Monday, November 08, 2004

I was eating at Steak and Shake this evening where I read this feature story in the USA Today Money Section.

Why on earth is poker NOT MENTIONED ONCE?


Casinos struggle to find way to deal in next generation
By Chris Woodyard, USA TODAY

LAS VEGAS — Twentysomethings have seized on the new Las Vegas as a 24-hour playground where the partying never ends. There's just one problem: They don't gamble as much as their baby-boomer parents.

And when they do gamble, they're more likely than their elders to snub slot machines — the casino industry's top profit center — in favor of table games. Says student Lauren Cardinet, visiting the Hard Rock resort here from her home in Santa Barbara, Calif.: "I don't like gambling by myself." Slots, she says, are "pure luck, and there's not that much to it."

But the casino industry sees huge dividends in overcoming the indifference of young gamblers like Cardinet to slot machines, which offer faster action than table games and are less costly to operate.

Manufacturers are rolling out new slot machines that have more in common with the latest video games than with the old one-armed bandits.

As a result, casino executives are increasingly hopeful of snagging the iPod generation, and perhaps locking in for decades a customer base they can depend on.

Being pushed to the background are the three-reelers that mimic the mechanical one-armed bandits that paid off for matching cherries, oranges, bells or bars. In their place are updated devices that offer lots of action to keep players transfixed — from animated characters, video loops and dozens of winning combinations to bonus rounds as a reward for sticking around.

There are also new electronic devices in the pipeline that mimic table games. The devices offer younger gamblers interaction with other players, just like real table games. But they lack the higher stakes of a live table game, as well as the potential for intimidation by a dealer.

New-style slots are still outnumbered in Las Vegas by the traditional models. But the new models have become commonplace, and they're expected to continue to gain market share as casino operators chase the younger set.

Young players could become a huge growth engine for a casino industry already on fire. U.S. gaming industry revenue has risen steadily in recent years, even through 9/11 and the 2001 recession. Gambling brought in record revenue of $27 billion last year. The industry's mega-acquisitions earlier this year — Harrah's buying Caesars, and MGM Mirage picking up Mandalay Resort Group — called attention to the increasing influence of big, sophisticated, publicly traded corporations in the business.

The spread of legalized gaming to Indian reservations and racetracks has fueled growth nationwide, which, in turn, has spurred interest in the Valhalla of gambling, Las Vegas. The city is on pace to hit 37 million visitors this year, surpassing the record 35.8 million in 2000.

Touchy subject

The appeal to young gamblers is touchy for some in the business.

Slot-machine manufacturing is dominated by International Game Technology, a Reno-based company that has an estimated 70% market share. It says it doesn't target particular customer groups. Its slot machines are aimed "at the broadest appeal possible," and the company "isn't necessarily pinpointing the younger customers as a slot player," says IGT Vice President Ed Rogich.

But others acknowledge the aim of appealing to a new generation with updated machines.

"We had a younger player in mind," says WMS Gaming's CEO Brian Gamache as he showed off a new highly animated slot machine based on the movie Men in Black at a trade show recently.

Some casino executives, too, acknowledge the need to market their slot parlors to the younger, hipper visitors to Sin City. The latest slots have "greater relevance to 21- to 35-year-olds who have grown up on Game Boy and Xbox," says Harrah's CEO Gary Loveman.

The Hard Rock resort, a Las Vegas hot spot with the younger crowd, is impressed enough with the new games that it plans to build a promotion around them next year. The prize to the winner: a surfing safari.

Not an easy task

Luring younger customers won't be easy. Says consultant Steve Szapor of the Innovation Group: "The majority come with a bunch of money in their pocket, but it is going for the nightlife, food and entertainment."

They love the idea of hanging out in Las Vegas but haven't developed into the hard-core players of their parents' generation.

Research by Yesawich Pepperdine Brown & Russell, which publishes a profile of U.S. gamblers, suggests the most devoted gamblers nationwide are well-off empty nesters. Their mature offspring aren't emulating their gambling behavior.

Younger adults "are attracted by the nightlife and the action more so than the gaming," says CEO Peter Yesawich. "The gaming appeals mostly to the older, more mature population."

Jim Hughes, vice president of The Palms resort, another twentysomething Las Vegas mecca, notes an obvious reason for the generation gap in gambling: Older people generally have more money to gamble.

"Do they gamble?" Hughes asks of the young adults. "Sure, they do. Do they gamble as much as the boomers? No."

At the Hard Rock, only about 35% of casino floor space is devoted to slots. That's about half the proportion in a typical Las Vegas casino.

Hard Rock President Kevin Kelley says the scant space for slots recognizes the preference of many younger gamblers for table games.

That preference for less-lucrative live games and the tendency of younger visitors to seek a good time outside casinos partly explain why the mix of Las Vegas' resort revenue has changed.

Most of it now comes from rooms, food, drinks and other non-gaming activities. Back in the 1980s, resorts depended on gaming for as much as 70% of their revenue, often discounting food and rooms to attract bettors, says Terry Jicinsky, an executive at the Las Vegas Convention and Visitors Authority.

Data from demographics researcher Claritas show that the propensity to gamble in a casino appears to be a function of income rather than age. Younger people generally earn less, so there's less money to part with in a casino. But the gambling industry and Las Vegas boosters aren't content to leave it to chance that today's younger crowd will just grow in to the gambling habit.

In its five-year marketing plan, the Convention and Visitors Authority has begun targeting first-time visitors, ages 25 to 34, even though they aren't as immediately profitable overall.

"It is important to strive to increase their gaming and non-gaming expenditures to make them a more lucrative part of the visitor mix," the report states.

This isn't the first time that Las Vegas has dealt a youth invasion. A decade ago, the town went through a family-friendly phase. Casinos such as the then-new MGM Grand opened a theme park.

Circus Circus had an indoor roller coaster. Dads pushing strollers jammed the Strip, and kids were shooed off casino floors. The problem, casino executives soon discovered, was that parents were too time-pressed with their kids to gamble.

This time, at least Las Vegas is seeing a population old enough to get past its 21-year minimum age.

A new aura

On a recent warm weekday afternoon, passing through the gambling pits at the trendy Hard Rock feels like tiptoeing through the public library.

The action is outside. The pool scene rocks with pop tunes wailing over loudspeakers. Even the pool attendants are showing off their dance moves to each other.

Even if today's younger visitors don't gamble much, at least they bring a new aura.

They are making Las Vegas cool again. Resorts are scrambling to add nightclubs and "ultralounges," such as Tabu at the MGM Grand, Tangerine at Treasure Island and Ghostbar at The Palms. They are re-establishing Las Vegas as a celebrity hangout. Last month, Paris Hilton, 23, said she would open her own Club Paris and design a suite at the Aladdin hotel casino.

About 71% of casino executives participating in a survey conducted for a recent industry trade show say they expect that resorts will redesign themselves with young customers in mind. "The casino of the future will be younger and hipper," predicts Frank Fahrenkopf, CEO of the American Gaming Association.

In a bid that could bring in younger bettors, gamemaker Shuffle Master is developing electronic games that play like live ones — using attractive virtual dealers instead of live ones.

Being tested in some California Indian casinos now and expected in Nevada within a year pending approval, they let up to five players at a time play blackjack for as little as a dollar a hand, instead of the $5 or $10 minimums often found at the live tables.

They're more profitable for casinos, too, without a live dealer, says Brooke Dunn, a Shuffle Master executive. They fill a need for younger players. "They want the socialization. They want the ability to interact — not to play solitaire."

New-style machines are getting more sophisticated and play faster, attributes that could attract younger players. Driven by personal computer technology, these machines offer dozens of winning combinations and video clips or animated characters that run around on the screen.

For instance, IGT's Star Wars slot machine lets winning gamblers who play long enough bet on the outcome of a light-saber fight between Darth Vader and Obi-Wan Kenobi, and see the Death Star unleashed. Some games have themes based on personalities or TV shows of interest to younger players. Pamela Anderson, for instance, will grace a Bally Gaming and Systems slot machine.

The games play fast, about 13 to 18 spins a minute, twice as fast as the old reel machines, says Butch Witcher, an industry consultant based in Monterey, Calif.

'The cartoon things'

The new-style slots worked on Tom Kilcoyne, 26, of Cleveland. Kilcoyne says he made $30 playing new-style video slots with names such as Money Storm, Texas Tea and Hexbreaker. He says slots have never held much appeal for him, but he was attracted when he saw people playing what he called "the cartoon things." Said Kilcoyne: "Those were the ones I ended up playing, too."

Experts are divided about the possibilities of turning a party crowd into a gambling crowd. "To try to fundamentally change that younger generation's attitude is going to be a challenge," says consultant Szapor.

The Palms' Hughes has his doubts, too. Some of the newest games are yanked quickly because they are so sophisticated that players can't figure them out.

"The fact is young people don't traditionally play slot machines, and that's who they are making some of these games for," Hughes said.

Counters Sharon Lewis, a gaming industry consultant for PricewaterhouseCoopers: "If there's gaming activity and excitement on the floor, they may decide to stay and gamble a bit."

All agree, it's a bet worth making.


On a more interesting note, go read John Perry Barlow's reflections on the election: "magnanimous defeat."

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