There are few deeper thinkers in the world of casino and hospitality innovation than Dr Robert Rippee, the Executive Director of UNLV’s Black Fire Innovation Hub. Rippee has a stellar career in the hospitality industry behind him – and a brighter legacy yet to be forged.
His Ph.D dissertation, “A Nomological Network Analysis of Innovation in Hospitality Education and Industry” was published at the height of the Covid-19 pandemic. It is perhaps the most comprehensive study into the methodology of hospitality innovation, challenging the industry to chart a new path.
Rippee concludes his work: “The Covid-19 pandemic has been devastating but from the research on its effects also comes the opportunity for innovative and entrepreneurial minds to find new solutions. New solutions that may help the industry recover, restoring millions of hospitality workers’ livelihood, and return the pleasure and enjoyment of tourism. There has never been a more critical moment for entrepreneurship and innovation in hospitality.”
His observations are highly prescient, with perhaps the greatest advances in the casino experience within sight.
Casinos: An analogue legacy in the digital age
The land-based casino sector is perhaps the industry least embracing of technology and innovation over the past 50 years. Some consider this is what makes the sector so engaging, as customers receive an analogue experience in the digital age. However, we have witnessed that the small innovations made have had a positive impact on customers and businesses alike.
The first, and perhaps the most compelling, was the introduction of a stool or chair adjacent to a slot machine. This novel introduction increased time on device and led to a sharp increase in slot revenues; making them as, or indeed more, important to the casino floor than table games.
The next great innovation was digitizing the casino floor. This process enabled the advent of digital slots, multi-denominational wagers and a scientific approach to management of casino operations. The technology also saw linking of slots, creating the possibility of truly life-changing jackpot wins for a relatively small wager, again making the experience more enticing and driving revenue. This change allowed for Ticket-In/Ticket-Out (TITO) systems and hastened the elimination of clunky mechanical slot devices; which in turn reduced labor costs, mechanical issues, coin use and led to widespread adoption of players cards, and customer tracking technologies.
This increased data collection of both device and player evolved, enabling detailed insights to customer value and focused loyalty and marketing efforts, which have been key to the professionalizing of operations and management within the wider industry.
Whether due to legislative constraints, industry complacency, market consolidation or several other issues identified by Rippee, the past 20 years have seen a stasis with respect to large-scale innovation in US casinos.
Old ideas, new practices
In a post-Covid world, and as we firmly embrace the full digital splendor of the current age, it seems that land-based casinos are about to take the leap and embrace technology, with the move to go cashless under consideration and arguably well under way.
Conceptually, the cashless casino is not new. For generations, chips or credits, interchangeable for cash, have been the currency of choice, but what is new is the sophistication of the technology and increasing willingness of customers to embrace these new technologies. However, the road from vision to reality is fraught with potential challenges.
Some of the biggest names in business that the average customer has never heard of, Everi Holdings (once Global Cash Access), Sightline Payments and Fortune 500 company, Global Payments (Gaming Solutions), which is the leader in the space, have recognized gaming as a sector for major innovation.
These companies traditionally provided customers with the payment methods to retrieve currency from their bank accounts to product vendors, including casinos. Their platforms currently include engagement with customers via terminals offering ATM-style services, larger transfer services via casino cage or other financial functions.
However, as we have observed in other sectors, customers are moving towards cashless transactions, making payments directly from debit card “touch” services or via digital wallets on cell phones. As Global Payments sets out, there are clear benefits to this. From the customer perspective, costs are reduced as there are fewer interactions to bring cash in a bank account to use. It also allows the customer to accurately track their gaming spend, which is harder when using hard cash inserted into slot machines or at the tables, unless a marker is used.
From the casino operator view, easier transactions increase customer loyalty (which is the driver of competitive advantage), costs are reduced and it is easier to monitor sources of finance from a fraud or money laundering perspective.
In addition to the “true” cashless enablers are the gaming technology companies that have enabled cashless modularity to their devices. IGT has developed “The Resort Wallet,” Konami and Sightline have partnered on Play+ and Scientific Games has a Unified Wallet, each with the aim of being the winner in the digital wallet war.
For sure, due attention must be given to these manufacturing giants, with their prized patents, staggering market values and dominant market positions; but equal measure must be given to a much smaller company, Acres Gaming, led by casino pioneer John Acres.
Many of the real innovations made in the past 30 years – including several of those outlined above – originated in the head of Acres, were implemented by his hand, and then acquired and exploited by the larger companies. Acres is a technologist, but that is not what drives his desire to innovate; he is motivated by improving the customer experience in the casino environment. Knowing that he cannot compete with the other providers’ market position, Acres’ Foundation is an enduringly flexible, open solution. Yet moreover, in addition to functionality, it provides Acres’ staple of customer engagement, insight and increases customer involvement via a mobile device.
All these systems are at various points of development and implementation; and several cash enablers and games suppliers have both informal and informal partnerships in place, where fintech and casino-tech are working together to accelerate efficacy. As we know, the regulatory environment in the US does not move in lockstep. So unlike previous casino innovations, where Nevada led the way, tribal, US regional and even international jurisdictions are the testing ground for the future Las Vegas casino floor.
The race is on for widespread adoption on the casino floor, but both the route and the finish line are continually shifting.
Old practices, new ideas
We associate gaming currency with the clay chips of blackjack and poker players, but these are insignificant to the millions of console gamers’ transactions, where accumulated points (and cash) is used to acquire, skins, loot boxes and other features. Or behind the cell phone glass, where both cash-denominated credits and non-refundable points are used to spin digital slot machines and similar games.
Across the world, it is evident that the good old greenback is losing traction as the currency of gamers. The earliest convergence between physical and digital began a decade ago, with the MyVegas Social Casino, where players could redeem their accumulated points within four-wall casino buildings, whether on food and beverage, or even free rooms. Casino loyalty programs have long implemented points that are acquired and redeemable in cross-functional areas.
From these seeds, betting and gaming apps are entering a new age, with the rapid ascent of the multi-billion-dollar sports-betting business, currently dominating US commercial breaks, and promising to usher a change in the perceptions of casinos in general and Las Vegas in particular. Even one of the gaming industry’s biggest critics, Disney, has made advances in the sector, promoting sports betting on its ESPN network, and holding a (passive) stake in DraftKings.
Moreover, looking outside the gaming universe, non-traditional digital currencies are established alternatives to legacy currency. In Las Vegas, there has been some sporadic adoption, with several resorts, notably Derek Stevens' properties in DTLV and the new Strip addition, Resorts World, allowing Bitcoin for payment, but not gaming.
Matthew Dickson, CEO of BitBoss, is leading the movement to align blockchain technology with the cashless casino experience. Dickson, a gaming entrepreneur, believes that rather than taking small, incremental steps, casinos should fully embrace the available technology and generational societal trends holistically; aligning all gaming and hospitality platforms into a single digital currency, where all activities, from digital sports betting, to casino transactions, to hotel reservations can be made via a single digital wallet. This would eliminate the need to even engage with the cash element – and the fees levied by the cash-based payment companies. Unlike some digital currencies which have changeable exchange rates, Dickson advocates for a fixed unit, so all payments are totally transparent; and like cash, this technology can link into existing payment, tracking and bonusing systems.
There is concern from regulators, as these technological and supplier changes see the management of the customer’s spend, sources of funds and propensity to undertake irresponsible practices, transferring from the casino’s responsibility (and accountability) to third parties. True, many of the digital wallets have built-in personal limits and controls; but from a regulatory perspective, where the actual control and monitoring structures sit – whether the casino, software providers, cash managers or indeed even the banks where customer cash is held – is still ill-defined.
Investigating the effects on customer behavior and developing the regulatory framework is imperative. The UNLV’s International Gaming Institute (supported participating parties include UK online gaming giant, Entain, Sightline Payments and Global Payments) has recently initiated a deep study into responsible gaming and cashless methodologies. The industry awaits these findings with anticipation.
The implementors’ dilemma
When Ticket-In/Ticket-Out was rolled out, the owner of the technology was MGM Resorts. It called in the leading manufacturers of the day and instructed them on the expected protocols. However, in this age of high-reward innovation, the key players are not so collegiate in their approach, with patents prized and protected.
As illustrated above, there is a clear opportunity to innovate; the technology is present, the desire is evident, but the roadmap to implementation is not apparent.
It is here that we refer again to Rippee’s timely contribution; (there is) “A significant deficiency in any theoretical foundation for hospitality innovation-related research, due to the absence of an interdisciplinary research foundation, including seminal works.”
In tribal and regional markets, where there are few operators and a less competitive environment, implementation is relatively straightforward, with few external checks and consequential restrictions. Indeed, Rippee himself proposes a strategy for large-scale implementation in his dissertation. And yet, in a crowded and competitive market such as Las Vegas or Atlantic City, the risks of choosing the wrong strategy or supplier could have a detrimental impact; unlike any previous innovations.
From an operator perspective there are both upsides and downsides in locking in customer spend; capturing a greater share of customer wallet is a stated strategy, and a driver of multiple resort ownership. However, if a standalone or the consolidated resort owners apply different, non-compliant, technologies, the competitive environment will be altered to the detriment of non-lodging (or non-multiple wallet-holding) guests. Or to put it another way, without standardization, the long-held behavior of customers moving from one property to another would be a thing of the past. Nobody wants to be selling Betamax video tapes if the means of watching is VHS.
Perhaps the answer sits in the successful implementation of past changes, namely cooperation and standardization. Together, the major resorts companies should advance as one. This approach would no doubt assume that the gaming tech companies would have to accept sharing or relinquishing of their patent rights. Like the introduction of the Euro in Europe, a gradual switching takes place, with conforming digital wallets replacing cash over a defined period, with transferability between all associated members.
Understanding the technological future of casinos is realizing the thesis set out in the analogue behaviors of the past. We must understand that our strategic assets are our customers, and successful technological change requires a concerted effort to innovate to meet their needs. The answers to the difficult questions related to the complex implementation are already evident, albeit in a less established manner, or until Dr Rippee’s contribution, a less codified form.
Theoretically, the new challenge is actually an old problem – it is just how to apply the technological innovation that is the question. The answer to innovating the new is also in the old. It just requires deep thought, careful consideration and experienced hands, otherwise the entire customer experience will be disrupted, and not in a positive way.
Oliver Lovat leads the Denstone Group, which offers strategic consultancy on customer-facing, asset-backed investments, including casinos. He is visiting faculty at Bayes Business School, part of City University of London.