Summary

In this episode, Nick & guest co-host, Lucien Wijsman, speak with Barry Jonas, Managing Director and Senior Gaming Equity Analyst at Truist Securities. Learn about Wall Street's take on the gaming industry, including investor likes / dislikes, the ins and outs of valuation and demand forecasting, trends exciting / worrying investors, and the potential impacts of Trump tariff and immigration policies. Also in this episode, configuring multi-game terminals and financial woes at Holland Casino.

Transcript

Nick Hogan:

Howdy, Lucien. First of all, welcome back from your travels. I take it you’re happy to be back in our lovely little medieval university town here.

Lucien Wijsman:

Amen. Always, when I come back, when I walk around, I told my wife yesterday, I said it’s so nice to come home. But this time, I have to be honest, I absolutely loved every minute of my extended trip through South Africa, which is just fantastic.

Nick Hogan:

Yeah, it’s an absolutely lovely country. It’s always cool to be down there. And we have King’s Day here in the Netherlands tomorrow, so I take it the Wijsman family is going to be decked out in orange clothing and waving Dutch flags and all that stuff.

Lucien Wijsman:

Orange hats and makeup on the cheeks, red, white, and blue. Yes, yes.

Nick Hogan:

Very good. All right. So let’s open up today with a bit of news from our backyard here. The Netherlands state-based casino operator, Holland Casino, was in the news this week with CEO, Petra de Ruiter, someone we both know, stating that the government’s gaming tax increases over the next two years threaten to bankrupt the organization. So late last year, Dutch parliament ratified a proposal to increase the Dutch betting and lottery tax from 30.5% to 37.8% over a two-year period, so first to a rate of 34.2, which went into effect on January 1st of this year, then increasing to the 37.8% level on January 1st of next year.

So initially, Holland Casino, which incidentally experienced a 10.4 million euro loss last year, it announced its intention to offset the tax increases through a cocktail of cost cuts and revenue increases. So on the cost front, this includes the closure of one of its 14 venues, Casino Zandvoort, a 20% headcount reduction across the board, and increased roulette hold through the introduction of double zero wheels, among other measures. So there was far less specificity on the revenue front as 2024 saw lower spend per trip in land-based operations, as well as significantly lower year over year receipts in their online vertical.

So de Ruiter mentioned that to stay in the black, Holland Casino would likely be forced to recruit new players more aggressively and also attempt to increase trip spend from existing players, both of which would put Holland Casino at odds with its responsible gaming mission. And further, the pain here is also expected to wreak havoc in the country’s street market, with arcade operator JVH Gaming CEO, Eric Olders, another guy we both know, announcing late last year that the company intends to shutter 25 venues, so that’s nearly one third of its operational footprint, during the course of 2025. So as you are the Duchy at the table, Lucien, what say you here? Do you feel that this insolvency danger is real or do you think this is more just an attempt to renegotiate? I am curious as to your thoughts.

Lucien Wijsman:

The Duchy on the table who hasn’t been really in the Netherlands for the last 25 years, whereas you. I don’t follow the news very, very closely, but what I do notice is that the biggest part of the decline in revenues at Holland Casinos does not come from the land-based operations, but from the share of the online market, which is 26% smaller than the year before, so I think that probably hurts them much more than what’s happening in the land-based area. Yeah, they’re in a very competitive environment online, and they’re the only online licensee that has a very large land-based footprint as well. So I’m a bit surprised that they are unable to hold to the market share that they had in the beginning, and I’m not going into the why’s for that, but that seems to be a much more important reason for the decline than anything else.

On the land base where they say that they have visitors spending less per visit, that’s not in line with all the other operations where I consult, where across the board, what I see is that less visitors spend more or less the same time, spending more money per visit. That’s what I see with all the big customers where I am, and the reason for that is that the minimum bet, the entry bet to play slot machines has gone up dramatically over the last number of years. It must have been the same at Holland Casinos. I’m a bit surprised that they very much atypical there. Less visitors, yes, I believe. Same time spent, I would assume less spent per visit. That surprises me very much.

And the last thing that you said was that they’re now thinking of introducing double zero roulette. It’s a monopoly operator. I don’t understand why they have not introduced double zero roulette 15 years ago. That is beyond what I understand. Casinos now make money on table games from the bonuses which have a much higher household, and from increasing the hold on the base game.

Nick Hogan:

And double zero basically doubles the house edge, yeah? Versus-

Lucien Wijsman:

2.7 to 5.4%.

Nick Hogan:

Yeah, okay.

Lucien Wijsman:

And if you look at the United States where there’s enough casinos now offering triple zero, which gives you 8.27%. I know Holland Casinos has tried to cover the rising expense. Of course the salaries have gone up dramatically in the Netherlands, so the person behind the table will cost them much more. They’ve tried to cover that by increasing the chip value on tables, so you now have a minimum chip value of 10 euro in most Dutch casinos on roulette, which is simply too expensive for their player base. People cannot afford to play 10 euro chips easily, so a lower chip value with double zero and bonuses in my book would’ve been an approach which would have worked better, but I’m not selling on [inaudible 00:06:50].