Choppy waters for global offline casino industry

By Paul Sculpher

Hindsight is 20/20, so they say, and while in the UK offline casino industry in the late 1990’s all the talk was about the incredible opportunities offered by deregulation and opening up the industry to new players, in truth that was the golden age right then, and things have become progressively tougher ever since.

There have been a number of casino closures in the UK of late, and unless something changes significantly, there’ll be plenty more.  A tough combination of anti money laundering regulations, competition from new quarters, wage inflation and problem gambling awareness have squeezed top lines and inflated cost lines, such that generating a profit after gaming duty is increasingly challenging.

Much of this won’t apply to the top end casinos in Mayfair – effectively they operate in their own microclimate – but for provincial and grind action casinos, times are tough. Let’s take a look at each element in turn.

The various elements of money laundering regulations are, first and foremost, clearly a very good thing.   In terms of keeping criminals out of UK casinos, it’s always been part of the deal, but my view is that while blind eyes may not have been turned, a couple of decades ago there weren’t many searching questions being asked either.  Back in my dealing days 25-odd years ago, I clearly remember, in a casino I’ll elect not to name, both of our two best Blackjack players disappeared almost simultaneously – it transpired one was banged up for eight years for fraud, the other shot dead in a drug related dispute.

With the rules we have now, these guys wouldn’t have stood a chance of gambling to any degree, and that’s clearly a good thing. However, the problem for offline operators isn’t the criminals they lose as players (although I’m sure you’d get a mildly wistful look from one or two casino owners) but the collateral damage to completely legit players has had an effect on trade bordering on the catastrophic.

Having to see proof of funds and proof of income sounds simple enough, but when you’ve had to ask a lovely old lady to produce written evidence of her husband’s death to show her inheritance as a source of funds, it’s not a huge mental leap to realise that sometimes, that old lady’s going to say “get stuffed” – or similar – and her spend will be lost to the industry forever. Similarly, there are a large number of wealthy people who just don’t want to discuss, or provide evidence of their finances.   Sometimes this is just for privacy reasons, and no doubt sometimes their fear of unwelcome attention from the taxman, but the net effect is damage to the business.

The long term situation is still unclear.  Regulators continue to fine operators who don’t play by the rules – offline and online – and certainly there’ll eventually be some sort of acceptance from some unwilling players that there’ll simply be nowhere to play that doesn’t ask questions, so they’ll have to stump up the paperwork sooner or later and return to the market. However, some perfectly legitimate players with funds or incomes appropriate to their level of play are gone for good.

The casino sector also faces stiffer competition from unexpected directions.  In the UK, the big political hot potato is FOBTs, or Fixed Odds Betting Terminals.  This isn’t the place to go into the details of how they came about or the drama over their legislation and stake reduction, but it’s certainly fair to say that they’re an incredibly hard form of gambling, with stakes up to £100 every 20 seconds. My view is that the hardest form of gambling should only be located in the most heavily regulated environment – casinos. The commercial impact (leaving aside for the purposes of this article the public health impact) of essentially deflecting this play from the casino industry to become a gigantic windfall for the bookmaking industry has hurt casinos, no doubt.

Obviously there are other competitors in play in the market, with the leisure industry being as dynamic as any other. Online gambling will have taken out a chunk of the UK offline market, and while the larger operators have their own online offer in the main, smaller operators haven’t filled the same gap.

It’s also sobering to consider the gambling market with a wider viewpoint.  In the US there’s a lot of talk about the falling proclivity of younger people to play slots, with their being used to far more sophisticated and interactive entertainment via video games.  Identifying the problem is the easy part, however, and there’s no simple solution in sight.  The skill-based gaming terminals have popped up in Las Vegas, for instance, but their impact hasn’t moved the needle to any great degree.  This might not be the same problem in the UK that is in the US – our slot spend is way lower, due to the availability of ambient slots gaming in pubs, bookies, arcades etc – but there has to be a worry that live casino gaming may be negatively affected by demographic shifts.   Is going to the casino perceived as only for old people?  Nearly every new casino opening tries to tap into the “cool” market by way of décor, but if we do have a serious problem with attitudinal shift, we’ll only know when it’s too late to reverse it.

Wage inflation is a simpler concept – in the UK the National Living Wage keeps on rising, as do employers’ mandated pension contributions. Its no secret that the casino business is a labour intensive one, and while the introduction of electronic roulette has been very successful – other electronic table game less so – payroll still represents a significant slice out of top line income for all casinos.

Doing anything about this is a genuine minefield for operators. Stripping out all but the most necessary staff is one approach, but no matter how widely you want to cast your casino’s appeal, a good proportion of your visitors expect a premium offer, and a skeleton crew will find that difficult – nobody likes having to wait at the bar for ten minutes, or fight through a crowd to access table gaming at a realistic minimum.  With table gaming staff generally being the lion’s share of casino costs, one approach is to jack up minimums to achieve the required win faster, but in a competitive market, that brings the danger of people just going elsewhere.

Problem gambling awareness is a ticklish subject to talk about, since any analysis of the problem inevitably leads to questions of conflicts of interest.  The truth is that the casino industry has to have lost a lot of business with the increased focus on problem gambling, and clearly that’s a good thing.  We shouldn’t be making money out of people who have difficulties controlling their gambling, and it’s heartening to see the number of interactions taking place with customers at the sites I’m involved in.

Having said that, it’s important to have perspective, and to recognise that there’s an industry out there in the problem gambling sphere which may not always have the players’ interests as their number one priority.   Tools that ostensibly identify problem gambling behaviour – as opposed to direct interaction with management or staff – may generate lots of false positives, and there has to be a ratio at which point the industry, and the players, are done more harm than good.

It’s also surely fair to say the amount of responsible and problem gambling awareness collateral out there - Responsible Gambling Week for example in the UK – has brought the issue to mind, and the recent furore over FOBTs stake reduction timing also helps to highlight the issue to gamblers and people entering the gambling market. That is the most effective tool of all, to make sure customers are informed, and if casinos had to make money from problem gamblers to survive, then they shouldn’t exist.

There are plenty of headwinds for the UK casino market, and it’s difficult to see how things will improve in the short or medium terms.   Maybe the legislative regime will change, maybe technology will come to the rescue (again) or maybe the demographics or tastes of the population will mysteriously change to make casinos more mainstream.  Everything is dynamic, of course, but right now it’s a tough business.

Paul Sculpher, Gaming Recruitment Solutions, and Independent Gaming Consultant

The changing face of Las Vegas

By Paul Sculpher

Life in Las Vegas has never stood still for long, and while the last few years have been an exception to that rule for the most part, the next round of major deck shuffling is imminent.

It’s hard to remember a quieter period in terms of new openings, implosions and takeovers than the last few years, with the not-entirely-successful opening of the Lucky Dragon and conversion of Sahara to SLS being the only projects of note visible to the average Vegas goer – and they’re not exactly on the City Center scale.

However, hold onto your hats, because the next round of development is well under way.

Genting’s Resorts World is taking shape nicely on the Strip just south of Circus Circus and opposite perennial brunch favourite, the Peppermill. A mildly comedic lawsuit notwithstanding (partly due to the colour of the glass on the outside of the building being similar to that used on the Wynn nearby), the site is due to open in late 2020, and the plan will involve partnerships with Genting’s other businesses around the globe. The senior management will no doubt be slightly unsettled by the fate of the Lucky Dragon, which was nearby, similarly squarely aimed at the Asian market and failed pretty dismally, but Genting have a far bigger database, far more experience and a much bigger site, perhaps big enough to draw people to the north of the Strip just for a nose around.

Also coming down the chute (for late 2020) is Circa, the first major property to open in downtown Las Vegas in forty years. Developed by the same guys who own the D downtown, this is around 800 rooms and looks to be an attempt to go upscale in a big way – 6 pools, rooftop amphitheatre etc.  It’s hard to argue with the concept, with downtown so far immune to the incredible price gouging present on the top end locations on the Strip. Many Vegas visitors will have one night downtown per trip for a change of scenery – and beers that might be less than $5 – but the idea of having an upscale resort in the area seems like a solid way to attract large numbers of mid-level spenders who have a respectable bankroll, but want their money to last a little longer, while having  Strip quality surroundings.

There are also the usual rumours of takeovers and changes of ownership.  Caesars Entertainment’s situation is fluid, with talk of them being for sale as this article is typed, and Carl Icahn acquiring shares at a rapid rate. It seems unlikely that any sale would make a dramatic difference to the Vegas offering at least - the power of the Caesars Rewards database (rebranded from Total Rewards) is huge across eight Las Vegas properties – but who knows which territories would be considered non-core and sold off. Regulatory risk might be the key consideration.

Our old friend the Hard Rock Hotel and Casino will also be changing, to become the Virgin hotel.  The synergies are obvious, with Virgin Atlantic and Virgin Holidays being under the same ownership umbrella, so it’s easy to see incremental trade being driven to the slightly off strip location occupied currently by the Hard Rock site. It’s always had a great feel about the place, so it will be fascinating to see how the transformation develops away from rock memorabilia (often from bands you’ve never heard of ) to a more contemporary scheme. Virgin are also trialling their Hyperloop nearby –  the fabled sub one-hour rocket speed journey from Los Angeles may not be imminent, but you can bet it’ll happen eventually.

There’s plenty more going ion in and around Las Vegas, so the city with more image makeovers than Madonna isn’t done yet.

Paul Sculpher, Gaming Recruitment Solutions, and Independent Gaming Consultant

GRS Recruitment - Helping operators remain compliant

The amount of legislation operators in the betting and gaming sector have to deal with is, as everyone knows, staggering – which is of course entirely reasonable given the nature of the product.  We’ve met many operators, and almost without exception they’re 100% committed to protection of the customer and compliance with the various rules far ahead of the commercial imperative.

However, delivering a compliant business does require a team of professionals to attend to the detail.   With AML issues being at the forefront of any compliance person’s mind at present, especially given the parade of fines and other sanctions being currently being launched at operators, it makes sense to dedicate significant resource to ensuring all bases are covered in all areas of compliance and social responsibility to safeguard both the customer and the business.

There was a period relatively recently where the market hadn’t quite caught up with the demand for experienced compliance specialist at all levels, meaning it was difficult to recruit people directly into roles from AML Assistant to Compliance Director, but more recently the market has reacted, and there is an increasingly large pool of qualified candidates, with track records of quality performance, for operators to look at.

At GRS, we have been able to help operators in this tricky area at all levels over the last four years or so, and we feel it’s becoming something of a speciality. Our operational background helps us to understand the detail of operator requirements, and of course it’s not an area to leave to chance when hiring.  As the regulatory framework continues to evolve, compliance teams must evolve with it and while developing from within has obvious benefits, sometimes it’s necessary to move more quickly.  We’ve seen a number of instances where operators have decided to add a whole additional stratum of compliance into the equation – in fact we’re recruiting for one such additional layer, in terms of a £100-£150K Compliance and Regulatory Officer – right now.

Compliance in betting and gaming will always remain a dynamic environment, as befits a product which constantly evolves through technology and player preferences, and keeping your team up to date via timely gathering of information is critical. At least now that there’s a real market for Compliance professionals, there exists the possibility of buying in additional knowledge at relatively short notice.

GRS Recruitment have been helping talent meet opportunity for over four years in the betting and gaming sector, and are available via email on steven@grs-recruit.com

Raising the Rampart

Is there a more reliable person to count on in the industry when it comes to security and compliance than a former Met head honcho?

Paul Sculpher meets Extrayard Security Managing Director Roy Ramm to find out

There’s a new provider offering compliance and security consultancy services to gaming operators. The man behind the firm, Extrayard, is Roy Ramm, a familiar name to many in the industry and a man aiming to address the very real concerns apparent at present. Anyone who knows Ramm will have heard one of the colourful stories from his past, which are always incredibly entertaining and insightful in equal measure, as they shine a light on a vast array of professional experiences from a varied, glittering career.

Ramm was previously a senior Metropolitan Police Detective, leading some of Scotland Yard’s most iconic and demanding departments. By the end of his career in London’s Metropolitan Police he had commanded the Serious and Organised Crimes Branch, The Fraud Squad, the Undercover Policing Unit, the world famous Flying Squad, led hostage rescue operations in six countries and run serious crime investigations in London.

Roy Ramm. Photo taken from the original published Gambling Insider article written by Paul Sculpher

Next came decades with casinos operator London Clubs (later Caesars Entertainment UK) as governance and public affairs director, looking after security, compliance and regulatory relations for the group’s casino operations in the UK, Africa and the Middle East. Now, with Extrayard, Ramm is aiming to lean on that experience to deliver a unique support package to the wider gambling sector. Extrayard’s mission is to help operators in any sector and of any size proactively formulate policies and procedures to protect their businesses, to give them continuing confidence that they are safe and compliant, and to help minimising harm when things do go wrong. “It’s about starting it right, keeping it right and putting it right,” Ramm explains.

The operational imperative is to build a successful business, offering customers great experiences. However, sometimes businesses can become so absorbed in commercial challenges that other issues like regulatory compliance and asset protection suffer. From a regulatory and compliance perspective, Ramm believes there are only two things that really matter to regulators right now: money laundering and social responsibility. Recent events with Paddy Power, Rank and other operators would tend to underline that this is where the regulatory focus lies. “Operators who don’t acknowledge the measures necessary to be compliant from both an AML and from a responsible gambling perspective are putting their licences and their businesses in jeopardy. You only have to look at the public statements the UK regulator has demanded from UK licensed operators to see the regulator’s direction of travel. There is an increasingly strict AML requirement to know who we are doing business with and where their funds come from. This will be extended by the 4th EU Directive”.  Ramm is also aware of the responsible gambling onus operators are under. “However customers fund their gambling, operators are now expected to monitor how customers are behaving to minimise the risks associated with gambling excessively. This puts enormous pressure on operators, large and small, both in the real world and online,” he explains.

Adapting to this modern age of new compliance is where Ramm believesExtrayard has a role in the industry. For smaller operators who can’t support in-house service, Extrayard offers bespoke compliance plans and support. For larger companies with in-house compliance functions, Extrayard offers probing and exacting audits that challenge the procedures mirroring the way a regulator might investigate such a business.

According to Ramm, there’s a real risk in larger operations, with their own in-house teams, that familiarity can lead to some softening of the rigour required to ensure compliance, and the commercial imperative can challenge any department’s commitment to focus on non-revenue earning matters. An independent third party engaged in a one-off or ongoing audit process can “reset” the mindset of organisations in this context. The other speciality where an outside agency can help operators is in revenue protection, because as gambling operations become more complicated, there are more and more ways for dishonest individuals to prosper. Ramm leans on his time in the police force when facing these issues. “Loyalty schemes, on a big enough scale, become opportunities for theft of significant amounts of value. The take-up of the scheme in one operation we investigated seemed almost too good to be true, and it was.” An enquiry revealed that a trusted and respected member of staff was discovered by management to have loaded a player’s reward account with points unjustified by the level of play. At the time the discrepancy was accepted as an “honest mistake”, and that might have been the end of it, except that years of policing experience and a detailed knowledge of the industry led Ramm and his team to look deeper, revealing that a systemic failure had been exploited by a corrupt network involving trusted staff and several friends and family members posing as customers,  all of whom were benefitting from the criminal misappropriation of valuable points. The enquiry led to criminal convictions, asset recovery and revised procedures. It is clear that an in-house team may not always be enough to protect operators from the serious challenges presented by theft, responsible gambling matters and, latterly,  the new AML regulations.

A fresh pair of eyes with a vast amount of experience could give operators some comfort that their in-house teams will not drop their guard in an environment where inattention can lead to action by the regulator and material loss of assets.
 

GGV Leeds casino recruitment drive

Staffing a Casino from Scratch - Paul Sculpher

It was back in February 2013 that GGV – Tony Wollenberg, Andrew Herd and I – submitted our second and final bid for the 2005 Gaming Act Large Casino License in Leeds. That seems an age ago, and at the time the prospect of actually opening the site seemed preposterously far away. However, now, as I type, our fitout contractors are on site carrying out preliminary works, and the opening is flying towards us at dizzying speed.

Among the vast array of tasks that need to be carried out before we open the doors in mid-November, the most pressing at the moment is recruiting the senior team, eventually followed by up to 200 staff members. As a new operator in the business, we’re aware that we look like something of an unknown quantity, but we all have individual track records and the casino is already a pretty big story in the area so word’s getting out there.

Job number one is to find the perfect General Manager. We are very aware that the nature of the Leeds operation is going to be pretty different to the majority of British casinos – it’s a very large city centre site with all the opportunities and challenges that brings. We’re looking for a GM with a wide range of experience, and we’re very conscious that as an independent operator, there’s no manual for a lot of the decisions that will need to be made. With a flat structure, there is no “they” to make decisions -there’ll be only three people senior to the GM in the company, so open mindedness and independent thinking is required.

We’re looking for a best of breed casino GM to take the business forward – we haven’t ruled out someone from outside the industry, but there’s a pretty steep learning curve to ascend, and with the scale of business we are developing, it would take a very special person to attack both tasks simultaneously. We’ll be using a recruitment agency for the majority of the senior positions – with plenty of other workstreams to crack on with, it makes sense to bring in a specialist.

Copy of the original published article in Gambling Insider, written by: Paul Sculpher

Once the GM is hired, we’ll have them help with the senior team – the Head of Gaming, Chief Marketing Officer, Head of F&B and other roles, as well as the critically important shift managers. Having recently had a dip back into operations myself, it’s easy to forget just how critical the right set of shifties is – the moment interaction with customers goes beyond the routine, it’s the shift managers who determine whether the interaction ends on a positive note, whether or not it started that way.

The staff recruitment will be even more of a challenge. We are in the lucky position that our casino launch is part of the launch of a very large retail and leisure development, Victoria Gate.  This includes a huge John Lewis, and 20-odd retail units as well as half a dozen F&B outlets. With a scheme of this scope, it’s already big news in Leeds and that can only help us gather momentum towards the big day. Critically, Leeds council have already been enormously helpful in getting us and other operators set for the recruitment drive – over 1,000 staff are required in all for the whole complex – and their resources and total knowledge of the area will be vital.

We’ve already had discussions with the council about recruitment roadshows – getting out there in the community and giving the potential team members a face to associate with the project, and someone to talk to.  There are obviously some preconceptions involved in working in a casino, and the last thing we want is to miss out on promising candidates because they’re not sure what the job is all about.

The collaborative approach with the council is a key part of our recruitment strategy, however the element they’re less likely to be able to help with is experienced gaming staff. Getting the right team together can be the making of a casino operation – for all the fact that we’re running a multi-faceted, integrated leisure destination we’re not confused as to where we will make the money we need to thrive – and finding a team big enough to operate what we have in mind won’t be easy. We won’t be wanting to go too close to 50% of our gaming team being trainees, although as we will be using the Blackpool Academy we can have confidence that they will, with our management team’s input along the way, by pretty much oven ready, or as ready as trainees can be when they first meet the public. It can be pretty intimidating trying to demonstrate your new found skills in a pressure situation, and we’ll be with them along the way to make it as easy as possible.

Finding those experienced staff will be the biggest recruitment challenge we face. No doubt every member of the management team will bring a handful with them, some will appear as if out of nowhere in Leeds, and we will, like any other casino, be ready and willing to employ staff from the rest of Europe, assuming they have the right skill level and correct licence (a “Personal Functional Licence” for gaming staff).  It’s likely, too, that some staff from the other casinos in Leeds and the surrounding areas will apply for roles. As long as we are selective in the ones we bring on board then we’ve a chance of getting the mix right. From experience of dropping into the local casinos, though, there are some fantastic team members who we will be delighted to welcome into the fold if they approach us to be involved in what has to be the most exciting new casino project in the North of England for many a long year.

The project has been in the works for four years or more, and now with the late 2016 launch rapidly approaching, there’s a huge amount of hard work ahead.  Securing the right team can only make that a little easier, and we’re looking forward to the challenge.

Staffing your company well is just about the most important thing you need in order to be successful...