European Gaming: The Dynamic Between Online and Land-Based Casino Operations

Figures from the European Gaming & Betting Association (EGBA) show that the European online gaming and betting market is thriving. In fact, research from last year indicates that it was the largest market for online gaming, worldwide. A staggering 47.6% out of the global market of EUR €34.6 billion in Gross Gaming Revenue (GRR) came out of Europe (Asia: 30.3%, North America: 13.3%). In its projections, the association forecasted the European GRR to reach nearly EUR €25 billion by 2020. Yet, despite the significant size of the sector, online gaming and betting only represented 17.5% of the total gaming market in Europe. While the EGBA cited forecasts for the European online gaming and betting sector’s market share to grow to 22% by 2020, research also projects a growth of more than EUR €6.6 billion for land-based casinos (with GRR reaching EUR €84.3 billion by 2020). Traditional bricks-and-mortar operations will thus continue to generate the bulk of the revenues for the industry. With this in mind, we got in touch with senior casino executives to talk shop. With online gaming continuing to gain momentum, what is its competitive impact on traditional land-based casino operations? Casey Cohen, Chief Marketing Officer at The Hippodrome, commented, saying: “Looking at online gaming as a potential revenue stream for the bricks-and-mortar operators, as opposed to competition, can lead to a strategic rethinking of an operation by creating both direct transactions as well as indirect revenue opportunities such as database growth or guest experience enhancements, leading to the betterment of online and bricks-and-mortar financial performance.” Casey mirrors here the views of other executives with whom we connected. Saverio Scheri, President at WhiteSand Gaming, said: “When looking at online gaming, everyone assumed this big shift and potential losses in revenues for bricks-and-mortar operations. But, this shift never happened, and it is certainly not the first time that we have seen technology-led threats to the industry not materializing, such as server-based gaming. In fact, anticipated growth of the online gaming sector has been much slower than forecasted. One potential reason for this is that there is still a bit of hesitance and an uneasiness around online gaming sites, mainly evolving around trust issues. The many illegal sites have not helped, and then there is of course the regulatory environment, which, in the US, has been a lot about trial and error. Big casino operators just won’t risk associating their valuable brands with unproven business operations.” Christian Stuart, SVP & Chief of Staff at Caesars Entertainment, concurred, stating: “In Las Vegas and Atlantic City, where online gaming is legal, that particular segment of the market is certainly growing – but it is not to the detriment of the traditional land-based casino operators. The explanation is a simple one: If customers enjoy the thrill of gaming online, then they are likely to enjoy the thrill in a bricks-and-mortar environment. The latter has an additional advantage of providing a social context, and this is not to be underestimated.” It seems, if anything, online gaming has made land-based casino operators more alert. In a world where everyone and everything goes ‘online,’ the answer seemingly lies in capitalizing ‘digital’ in the marketing arena. Cohen agreed, commenting: “The European land-based operators are well ahead of the curve where online is concerned and have evaluated three options, which are: (1) operating their own online sites (thus creating an additional revenue stream); (2) partnering with a third-party online operator and utilizing online gaming to build data and drive brand exposure, possibly by way of a licensing agreement; or (3) not participate at all. At The Hippodrome, we have joined forces with Betway so as to not miss out on the digital opportunity. The partner strategy is one way for traditional land-based casinos to go digital and, in doing so, the operator creates ‘through-the-line’ marketing opportunities, allowing for more cost-efficient and measurable marketing opportunities in their marketing program. Regardless of the age demographic you are thinking of attracting, everyone has gone ‘mobile,’ so engaging online with your clientele is important and the potential to gain revenue, collect valuable customer data or enhance the overall guest experience certainly is persuasive. Companies should make a true commitment to digital by formulating their goals and creating long-term strategies that lead to holistic and ever-evolving online marketing efforts.” Scheri concurred and noted: “There is definitely an opportunity for casinos to engage digitally with their consumers. In the US, we have seen success in reaching out to new and different market segments by engaging and interacting with them online through networking sites, e-advertising or social gaming. The idea is a simple one – capturing people online and bringing them and their activities to a bricks-and-mortar casino by offering slot cash prizes or overnight stays at a casino hotel, for example. The bottom line is that the digital arena offers new and exciting ways to engage with consumers and at much lower costs than traditional marketing.” In line with this, Stuart stated “you need to make sure not to ignore the fact that people go mobile […]; you need to embrace the social aspect of it. Even more, we have captured new, previously unknown, online guests in our bricks-and-mortar businesses, which shows it is growing the pie.” When talking about digital marketing, Stuart equally commented on the importance of loyalty programs. “All of our re-investments are based on knowledge. We use data to continuously test our products and service offerings to figure out what the best mix is. Loyalty programs are therefore constantly evolving, and they help us to stay on top of our game.” Early in the year, Hard Rock confirmed its upcoming project in Cyprus, whilst US Cordish Companies announced its intent to invest EUR €2.2 billion to develop a major gaming and entertainment complex called Live! Resorts in Spain (the former Las Vegas Sands site) – thus seemingly underpinning the fact that ‘life goes on as usual,’ despite the emergence of the online players. What, if anything, should land-based casino operators watch out for when planning their European projects? As the ‘guy on the ground,’ we asked Cohen for his insights. He picked up on Stuart’s earlier comment about the fact that land-based casinos offer more than just gaming. “The big US operators have done a tremendous job at ‘putting on a show’ – they understand that gaming can be enveloped by the service, entertainment and retail offering created in a unique and more holistic experience, which cannot be replicated online. This is an opportunity for the European casino market to create a more resort-like offering as well. Admittedly, in Europe and particularly in the UK, there are more restrictions – with specific regard to gaining access to the right site with license options – which make it harder to achieve that same level of sophistication in the product and service mix like in the US.” One thing is for certain, despite the challenges faced by the industry, it remains a more-than-resilient sector. Disruptors, such as online gaming, do not always negatively impact the traditional players. Sometimes, they actually help to push the boundaries, re-strategize and foster innovative thinking. Similar conversations to the ones with Cohen, Scheri and Stuart were also held at the ICE Total Gaming event in London and reconfirmed the positive outlook of the industry.