Summary

In this post-G2E episode, Nick & Don present budgetary guidance for 2024. Sub-topics include Halloween; conducting fair share, occupancy, layout, and demand analyses; the CapEx / OpEx split; pacing spend, and; focusing on the greatest in lieu of the latest.

Transcript

Nick Hogan:

Good morning, Don. How are things in The Prairie State today?

Don Retzlaff:

Good morning, Nick. I think we finally turned the corner from summer to fall. It’s chilly, rainy, the leaves are starting to fall. How about things in your home?

Nick Hogan:

Well, same weather-wise. We’re recording on Sunday the 29th of October, and I have to say I’m a bit groggy from a Halloween party I attended last night. Are you a Halloween guy, Don?

Don Retzlaff:

I am not, but my daughter sure is. But no, it’s hit-and-miss around here. There’s lots of parades for Halloween in this area.

Nick Hogan:

Parades?

Don Retzlaff:

Parades, yes. They do parades on the weekend and parades on Halloween night where there’s floats and everything else. Think your typical 4th of July or Rose Bowl type stuff just on a small town level.

Nick Hogan:

Okay. Well, it is been my favorite holiday bar none since I was a little boy. But living in Northwestern Europe, it’s not the greatest place to live if you’re into Halloween, so just really isn’t a thing here. But we do know a Canadian family in town that lives in a neighborhood with a bunch of Anglo American expats and they throw a big hoe down every year. So it’s been, let’s see, it’s an annual tradition for us for, I think, it’s 13 years now. But we’re now at the stage where the boys are way too cool to attend and then this gives my wife her excuse to skip, so I went by myself.

I was the only guy with neither a date nor a family with me, and I can’t tell you how many times I heard, “You’re here alone? It’s so cool that you would still show up.” So it was one of those things where the more you hear it, the less I thought that any of my actions were, quote, unquote, “cool.” So I’m schlepping home in the station wagon post-party. I stop at a stoplight, and I catch myself in the rearview mirror. So I was dressed up as Edward Scissorhands.

Don Retzlaff:

Nice.

Nick Hogan:

So I had the hair, the white face, the scars and stuff, and I asked myself, I was like, “Has the time finally come? Do I need to hang this up?” Then no sooner had I thought that then a car pulled up next to me with a 50-something Dutch dad in a Batman suit. He looks over at me, smiled, gives me a thumbs up and then he takes off. So I’ve elected to interpret that as divine intervention, and I’m happy to announce that next year I’ll be redoubling my Halloween.

Don Retzlaff:

That’s perfect.

Nick Hogan:

Also, I think we can dedicate this episode to Dutch Batman, so thank you, Dutch Batman, for keeping me true to my Halloween self. So alrighty.

Don Retzlaff:

There’s always signs, you just have to look for them.

Nick Hogan:

Exactly. Exactly. Okay, so let’s see. So we had a truly great listener question come in last week, but before I hit it, let me say that we’d love to tackle any questions that anybody listening may have. If you have a question about what we’re presenting or something that you’d like us to present, please drop us an email at reelcast@reelmetrics.com. Again, that’s R-E-E-L-C-A-S-T@reelmetrics.com. Our policy is to keep all questions anonymous, so please speak directly, and don’t worry about us revealing your identity. That’s not something we do. So this comes from a Canadian operator and reads, “I have a question regarding fair share in unit adjustments. Our fair share premiums on $1.00 denom always point to increasing supply, but average utilization/occupancy is around 10 to 15%. When I drill into individual $1.00 titles and don’t see any with occupancy rates exceeding 25%, I am hesitant to increase supply. What would you guys do?” So thank you for that question. Don, I’ll let you fire away at that.

Don Retzlaff:

You’re right, it is a great question. The things that we’ve talked about in the past were more fair share 101 or fair share basics. You can get a lot deeper into the fair share analysis by using occupancy, handle pulls, things like that, and he’s right. There are certain denominations, certain game types that need a premium before you increase. 100% is not enough just because of the way they play. If you’ve got a game that’s at 10% occupancy but it’s at 100% fair share, you do not need to expand. Most of the time, I actually used a model, and I want to say it was UNLV that created it and it incorporated handle pulls, occupancy levels and you could tweak it. It was a great model, and what ended up happening is you could eyeball it then for $1.00 reels. 115 to 120% is probably more like the sweet spot than 100%-

Nick Hogan:

Okay.

Don Retzlaff:

… just because on a Saturday night you’re not going to have more than 1/3 or 40% of your machines in play versus a penny video where you’re going to have, on a really busy casino, you’re going to have above 65% above 75% of your pennies in play. You’ve got rooms, so there’s no need to expand when you’re talking about density on the $1.00s. The fair share really works best… it works good from $1.00 below, but you do have to have those caveats. If you can incorporate your occupancy, now you’re starting to get into fair share 201 or fair share advanced where you’re really looking at this stuff on a month-to-month basis and including other variables besides how many units are on the floor and what percentage of revenue they generate.

Nick Hogan:

Okay, as I understand it, so anything that’s, let’s say, $1.00 denom or up, you would just naturally boost the threshold on the fair share premium to around, you