Ian Sutton Gamingfloor.com: First of all Professor Kilby, thank you for letting me post questions to you about developments in the casino industry around the world and get your perspective on events.

"Old Europe"  has had casinos since the middle of the 19th Century. They were mainly established in tourist destinations, coastal towns and spa's. Would you say that destination based gaming is preferable to setting up casinos on the doorstep of or amid major population centers?

Jim Kilby: This is fun Ian. I'm enjoying it very much. That is really a ROI question  that is best addressed in a feasibility study. You would want to choose the project that will yield the greatest return. In one scenario, one might find the dollars would be best spent on a destination resort while under a second scenario the major population site might be the best project. Let me give you two examples: 

1) A project in Chinatown, San Francisco, or 

2) A project in Palm Springs, California. 

The Palm Springs project would probably be a destination while the Chinatown project would be little more than a casino. I choose Chinatown.
Since we use the term “destination resort”, exactly what does that mean? Many resorts call themselves destination resort that I would not call a destination resort. I guess a destination resort is one that has a lot of stuff where, in theory, one could spend their entire visit in one property.

European casinos have traditionally been dominated by table games, but slots like in the U.S. are increasing their slice of the action. In France slot win is presently as high as 90% of the total. Surely with the advance of technology, research and development this is simply not just a fashion. Do you believe that it would be a good idea for regulatory bodies to stipulate minimum table numbers when granting casino licenses? 

When Atlantic City opened, there was a minimum amount of floor space that must be dedicated to table games. The mix between tables/slots is really driven by the “public policy” toward gaming. If the policy is that gaming is to generate employment in the geographic area, then specifying a minimum table requirement is logical. The public policy provides the “road map” for all future regulators to follow. Unfortunately, many jurisdictions throughout the world do not have a public policy; they simply legalized gambling. The public policy supports the reason for the legalization and provides direction to all subsequent gaming regulators. So, from the employees’ perspective, they like the idea of minimum table requirements. But, from the owner’s perspective, he wants the flexibility to create a facility that yields him the most profit.

Several overseas countries forbid gaming staff accepting tips. What
do you think are the drawbacks or benefits of such a system?
Does tipping result in better customer service, increased play levels and therefore higher profits? Has any research been done on this subject?

Good question Ian. Unfortunately I am not aware of any proof positive one way or the other. In my consulting I have visited many casinos that forbid tipping but I have never worked under that environment. Your question can only be answered correctly with research and it would be extremely difficult to style a study to provide the answer.

Many European countries in 2002 & 2003 are struggling with gradually declining attendances. The Euro has not helped. Why is it that some U.S. casinos get attendances in the 10's of thousands daily and in Europe just in the low hundreds per day.? Is more effective marketing of the product and ramped up customer service the simple answer to get customers to leave the comfort of their homes.?

In Las Vegas, we are always trying to build a better mousetrap. A successful casino in Las Vegas must continually be upgrading the property to attract new customers and keep the existing customers. The public has grown accustomed to gaming. When gaming is first introduced in an area, the motive for visiting the casino is to gamble. Today, many casino visitors’ primary reason for visiting the casino is to dine, see a show, see a movie, or go shopping. We know that they will gamble during their visit, but gambling has grown to be a secondary reason in many markets. So to drive attendance, the operator must create features, other than gambling, that draw the visitors.

U.K. deregulation will be delayed and may never happen. Several U.S. companies have struck deals with British companies. Do you think that U.S. companies when going overseas need local partners? What are the benefits from an operational standpoint. Do you think that the appeal of major U.S. brands and strong financial backing is always a guarantee of success?

I don’t think it is mandatory to have local partners but one would think it would help. The local partner might make it easier to get a gaming license. The local partner can help in the financing. I do not think a U.S. brand guarantees success; It doesn’t even guarantee success in the U.S. Every market is different. The successful operator will be able to develop a plan that addresses the nuances of the chosen market.

Many countries are implementing stricter controls and reporting of suspicious transactions. Do you think that casinos should be more pro-active in combating the problem of money laundering? And on a similar theme. There is one court case in Australia ongoing and possibly two more pending. If it has been proven in a court that a LARGE amount of money gambled in a casino was stolen, and that the casino made no attempt to find out the source of the funds, should the casino be required to pay it back to the victim?

Accusations of this type are occurring in the U.S. as well. I am aware of at least two high-profile cases working their way through the U.S. legal system. The culture of the casino is to follow the letter of the law: Nothing more. Should we be more pro-active? I share the same culture as today’s casino operators: Follow the law. If the law is inadequate, change the law.

Several countries around the world are thinking of establishing
casinos. Among them Mexico, Thailand, Japan & India. The argument for establishing casinos in a community, state or country is that the operation will bring economic benefits and jobs. What is your opinion, is this always the case? Would this be a selling point that you would personally use?. And what have been the negative effects upon Nevada of legalized casino gambling?

With casinos come jobs and capital investments. Unfortunately, there is significant social expense as well: compulsive gambling, broken homes, suicides, etc. Nevada would not be where it is today without gambling. Personally I think Nevada is much better off with gambling than without. However, Nevada is unique. It is 300 miles from the nearest population center; is almost like an island. One had to make a deliberate effort to visit Las Vegas. Today casinos are everywhere. It is kind of growing up in a home with a weapon. You learn young in life that the gun can kill and must be handled safely.

Would you say that Internet gambling either at online casinos, sportsbooks, poker rooms etc.. is having an effect on business levels at bricks and mortar casinos?. Or is Internet gaming perhaps providing a new pool of customers for the future? Do you believe that advertising of Internet casinos should not be permitted in countries that have legal traditional gaming or other gambling products?.
P.S. Lawmakers in Italy, Holland and Germany are already engaged in legal action against many websites and publications.

I’m sure Internet gambling is having an impact. Every casino is competing for a fixed amount of the player’s discretionary income and now Internet casinos are part of the competition. I’m sure the Internet casinos argue that they are introducing new players to gambling. I don’t buy it.

Advertising: I don’t think so but who knows what motivates legislation. It was not so long ago that advertising casinos in the U.S. for illegal. I would like to see the argument for restricting the advertising. I think the states that have gambling, and forbid Internet casino advertising, are motivated by greed. They want as much “taxable income” as possible. Internet gambling is difficult to tax the same as brick and mortar casinos.

Many international casinos require that a player has valid ID and
must become a member before allowing them to enter. This has many advantages in that players wishing to be barred can be easily excluded. It also almost totally eliminates the problem of underage gambling. Can you see a time ever arriving in the U.S. that such a policy will be desirable or from a a legal standpoint even a requirement?

Ian, for this to work in the U.S.  you must have a controlled entry. The first day the Mirage opened over 100,000 people entered the casino. Can you imagine trying to I.D. all those people? Impossible! I doubt any operator would choose this means of operation if not forced. Your job is to maximize profit. To maximize profit, the gambling experience must be as convenient as possible. Requiring I.D.s adds a barrier that, undoubtedly, decreases player visits and profit.

Thank you Professor Kilby. I will post a message on my forum at Gamingfloor.com asking for more questions. 

Ian, I will answer any question I can. 

Please encourage them to ask whatever they like.

CK, Burswood, Western Australia

Reading the American staff forum, they seem very upset about new hire part-time and "extra board" they call it.  Many complain about working a full schedule yet only considered "extra" - Some say for 2-3 years? Why? 

Most casinos, where a dealer would like to work, have more applicants than positions. Dealers earn $200 per day and more in tips at the more desirable casinos. Casino business grows slowly. Consequently, it takes time for the business to grow to the point that additional staff is needed. In the meantime, casinos will establish an extra board to satisfy spikes in demand. Dealers will work on an as needed basis. Personally I think the beef is over-blown. If the dealers were made full-time, and the business takes a dip, the most recent hires are going to be the first laid off.

"CJ" Cairo, Egypt
What really happened at London Club in Las Vegas? We hear on our side, what is the American version?

The Las Vegas market is cut-throat. British casinos don't have credit to deal with or discounts on loss to offer. Also, the U.S. customer has no property loyalty whatsoever. They go to the casino that gives them the best deal. The London Club has never had to compete in such an environment. This is my take with the limited information I have.

No name given, Parap, Australia

Do you ever think that American casino corporations will be allowed to venture into internet gambling?

If they do it will be a long way down the road. As you are probably aware, the Isle of Man recently issued internet gaming  licenses and the MGM/Mirage won a license. They quit after about a year. They were not allowed to take bets from U.S. residents. Legislation in America prevents U.S. residents from gambling on the internet and, until that changes, no American casino will venture into internet gambling.

LA, Casino Shift Manager, Port Perry, Ontario

I was wondering if any studies have been undertaken or research done that has determined the optimal time a dealer should be on the table before they start to lose focus and concentration, particularly when this translates into errors. Thank you...

I am not aware of any published studies on the subject. I was involved in proprietary research several years ago where we tried to quantify the cost of dealer mistakes in blackjack. We reviewed 5,000 dealer player hands where dealers worked 60 minutes on and 20 minutes off. The data came from a downtown Las Vegas casino whose dealers would be classified at the level above break-in. It wasn’t a break-in casino but it was one that dealers would use as the step before a strip job. The company commissioning the study believed that dealer errors amounted to more than $100 per day. I was astounded to find only “5” hands where the casino over-paid the player and the error went un-corrected. There were errors during the hands but they were either corrected by the player, dealer, or floorman before completion of the hand. 

It would be next to impossible to quantify the cost of “dealer fatigue.” You would need to have two extremely large samples where the length of time on game is the only difference between samples. Based on my experience, I would say dealer fatigue from 60 on 20 off staffing is insignificant. 

Now, let me go on a tangent. I tell the same story to my students. When I broke in, blackjack dealers worked 40 on 20 off. Every now and then we would have to work 60 on 20 off. You can't believe how we bitched in the break room. We found multiple reasons for arguing, amongst ourselves, why this was overwork. Now let's go back to when I was in high school in Oklahoma. I would haul hay and roof houses during the summers. You won't find many jobs that are harder. When the older dealers would complain about the 60 on 20 off, I would think about those hot Oklahoma summers with my butt either on a roof or loading and unloading bails of hay. It put it all in perspective. 

Michelle in Romania

When considering how much to comp table games players, should the operator always stick hard and fast to comping on the basis of a percentage of theoretical win, or are there other factors that should be considered that may be more important? I ask as, for example, many junket operations in Eastern Europe make no financial sense from the operators point of view as theoretical win often does not even cover expenses incurred. What am I missing here? What is the best way to comp a player that loses $5,000 yet has a theoretical loss of just $50? The operator is in fact just holding that money in escrow for the next winner, but the player will surely be expecting decent comps. 

It is extremely difficult to develop a comping policy that: 1) encourages player patronage while 2) assuring an acceptable profit margin. True, theoretical win demonstrates the true value of the player. And a policy addressing theoretical casino win ONLY addresses the first objective. However, actual player loss demonstrates a player’s sincerity. I would never advocate a policy that awards comps on theoretical win ONLY. You must develop a system that addresses both theoretical casino win and actual player loss. A casino should have a policy that awards up to the greater of “x” percent of theoretical casino win versus “y” percent of actual player loss. This is a difficult policy to develop but can be done. The percentage of actual loss will vary based on length of play. I discuss this in my textbook. 

Marc, UK 

What casino operation outside the states impresses you the most and why?

I was impressed with South Africa casinos when Sol Kersner was the operator. Mr. Kersner is the international version of Steve Wynn. He was a visionary and built tremendous facilities. He had top management and was committed to making the property the “best.” Genting Highlands in Malaysia is impressive in the way its management handles the tens of thousands of Asian customers visiting daily. 

Interview complete

Thank you for your participation

Scott Cameron 

Well Mr. Kilby that should do it. I hope you had a good time

Scott, I was reluctant when first approached to do an online interview. You persisted and I relented and I’m glad I did. I truly enjoyed the questions presented and, hopefully, those reading the interview got something out of the exchanges. I would be happy to do a follow-up at any time you see fit. Thanks again for the opportunity.