Positioning Your Gaming Business for Future Success

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1 Positioning Your Gaming Business for Future Success How to take advantage of a rapidly changing industry RADHIKA PAPANDREOU Co-Head Hospitality & Leisure Ferguson Partners

2 HOW TO POSITION YOUR GAMING BUSINESS FOR FUTURE SUCCESS Leaders in the gaming industry must place big bets on new technologies, new formats and new customers to contend with market evolution and technological innovation. Factors driving this environment include: Demographics Destinations Data and technology Do you have the Board and senior leadership equipped with the skills and experience to make smart wagers and come out ahead? As the gaming industry works to understand and respond to new trends, leadership will need to revamp hiring strategies to remain competitive. Shifting Demographics The industry can t ignore two key demographic changes: age and country of origin. approach to gaming and related pursuits. The slots, which are such a draw for the older-than-50 set, don t move the younger crowd, who favor video-style wagering (often on mobile-enabled machines or their own devices) and more experiential activities, such as virtual reality games, climbing walls and other multiplayer amusements. Also of note is the increasing number of international travelers to the US. According to the US Travel Association, after the United Kingdom, the most inbound travelers (excluding North America) hail from Japan (10%), China (7%), Germany and Brazil (6% each). They want experiences tailored to their interests and expectations for service and amenities, making it crucial to bring more cultural insights and awareness to the industry. Attracting a greater share of this segment requires using data and marketing technology to produce culturally sensitive marketing campaigns and create offerings that address their specific interests. As boomers age, gaming companies must keep them engaged while developing formats and amenities that appeal to the rising number of millennial travelers who expect different things from travel and leisure than older adults. Nielsen research found that multicultural millennials who are active on mobile devices influence more than $1 trillion in total CPG and entertainment spending. Tapping into the increasingly deep pockets of this rising wave of guests requires a new Changing Destinations Legalized gambling and casino development continue to expand beyond traditional centers and formats. Gamblers continue to flock to Macau, where gross gaming revenue surged 17% through May The industry is still bullish on Macau, too, as witnessed by massive investments from US casino developers: the $4.2 billion Wynn Palace, the $2.9 billion Parisian Macao 2

3 (a Sands property) and the $3.1 billion MGM Cotai. Others are eyeing Japan, which recently legalized casinos with enabling legislation that includes rules for choosing operators and selection for integrated resorts (see below). Closer to home, 24 states host casinos and gambling in various forms, and many want to expand. For a little perspective, relative newcomers Maryland and Pennsylvania account for a little more than $4 billion in gross casino gaming revenue after merely a decade in the business, according to the American Gaming Association. Maryland had the highest increase in total annual gross gaming revenue, up 18% in 2015 (the most recent year for which data are available). Other states, like Georgia, are contemplating a seat at the table. MGM, for example, has proposed a $1.4 billion integrated resort for downtown Atlanta. Regardless of where the property is, cavernous halls full of slots and gaming tables don t appeal to the younger generation, who prefer more intimate rooms, personalized experiences and games of strategy or skill. To meet that demand, developers are changing layouts and adding amenities. While slots stagnate and other games ebb and flow, non-gaming revenue is the sweet spot for growth. Integrated resorts feature casinos, hospitality, and food and beverage alongside shopping, spa experiences, entertainment venues, and opportunities for fitness and adventure. In late 2016, MGM Resorts CEO James Murren reported that 75% of the company s Las Vegas revenue came from nongaming activities, which include hotels, eateries and retail. And according to research from Moody s, nongaming activities generate between 55% and 65% of total revenue on the Las Vegas Strip. Evolving Data and Technology The industry has relied on data and technology for basic operations. But the smart money is on more robust use of innovation to: Understand customers better. Design stronger campaigns and offerings. Fuel loyalty programs. Provide stronger information/cyber security. Deliver mobile apps. Leverage mobile-enabled booking and payments. One of the most promising uses of big data is personalization getting to know more about each guest for use in everything from marketing personalization to up-selling and setting the right level for comps and deals. Carefully tracking each guest s use of amenities, games, retail and dining options enables casinos to target specific interests FERGUSON PARTNERS 3

4 HOW TO POSITION YOUR GAMING BUSINESS FOR FUTURE SUCCESS while simultaneously identifying important patterns in and across audience segments. risk and reward provides an edge in decision-making and visioning. According to the Deloitte report, Leadership Refocusing Director and Executive Recruitment Effectively addressing these trends requires board and senior leaders with more diverse experiences, skills and backgrounds. New Verticals: Gaming organizations must recruit for experience outside the traditional industry. For example, Caesars Entertainment CEO Mark Frissora was hired from his position as CEO of Hertz; earlier in his career, he was with General Electric and Philips Lighting. Action Item: Seek out candidates with considerable experience in property investment and management, mergersand-acquisitions work, and travel and tourism to guide expansion. Experience in food and beverage, golf, amusements, retail, and hospitality is key to planning for and executing integration or diversification. Expertise in applying big data and analytics beyond operations and into marketing and customer behavior enables leadership to identify and act on deeper, more valuable insights and operational efficiencies. Innovation and Experimentation: The industry is clearly at an evolve or stagnate point. Recruiting leaders who understand disrupted: Pushing the boundaries, 2017 Global Human Capital Trends, Perhaps most important, innovation and risktaking now define high-impact leadership. In the words of Mark Zuckerberg, CEO of Facebook, The biggest risk is not taking any risk. In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks. Action Item: Bet on Directors and executives with direct experience in innovation, organizational transformation and managing risks. They have the vision and firsthand experience to guide the organization into new areas required to grow and thrive. Representative Recruiting: As the traditional guest profile becomes more diverse, organizations need to reflect the new customer base. For example, at MGM Resorts, a committee of millennial employees is charged with coming up with ideas to ensure the company s offerings are relevant to this powerful age group. Action Item: Pinpoint candidates from the demographic groups now driving the industry and making decisions about leisure, business and bleisure travel: millennials, women, people of color and members of the LGBTQ community. 4

5 Conclusion To make sure Boards and senior leaders possess the skills and experience to make the right decisions for the organization s future: Commit to expanding the scope of recruiting to address these challenges with the right people in place. Consider sourcing candidates from verticals in which the Board and leadership team are lacking experience or connections. Thriving in the face of significant change and over the long haul requires more mindful recruiting and hiring to identify and win over top talent. FERGUSON PARTNERS 5

Ms. Papandreou is a Senior Director at Ferguson Partners where her focus is on senior management and Board recruitment. She co-leads the Global Hospitality practice and leads the Chicago office.

6 Ms. Papandreou is a Senior Director at Ferguson Partners where her focus is on senior management and Board recruitment. She co-leads the Global Hospitality practice and leads the Chicago office. Radhika has expertise in recruiting for Boards in the Restaurant & Leisure sector working on full Board creation and Board refresh RADHIKA PAPANDREOU Senior Director, Co-Head Hospitality Practice Ferguson Partners rpapandreou@fergusonpartners.com projects. She frequently speaks about governance and Board recruitment trends at national conferences and in publications. Before joining Ferguson Partners, Ms. Papandreou was a Managing Director at Lloyds Bank, running the Consumer and Healthcare practice for North America. She had responsibility for the management of the sector team and was a member of the North American Management Committee. She worked between the New York and Chicago offices, leading teams in both cities. Radhika has over seventeen years of banking experience. She spent the first ten years of her career at Citigroup in various roles, including origination in the Financial Institutions Group, capital markets credit, and Consumer and Healthcare relationship management both in New York and in London. Radhika earned her Bachelor of Arts degree in International Affairs and Economics from the Johns Hopkins University, and an M.B.A. in Finance from New York University s Stern School of Business.

7 About FPL FPL is a global professional services firm that specializes in providing executive and Board search and leadership, compensation, and management consulting solutions to the real estate and a select group of related industries. Our committed senior professionals bring a wealth of expertise and category-specific knowledge to leaders across the real estate, infrastructure, hospitality and leisure, and healthcare services sectors. Comprised of two businesses that work together, FPL offers solutions and services across the entire business life cycle: Ferguson Partners With an emphasis on the right fit, Ferguson Partners offers services in executive and Director recruitment,. We also also offers a full range of leadership services including CEO and senior executive succession planning, leadership assessment and coaching, and team effectiveness. FPL Associates Focusing on a wide array of business needs, FPL Associates assists with the assessment, design and implementation of compensation programs. We also provide organizational, financial & strategic consulting, bringing a wealth of industry and category-specific expertise to a broad range of projects.. Our service offerings FERGUSON PARTNERS FPL ASSOCIATES EXECUTIVE SEARCH LEADERSHIP CONSULTING COMPENSATION CONSULTING MANAGEMENT CONSULTING Board/Trustee Recruitment Board Assessment Chairmen/CEOs/ Presidents Senior Management/ Corporate Officers Succession Planning Assessment for Selection or Development Executive Coaching Team Effectiveness Benchmarking Program Design Contractual & Policy Arrangements Surveys Strategic Planning Organizational Design Corporate Finance Specialized Research Our industry practices Real Estate Private Equity/Real Estate Investment Managers, Public (REITs) & Private Owners/ Developers, Property Services (Brokerage) Firms, Commercial Finance, Residential Mortgage Investment/ Finance, Homebuilders, Corporate Real Estate Hospitality & Leisure Lodging (Brands/Owners), Gaming Resorts & Sports & Recreation, Amusement Parks & Attractions Healthcare Owners/Investors/ Operators/Financiers of Seniors Housing, Hospitals, Health Care Infrastructure, Engineering & Construction Infrastructure Investing: Transport, Energy, Social Infrastructure; Construction & Engineering Mortgage Investment/ Casinos, Restaurants, Service Providers Our office locations CHICAGO HONG KONG LONDON NEW YORK SAN FRANCISCO SINGAPORE TOKYO TORONTO 2017 FPL Advisory Group. The Ferguson Partners recruitment practice consists of five affiliated entities serving FPL s clients around the world: Ferguson Partners Ltd. headquartered in Chicago with other locations in New York and San Francisco, Ferguson Partners Canada Co. in Toronto, Ferguson Partners Europe Ltd. headquartered in London with a Japan branch located in Tokyo, Ferguson Partners Hong Kong Ltd. in Hong Kong, and Ferguson Partners Singapore Pte. Ltd. in Singapore. Ferguson Partners Europe Ltd. is registered in England and Wales, No , Registered Office: 100 New Bridge Street, London, EC4V 6JA. Ferguson Partners Singapore Pte. Ltd. is registered in Singapore, Business Registration No. (UEN) H, Employment Agency License No. 12S6233. FPL Associates L.P., the entity which provides consulting services to FPL s clients, is headquartered in Chicago.

8 HOW TO POSITION YOUR GAMING BUSINESS FOR FUTURE SUCCESS 8

Creating a Competitive Advantage for REITs

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