Summary

In this episode, Nick & guest co-host, Michael Carruthers, speak with Ryan Scott, Vice President of Commercial Strategy - Slots at Light & Wonder. Learn about Ryan's path from casino operations into strategic supply-side roles and how he leverages experiences in each to better inform L&W's commercial strategies. Hear about the dominance of the Big Three suppliers on today's slot floors, and how they're leveraging advantages in distribution power, developmental and analytical capacity, product bundling, lounge programs, and other strategies to fortify and expand floor share. Also in this episode, the ongoing debate about voluntary smoking bans.

Transcript

Nick Hogan:

Hi everyone. Welcome to the fifth episode of ReelCast 4th season. For the next few episodes, I’ll be joined by a new trustee co-host who was once a guest here on ReelCast. I’m referring to Vice President of Gaming Operations at Delaware North, Mr. Michael Carruthers. So first of all, howdy, Michael. How are things with you today?

Michael Carruthers:

Hey, good morning, Nick. How are you?

Nick Hogan:

Yeah, not too shabby. Thanks. Let’s see. You’re coming at us from New Orleans then, that area there today?

Michael Carruthers:

Very hot New Orleans, yes.

Nick Hogan:

All right, cool.

So for today’s episode, Michael, we’re going to combine our industry news and listener question segments as both are covering the same topic. So we’ll start with that listener question, but before I jump into that, let me say that we’d 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. 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 is not something we do.

Okay, so this comes from a slot director in the American Midwest who asks, “Hi guys. I am relatively new to gaming, and I have to say that the industry’s position on smoking confuses me to no end. I work in a casino where smoking is permitted and I hear constant complaints from staff, grind players, and VIPs alike. Nonetheless, the policy remains in place and no one seems willing to even discuss a voluntary ban, let alone implement one. I’ve heard the old adage that smoking bans drop revenues by 25%, but do you feel that this is valid? Do you collect data on smoking preferences? And if so, what does it say? Can you help me understand why the industry seems so terrified of this topic?”

So first, many thanks to the listener for that question. Definitely a good one. Now, before I dive in too deeply on this, I do feel that that 25% assumption is perhaps a bit rich. So the range I typically hear is at 15 to 20%, and that’s really provided that there are roughly, let’s say, equidistant competitors that permit smoking if you have a ban. Now, the reasons underlying that are pretty nuanced, but let’s leave that be for now.

Now, in answer to your specific question, we as ReelMetrics do not track smoking preferences on a player-by-player basis. Obviously we compare the performance of, let’s say, smoking areas versus non-smoking areas, et cetera, but we don’t have a single byte of data at the individual player level. I don’t recall ever seeing such a preference on a loyalty program enrollment form, and other than, let’s say, smoking and non-smoking preferences for, let’s say, hospitality and F&B preferences, I’m not even aware of an operator that collects this information systematically. I’m not saying that they don’t exist, I’m just simply not aware of anybody doing it.

But as luck would have it, Michael, a couple of weeks ago, Mark Gruetze from CDC published a great story about casino smoking policies, and the article basically put forward three things. So firstly was that there are little or no hard data covering player preferences relative to smoking policies, what I just mentioned there. Two, that the data that do exist suggests that smoking is wildly unpopular. And then three, on topic, most operators simply prefer to dance, dodge, and kind of kick the can down the road until they’re compelled, let’s say, by a regulator or some other authority to do something. So on the data front, Gruetze cites two studies. The first was by the late Mike Meczka, who did a study in the Pacific Northwest just after COVID. It looked at how locals select casinos. So the most prominent criterion that I guess it was 32% of respondents put forward was, first of all, location, so what is a casino’s proximity to the player. That’s the first thing on which they chose. But then the second most prominent criterion was, in fact, smoking policy, meaning that they wish to play only in smoke-free casinos.

And then the other study he cited was one conducted by BCSlots, and we had discussed this with Brian Christopher and Josh O’Connell when they were on the podcast, which they show that 86% of players prefer smoke-free gaming, and that figure goes up to 89% when the player’s annual incomes are over 150K. Now, I think those are generally pretty interesting because those who follow Brian tend to be pretty serious slot players. And those results track, I would say, very tightly with the cigarette smoking rates in the US generally, which I understand are around 11%.

So Michael, I have all sorts of thoughts and theories as to why operators are so reluctant to impose voluntary bans, but I’d way rather hear from you on this one. So as an operator of large, professionally managed, and wildly successful casinos, what say you on this topic?

Michael Carruthers:

Yeah, that’s a tough one, Nick, and I agree that it largely depends on the competitive landscape and the jurisdiction. We have properties that are a hundred percent smoking, a hundred percent non-smoking, some that have smoking patios, some have a small non-smoking section, some have a small smoking section, so it’s kind of run the gamut there with what we offer and what we’re allowed to operate in. But yeah, I think it’s largely driven by jurisdiction and competitive set.

Nick Hogan:

So you really feel that more than anything… Because it has always been my sense that pretty much everybody waits until they’re forced to do it, and it always does just seem to me kind of like just the fear of the unknown. They’re not really certain what the impact