, a trio of gaming industry experts see a future much like the recent past — only more so.
That was the upbeat tone of “Looking at the Crystal Ball: The Gaming Industry’s Path Forward,” a roundtable held on opening day of Global Gaming Expo at the Venetian Expo Center in Las Vegas. Weighing in on the topic were Vici Properties President John Payne, Union Gaming co-founder Bill Lerner, and Penn National Gaming Vice President of Business Intelligence Kate White.
Queried by moderator Michael Soll as to how the gaming industry over the next three decades would compare to that of the past 30 years, Lerner replied, “If I were a betting man, I’d say the lion’s share of revenue from these buildings will remain where it is today.”
He added the igaming sector would be “rather large,” but not comparable to brick-and-mortar casinos, despite convergences of gaming and media symbolized by the renaming of the Superdome in New Orleans after Caesars Entertainment.
Payne added that online sports betting customers who are learning about brick-and-mortar casinos “are the real magic that’s going on here. You can only imagine that when they start visiting the assets, the profitability will continue to go up.”
Describing himself, to laughter, as “a recovering operator” (he used to run Harrah’s New Orleans), Payne said a key factor was “the normalization of gaming in America.” Whereas his wife used to admonish him not to tell anyone he was in gambling for fear of being ostracized, now his grown daughters don’t even think of sports betting as gambling. Gaming’s new omnichannel presence, he predicted, would only further grow that pie.
Much of the discussion centered on the growth of casinos as a real estate investment opportunity, as epitomized by last week’s $5.6 billion sale of the Cosmopolitan of Las Vegas. As Soll put it, “Things are so dynamic in the industry right now. There are so many moving pieces.”
“It feels like early innings still,” replied Lerner, noting that Vici and its peers paved the way for Blackstone Group, Apollo Management, and perhaps others to advance into the gaming space. Casino assets, he explained, were historically undervalued compared to retail and similar sector, which generate a lower cash-flow multiple.
Payne concurred, noting that the gaming-as-real estate phenomenon dates back only eight years to when Penn National formed Gaming & Leisure Properties.
“Institutional investors didn’t have a clue” about how valuable and durable casino properties are, and now record levels of cash flow are helping drive the value of those properties to the point where they ‘re attractive acquisition targets. “So you see that institutional investors are getting educated” and now looking at international gaming markets like Canada, Singapore and points beyond.
Lerner added that the cost of capital for acquisitions is still low, creating an advantage for real estate investment trusts (REITs), and capital is inexpensive for tribal operators as well, meaning that “more parties are on the hunt to grow. Deals are getting done and you’ll see some tribal operators and smaller operators being able to aggregate” casinos, as is already happening in Las Vegas, with the San Manuel Band of Mission Indians’ purchase of Palms Casino Resort.
Payne likes the gaming real estate story, thanks to the operators involved and their adaptability. For instance, swimming pools used to be underutilized assets until casino executives invented dayclubs. Now partygoers can cavort all day, in addition to keep doing so after the sun goes down.
“I go to bed at night knowing the real estate is going to be as much in 20 years,” because operators will continue to adapt, said Payne, citing Winston Churchill’s maxim, “Never let a good crisis go to waste.” Casinos, he insisted, are “relatively cheap,” adding, “gaming has come through COVID extremely well … and the operators, frankly, are the best in the world.”
White largely confined her remarks to the digital-gaming sphere, her remit at Penn National. When Soll observed that “’Millennial’ is a word I surprisingly don’t hear about anymore,” White replied that a large tranche of her responsibility is identifying such customer segments, then drilling further down into them. “Now I could say we have 1,500 different types” of player, due to the richness of the available data. Millennials, for instance, might come to the casino and play corn hole, but go home and bet on sports.
Penn, White said, relies heavily on its customer database, in addition to vigorous mergers and acquisitions and media activity (possibly alluding to its alliance with the Barstool Sports website). “Data as a currency in the omnichannel world is where we’re going to differentiate ourselves,” she said of her company. “Now I can say that I have a customer who spends significantly and becomes an online customer.”
“It’s pretty obvious that digital is something our industry is still adjusting too. You need to find a niche within these customers,” White continued, to attract them to your brand. Fortunately, she said, investment in the digital sphere has been great over the past five years and it “will be increasingly dynamic in the next five years. We’ve never really had to go back and rebrand,” saying that Penn didn’t need to change what works.
“I can take a player across all of my forty-plus properties,” due to the company’s ominichannel approach. “We can still create a strategic relationship with a customer across all of our brands. I doesn’t matter where your customer- relationship management begins, as long all your customers are on that one CRM,” White said.
“The companies that will win will be the ones that provide access and convenience,” interjected Payne, especially as consumers spend more on experience. That raised the question of personalizing the online interaction and White was prepared. There is a new expectation of what personalized digital experiences will in real time will be, she said, with Penn’s cashless-gaming rollout, for example, emphasizing immediate, in-game offers. “The amount of time and energy spent cleaning data,” White concluded,” is much less than in the past.”
