Golden Entertainment, Inc. traces its origins back to 2001 when Blake Sartini purchased a sleepy 700-unit Nevada slot machine route from Station Casinos.
At a time when other states were aggressively building commercial and tribal casinos, Sartini – who had overseen route operations for Station in an executive role – saw the market for distributed gaming in bars, taverns and gas stations as an underserved niche with excellent growth prospects in Nevada and elsewhere.
Over the ensuing years, as traditional forms of gaming have faced macroeconomic hurdles and increased competition, Sartini’s original vision of a non-traditional distributed gaming enterprise has come to fruition. His holdings have grown from 700 slot machines to 7,600 total games in some 700 locations across Nevada, making Golden the largest route operator in the state.
As Golden’s slot route business in Nevada has blossomed, it has expanded its horizons into new verticals and new markets. In 2016, the company acquired routes in Montana through two separate acquisitions and is now the second-largest operator in the state with 3,000 terminals situated in 300 locations. The company has also pioneered a new vertical through its line of wholly owned taverns. Golden is Nevada’s largest tavern operator in Nevada with 53 locations – 51 in the Las Vegas Valley – under seven brands. The company plans to open seven new taverns under the PT’s Gold brand in the Las Vegas area in 2017.
The $341 million merger in 2015 between Golden Gaming and Lakes Entertainment – which formed Golden Entertainment – included the Rocky Gap Casino Resort in western Maryland. The company now operates four casinos, which includes three small ones in Pahrump, Nevada.
What makes Golden’s approach to distributed gaming unique, its executives say, is the company’s foundational commitment to offering a unique and high-class gaming and hospitality experience regardless of the setting.
Steve Arcana, chief operating officer of Golden Entertainment –
“As casino operators, the first thing that comes to your mind is great service. You walk into a Wynn property and you’re treated like royalty,” said Steve Arcana, chief operating officer of Golden Entertainment – who has been alongside Sartini from the onset.
“We saw it as an underserved market where you could offer people a great experience – not just from a gaming perspective, but an overall experience: offer great food, offer the ability to have a great social environment with friends after work, offer the ability to watch all the best sporting events on big screen, high-definition TVs,” he said.
Arcana insists that that mantra applies equally to its 53 taverns as well as its slot route partners. “We call the basic route model ‘plug-and-play’ – which means you drop a game off, plug it in and it earns what it earns. That is the complete opposite of what the foundation of our company has been built on and what our core values are.”
In practice, that means Golden offers the latest game technology, systems, cash handling, marketing and player-tracking tools to bring increased value to both the customer and the location operator and to keep the company ahead of ever-tightening competition.
“Our core values are: whether we own the location or provide the games in the location, we’re going offer the best product and we’re going to offer the best service,” Arcana added. “That is something that is a never-ending commitment in the company.”
With the economy in Southern Nevada improving, analysts see upside in Golden Entertainment’s business model – which is at its essence an outgrowth of the traditional Las Vegas locals segment.
“The slot route business is a pure play on the population and economic growth of Nevada – particularly the Las Vegas Valley,” said Frank Fantini of Fantini Research, noting that while Golden is already the largest distributed gaming operator in the state, there is plenty of room to grow.
“I don’t think you can go wrong investing in the Sun Belt. Go to the southwest corner of the Las Vegas Valley and you will see thousands upon thousands upon thousands of homes under construction. (Golden is) plopping down PT pubs in middle of those areas,” he said.
Fantini, who is also a shareholder in the company, said that the Golden is well-positioned to acquire new business in other markets should states like Pennsylvania or Indiana that have been considering implementing VGTs ultimately decide to do so.
“There’s nothing that prevents them from buying more. They have financial wherewithal to do it – they’re only at 3.5 times leverage right now,” he said.
Fantini also predicts that the company will not only continue to diversify geographically, but that it will deepen its involvement in the brick-and-mortar casino business once it has built up the acumen to get the needed financing from banks and investors for even bigger deals.
“Sartini makes no bones about the fact that he’s a casino guy and that he looks forward to expanding the company in the casino space,” said Fantini, adding that Golden is still likely a couple of years away from becoming a major player.
“As small as they are, it’s hard to imagine them buying a casino you’ve ever heard of. But I’ll tell you that the guys at Eldorado don’t want to own these tiny little $5 million EBITDA casinos in obscure places (following the pending acquisition of Isle of Capri), but they would be a natural fit for a smaller company like Golden.”
The fact that Golden is still largely owned and operated by its founding family, despite being a publicly traded company, is also a silver lining for Fantini.
“I’ve always been very fond of companies in which the founding families still control the stocks and still manage the companies,” he said. “Because then you don’t have to worry about their interests being aligned with shareholders – they are the shareholders. They have personal pride in the business.”
The biggest potential risk factor confronting Golden and others in the locals and distributed gaming segments is a potential tightening in consumer spending in the region should the local economy experience a downturn.
Fantini points out the fact that people who weathered tough times naturally tend to be a bit stingier with their money, particularly in Las Vegas where the impact of the 2009 recession was worse than in other parts of the country. “When you lost your job and you lost your house, going forward you might be a little more cautious.”
Golden’s Arcana remains encouraged, however, by the improving economic indicators in the region and is confident that there is plenty of room for advancement in the short and long term.
“There is business out there to be had, particularly now that the economy is improving in southern and northern Nevada,” said Arcana, specifically noting that the bolstered economy is bringing with it new residential and commercial developments that become prime locations for distributed gaming operations.
“A lot of those businesses have ability to apply for restricted gaming licenses. With that privilege comes the need for a gaming operator – that’s where we and our competitors step in.
