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2013 Gaming Industry Forecast: Part 2

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Various Contributors
Publish Date
December 28, 2012
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Introduction
Part 1
Part 3



Jim Dennedy
President and Chief Executive Officer
Agilysys Inc.

Our development efforts at Agilysys for the coming year will be focused, in large part, on tighter integration between our products. The market has indicated a preference for more tightly integrated applications, especially for guest-facing transactional systems. Our customer base also indicates it wants a more immediate and better understanding of guest spending, so we’re making significant investments in that area—for both our in-market products and the next-generation platform we’re designing specifically to address this need. We’re also making investments in solutions that require less time and expense to install, configure and maintain.

Of course investing in the business goes way beyond products. It’s also about investing in service and service quality. Feedback from our customers will continue to guide our improvements in the coming year. We will also continue to bring in customers from the gaming industry and other hospitality segments to offer their advice on product roadmaps, features and technologies.

As for what’s ahead in the gaming industry, we see three major technology trends—cloud, mobility and social media. Hotels and casinos are looking to software-as-a-service to reduce their on-premise footprint and save the time and expense required to manage in-house systems. They also want mobile solutions that enable staff to serve guests more effectively and efficiently. Finally, they want to utilize social media to shape their offerings, improve service and increase guest spending.

Addressing these in order, we offer several applications in an above-premise delivery model. While not true “cloud” solutions, they do enable properties to reduce or eliminate their on-premise footprint, as well as the personnel resources required to deploy and manage the technology. We have a virtual IT offering—a managed service—for both on-premise and off-premise management of the physical IT infrastructure. We’ve also made significant investments to improve and more directly own our mobility strategy, which has dramatically enhanced the mobile readiness of our core products. And we’ve designed, developed and released for pilot a true cloud-enabled point-of-sale solution called Elevate™. Although Elevate was initially designed for the managed food service market, we’re expanding its feature set to address the other markets we serve. The design of the application and its deployment model are intended to reduce the level of professional services required to install, configure, train, use and manage the solution. As for social media, the investments we’re making in our next-generation platform will enable customers to exploit the social graph so that they can tailor the guest experience and deliver real-time offers.

Although the last few years have been challenging for the gaming industry, the future is exciting, with many opportunities to offer enhanced service to guests. With the right technology, improved processes and trained personnel, casinos, hotels and other hospitality providers will be positioned to leverage key technology trends to capture greater wallet share and earn more value from the market.


Andrew Cardno
Chief Technology Officer
BIS²

In 2010 and 2012, I warned operators to prepare for the unexpected. I can only say the unexpected has happened from unseasonal storms in Atlantic City, to world-leading slot machine manufacturers deciding to focus on making online games, and to gaming operators in Macau stating that they need to diversify into non-gaming activities. Regardless of whether it is the nature of these markets, these “black swans” are in many ways some of the biggest changes in the industry and create some rather remarkable challenges for operators’ worldwide.

BIS2 saw astonishing growth in 2012, as operators globally are adopting advanced analytics as a core part of their management strategy. The astonishing growth has seen us complete installations on five continents and across more than 150 casino floors. During 2013, we will continue to build out our business partnerships. We are proud of the network of distributors we have established and especially pleased that this network provides a global distribution of experienced industry leaders who are committed to helping BIS2 grow and build a worldwide footprint.

The customer experience is now central to the analytical work that BIS2 is doing. This work has been dramatically simplified by the addition of preference filters to the analytics capabilities. Quite simply, this method enables operators to understand the market basket of their gaming products. Now, like never before, we are enabling our customer base to build customer experience-optimized gaming offerings.

The now well-tested field theory is that by optimizing customer gaming experience, operators can drive additional revenue of 2 to10 percent (depending on your starting point). This is a dramatic financial benefit that does not require significant management to enable analytically driven change. However, the results are remarkable.

BIS2 is investing heavily in R&D, and 2013 promises to be one of the biggest commitments we have made to product development since our founding. We have a yet-to-be-unveiled product line touching high-value problem areas, such as data matching and mobile applications. This new product line will be built on the existing infrastructure and provide our existing users with a clear path forward.

In 2013, we will release version 8.8 of our flagship gameViz product line. This  product’s capabilities include CRM integration and campaign management. Our strategy with CRM tools is to provide sophisticated easy-to-use tools, by which marketing programs can be set up, executed and analyzed from BIS2. However, the actual management of the CRM will be from within CRM products. As such, BIS2 is a driver of, but not an owner of, the CRM tools. By taking this interoperability-based approach to CRM capabilities, we can enable our customers to have both the sophistication of a BIS2-enabled interface and the flexibility of a fully enabled CRM tool.

In 2013, we hope to see a softening of the market resistance from existing system vendors. This softening may well be enhanced with the continued pressure from a customer base that is requesting deeper integration with traditional gaming system capabilities.

BIS2 has significant developments with our solutions in other industries. In 2013, this cross-industry development will continue to provide further advances in the product line and enhanced flexibility in our advanced analytics.

2013 is lining up to be a wonderful year for BIS2, with growth opportunities on six continents and a product that continues to develop with some fascinating capabilities. We plan to have a lot of fun developing and working with our customers and partners on new projects and solving more of the industry’s most difficult analytical questions.


George J. Levine
Executive Director, Sales and Marketing
Casino Data Imaging Inc.

Since the introduction of CDI’s first casino data visualization program in 2001, the art of visually presenting and analyzing data has matured from reporting basic KPIs and high-level color coding with drill downs, to more interactive, animated and actionable presentations. The new GlobalSuite™ platform allows CDI to add advanced analytics to support dynamic graphical and reporting environments. The results are impressive. Utilization of the Microsoft .NET framework provides CDI a state-of-the art platform, promoting a flexible, scalable and powerful development environment. Companies that have already invested in reporting programs can license GlobalSuite’s advanced visualization module and/or dashboard control center, allowing casinos to maximize their current BI assets. For report and pivot analysis, CDI’s GlobalSuite Report Analysis module is “plug & analyze” for immediate powerful analysis including “on the fly” report filters and features (3-D charts and graphs, alerts, and more). Applying 12 years of analysis know-how and working closely with end users, Microsoft© Reporting Services has provided our engineering team a robust development environment. The bottom line is that our bandwidth is set high to meet current and future customer requirements.

During these uncertain economic times, we continue to see more customer emphasis on revenue optimization and efficiencies. For CDI, this has been threefold with increased utilization of our GlobalSuite and CasinoCAD© programs, more interaction with CDI client support specialists and new sales. Later this year, CDI will test web versions of GlobalSuite, providing more versatility and mobility for our end users. We are also focused on additional key strategic relationships that will provide value-added features to our product set.

2013 will also see additional installations of CDI’s iGuide™ Wayfinder program. This has been an interesting project for several reasons. With several former slot managers on our staff, there is an appreciation and focus on the dynamics involved concerning iGuide’s the front- and back-end user interfaces. In working with casino IT, slots and marketing, the iGuide console master (user interface) has evolved into a logical and easy-to-use application ensuring the program is always up to date. The console master encourages creativity throughout the program, and is user-friendly and exciting for the admin to see the results before pushing out to the kiosks.  Customers quickly understand this is a live casino map and can easily find and locate casino games (including multi-game themes and denominations). iGuide also covers all other aspects of the casino including restaurants, jackpot winners, customized ticker information displays, promotions and much more. CDI is a visionary company and often our own harshest critic. We push for continual change and forward movement in our products and support.    


Jim Bach
Chairman
NEWave

In our forecast this year, we are looking at two things: the near term and the long term. First, in the short term, the majority of casinos have successfully prepared for the major changes in FinCEN that will take place on March 31, 2013. We forecast the first quarter will be spent helping casinos ensure they are completely ready and in compliance.

A look to the long term begins with a quick look back. In 2012, while we were able to move the business forward, the economy generally continued to bounce along the lower spectrum. Working closely with our clients, we have found that casinos across the U.S.—corporate and tribal—have had a continuing focus on increasing efficiencies and discovering ways to do more with less. Without a sustained high-level recovery, we see no clear reason why this approach will change in 2013.

As casinos are looking to do more with less, we forecast that in 2013 NEWave will focus increased energies on providing efficiencies that allow operators to do more with less. This will include our current three product lines (myCompliance Manager, myRevenue Manager and myDocument Manager), which provide the benefit of reducing mundane labor intensive processes and provide a collaboration of products that can be utilized to reduce manual steps.

In 2013, a major focus for NEWave will be our new Tax Form Validator software. This software allows for a single tax form product for W2G, 1042-S and 1099MISC across the operation. This product utilizes a single authentication database simplifying the year-end filing processes. Operators do not have to worry about lost or misplaced data or files, meaning the savings are twofold: more efficient tax forms process and significant reduction in risk of large fines.

Also in our plans for 2013 is the launch a number of new efficiency-driven programs, including audit tools for food and beverage, retail and casino cages. Many of these processes have remained the same for 20 years or more without technology being leveraged to improve the process. When these new tools are added to our already-powerful suite of audit efficiency products, we believe the value to operators will be hundreds of thousands per year.

Another source of efficiency that we predict casinos will look to in 2013 is paper use and storage. Regulations require casinos to store documents—for good reason; however the cost and space involved in storing all that paper is reaching a breaking point. As 2012 ends and casinos are looking at their year-end obligations, we are getting countless requests for document management solutions. We see this as a growth area in 2013 for NEWave, as we have software and hardware solutions that increase compliance efficiency and document management.
We thank our clients for a successful 2012, and we wish everyone in the industry a very happy and successful 2013.


Tammy Farley
President
The Rainmaker Group

Patrick Henry’s words may best characterize my sentiments relative to a gaming forecast for 2013: “I know of no way of judging the future but by the past.” And as I’ve watched and charted the intensity of gaming activity over the past year, what I continue to see is a noticeably elevated focus on three areas: 1) the non-gaming customer whose non-room spend is significant; 2) channel optimization; and 3) group and meeting space optimization. These are areas certain to receive greater attention in 2013 and beyond.

Let’s first look at the non-gaming customer with significant non-room spend. The lingering residue of the “great recession,” if it’s done nothing else, has forced gaming companies to become more attuned to this customer and more imaginative in recognizing and rewarding him or her. Today, loyalty programs, in increasing numbers, are no longer tying their rewards solely to how much the patron spends on gaming, but equally so to how much he/she spends on shopping, nightclubbing, dining and shows.

MGM Resorts International (M life) and The Cosmopolitan (Identity) are two high-profile examples of this trend. While these programs continue to be refined, the spotlight of attention is shining ever more brightly on today’s non-gaming customer. When you consider Las Vegas, for example, where non-gaming customers comprise 75 to 80 percent of the market and where non-gaming activities generate 60 percent of Strip revenue, this spotlight is likely to get even brighter and more intense in the coming year.

The concept of channel optimization is another area to watch in 2013. Let’s first define what channel optimization is not. It is not channel management, which is making sure your pricing is accurate, up-to-date and reflects parity across your various channels. A lot of companies are spending a lot of money on a lot of tools to make sure their prices are not only accurate, but are in parity across channels so they are not in violation of the contracts they’ve signed with major OTAs.

Channel optimization, a method of identifying for the casino-hotel operator the right channels and right partners for a given business opportunity, is not a new concept for our industry, but for operators, the precise, “surgical” application of knowing when to turn channels on and off for a particular date and property has a way to go. That’s why I believe this will be one of the three areas of greater industry focus and scrutiny in 2013.

The third area is group and meeting space optimization. A higher degree of confidence in the economy is translating into a higher degree of confidence among meeting planners in booking annual business events. As a result, in 2013, casino hotel operators will need to be ever more vigilant in working smartly and efficiently to maximize this revenue as opportunities arise. I expect our industry will lean more heavily on tools that can give them greater confidence in group pricing and forecasting. 

Forecasting is key, and we already have a lot of historical data. We just need to determine how best to segment the business so we can accurately predict the number and type of group opportunities that will present themselves within a given week. If we can accomplish that, we can develop an optimization algorithm that can help operators quote group prices confidently and profitably. 

Once we master group forecasting, the door to meeting space optimization will swing open as well. We know where we have to go and we’re working hard on getting there! The race to find a solution will accelerate in 2013.

And finally, the past year has given us continued growth in most gaming markets, with additional capacity and properties being added in the U.S. and an explosive growth of new rooms in the dynamic, vibrant market of Macau. Let’s hope 2013 brings us more of the same!


Kelly McGuire
Executive Director, Hospitality and Gaming Global Practice
SAS

Whether redesigning service offerings, improving retention, launching loyalty programs or pricing to maximize revenue and profit, 2013 will be all about turning volumes of operational data, both structured and unstructured, into meaningful, actionable information.

Intelligent use of information, carefully synchronized across the enterprise, will help casino managers improve the patron experience, maximize profits and increase the value of their patron relationships, ensuring advantage in an increasingly competitive market. None of this is possible without a strong analytics strategy, built on a solid data management foundation.

Many casinos have already begun to see the advantages of advanced analytics, and investment in analytics will continue to accelerate in the coming months. Whether redesigning service offerings, improving retention, launching loyalty programs or pricing to maximize revenue and profit, in-depth knowledge of patron behavior, market conditions and competitor influence is critical to keeping a leg up on the competition.

We’ve all heard the buzz about big data, yet many casino operators would argue that they don’t really have a big data problem. At SAS, we think of the management challenges facing casinos today as a “big analytics” opportunity. The casino industry is quickly moving beyond managing reactively, through historical reports that are delivered too late to really make a difference toward a more proactive approach—identifying problems before they occur and taking the right steps to turn those challenges into opportunities. Being proactive requires forward-looking advanced analytics like forecasting, predictive modeling and optimization. Staying proactive means those results need to be delivered at the speed of business, in a consumable format that drives action, not analysis paralysis.

Strategically, we will see casino IT departments start to move away from niche software solutions and focus on platforms that use a common framework and data warehouse for all software solutions and allow easier expansion of capabilities. This common platform simplifies extracting, cleansing, analyzing and reporting on data from all operations within the casino. It also increases user acceptance and generates incremental ROI by facilitating a phased approach to implementation.

During the year ahead, many casinos will expand their use of customer intelligence solutions, like SAS for Patron Value Optimization, which allows casinos to predict patron behavior and take the right action to increase loyalty, retention, response rates and revenue. As well, casino companies will continue to deepen and expand their use of revenue management technologies for profitable pricing strategies. More and more casino companies are adopting hotel room pricing solutions, like IDeaS Revenue Management System, across their estates, as room revenue management becomes a “must have” for casinos. We are also seeing examples of expansion in our work with MGM on entertainment revenue management. We forecast that there will continue to be more innovation in applying revenue management and price optimization to other revenue streams in 2013 and beyond. Further, the platform approach will facilitate sharing of data and analytics across departmental silos, resulting in synchronized decision making with an eye to benefiting the organization, not just the department.

Casino companies will continue to expand the scope of marketing and pricing activities to include analysis of social media data and other unstructured text data, such as customer surveys. Analytics will also streamline cost controls, such as demand forecasting and workforce optimization, to keep labor costs in balance.

Expect to see more emphasis on “real-time” applications, whether it’s delivering an offer to a patron while they are on property or alerting an employee, like a casino hosts, to take an action. Real-time delivery makes big analytics even more crucial, since predictive models must run in nanoseconds.

It’s an exciting time for casinos, especially when you are using analytics! 




Andrew Zarnett
Gaming and Lodging Analyst
Deutsche Bank Securities Inc.

For 2013, it is impossible to have a definitive industry view without knowing how President Obama and Congress will, or will not, deal with the fiscal cliff. Either way, it is our belief that taxes will go higher. Thus it is our expectation that consumer spending will be softer in the coming year. We are worried as to the crowding out effect that higher taxes, along with price inflation, will have on discretionary spend.

Looking to industry demand, we believe visitation and spend will be up marginally in 2013, but clearly impacted by higher taxes and dubious economic trends, including reduced consumer wherewithal and stubbornly high unemployment. While better convention volumes in Las Vegas may help 2013’s performance, the positive impact may be less than the prior year. On the supply side, capacity additions have been fully absorbed in Las Vegas. Along the Atlantic Coast, near term supply is expected to grow by 17 percent (+16,500 positions) over the next three to four years.

We expect that supply will be detrimental to operators in a hesitant demand environment. Thus, we believe the combination of sizable new supply and moderate demand will provide for a challenging operating environment. Away from AC, we estimate the regional markets in aggregate will experience flat revenue, along with lower EBITDA. In 2013, we will be watching how companies further align their cost structures to perhaps slightly higher revenues after rapidly reducing costs in 2011-2012. We expect little can be done to further reduce costs and some operators may have to add expense to fill gaps left behind, as significant cost cuts were implemented. We note, in the future when we look back on gaming, it will be clear, gaming is and will continue to be a recessionary industry.

Our review of the regional market clearly indicates that regional gaming properties are positing mixed results. Over the past 12 months, Colorado (+1%), Iowa (SS) at +2.7% and Detroit at +2.9% have been relatively stable during the downturn, while other regional markets such as Louisiana (-1%), Indiana (-3.5%), Missouri (SS) at -1%, Illinois (SS) at -7.3% were down in the mid-single digits (due to new competition), indicating the relative stability of these markets relative to Atlantic City (-8.1%). Looking ahead into 2013, we expect regional markets will continue to outperform Atlantic City; we believe they will benefit from less regional competition, easy year-over-year comparatives and consumers’ preference toward traveling closer to home. Further, some of these markets have little supply additions compared to the Atlantic Coast market.

How will competition impact the Atlantic Coast market? During 2012, the continued growth of properties in Pennsylvania, new supply in Atlantic City, Maryland, Pennsylvania and New York had a decidedly negative impact on the performance of Atlantic City assets. Making matters worse, Atlantic City was also hit by a Category 1 hurricane, which temporarily shut down casinos for a period of five days. Although the casinos suffered minimal damage, the road closures, power outages and gas rationing continued for a prolonged period after the storm, which will decidedly impact revenues through early 2013. Our view of continued declines into 2013 remains intact as new supply continues to be introduced into the Atlantic Coast market. In the near term (three to four years), we expect gaming positions to grow 17 percent (+16,500 positions). Against the backdrop of increased supply, we foresee continued declines in Atlantic Coast same property revenues, and EBITDA as that market struggles to absorb the next round of supply additions.

Our view of Internet gaming remains that Internet gaming (online poker) will roll out on a state-by-state basis and not pass at the federal level. Given intrastate limitations, we believe that the impact to any single operator will be much smaller. Further, as operators form an online strategy, the competitive set could be much more intense in the short run. Longer term, we believe the business will consolidate. In a state with high penetration of gamers, such as Nevada, and little ability to extract additional dollars from players, cannibalization could be great. In other states where casinos are somewhat isolated from the population, online poker should expand the market. And lastly, investors should pay close attention to the potential impact of lotteries as they enter the online gaming market.


Frank Fantini
Publisher
Fantini

The conventional wisdom usually tends to be that current trends will continue into the future. But that rarely happens. More often than not, there are surprises. Thus, the safest prediction about 2013 is that it will surprise us at least once in a significant way. This past year has been way too unsurprising to continue.

What that surprise will be, and whether it will be good or bad, only time will tell. Meanwhile, following are some specific thoughts.

The economic recovery in the U.S. is gaining steam and is likely to continue to do so, and China has resumed industrial growth and has the greater certainty with its new government in place.

The U.S. recovery should result in stronger consumer spending, which will be especially helpful in regional markets that lagged the Las Vegas recovery, and where casinos continue the cost controls that should mean a higher percentage of new revenue falls to the bottom line.

One of the chief themes in regional markets is cannibalization, and whether much of the benefit of casino expansion is diminished as the segment transforms into more of a market share game.

Until the impact of new capacity clarifies, investors may be reluctant to embrace regional operators enthusiastically.

Having said that, each of the regional operators has its own strategy, and it would not be surprising to see one or two of them outperform expectations.

The Las Vegas Strip is more difficult to assess. The expectation of growth in corporate spending on conventions and trade shows isn’t as buoyant as it was heading into 2012. On the other hand, Asian high-end play continues strong, and a recovery in China will further strengthen that.

China, of course, has its biggest impact on the half dozen casino operators in Macau.

It appears the Chinese economy is coming back, which would boost both VIP and mass-market spending in Macau.

But questions remain, such as whether the new government, in its efforts to at least appear to be cracking down on corruption, will make it difficult for VIP players in Macau.

Another question is whether the economic doldrums in Europe will weaken the world economy, thus taking some of the steam out of export-dependent China.

Aside from these big issues of the world’s economies, there are trends within the gaming industry that are changing the landscape. They include the privatization of lottery operations both in the U.S. and internationally, which open big opportunities for Lottomatica, INTRALOT and Scientific Games. Another trend is the advance of online gaming state-by-state in the U.S. and the knocking down of national obstacles to free trade in the gaming sector in the European Union, which should create new opportunities. Lastly, states are replacing gray slot machines with VLTs, as in Illinois, or better yet, replacing them with iPad-like devices, as in Minnesota.


Michael J. Pollock
Managing Director
Spectrum Gaming Group

I recently returned from several meetings with top regulators from throughout South America, and they expressed a number of thoughtful, well-placed concerns regarding the future of gaming, particularly as it hurtles quickly toward an online presence. Their concerns are particularly noteworthy because the issues they raised are hardly unique to Latin America. They extend from British Columbia to Chile, touching every gaming market in between.

The chief concern is how to maintain the integrity of gaming operations in a virtual world, particularly when so many new entrants plan to crowd the field, and when regulators face a host of concerns that do not exist in the brick-and-mortar world, such as geolocation “spoofing”—the ability (or inability) to effectively ensure that underage gambling does not become a major issue. Indeed, many fear that such issues could explode, not simply expand, if regulators are not prepared to deal with them.

Organizations such as Spectrum Gaming Group and our friends at Gaming Laboratories International are working hard in our respective spheres to ensure that regulators have the necessary tools and are aware of the inevitable limitations that may occur in an online world.

Spectrum is particularly focused on making sure regulators treat online operators and suppliers with the same degree of probity as they do in land-based gaming, to ensure that only individuals with the requisite level of integrity participate in this emerging field.

Equally important, however, is that emerging online markets throughout the Americas need to consider developing policies that both protect and enhance their existing brick-and-mortar industries. Each market is different and each needs its own policies, but a common thread is that the public sector—legislators and regulators working together—should consider authorizing strategies and participants, who can help grow the entire gaming sector, not simply the online sphere.

As we move from continent to continent in analyzing existing policies and suggesting new ones, we note that many of the policies developed in Europe—clearly the most advanced online gaming market—are not easily importable into either North or South America. Europe simply does not have the same concerns regarding protecting or enhancing its brick-and-mortar industry, since that industry has never developed to the same extent that it has in many gaming markets in this hemisphere.

The chief lesson when it comes to developing gaming policies and regulations is that one size clearly does not fit all. This lesson becomes even more pronounced when we bring lotteries into the mix, since lotteries—with some notable exceptions—do not oversee land-based casinos as part of their legislative mandate. Still, lotteries will have a crucial role to play, as they develop strategies that can either enhance or—in a scenario that is far less desirable—compete against land-based casinos.

Again, every market needs its own customized strategies to meet its own political, legislative and market-based challenges, but we believe the future of gaming would look a lot brighter if regulators in their differing spheres elect not to operate in silos, but rather work in a cooperative fashion to design comprehensive strategies to meet a variety of goals, including maximizing employment and investment, as well as revenue.

One core principle to be considered is that, all else being equal, online gaming will generate more revenue and profit if it is linked in some material fashion to brick-and-mortar casinos.


Rich Baldwin
Managing Director
Union Gaming Analytics

Heading into 2013, we have thought about where the domestic gaming industry is heading. Broadly speaking, we expect further gaming expansion and the potential for legalized Internet gaming to dominate the headlines, but provide little growth to the overall gaming market or to the bottom lines of casino operators and gaming technology companies during 2013.

Overall, Election Day 2012 resulted in limited new gaming expansion and certainly not enough to move the needle. Our view is that 2013 domestic revenue growth is highly correlated with U.S. economic growth. Across the regional gaming markets, we would not expect to see a material uptick until we see a sustained recovery in the broader macro-economy. That said, we expect growth for existing gaming assets (e.g., those impacted by new competition) to show flat to modest growth.

Given the slow growth macro environment, we are not surprised by some recent M&A activity, namely the acquisition of Peninsula Gaming for $1.45 billion. Heading into 2013, we would expect further consolidation by casino operators with healthy balance sheets that are seeking greater geographic diversification and a better alignment of strategic cross marketing opportunities. We anticipate a reshuffling of certain gaming assets amongst the operators and the divestiture of non-strategic gaming assets in crowded markets, in return for higher growth capital allocation opportunities and to provide some balance sheet relief.

Notably, Penn National recently announced a transaction whereby it intends to spin off its operating assets from its property assets. We believe the deal was driven largely by valuation arbitrage, which validates our view about limited domestic gaming growth. Given the immediate share appreciation for PENN, we would expect other casino operators to at least consider a similar strategy. However, we believe most will be patient and take a wait-and-see approach.

On the Las Vegas Strip, we like the long-term story, with limited supply growth coupled with modest demand to improve profitability. However, in the short- to mid-term, the market continues to experience a less affluent mix of visitors as reflected in recent visitation numbers, with decreases in convention attendance (business travelers) and air traffic (higher value visitors), and an uptick in motel guests (budget-oriented travelers).

On the gaming supplier side, the lackluster macro backdrop should remain challenged in 2013, given that many operators are still grappling with overleveraged balance sheets and are keeping their powder dry to pursue new growth opportunities. Domestic unit sales should be relatively stagnant and play levels on recurring revenue participation games are directly correlated to expanded consumer gaming budgets. Broadly speaking, another G2E has come and gone and we continue to see an influx of new entrants into the gaming technology space. Several of the newer entrants are building good slot product with competitive feature sets and game content and thus, are garnering some market share by competing primarily on price. However, in our view, true product differentiation appears to be lacking and there are clear-cut redundancies, in particular with R&D spend and regulatory costs. Therefore, we believe the market is ripe for consolidation.

In summary, we expect 2013 to experience minimal top-line domestic revenue growth, and therefore the stage is set for a year of increased M&A activity, which could yield immediate and significant economic benefits. However, gaming expansion will continue to dominate the headlines. The key states to monitor during the 2013 legislative session will be Kentucky, Texas and Illinois. In addition, Massachusetts, Maryland and Ohio will continue to roll out new gaming supply, albeit fairly limited in 2013. A key theme will also be whether new supply leads to growth or just cannibalizes existing supply. Finally, we expect to see some movement in the rollout of state Internet gaming, but we do not anticipate 2013 to be a breakout year for the Internet gaming market.



Jason Rosenberg
CEO
American iGaming Solutions

While searching for my crystal ball, I have had a moment to reflect on 2012. It was a great year to be an i-gaming expert. American iGaming Solutions (AiS) saw a growing interest month over month in its education and consulting services, and significant growth during the year for marketing and management campaigns.

The potential for amazing revenue from online gaming is obvious, but an online operation is neither an automatic home run nor a license to print money. As I am trying to encapsulate several days of educational material in relation to predictions of 2013, one thing really stands out. We preach a “magic formula” to all operators, regulators and service providers: technology + proper budget + key experience = i-gaming success. All organizations that have entered or wish to enter this “new” sector must employ all three aspects or they will fail 100 percent of the time. As dinosaurs in the online gaming industry, the AiS team has seen this play out hundreds of times in the last 15 years. We believe 2013 will bring a much stronger focus on the concepts in this formula, as well as a concentrated awareness of the aspects of day-to-day operations.

We do not believe any federal online gaming regulation will pass in 2013. There simply is not enough common interest in Congress, nor a willingness to compromise. Meanwhile, we will all get to watch every other country with regulated online gaming reap the rewards of their efforts.
We are not saying that another country has done it perfectly or that there is no room for improvement. There are still concerns to be dealt with, but the technology is readily available to cover these concerns. When coupled with the top-notch regulatory experience that already exists in state and tribal entities, we have the best opportunity for revenue, compliance and customer protection over any other country in the world.

Each state and tribe will continue to forge its own path in 2013. We will see at least two states take the first steps to enter into a compact with one another, and several tribes will lead the way on this front. We will see many companies from outside the U.S. partner with licensed properties in each state and tribe where gaming is active, as there is no need to recreate the wheel. With this in mind, I cannot overstate how important continuity between physical floor games and their online counterparts will have with U.S. customers. For this reason, the major U.S. game manufacturers have a very unique opportunity to capture significant market share.

2013 will undoubtedly see a rise in free-play and virtual currency sites. We will see proper execution of player marketing to bring online customers in to brick-and-mortar, and to continue an existing customer’s experience. Cross promotion of online and physical properties is vital, and there are some fantastic ways to do this. We also firmly believe the reach of online affiliates cannot be ignored, as more than 60 percent of the top 500 retail sites employ affiliate programs. It is my personal prediction that the states and tribes who embrace the tracking technology that is available will dominate those that do not. It truly is simple math and this all a game of numbers.

American iGaming Solutions expects considerable growth in its consulting, marketing and management contracts. With more than 25 years of online gaming experience, the AiS team will be expanding its online gaming educational seminar reach to all corners of the country to meet the rising demand for day-to-day industry knowledge. We are very excited for the upcoming year, and look forward to the ever-changing landscape of gaming in the United States.


Sue Schneider
Owner
e-gaming brokerage

State capitals in the U.S. are sure to be busy in 2013 as state governments continue to search for innovative revenue sources. The stigma of online gaming as one option seems to be finally waning in the U.S., but it’s still slow going.

A number of states are exploring the opportunity for their state lotteries to bring their ticket sales online. It is certainly complicated by the power of terrestrial retailers, such as convenience store owners who don’t want to be cut out of the loop. But states like Illinois have blazed a trail that is sure to be followed by three to five more states this year whose lotteries feel that they already have the enabling legislation in place to allow for this digital distribution channel.

Some states will likely be putting forth legislation that will allow their lotteries to put their existing ticket sales online. Yet others may well be debating laws that go even further to allow other gaming products, such as poker, to be offered to residents of the state.

Of course, this is predicated on there being no federal poker bill coming to pass in the lame duck session, which is still in full swing as this issue goes to press. Congress faces serious fiscal issues that demand their attention. When you combine that with opposition to the Reid/Kyl bill by the state lotteries and the National Governors Association (which they perceive as taking away states’ right), my bet is and has always been that no federal poker only bill will be successful.

In addition to the efforts of the state lotteries, a number of states may well have legislative proposals put forth to legalize various other forms of online gaming. Nevada, New Jersey and Delaware have already done so and are putting their regulatory structures in place. Delaware’s is the most broad, allowing a variety of casino games, in addition to online poker, to be played.

It’s been interesting to see the variety of regulatory regimes that have been designed in these states and how different they are from each other. A good array of models for regulation is continuing to develop. Given the fact that the U.S. can benefit from reviewing well-established regulatory structures across the globe, it will help in not having to “recreate the wheel.”

In 2012, bills were proposed or conceptually floated in a variety of states, including Hawaii, Mississippi, Florida, Iowa, California and Illinois, among others. It’s anticipated that proponents in at least some of those states may take another run at passing regulatory bills. Two others, Pennsylvania and Connecticut, have recently made comments that they may well explore this also.

With the elections behind them, policymakers are gearing up to explore their options and some legalization bills into play. Stay tuned for interesting legislative sessions in statehouses across the country.




Stephen Martino
Director
Maryland Lottery and Gaming Control Agency

In November, Marylanders approved Question 7, a referendum that will expand commercial casino gaming in the state. For the five already granted casino licenses, the ballot measure authorized dealer-operated table games and allows the casinos to be open 24 hours a day, seven days a week. The new law also authorizes the issuance of a sixth license in Prince George’s County, a suburban Washington community. With these changes, Maryland should see its footprint in the Mid-Atlantic gaming market continue to grow and become more competitive. The Maryland Lottery and Gaming Control Agency (LGCA) has regulatory oversight of existing casinos operations and the expanded responsibilities conferred by the approved law.

The campaign regarding Question 7 was expensive, high-profile and contentious. With contributions on both sides of the issue dominated by casino companies looking to bid for the new license, introduce tables or shield existing out-of-state operations, more than $90 million was spent advocating for and against the measure.

The result of Question 7’s passage is an opportunity to move forward and continue to develop Maryland’s commercial casino program. With three casinos now operating, the state’s gaming program is fulfilling its promise of generating revenue for public education, recapturing gaming dollars spent in surrounding states and creating jobs.

The effort to transition the existing casinos to 24-hour operations will be contemporaneous with when the law goes into effect, likely in late December or early January. Already, the LGCA staffs the casinos around the clock, so the change is easy to accommodate.

With regard to the launch of dealer-operated table games, the LGCA began working on these regulations in early fall 2012, in anticipation of the measure passing. These regulations should be approved by the end of December, providing an important framework of expansion for each casino. Ultimately, it’s the responsibility of each casino to develop plans for table game operations, including the hiring and training of dealers, purchasing of equipment and meeting their regulatory obligations.

Like all casino regulatory agencies, the LGCA will conduct background investigations of the new employees and vendors. Auditing responsibilities will expand for the agency as well. With these new responsibilities and obligations comes the need for more employees and support. One week after the passage of the gaming referendum, the state of Maryland authorized the hiring of 37 new employees for the LGCA, including doubling the background investigation unit.

Already, more than $229.5 million has been generated for Maryland public schools since the first casino opened a little more than two years ago. Yet, most of this has come from the state’s smaller facilities that opened first, and Maryland’s second-highest-in-the-nation tax rate of 67 percent, of which 48.5 percent has gone to education. That rate will decline when the Prince George’s County casino opens, which won’t be until 2016 at the earliest. With table games being taxed at a more modest 20 percent, the opportunity exists for Maryland to make its casinos competitive with neighboring states. The LGCA will support that effort.




Jim Murren
Chairman and Chief Executive Officer
MGM Resorts International

Happy New Year from Las Vegas! All of us at MGM Resorts wish you much good luck in 2013.

As many had predicted, the economic recovery of Las Vegas has not been the dramatic V-shaped recovery that we all wish it could be, yet the city is experiencing a gradual uptick in occupied room nights, ADRs and visitation.

Because the Las Vegas Strip relies so heavily on our guests’ discretionary income, we’re keeping a close eye on economic indices such as the Case-Shiller Home Price Index, which is observing consistently rising home values nationwide. Case-Shiller is a positive indicator of household net worth, a leading indicator of discretionary spending.

Speaking of discretionary income, our visitors’ preferences and spending habits have undergone a radical shift in the last half decade. As technology has improved, allowing customers increased ability to price shop and review options, it is increasingly important for us to stand out in the Las Vegas market.

To motivate customers further to want to stay, play, dine and be entertained all within our resorts, we have launched a customer loyalty program, M life, which gives our customers points and rewards for their loyalty to us.

Fast-track technology is giving the hospitality industry more of the tools needed to customize and personalize our guests’ experience. Our collection of resorts allows us to offer unique and astonishing experiences. For example, for avid scuba fans who happen to be very loyal customers with a high status in M life, we are able to personally invite them to scuba dive in Mandalay Bay’s Shark Reef. Or, if we know our loyal customers like Cirque shows, we can offer a unique backstage experience. The possibilities are endless.

Newer and more innovative technologies allow predictive modeling, which is the foundation of the M life guest rewards program. To expand the guest experience opportunities, we’ve expanded M life to include guest rewards for purchases beyond the gaming floors, including at our array of restaurants and entertainment venues.

Long-term, our goal has been for Las Vegas to be everything for everybody. More than a decade ago, the gaming-resort industry set a goal to diversify from its reliance on gaming revenues by introducing world-class restaurants, ultra-lounges, creative entertainment concepts and designer retail brands. As an industry, we should be very proud that our transformation has been so successful as non-gaming revenues now surpass gaming revenues on the Las Vegas Strip.

MGM Resorts is pursuing new opportunities to bring our iconic brand names to places we haven’t been before. In Maryland, we are pursuing an opportunity to build an $800 million resort on the banks of the Potomac. We are also working to bring a unique destination resort to downtown Springfield, Mass. Through MGM China, we have plans to build a $2.5 billion resort on the Cotai Strip in Macau.

These are extraordinary times for an extraordinary industry. I am pleased to be leading MGM Resorts’ dedicated workforce and we look forward to serving you better than ever this year.




Sim Bielak
VP of Sales & Business Development, Global Casino Gaming
Crane Payment Solutions

If there is one thing we have all learned over the past year, it is that being cautiously optimistic is the new norm. Everyone loves a booming economy, but I think we would all appreciate a stable one just a little bit more.

With that being said, there are a few areas we are looking toward as stabilizers, as well as growth opportunities, for 2013. In Latin America, for example, they may have had their setbacks, but it continues to be almost resilient to the rest of the world’s woes and still seems to be on the upswing. Macau is another market that continues to expand year over year, eclipsing revenues made from the Las Vegas Strip. Closer to home, we continue to see North America stabilizing as operators continue to refresh their floors. There has been some pullback, but overall, the tone is positive.

As a company, we are pretty proud of what we have been able to accomplish over the past year. The former Money Controls team has proven to be a great asset for the company, and we are very happy with their performance. We also made strong gains this year in Canada as we won 100 percent of the VLT business with the NRI G-13 coin validator.

Crane Payment Solutions also launched a new website in November, which brought together all four brands. It will definitely make it easier for customers—both existing and new—to search for products either by categories or markets.

As we look toward 2013, we can say that the Ardac Elite is the No. 1 selling bill validator in Latin America and the U.K., and we are not expecting this to change. We have a strong product offering here.

We also expect to gain more prominent properties with the CashCode one and oneCheck cash management solution. Although the solution is not new, people’s perception of it is. Operators are starting to realize the “no upfront cost” is a good deal. Our favorite win in 2012 was Valley Forge Casino Resort in Pennsylvania., who is taking advantage of oneCheck.

Switching the subject to i-gaming, I am prompted to stand with the points I made last year at this time. Currently, i-gaming caters to an entirely different type of clientele and I don’t believe it will have a negative impact on the brick-and-mortar casino operations. These casinos however, should view this online market as a growing opportunity versus cannibalization, as the large OEMs are already leveraging these customers with a lot of online games, and in time, these online players could become customers on the casino floor.


Eric Meyerhofer
CEO
FutureLogic Inc.

2012 has proven to be a year of opportunity and continued success at FutureLogic. In certain jurisdictions, online gaming has been in place for a number of years, and given the current climate in the U.S., will make a quick emergence here. We’ve anticipated this at FutureLogic, and are seeking to use this opportunity to add greater value to our customers in the same manner in which a number of land-based U.S. suppliers and operators seek to do so.

A plethora of Nevada applications by land-based interests is underway, and a number of operators and manufacturers have or will soon be receiving online gaming licenses. Marketers are strategizing how to introduce land-based players to their online sites and merge the player experience. Land-based operations generate high margins inclusive of competition, advertising costs and player retention. For online operations, the efficiency of costs for player acquisition and retention is a significant challenge, which is very different when moving from a fixed physical address to the virtual environment where players can quickly change play sites. My belief is that the land-based operators have a golden opportunity to perform well online with player acquisition and retention, because they have the broadest set of tools available to them to create “player stickiness” and brand loyalty with their ability to touch players with rewards and recognition in both the virtual and physical worlds.  This is where FutureLogic can support its land-based operator customers and provide a new powerful tool in the battle for the online player.

FutureLogic’s PromoNet® Online is one of the many modules within the land-based promotional couponing system, PromoNet® Campaign, which enables casinos to effectively steer players to online sites and provides a vehicle for tangible awards for a participating player. This helps ensure player stickiness by extending the player’s experience and linking land-based and online gaming sessions. Using FutureLogic’s PromoNet Online, casinos can route players on their land-based floors to their websites by use of slot player issued coupons. When high-value players hit specific predetermined triggers on the game, e.g. $500 coin-in, a promotional coupon is issued to the player in real-time right at the game. There is a QR code on the promotional coupon, which when scanned with the player’s smartphone, takes the player directly to a predetermined website. The powerful thing about this approach is that players are automatically registered on the same device on which they will most typically consume online gaming, i.e., their smartphone. Once the player moves off the slot floor or leaves the property, the online experience travels with them. In addition, by using the customer’s own hardware, operators avoid significant financial investment in upgrading casino floors with technologies that cannot travel with the player.

Extending the player experience from land-based to online gaming creates a number of tangible benefits to the casino operation. Land-based gaming experience is extended as players continue to enjoy their favorite games across multiple platforms. In this manner, the online gaming experience is complimentary to land-based, leveraging existing player club membership to drive players to the branded online experience.

Standard land-based PromoNet installations have yielded high redemption rates, far in excess of 50 percent, and we have every reason to suspect that we’d see this level of player online participation versus coupon issuance using the coupon as the bridge. Finally, players are given the freedom to redeem rewards via their smartphones or at a later date at home.

In closing, to land-based operators worldwide, online gaming may be viewed by some as a significant challenge, but properly exploited, it also provides a significant opportunity for land-based operators.

Skip Davis
President
Gary Platt Manufacturing

We at Gary Platt Manufacturing look forward to 2013 with optimism as we do every new year. There are outside market forces, general economic conditions and more political maneuverings than we can keep track of. All of this determines the company’s opportunities to some degree, but in the end it comes down to finding our own path to success, regardless of the circumstances. We expect to continue to grow in 2013 as we have consistently done in the past.

While the general economic climate continues to slowly improve, the industry as a whole is trying to find its way back to the levels of profitability enjoyed five years ago. Profits per property on average are not likely to climb back to their previous highs. The proliferation of gaming in the U.S. continues to dilute earnings in the affected markets. In addition, properties in most of the new jurisdictions are burdened with high taxes on gaming profits. This expansion is good in the short term for suppliers, but we believe the reduced profits will require vendors to continue to deliver a more cost-effective solution.

This makes customer retention a critical component of our business plan. We believe our most important job is to service our existing customers first and foremost. In order to do that, we need to maintain a level of profitability that allows us to service our customers after the sale.
We have all seen our share of competitors who lower the quality of their product and sell on price, only to realize that they can’t afford to meet their post-sale obligations. In addition, making sure that the product we are delivering is of high quality and durability will drive loyalty and repeat sales. We are continually improving our products, while working to hold the line on material costs. This allows us to meet the demands of our customers without having to increase our prices.

In 2012, we introduced our recycled chair program. We always knew that our chair components had a life that would exceed the fabric life. In an effort to give the customer a new look and meet a core desire to recycle, we developed a program to reuse most of the structural components and, in the process, significantly reduce the chair cost. The product is indistinguishable from a new chair except in the cap-x budget.

In 2013, we expect to expand our distribution network either through bringing on additional distributors and representatives, or through acquisition. In the past year, we have seen opportunities to consolidate in our industry to the benefit of our customers.

We expect to introduce two or three new products in 2013 to carry on our drive for continuous improvement. This will include internally driven innovation, as well as customer-specified design and development. Many of our most innovative new products have come from joint development projects with our customers. There is still a tremendous amount of growth potential in our industry, as well as in related entertainment industries.


Roger Gasser
Sales Development Manager
Gasser Chair Co.

The gaming market has definitely improved for us, and the recent G2E show generated interest and orders from customers that were looking to expand into new jurisdictions. They were also looking to update current properties through remodeling or expansions.

Casino operators look to us to help with solutions in various areas of the gaming floor. Since we have complete manufacturing and engineering capabilities, we can bring a concept to completed project with confidence. The ability to utilize aluminum, steel and wood allows us to assist in many types of design. This may be in slot, high limit, table games or other gaming areas. Our customers require seating that is comfortable for the player and easier for the staff to position.

Minimizing fatigue for casino employees is an important element when considering a seating unit for ease of movement. This also translates into a better experience for customers when positioning themselves to the game. Our new patented circular Halo base has been very well accepted by operators and players because it satisfies both requirements. Through engineering and product development, we have minimized the surface of our Halo base that comes in contact with the carpeted floor. Having our own powdercoating facility allows us to apply an additional coating that enables the units to slide.

We also introduced our new Coltrane series, which is a four leg base made from aluminum, and is 20 percent lighter than current models on the market. It also enhances player comfort with molded ergonomic contoured foam cushioning. Operators are concerned about ease of maintenance, and we offer an easy change seat and backrest for quick change of upholstered components. We also continue to develop wood framed units for our customers and introduced the Vespur and Camber at G2E 2012.

Our customers request a variety of styles and options for their seating. To help with their decisions, we introduced our new gaming seating product summary catalog at G2E. The 72-page catalog allows customers to review a sampling of our products and options. We also continue to build relationships with game manufacturers and suppliers. We partnered with three game manufacturers at G2E, providing them with seating to use in their booths. This allows their customers to experience the ergonomics and comfort available from our product line.

The gaming market is very important to our future success and developing new markets is a constant goal. We participated in the Australian Gaming Expo this year in Sydney, Australia, and developed relationships and favorable acceptance. We were also able to secure local representation and develop a showroom presence. Having representatives and samples available for customers to field test is a perfect way to demonstrate our quality, features and benefits to our customers there. Due to us being a supplier to this vibrant and growing industry, we’re seeing definite signs that there will be increased opportunities in the future.

We continue to invest in advancing technologies, engineering and communications to be a solution source for our customers in the coming years.


Tom Nieman
VP of Global Marketing
JCM Global

We could not begin this forecast without first taking a look back and giving a thank you to the operators and suppliers across the world who have given JCM such incredible support over the last year. Another special thank you goes to everyone who participated in the AGA/AGEM Golf Classic Presented by JCM Global, where we surpassed our milestone of donating more than $1 million to the National Center for Responsible Gaming through the tournament.

Now, looking forward to 2013, as a supplier of critical peripheral components, JCM believes that in addition to striving to be the world’s best bill validators and printers, we must also deliver a “value added” proposition to both our operator customers and the OEMs.

We forecast that in 2013 and in the years to follow, we will continue to evolve and mature our development efforts in creating a sophisticated, wireless and encrypted peripheral component management system that will increase operational efficiencies and lower cost of ownership, all while improving the player’s experience.

JCM believes that an improved delivery of high-volume data in a safe and secure wireless environment will have a huge impact on operational efficiencies and lower cost of ownership.

With these things in mind, in 2013 we will continue to evolve technology that builds on the iVIZION® platform that will deliver added value, capitalize on the wireless environment and increase operational efficiencies. At G2E 2012, we previewed our Dynamic Network Applications (DNA), which were the first realization of these technological goals. In 2013 and in the years to come, we will continue to build on the iVIZION and DNA platform, increasing operational efficiencies and capabilities, making maximum use of GSA standards and other available platforms.

We are frequently asked about the i-gaming space and, while today JCM is not actively seeking a position in the Internet gaming segment, one area we foresee continuing development in 2013 is on an i-gaming device, specifically the mobile phone. We have been working closely with Techfirm on NFC-enabled transactions on the casino floor, and we forecast that, as players/consumers in North America and Europe become more comfortable with mobile transactions, the potential of our Mobile Wager Wallet™ to deliver a convenient and secure way to conduct transactions in casino environments will grow with demand.

On one last note, one of our development partners, Nanoptix, recently successfully defended itself in a patent-related lawsuit. With the case dismissed, we forecast continuing development from and with Nanoptix, as we continue to present the PayCheck™ line of products to the industry.


Jason Cohen
Executive Vice President
KGM Gaming

Our company motto is “We’re Everything Casino,” and you will soon see why. KGM Gaming is the exclusive distributor for Ainsworth in the Northeast region of the Unites States. Initially when we started with Ainsworth, we were fighting for floor space. With great locations and proven performance, we have created a demand for our product in the market. The Northeast market has potential for substantial growth with regard to product to ship in 2013. We saw this recently at G2E 2012, as it was by far the busiest show for us in a number of years. Currently, we have a few properties in our territory that have more than 100 units on their gaming floor with large orders in production. We rely heavily on Ainsworth with regard to what we can sell into our approved jurisdictions. Therefore, we work very closely with them to ensure that our game library is sufficient to support our current games on the floor as well as forecasted sales.

At KGM Gaming, our goal is to improve the quality of our products while trying to control costs for our customers. We manufacture all of our non-gaming products in the Philadelphia area. As for our non-gaming products, our Fusion slot base rollout this year is a big hit for us. We shipped more than 4,500 units to date and have multiple properties that have scheduled deliveries over the next few months. Our clients are excited about the ability to change the entire look and color of the slot base by only purchasing three new components—the countertop, access panel and foot rest. The internal structural steel frame always remains. This lowers future cost when renovating and reconfiguring.

Our seating division has invested a lot of time and money into R&D, and we are showing our competition that we are a contender in the seating market. We invest time into design, development and education to ensure that we are leaders in ergonomics. We are proud to say that our chairs are made in the USA; we don’t rely on any imported materials.

Our casino signage division is experiencing unsurpassed growth while incorporating new materials and developing ways to value-engineer our casino signs. We are working with these new materials to develop signage for the future that we feel will evolve from what we see on the casino floor today.

Our service division is growing at 100 percent growth year over year. We are forecasting tremendous growth in this division over the next year, due to certain circumstances in the industry and growth in gaming.

With all the technology changes in the market that are happening ever so quickly, we at KGM Gaming are quick to adapt, adjusting to the changing markets and changing our products to ensure that we fit the needs of our customers. We are also on the cutting edge and try to be a step ahead with our products. We look at ourselves as the company that is creating changes instead of trying to catch up and adapt.


Tom Nugent
President-Gaming
MEI

I always enjoy writing this forecast because it offers the opportunity to both look backward and forward. Last year, I posed this question: Could modern day economics in gaming be the “new norm”? An additional year of perspective should help us feel better about answering that question. Geographic expansion continues. And the investment in VLT networks—in Canada, Italy and the U.S.—has provided both a tremendous opportunity and a template for international growth.

Perhaps the most encouraging sign has been capital investments made by casinos. MEI enjoyed a great year in 2012, due to an increasing replacement rate on the floor and operators’ willingness to spend budget dollars on peripherals that enhance the gaming experience. All signs point to this trend increasing in 2013.

Although there is likely no technology that will single-handedly drive investment, incremental technological leaps continue to drive progress. We, as an industry, have always been able to use innovation as a vehicle to achieve prosperity. G2E provided reason for optimism that this will continue—it was well-attended, participants were empowered to make decisions and were excited by what they saw.

Gaming has always embraced the power of technology. The success of our core product, CASHFLOW SC, is based on the industry’s focus on value. Operators understand that improving the customer experience far outweighs the benefits of a one-time promotion for a component as critical as the note acceptor. MEI’s value proposition—that a note acceptor should be evaluated on acceptance rate, jam rate, security and cost of operation—resonates better today than it did in 2002 when CASHFLOW SC was introduced.

Inherent in embracing that value proposition is the rejection of technology for technology’s sake. Our next generation product, SC Advance, was applauded for focusing on core benefits and being backward compatible. SC Advance is a metaphor for the gaming industry in many ways: 1) the intent is to take a successful model and make it even better, 2) new technology must be blended with legacy platforms to maximize operator profitability, and 3) the industry must move forward or advance to replicate past successes.

Clearly, we can’t settle for the new norm. And judging from past history, we won’t. The drive for continuous improvement will result in innovation that will serve the industry well in both existing and new jurisdictions.

I believe that MEI can be used as a case study. The introduction of EASITRAX Soft Count has allowed MEI to evolve from a component supplier to a cash management expert. The integrated hardware/software solution is now installed in more than 100,000 games globally. MEI, like gaming, is evolving into an entity that is true to its roots but flexible enough to leverage technology in a way that can redefine the experience.

We will continue to face challenges. The U.S. market is improving, but is plagued by an economy that is growing at a slower rate than we would like. Europe will continue to be a struggle. Those negatives, however, are strongly overshadowed by opportunity. Improving replacement rates. New U.S. jurisdictions. Expansion in Asia. And, of course, investment driven by incremental technology improvements.

I’m hopeful that when I sit down to write next year’s forecast—and re-read the 2013 version—I will have even more reason to be bullish about the future of gaming. In a sense, I hope that is the new norm; every passing year gives us more reason for optimism. Will 2013 be a lights out success? No. It will be a struggle in certain geographies. But, given where we were two to three years ago, there is clearly a bright light at the end of the tunnel.


Mark Bryant
President and CEO
Micro Gaming Technologies (MGT)

Casinos in 2013 will continue to focus on finding ways to save money, while at the same time searching for new ways to acquire, retain and grow revenues. Internet gaming, and the Internet as a whole, will continue to get a lot of attention, and it will undoubtedly create future revenue opportunities. MGT’s attention, however, will remain focused on helping our brick-and-mortar casino customers make more money.

The gaming industry will continue to see casinos reach players using content delivered to mobile devices and the casino floor. I believe the industry will see unprecedented cooperation between large and small manufacturers to bring tightly integrated best of breed solutions to the casino floor.

Self-service promotional kiosks have become commonplace in casinos, and MGT has been at the forefront of that technology. In the coming year, we will be taking our real-time promotional software and self-service redemption functionality directly to video slots. 
The result: improved player experience, more play per device, increased profits for casinos, and a new method for casinos to distinguish themselves and compete in the marketplace.

Our approach to solving the problem of bringing these features to the video screen places MGT as the only vendor currently utilizing all of the available methods of delivery, including integration on the EGM, content delivered to SMIB devices, and using secondary devices with video overlay and blending boards that can be added to any video slot machine.

Alliances with Intuicode, Monkota Gaming, Reel-TV and others have helped make this a reality. Gaming submissions are scheduled for January 2013. We have agreements with two sites for beta and scalability testing, and have already received tremendous interest from industry leaders. We look forward to working with additional manufacturers who seek to take advantage of revenue generating content delivered to their platforms.

MGT has been in business since 1997 and is currently installed in more than 10 percent of all U.S. casinos. MGT continues to enhance its product offerings through the counsel of our customers. We enjoy robust growth with an average of two new locations per month. With our customer-focused innovations and unparalleled service, the coming year promises to be exciting.


Tracey Chernay
Executive Vice President, Sales and Marketing
TransAct Technologies Inc.

Looking forward to 2013, I see a tremendous opportunity for TransAct to expand our global role and relevance to both casino operators, as well as to casino management system providers, with our groundbreaking software solution, Epicentral. I’ll speak to our 2013 segment trends in three major categories: communicating with players with personalized, relevant offers; open systems; and mobile offerings.

In 2013, casinos will continue to seek new and innovative ways to communicate and connect with their players. Those properties with the ability to connect with and really reach their players will have a competitive advantage over those that simply continue to market to players in the same old traditional ways. The competitive advantage is steep—it’s the difference between connecting to players while they’re playing with a personalized, relevant and timely offer, and marketing to the mailbox of the player with an offer that may be stale before it’s ever read. In 2013, when both the technology and the players are open to new ways of communicating, I believe more and more savvy casinos will choose the just-in-time, personalized offers delivered directly to their players while they play.

TransAct has proven itself to be an industry-leading, trusted provider of the Epic 950 casino slot ticket printer worldwide, and continuing that industry leading position with Epicentral, we expand to offer a system that leads us beyond voucher printing to printing coupons and marketing messages directly at the slot machine. With Epicentral, casino marketing departments are able to develop automated marketing campaigns that deliver the coupon or message directly at the slot, directly to their targeted players, personalized and relevant to that player while they are playing. Whether it is a welcome back reward, a bounce back coupon or a distressed inventory offer, any player is bound to feel recognized, rewarded and appreciated. Isn’t that what we all want?

While casinos consider how to connect to their players with Epicentral, TransAct continues to build our relationships with the casino management systems providers to offer a seamless integrated experience for the casino. TransAct has already earned certification from Bally for Epicentral’s integration with their systems, and we now have a growing number of installations integrated with them. Additionally, as our customers worldwide require, Epicentral is designed to be an open system and we have begun work with a number of other systems providers to integrate with Epicentral.

In 2013, TransAct will continue to expand upon the host of Epicentral mobile offerings with a real focus on expanded Epicentral mobile applications in Mobile Host, Mobile Player and Leaderboard.




Carolyn Goodman
Mayor
Las Vegas

Las Vegas continues to capture the world’s imagination as the city where anything is possible. With world-class hotels, award-winning restaurants, luxurious spas, fantastic shopping, the finest golf courses and spectacular entertainment, Las Vegas remains one of the most electrifying destinations in the world.

At its heart, Las Vegas is all about making sure our customers are well taken care of, and we are seeing a new emphasis on customer service in our hotel-casinos, especially downtown where a renaissance is in full-swing. We are seeing massive remodeling efforts and additions, as gaming operators see what the city is accomplishing downtown with new businesses, attractions, beautification projects and transportation improvements.

The D Las Vegas, the Golden Gate and the Plaza have all been refreshed and are getting rave reviews, and work continues on the Downtown Grand, which is going to bring a special vibe to the Third Street corridor that is anchored by the incredible National Museum of Organized Crime and Law Enforcement.

The Mob Museum is just one of many new attractions bringing people downtown. The long-awaited Neon Museum is now open and showcasing vintage Las Vegas. The Fremont Street Experience is embarking on a massive upgrade to its zipline that will make this exciting attraction an iconic Las Vegas element.

Eighteen new bars and restaurants are scheduled to open downtown in the next year, many feeding off the energy that is building in the Fremont East Entertainment District. This bustling, vibrant and fun-filled area will soon include Container Park, a brainchild of the Downtown Project that will bring a shopping district utilizing shipping containers to create striking indoor and outdoor spaces.

The interest in downtown is expanding daily, even to include the high-tech industry that is looking at Las Vegas as a long-anticipated new hub, considering the viability of Nellis and Creech Air Force Bases and the giant data repository, Switch. Zappos is seeing the potential, and now other high-tech companies are choosing downtown Las Vegas as the place to be. Recently, we announced that Take-Two Interactive will be coming downtown, initially bringing 150 jobs to Las Vegas. The company is one of today’s most critically and commercially successful interactive entertainment companies in the industry.

All of this growth and momentum only adds to Las Vegas’ reputation as the No. 1 destination in the world to hold conventions and meetings, and that is not going to change in 2013. Las Vegas provides all the convention space, facilities and technology for a successful business meeting, and hosts approximately 18,000 meetings and attracts 4.5 million business travelers annually.

Las Vegas is neon, glitz, glamour and fun, but it is also the place to conduct serious face-to-face business. Business travelers will work hard during the day, and then go out at night and have a fabulous time; they can enjoy a great dining experience as prepared by our finest chefs and see an incredible show in world-class surroundings.

It doesn’t get any better than that, and I couldn’t be more positive about the outlook for Las Vegas in 2013 and beyond.


Jump to:

2013 Gaming Industry Forecast: Introduction

Part 1 (Architecture, Construction & Design; Associations, Attorneys & Law Firms; Cash Handling, Equipment and Access)

Part 3 (Property Management; Regulation & Testing; Security & Surveillance; Slot and Class II Manufacturers, Slot and Class II Operators; Table Games & Equipment)

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