Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

1

Gaming Entertainment

Chapter 11

John R. Walker

Hospitality, Lodging and

Food Services Operations

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

2

Chapter Objectives

• Outline the History of modern casinos• Describe the various components of modern casino

hotels• Explain how casinos have been integrated into

larger hospitality operations• Appreciate the spread of casino gaming throughout

the world • Understand the basic principles of casino operations• Discuss the different positions within the gaming

industry

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

3

The Casino Resort: A Hospitality Buffet

• Twenty of the thirty largest hotels in the world are casino resorts on the Las Vegas Strip

• Today, many casino resort presidents and key executives have come up through the lodging or food and beverage side of operations

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

4

What is Gambling?• Gambling is the act of placing stakes on an

unknown outcome with the possibility of securing a gain if the bettor guesses correctly.

• To be considered gambling, an act must have three elements: something wagered (the bet), a randomizing event (the spin of slot reels or the flip of a card), and a payoff

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

5

What is Gambling?• There are two basic categories of gambling:

Social gambling and mercantile (or commercial) gambling.

• Social gambling is conducted among individuals who bet against each other

• In mercantile or commercial gambling, players bet against “the house,”

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

6

What is Gambling?• The house edge is what makes casinos possible• The house edge allows casinos to offer their

customers honest games, fairly dealt, and still remain in business.

• The house edge is defined as a mathematical formula that allows the ‘house’ to keep a small percentage of every bet made by a player. The player may have some ‘luck’ in the short run but the house ‘advantage’ usually prevails over the long run.

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

7

What is Gambling?• The handle is the total amount of money bet

at a game.• The win is the handle minus the money paid

out on winning bets—essentially, what the casino keeps.

• The hold percentage is the percentage of the total handle that is retained as win.

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

8

What is Gambling?

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

9

What is Gambling?• Just because the casino department is reporting

a net loss for a shift does not necessarily mean that the department is inefficient or incompetent; it may just be an expression of volatility.

• Over time, gaming wins will tend towards their historical average (house advantage).

• Because of volatility, even a busy casino can end up in the red for a shift or even a weekend if one high-stakes player has a run of good luck.

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

10

Comps: A Usual Part of an Unusual Business

• Comps are complimentary goods and services offered to casino patrons in order to attract their business

• Comps are distributed as a usual part of a casino’s operation.

• The value of comps varies; generally speaking, higher-producing players are given higher-value comps

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

11

• Casinos, with thousands of guests on any given day, rely on customer loyalty programs to track patron play

• Casinos use the information they gain about a player’s gambling patterns to offer him or her comps, based his or her expected levels of play.

• Most loyalty programs have tiered rewards structures, giving patrons an incentive to play more and unlock more rewards.

Comps: A Usual Part of an Unusual Business

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

12

Types of Casino Operations• Nevada-style gaming tavern, which is a typical

bar and restaurant that has less than sixteen electronic gaming devices

• Stand-alone casinos usually consist of only slot machines

• Indian reservation may be bingo parlors in prefabricated buildings to fully functional casino resorts

• Riverboats are usually permanently moored casinos with F&B facilities, and a hotel

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

13

Types of Casino Operations

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

14

Components of Casino Resorts• Destination resorts, such as those found in Las

Vegas, are centered on casinos that have several types of games available:– Slots– Table games (21, craps, roulette, baccarat, etc.)– Race and sports books– Poker rooms

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

15

Components of Casino Resorts

• In most parts of the United States, slot machines produce the bulk of the revenue

• Among table games, blackjack is most popular nationally

• Casino resorts also include the following components:– Lodging– F&B– Entertainment– Retail shopping– Convention facilities– Nightclubs

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

16

Evolution of Gambling and Casinos

• Gambling is among the oldest of human behaviors

• Purpose-built dice have been discovered at sites dating back to 7,000 years ago

• Casino resorts, as they are currently operated, are much younger, dating back only to 1941

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

17

Evolution of Gambling and Casinos

• By 1910 gambling had been outlawed in the United States

• In the midst of the Great Depression, in 1931, Nevada legalized gambling in order to increase tourism

• The El Rancho Vegas, was the first casino resort on what would become the Las Vegas Strip

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

18

Evolution of Gambling and Casinos

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

19

Evolution of Gambling and Casinos

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

20

Evolution of Gambling and Casinos

• In the 1970’s casinos were being purchased by corporations, integrating them into the national economy and initiating new regulatory scrutiny

• In 1976, New Jersey voters legalized casino gambling in Atlantic City

• Riverboat gambling debuted on the Mississippi in 1991

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

21

Evolution of Gambling and Casinos

• In the 1987 Cabazon decision, the Supreme Court affirmed that if a state allowed betting on bingo or card games, Indian tribes could offer these games without limits imposed by state regulators

• Today, there are more than 200 Native American tribes operating casinos in more than 30 states with revenues of more than $25 billion

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

22

Evolution of Gambling and Casinos

• American-run casino operators have found that Asia is an even more lucrative market for casinos than the United States.

• Both Macau (2004) and Singapore (2010) have become casino powerhouses

• Since 2008, Macau’s casino industry has become a world-wide leading gaming center with increasing revenues surpassing Las Vegas by nearly 400%

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

23

Macau

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

24

Working in a Casino Resort• Hotel operations:

– Much like the career opportunities in the full-service hotel industry, with the exception that food and beverage can be a division of its own and not part of hotel operations

• Food and beverage operations: – High-quality food and beverage service in a wide

variety of styles and concepts– Some of the best foodservice operations in the

hospitality industry are found in gaming entertainment operations

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

25

Working in a Casino Resort

• Casino operations:– Gaming operations– Casino service– Marketing– Human resources– Finance and administration

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

26

Working in a Casino Resort

• Retail operations:– Increased emphasis on nongaming sources

of revenues–Gaming entertainment business demands

an expertise in all phases of retail operations• From store design and layout to product

selection, merchandising, and sales control

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

27

Working in a Casino Resort

• Entertainment operations: – Because of the increased competition,

gaming entertainment companies are creating bigger and better production shows to turn their properties into destination attractions

– Production shows have climbed into the multi-million dollar range, with special entertainment venues built for superstars

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

28

Casino Shows

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

29

The Mirage Effect

• Since the 1990s rooms have become a major revenue center

• Gourmet cuisine was introduced in 1992 when Wolfgang Puck opened Spago in Caesar’s Palace

• The quality and cost of entertainment has skyrocketed

• Full-fledged malls inside casinos have seen retail spending climb

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

30

Sustainability in Gaming Entertainment

• Gaming entertainment companies continue adapting their operations and practices to fit “green” standards.

• Many well-known companies in gaming entertainment are leading the way to establish sustainable initiatives

• Harrah’s Entertainment Inc. has undertaken a sustainable initiative in several areas of operation, including energy, waste and water conservation, as well as climate control

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

31

Career Information

• The growth of the gaming industry has resulted in a variety of new job openings.

• People choose to work in the industry because it is known to place people first, whether they are employees or customers

• Most careers include impressive benefits packages and offer many career advancement opportunities

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

32

Trends in the Gaming Entertainment Industry

• Gaming entertainment dependent less on casino revenue and more on room, F&B, retail, and entertainment

• Gaming and lodging are converging• Continued scrutiny (inspection) by government• Exceptional service will drive the entire

industry• Continued improvement in management

career opportunities

Introduction to Hospitality, 6e and Introduction to Hospitality Management, 4e - Walker

© 2013 by Pearson Higher Education, IncUpper Saddle River, New Jersey 07458 • All Rights Reserved

33

Chapter End