Ten questions with longtime casino exec David Schugar

Jul 7, 2011 |
Longtime gambling executive David S. Schugar is a principal partner at the Las Vegas-based consulting firm RMC Gaming Management, which recently announced that it had added casino enterprises to the firm’s regulatory management and recruiting sides.

RMC Gaming Management, LLC (www.rmcgm.com) is a casino management and consulting firm specializing in “assisting casino enterprises with EBITDA ranging from $10 million to $100 million.”

Schugar, who has three decades of experience in casino operations, is the latest big-name industry expert in Covers.com’s 10-question segment. Previous subjects have included Sean Patrick Griffin, who wrote the book Gaming the Game (about the Tom Donaghy NBA betting scandal) and Caesars Corp. Executive Vice President Jan Jones.

In addition to his casino expertise, Schugar is the biggest (and perhaps only) Detroit Lions fan in Las Vegas.

Ten questions with David Schugar:

1. Is it realistic for casinos to believe that they can return to profitability levels experienced in 2006 and 2007? 

Companies solely or heavily invested in just the United States no longer anticipate profits to return to prior peaks in the foreseeable future. By contrast, companies with a property or two stateside who also participate in Macau, Singapore and other developing parts of the globe are more optimistic.

In the United States, an extraordinary level of uncertainty continues to exist in the economy at large. Mature markets are particularly challenging and it will remain to be seen how new jurisdictions like Pennsylvania and Ohio bear up over time, and the impact they have on surrounding jurisdictions such as Indiana and Michigan. Another unknown is how the advancement of legalizing some form of online wagering will impact the balance sheet of industry operators and suppliers.

2. What one thing can casinos do (that they are not doing now) to improve the bottom line?

Operators need to do a better job at customer retention. Doing so will help them better avoid buying back the same players with increasingly higher costing incentives.

This isn’t a breakthrough insight but over the course of  30 years on the casino floor and executive offices, I’ve come to conclude that this is not as intuitively understood by management as one might suspect.

Of course each department must contribute to the overall guest experience. But, at the end of the day, player loyalty is the metric I’ve found most indicative of a casino property’s success.

3. In a magazine article, you mentioned that boards of directors, executive management and regulators need to work together when major changes are needed at struggling properties. Does that mean that frontline workers (dealers, desk staff etc.) should not be included in planning sessions?

Yes, but let me qualify that. I do not subscribe to formal planning by committee structures. I expect the directors to direct, managers to manage, and supervisors to supervise and so on. However, the leaders I surround myself with also engage staff and find the peak go-to performers within ranks.

Invariably these managers include line staff informally in the evaluation of operational processes. This type of leader inspires and motivates his or her people by inclusion more so than design.

4. Do you believe that casinos in Las Vegas (and, for that matter, any group of casinos that are grouped near each other, such as Atlantic City or Foxwoods/Mohegan Sun in Connecticut) are independent operators, or should they cooperate in joint ventures to increase traffic?

Healthy competition is good for both the industry and the player. Imagine the employee who separates from one of the big caps on the LV strip. His or her options are greatly diminished by the years of mergers and acquisitions. There is a parallel for the player as well.

That said, I also see the need for cooperative marketing programs with the proviso that each property retain elements of individuality to maintain distinctive flavor in any homogenized group campaign.

5. Does building more casinos increase the number of customers, or is it more a matter of robbing Peter to pay Paul?

Paul is an RMC G.M. client, so let me speak in generalities: Until the 2008 downturn, a new casino generally led the growth of the market. Now the game has changed and adding the volume of a new attraction, when underutilized capacity exists, is making the return on investment much more challenging.

But Peter robbing Paul is not a zero-sum game. There are always carrying charges for a player exchanging one casino for another. Thus, for mature markets, it is a very demanding time for operators and player loyalty is the key to success.

6. In Las Vegas, the Tropicana was recently renovated and the Plaza in the downtown area is nearing completion of its own renovation. If they are successful, does this mean the end of the two-decade long implode-and-rebuild business model?

If successful, then yes, it will certainly cause the renovation option to be a more viable alternative to certain financial markets. There are a couple of interesting developments here. The UP was able to capitalize on an unusual opportunity by acquiring phenomenal bargains for its guest rooms from the halted Fontainebleau. For a comparably low cost, the Union Plaza will now offer the best room product in downtown LV. 

I’m particularly impressed with how the Tropicana has allocated its budget to virtually rebrand the property. The Tropicana is not comparable to City Center and the Cosmopolitan, but they now offer a real alternative on its corner with a trendy new look.

People like “new” and that is not going to change. But, so long as the access to capital remains a challenge, the renovation option will get a more thorough analysis by investors seeking improvements that can increase revenues, gaming or non-gaming, that don’t over-leverage a property’s balance sheet.

7. You have a reputation as a table games innovator. Are there any new table games on the horizon?

There are some exceptional games that will never see the light of day. In fact, my IP development company owns some of them. But yes, I’ve recently been presented with some new games on the way to market that will continue to push the envelope.

But don’t look for many new stand alone games. Side bet alternatives are still the best bet for game inventors. The game changer for table game inventors will be online gaming, which will make new table-styled games far easier to deploy, protect, and market.

8. In three decades in the business, what is the most unusual thing you have seen?

Innovative technology and spectacular architecture stand out as the most prominent phenomena I’ve seen. However, I’ve been personally intrigued by the cultural development of casino management that has paralleled the American public in the process. 

Starting out in 1975, I caught a glimpse of the tail end of an era that still featured some old time bosses. Gradually, as convention business and a broadened appeal for gaming took hold, it took a new generation of operators to better respond to the changing mores and appetites of an entertainment and travel-starved public. Today, we continue through a transition that would have been unimaginable as recently as five years ago with online gaming.

Understanding the psychology of the gambler requires being both traditional and contemporary to anticipate some fascinating and unexpected cultural nuances of the player in addition to the timeless thrill of the action.

9. Your career has permitted you to work on the Las Vegas Strip, Detroit, Mississippi and Indiana, and each of these locations had major differences in the customer base, regulatory structure and operating amenities. What are the three skill sets that have proven most important in each of these varied operating environments?

Creative problem solving is something I’ve found to be one of my starting points. I supplement the process with analysis and administration. I will alternate the order of these intermittently. Through the process, I include the human element with team building, empowerment, and an ever-present eye for talent.

10. What is the Next Big Thing in the casino industry?

Online gaming for now, but I’m looking further down the road for more global investment back into the United States, especially from Asia. In particular, a U.S. Government Department of Immigration program offers sources of capital badly needed by our industry. RMC G.M. is ahead of the curve on that issue and we will be able to quickly assist both the companies seeking investment capital as well as the regulators, who need to apply the same rigor that distinguishes gaming in the U.S.A. from the rest of the world.
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