Las Vegas Weekly

November 19, 2008 · 6:36 PM

Gaming leaders discuss how nation’s economic woes will affect industry for years to come

By Robin Leach

Gary Loveman, far right, shown presenting a $2 million donation check raised by Harrah's employees to help with the Hurricane Katrina recovery operation. Joining Loveman are Caesars Palace headliners Elton John, Celine Dion and Jerry Seinfeld.

Photo: Harrah's

Amid swirling rumors of major surprise Strip casino ownership changes and a possible shutdown of up to 40 percent of one casino company’s retail space, gaming industry leaders met at the Las Vegas Convention Center and warned today that America’s current liquidity crisis will significantly impact the way gaming companies do business.

“I don’t think we’ll see again in our career lifetimes the same type of spending we saw before,” said Harrah’s chief Gary Loveman, who grimly predicted “the country is approximately two-thirds of the way through this historic credit crisis, but that the process of fixing it will be measured in years, not weeks or months.”

Industry leaders were attending a panel discussion on the “State of the Industry -- the Evolution of Global Gaming” at the G2E Global Gaming Expo today at the Las Vegas Convention Center. Topics discussed included international and domestic expansion, investment in new technologies and product diversification.

The panelists in the session included Armin Karu, chairman of the management board of Olympic Entertainment Group; Loveman, chairman, CEO and president of Harrah’s Entertainment Inc.; Thomas “T.J.” Matthews, chairman, president, CEO and COO of International Game Technology; and Ernie Stevens, chairman of the National Indian Gaming Association. Frank J. Fahrenkopf, president and CEO of the American Gaming Association, moderated the discussion.

Loveman told attendees that the liquidity crisis is a much more important challenge to the ongoing growth and success of the gaming industry than the short-term drop in consumer spending. Explaining that the industry was caught up in an unprecedented level of spending when the credit freeze hit, he went on to say that the industry is resilient and will be profitable, but that there will be a significant sea change in the way the balance sheets of gaming businesses are structured in the future.

Matthews commented that the current economic condition has caused his company, one of the largest gaming manufacturers in the world, to adjust its plans. In recent years, IGT has been developing server-based gaming technology, an innovation widely expected to transform gaming floor operations in the future; however, with operators unable to make such expansive changes due to costs, the company is now focusing on partial-floor solutions that can still help its customers gain some operational efficiencies.

While tribal gaming has not been hit as hard as commercial gaming operations, Stevens noted that the current economic situation has reinforced the need for tribal governments to pursue economic development initiatives outside of the gaming sector.

When asked how the liquidity crisis will affect international expansion, Loveman noted that while the economic downturn has stalled casino development projects around the world, he also believes foreign governments -- particularly in Asia -- are likely to expedite the legalization process in an effort to address budget shortfalls. Karu added that while the casino market in Eastern Europe is now experiencing a pause after a period of steady growth, he expects significant growth to resume again as the global economic situation stabilizes.

Regarding the future of gaming technology and the gaming experience, Matthews spoke about a future trend toward games with a “community emphasis.” He attributed this trend to the desire of younger adults to play games that involve more decisions and interactions with other patrons. He emphasized the importance of creating more opportunities to publicly celebrate winners and winning by creating new games that provide “high-five moments” among players.

Matthews also said there is a big transformation already underway in gaming floor operations. He explained that having gaming floors populated with traditional slot machines was similar to having “a separate television set for every channel you want to watch.” New server-based technology, however, which allows a single machine to be programmed for a number of different games, will create substantial efficiencies for gaming operators, including reducing the footprint of new casino development. Matthews pointed to the example of MGM Mirage’s CityCenter, which will use server-based technology, saying that while it is the largest development project in the industry’s history, it won’t have the largest casino floor.

Loveman agreed about the importance of these new innovations, but explained that until the current economic imbalances are resolved, it will be challenging for gaming companies to significantly invest in new technologies and other enhancements.

— From Vegas Deluxe

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