BY OLIVER LOVAT
Casting The Die
How two young executives changed the gaming industry with modern management and strategic thinking
BY OLIVER LOVAT
The early strategist , John McDonald , formed his thesis for business at the poker tables . It wasn ’ t the last time that gaming and strategy were to be coupled . At the time , the contemporary description of strategy was defined as identifying goals , determining the methods to achieve them , and identifying the resources needed .
The journey of strategic thinking from smoke-filled casinos to multibillion-dollar corporations owes much to those that led the industry during a period of rapid growth .
FORMATIVE YEARS
Many trace the history of U . S . gambling in America to Nevada Assembly Bill 38 . However , the 1931 statute ’ s importance only became apparent after the federal government clamped down on “ gray ” and illegal gambling that existed across the country . The Nevada sunshine was free to disinfect the reputations of those practicing illegally and provide an open environment to formalize the structures of the business .
The Nevada casinos of the time were small enough to know the names , backgrounds and personalities of every employee — and many of the guests — without advanced player tracking systems . Their strategy was simple : get gamblers in the building .
Unlike many resort owners , Howard Hughes was not a casino guy , but had employed management systems in his manufacturing businesses and relied heavily on his team of accountants providing information for decision-making . His properties all followed the same model with little strategic differentiation , managed efficiently and vertically , with strong reporting systems in place .
When gaming was permitted in New Jersey ’ s Atlantic City , the casinos needed people that knew about gaming . Rather than hire established Vegas operators , the AC resorts hired regulators , business , finance and economics graduates , and others from outside Las Vegas .
This combination of newer properties , better operations , and a less remote location made Atlantic City seem a better bet than Nevada ’ s fading neon . By 1981 , just three years after the first property opened , Atlantic City had overtaken the Las Vegas Strip in terms of gaming revenue , becoming the casino capital of the U . S .
The experience of Atlantic City proved the value of casinos , with customer visitation to destination markets increasing from 13 percent to the mid-30s .
In 1980 , Harvard ’ s Michael Porter published his seminal book on competitive strategy . The conventional strategic thinking emphasized operating efficiencies and scale ( formed as an outcome of the profit impact of market strategy ).
Porter ’ s headline thesis was that within a competitive environment , any business must either be the price leader or drive customer value through differentiation , focusing on specific customer segments .
In Atlantic City , the Golden Nugget ’ s 506 rooms made it one of the smallest resorts , but it was the highest grossing casino in a very successful market , proving Porter ’ s example . It was built for gamblers , owing more to Disney than The Dunes .
All this was observed by two young executives — Terry Lanni at Caesars Boardwalk Regency and Phil Satre at Harrah ’ s / Holiday Inn . The hotel-based operators were focused on selling rooms . Satre recalled his observation — the key difference between the hotel and casino businesses ; in casinos it wasn ’ t about selling rooms , it was about getting the right customers in those rooms — as often as possible .
The Atlantic City experience had several important consequences for the gaming industry . A new generation of casino employees and executives joined the industry . Many were educated , commercial , and dedicated to building careers off the floor .
Much of the Atlantic City ownership was corporate . Sophisticated forecasting , sales and reporting procedures were employed , proving that scale was no challenge to modern management . It also highlighted the profitability of the gaming , when run properly .
However , the period could be summarized by Richard Schuetz , CEO of American Bettors ’ Voice , who was one of the few to move from Nevada to New Jersey .
80s Golden Nugget Atlantic City
26 Global Gaming Business OCTOBER 2024