Wednesday, June 23, 2010
For Racing and Gaming, More Proof That Less Is More
TARRYTOWN, NY, June 23, 2010--As gaming executives go, Jeff Gural is not a bandwagon guy. He’d rather create one. And there don’t appear to be any boxes big enough that would prevent his thinking outside it.
Gural’s free-wheeling, straight-talking style has made him somewhat of a maverick in an oft-stodgy industry, his remarks leading to controversy on more than one occasion. One gets the sense that he really wouldn’t want it any other way.
At the 2010 Gaming Summit Tuesday, the keynote address by the American Racing and Gaming LLC Chairman easily was the highlight. His tracks are succeeding not only because they benefit from an infusion of gaming revenue but because he’s a practitioner of a less-is-more philosophy.
That philosophy is paying dividends thus far, especially at Gural’s Tioga Downs Racing Casino and Entertainment complex, a harness track in the southwest corner of New York State. On a larger scale, it’s the same philosophy that just might save Monmouth Park.
Gural believes less is more when it comes to making horse racing popular again. He also managed to convince myopic lawmakers to accept less tax money in the short term in order to grow the bottom line. Those dollars were put into a marketing strategy that would have casinos profit from racing and racing profit from casinos.
From a racing perspective, the goal is to re-invent, re-structure and re-introduce racing as entertainment to the latest trends in consumer profiling while also efforting to grow casino revenue through the use of the more aggressive marketing techniques successful in other areas.
Improving the product by racing fewer days for higher purses and putting a focus on opening and closing days--considered the leveraging of entertainment strategies with popular promotional programs--Gural’s approach not only has increased buzz but grew the bottom line.
For example, “we lose money on our concerts,” explained Gural. “We put on concerts that would cost $40 but we charge only $10. And we give away concert tickets free to our regular customers.”
To mitigate the effects of negative perceptions created by gaming, Tioga has given back over $100,000 to the community since it opened, those dollars going to the United Way, American Cancer Society, American Red Cross and the Boys and Girls Clubs of America.
Things haven’t worked as well at his other venue. “It was a terrible decision,” Gural said of his buying Vernon Downs. “It’s too close to Turning Stone. [The Native American owned and operated casino] pays no taxes and allows smoking. The only advantage we had was a liquor license. Now they have one. They pay no taxes and we have a 50-50 partner [New York State].”
In high tax jurisdictions such as New York’s, Gural’s philosophy of combining database marketing with customer loyalty programs has delivered the highest ROI per marketing spend by driving repeat visitation, with monies efficiently targeting customers who wager most often.
To achieve this, venues need to reinvest in its middle and low market customers, spending aggressively to acquire customers which fuels the marketing program, techniques Gural believes will allow gaming venues in this state to compete with Native American properties and casinos in neighboring states.
At the heart of all this has been lower taxes and incentive programs helping venues to grow their business. In 2004, the tax rate was lowered from 71 percent to 68, with an eight percent marketing allowance.
Four years later, the tax rate was further reduced, the marketing allowance increased to 10 percent, including the creation of a 4 percent capital award that promotes growth via the construction of new hotels and the like.
Beginning in 2005, lower taxes allowed all state-based properties to grow their video gaming business, with revenue increasing from $205-million to over $1-billion four years later, more than tripling in that five-year span.
Significant gains were achieved when Gural convinced lawmakers to subsidize the Free Play pilot program he created. As an incentive, Gural rolled the dice and guaranteed a 3 percent increase to the Aid to Education Fund, pledging to write the check himself if it didn’t. Like Namath, he made good on his guarantee. “A real no-brainer,” he called it.
The Free Play Pilot Program subsidy consisted of the elimination of taxes on $20 Free Play coupons distributed to Tioga’s customers. To get those chits, however, horseplayers had to exit via the casino.
Gural convinced the lawmakers by proving that, despite New York’s having 50 percent more people, Pennsylvania, albeit with better locations, did double the business. Why? “Because Pennsylvania gave away $140 in Free Play, New York about $38 million.”
The principles of the subsidized Free Play Pilot Program is that it drives increased aggregate customer visits from established customers and those which the organization could not afford to subsidize before, as well as encouraging more visits from newer customers.
These marketing-based reimbursements grew the revenue and resulted in bigger and better promotions, with increased investment advertising geared to attract new customers and more live entertainment.
The most impressive results from the subsidized Free Play Pilot Program was a $14 million total contribution to Aid to Education, this year’s amounting to $1 million more than last year, $500,000 greater than the 3 percent increase Gural guaranteed.
Additionally, head count increased 19 percent with new customer intake up 52 percent, rated customer visits up 45 percent. Consequently, revenues have grown from $22.2 million to $27.9 million, up 25 percent. And the program has helped New York compete. Pennsylvania’s gross revenue in May of 2010 declined 6 percent, resulting in Pennsylvania escalating its Free Play rewards program.
These initiatives--the convincing of New York State to lower taxes so that casinos might invest in synergistic marketing strategies that grows business; the minimizing of the negative effects from gaming’s border wars, and reinforcing the notion that occasionally one needs to spend money in order to make it--are proof that sound strategies work.
At 68, Gural’s young enough to help lift racing out of the abyss to a new promised land, one in which the game is perceived to be special again and embraced by the main stream. That goal likely will take more time than he or any of those within earshot of his keynote address have left.
There’s little doubt that such a philosophy, like the one employed in Western New York and the Jersey Shore, can help lead the way. But only if racing executives, on balance, submerge their egos and jump on a bandwagon currently rolling in the right direction.
Written by John Pricci