The transition that many racetracks make from pari-mutuel to gambling often involves a steep learning curve and many challenges, according to an article that appeared in CDC Gaming Reports.
Experience shows that when state legislatures approve of gaming that they tend to award licenses to existing racetracks, dog tracks and jai-alai frontons, usually because they request them in order to survive and because they have experience in gaming compliance issues.
However, such ventures often involve new and often alien marketing strategies, dealing with a different customer base and tax rates for slot machines that are much higher than they are accustomed to.
The article quotes Ronald Sultemeier, who helped convert a Wheeling, West Virginia, dog track into a slots casino in 1994. “You can’t compare having an 8-percent or 10-percent tax they have with the challenge of paying what can be 50 percent or even 80 percent when you include purses and local taxes,” he said. That casino began with 400 slots and over time reached 2,300. “We really didn’t know what we had and we just threw them into the race track and anywhere we could put them. There was a big learning curve.”
The biggest change was marketing, he said. Racetracks don’t market themselves as extensively as slots casinos must.
“I’d be at casino meeting and say ‘We need to increase marketing by $1.2 million;’ they’d look like I’m crazy. They’d say, ‘We’re doing really well. Why spend more on marketing?’ said Sultemeier, who added that senior management needs to be taught a new way of thinking.
Alex Havenick, president of Magic City Casino, a dog track in Miami that began offering slots in 2009, operates a casino that leaders the Miami-Dade market in win per machine. He agrees that marketing is the most important lesson to learn. In the case of Magic City, it was appealing to the largely Hispanic community within a local radius.
“We developed the ability to market to our clientele. But we inundated ourselves with material, visiting casinos all over the country.”
Doug Hoppe, who was involved in launching the Hard Rock Rocksino near Cleveland, Ohio, one of seven racetracks that converted to racinos in the Buckeye State, noted that a key element is to create a database marketing program and marketing to it surgically.
“If you’re not good at database marketing you won’t have a good casino,” he told Gaming Reports.
