The “license to print money” myth is a surprisingly popular assumption about casinos and one that seems to prevent people from conducting all the usual due diligence and care that would go into say, a shop or restaurant opportunity screening exercise. Examples that come to mind follow. A large casino was developed in a jurisdiction where there are restrictions placed on slot machine maximum stakes. The revenue expectations of the slot machines were heavily relied upon to render the casino viable. When a revenue capacity model was run on the slots by an experienced manager several days before opening, it showed that it was a physical impossibility to generate the required slots income with the number of machines installed… The casino failed to live up to expectations. A large casino developed in Britain by a US operator failed miserably because it did not understand the propensity for live gaming or the mobility of players in the market, whilst a British company failed spectacularly in Las Vegas because it didn’t understand the customer and made fatal design flaws.
The “James Bond” image is another popular misconception about players and casinos. The Pareto Principle applies heavily to casinos with approximately 80% (or more) of the revenue being produced by 20% (or less) of the visitors. That 20% does not constitute people who don formal dress for an occasional night out; it’s more typified by the frequent visitor who feels at home in the casino in comfortable, casual wear. The un-initiated 5-Star Hotel manager is invariably aghast at the presence in his or her lobby of the “non-James Bond-ness” shall we say, of the casino players! “Where’s that casino manager, he’s obviously got this all wrong…” And on goes the conflict-of-interests. The feasibility study will enable the corporation to identify these conflicting situations in time to create solutions such as providing a separate casino entrance and differentiating F&B standards and prices in the hotel and casino.
I recall an incident where a group of executives went to great lengths to propose the development of a large caravan park in the grounds of a destination casino resort, some 2 hours drive from a major city. The executives proudly began to present their highly polished and detailed plan to greatly increase footfall to the resort when much to their dismay they were harshly reprimanded by the CEO. They had failed to recognize that the hundreds of caravans on the road would delay the 20% of visitor that produce 80% of the revenue and the significance of such shortening of the gaming session!
The feasibility study will highlight the key drivers of the casino and let you put into perspective the priorities of the business. It will help you avoid fatal/serious flaws and give you the best chance of optimizing your opportunity. Now wouldn’t you agree that’s an excellent result for 10 days’ fees!