Summary

In this episode, Nick & Don catch-up with Michael Carruthers, Corp VP of Gaming Operations at Delaware North. Learn about the past, present, and future of one of the industry's oldest and most diversified gaming operators, and how the gaming division is leveraging data and data analysis for competitive advantage. Also in this episode, lease vs buy for smaller operations.

Transcript

Nick Hogan:

How are things in Illinois today?

Don Retzlaff:

Good morning, Nick. Everything’s just fine. We had our typical weather where we had five inches of snow one day, and it was 70 degrees two days later.

Nick Hogan:

Yeah, right on time.

Don Retzlaff:

Yeah, that’s February and March in St. Louis.

Nick Hogan:

Well, so here we are in late February, and well, sale-wise, this has been one hell of a start to the year. Several new clients onboarded, more on the way, and the days are just cooking by. I’d be up for every year starting this way. So we also have another ICE show in the tank. So this one of course was the 34th and final ICE to be held in London, with the whole works moving down to Barcelona next January. So a bit of a bittersweet event this year, but in the final tally, I think pretty much everybody was ready to turn the page there. It was already an extremely expensive and logistically difficult show, and certainly post-Brexit, everything just got more complicated. So it’s going to be hello paella and so long boiled beef and cabbage.

Let’s see. Also since our last episode, one of us had the unmitigated gall to take a vacation. So you did a cruise around the Caribbean with our friends at Carnival, and I’ll preempt next month’s listener questions and ask how the slots treated you.

Don Retzlaff:

First off, Carnival has two casinos on Magic. One’s smoking, one’s non-smoking. And they did a really nice job on their game selection and their layout. It’s not easy on a cruise ship with all the poles and support beams and everything else, and the low ceilings. You’re not seeing a whole lot of Neptune Doubles on there, but a lot of new 49 Seas and Neptune Singles and Kascada Dual Screens and stuff like that. Everything basically banks a six. So they did a really nice job of laying out the casino.

Unfortunately, I know on a cruise ship, the whole percentages are a little bit higher than what I’m used to in my local casinos, and it showed, although some of the people I went with actually hit some really nice jackpots and came home winners, I was not as fortunate.

Nick Hogan:

Okay.

Don Retzlaff:

Yeah.

Nick Hogan:

I was expecting to hear about it. I was watching the news for an unscheduled port of call to replenish the cash in their cage or something.

Don Retzlaff:

Yeah, no such luck. And then after the cruise was over, we hit Hard Rock Hollywood down in Fort Lauderdale, Hollywood, Florida, and that place is a license to print money. What a nice place they have down there. Oh my goodness.,

Nick Hogan:

Indeed.

Don Retzlaff:

2000 plus slot machines, 200 table games. We were there on a Sunday evening, and the place was packed.

Nick Hogan:

Yeah, yeah. They have some fantastic business down there. Oh, yeah. Almost forgot. Have to gloat on the sports side of things. My alma mater, university of Iowa had cause for celebration last week with Caitlin Clark breaking the NCAA women’s basketball record for career points. I take it you saw that game?

Don Retzlaff:

Absolutely. She hit a shot that was just an unbelievable long three pointer to break the record.

Nick Hogan:

That was a 30 footer.

Don Retzlaff:

She’s something else. She’s fun to watch.

Nick Hogan:

That kid is absolutely incredible. It’s just really pride of Iowa at this point. So-

Don Retzlaff:

Pretty much.

Nick Hogan:

Okay, so time for listener questions. Before I dive in, let me say that we love to tackle any questions that anybody listening may have. So if you have a question about what we’re presenting or something 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 here we go. This one comes from an operator in the American Midwest who writes, I head up slots at a small casino with a daily net win in the $80 range, and I’m considering leasing a much larger percentage of my floor. New games are costing us around $30,000 these days with conversions running around five KA pop. If I were to lease games at an 80/20 split, and they do 1.5x floor, the annual lease costs would be $8,760 or $43,800 over five years. If they were purchased at $30,000, converted four times over five years, that comes to $50,000 excluding parts and maintenance. Sure, I’d own a core game outright, but that’s not worth much considering. I’ll be lucky to offload it for a thousand bucks in the second hand market. Sure there are financial advantages to owning certain games, but I’d guess that this applies only to about 15% of themes released. So what are your thoughts on this? Many thanks to the listener for that question. It’s a great one, for sure. And Don, this is about as a central to your wheelhouse as it gets. So you want to hit that one?

Don Retzlaff:

Sure. And it’s something that we talk about a lot, is expanding your lease games, and the cost to own versus the cost to lease. And she’s got all the math right. You’re looking at about $30 a day over the cost of five years for buying a slot machine. And if you can lease one for $24, go for it. I think it’s a great move. You know you’re going to get better revenue out of them. There is probably a tipping point, but you probably won’t get to that. I wouldn’t worry about it until your past 25% of your floor being leased games. But I can imagine if you’re only doing $80 a day, that you would