WE LOVE GAMECO This year’s G2E was
definitely the show where skill-based games and video game gambling established themselves as essential to the continued success and consumer appeal of casinos.
But what are the
underlying market factors and dynamics that are driving this consideration?
A key theme in the
domestic gaming industry is when technology will address stagnant slot play and attract a new casino customer. Per capita slot revenues have continually declined since the recession and slot win per $1,000 of personal income is down nearly 30% since 2009. Some new casino properties are seeing a dynamic shift in gaming habits with a roughly 50/50 split between table games and slot machines (compared to a traditional split of about 80% of gaming revenues from slot play). The primary patron for slot machines continues to age out without a corresponding replacement from younger players.
Trends These trends create a massive opportunity
for casinos to focus on the lifetime value (LTV) of younger “Gamers” who are attracted by skill- based games and video game gambling. The average age of today’s “Gamer” is 35 years (Source: ESA) which is approximately 20 years younger than the average slot patron therefore presenting the opportunity for accretive casino spend over the next 40 years. Acquiring these new customers and making them part of casino loyalty programs is one of the most valuable aspects of technology innovation on the gaming floor.
The LTV of a “net new” casino gamer is
approximately $35,000 and does not include significant non-gaming lifetime spend. If approximately 34% of the adult U.S. population gambles at casinos, this equates to an average
free cash flow, and earnings are in the strongest position in a decade, allowing for investment in innovations and new technology initiatives.
Utilizing a variety of skill-based and video game gambling products, mixed with traditional casino games that appeal to younger audiences such as electronic table games, card games, and branded slot machines, the potential to create the casino of the future has emerged now. Combining these new experiences with targeted marketing using social media, digital content, and influencer platforms, casinos can leverage a modest cost per acquisition to attract “net new” casino gamers and capture this massive potential lifetime value.
In summary, a variety of
factors make today a perfect storm to embrace technological innovation.
The casino floor has changed modestly over the past few decades. That
gaming spend of $871 per year (based on $71.8 billion total U.S. gambling spend divided by 82.4 million total U.S. adult gambling population). Assuming a 40 year customer lifetime, that calculates to $34,853 in gambling spend.
Beyond gaming spend, the average Las Vegas
visitor spends $123 per day on non-gaming activities. Using this proxy value and assuming 1-2 visits per year for 4-5 days per visit, this generates another $36,000 or more, on average, in additional lifetime value from these customers.
While non-gaming amenities and products,
such as nightclubs, bars, and restaurants, have been flourishing, the average Las Vegas Strip property has reduced their slot positions by 450 units over the past 10 years which allows for a unique opportunity today to create venues and experiences to attract these new customers. Additionally, most operators’ balance sheets,
said, casinos increasingly have a younger more diverse, and growing customer base that competes for consumer dollars with other entertainment options. It’s going to take a collective industry effort and a paradigm shift of looking at non-traditional casino metrics like incremental revenue, cost per acquisition, and lifetime value to appeal to the next wave of casino customers.
Positively, we came away from this year’s G2E with a sense that operators, suppliers, and the regulatory community are collectively behind embracing the next wave of gaming technology. The products and tools are now available to appeal to a younger audience and attract “net new” casino gamers.
And for all those people who were told that
playing video games would never pay off, we think your future is now and it is the casinos who will reap the rewards!
NOVEMBER 2017 37
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