California Tribes Urged To Embrace Risks Of Sports Betting

November 22, 2021
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Tribes in California and other Indian gaming markets have been advised to focus on on-premises mobile sports betting and embrace the risks associated with legal sports wagering, rather than view it as a mere amenity within their casino-resorts.

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Tribes in California and other Indian gaming markets have been advised to focus on on-premises mobile sports betting and embrace the risks associated with legal sports wagering, rather than view it as a mere amenity within their casino-resorts.

Although tribes in Arizona, Michigan, New Mexico, Connecticut and a dozen other states have already launched sports betting, tribal gaming executives and regulators attending last week’s National Indian Gaming Association’s (NIGA) mid-year conference agreed that getting sports wagering right was more important than rushing to market.

“Sports betting is not going to break the bank, but it is going to play a major role in this industry,” NIGA chairman Ernie Stevens Jr. told conference attendees in Temecula, California.

Stevens reminded tribal officials from the Golden State who attended the three-day conference that they still need to protect what they have built in their established land-based gaming resorts as they add sports betting to their offerings.

However, other speakers urged tribal officials not just to view sports betting as an amenity.

That was the advice from veteran bookmaker Vic Salerno, who is president of USBookmaking, and Rob Lekites, vice president of North American sports betting with GAN.

“It is not an amenity,” Lekites said. “It is a separate business. If you view it as an amenity, it will be that.”

Lekites explained that sports betting should be a revenue center for tribal casinos because it attracts a different player that may have never been to a tribal casino before and can provide a boost to food and beverage sales in particular.

Salerno, who began his career in Las Vegas in 1977 when there were still standalone sportsbooks such as Churchill Downs or the Rose Bowl, agreed, saying sports betting has now become “a necessity for all tribal casinos.”

“It’s not an amenity anymore,” Salerno said. “I can remember when Nevada didn’t have sportsbooks except for independent operators. The hotels then got into the business and called it an amenity.”

Salerno and Lekites last week participated in an hour-long discussion on retail sports betting as a casino amenity, but also addressed what sports betting means to both urban and rural tribal casinos, the risks associated with wagering, on-premises mobile, as well as how to make a sportsbook business profitable.

Currently, sports betting is taking place at tribal casinos in Arizona, Colorado, Connecticut, Florida, Indiana, Louisiana, Michigan, Mississippi, Nevada, New York, North Carolina, North Dakota, New Mexico, Oregon, Washington State and Wyoming.

Salerno, whose company American Wagering developed the first mobile betting app in Nevada more than a decade ago before being acquired by William Hill, urged tribes to embrace on-premises mobile wagering to help with large events such as the NFL’s Super Bowl.

Lekites agreed, saying there are some additional costs involved but with those costs are some real benefits, such as customer acquisition.

“So now you’re able to track a player that comes to your property,” Lekites said. “It also gives you an avenue to bring them to your property through promotions.”

Lekites added that if tribes start with on-premises mobile betting, if and when they are allowed to offer online wagering state-wide, “you’ve already begun gathering a customer base” and are one step ahead of the competition.

Retail sports betting is still going to be profitable in itself, the GAN executive added.

“At some point mobile is going to come in,” Lekites said. “At some point hundreds of millions of dollars in spend from third parties is going to come in to California. I strongly believe in preserving that retail business for as long as you can.”

“For the most part,” Lekites said, “these large operators have no interest in retail.”

“Their end game is getting market share and a state-wide mobile market,” he added. “Quite frankly, it is further than that. It is internet gaming that they really want. It is the Holy Grail.”

Lekites cautioned that online-centric operators are not going to focus on growing the retail market, which is an opportunity for tribes. He estimated that 15 percent to 20 percent of the California sports-betting market will always be retail.

In terms of operating a profitable retail operation, Lekites said if a tribal casino is taking in $100,000 a month in handle and has to hire and pay full-time ticket writers $20 or more an hour, it is hard to be profitable.

“If you can integrate existing staff and not have any additional full-time staff and focus on a kiosk-based approach as well as on-premises mobile … regardless of handle, that’s a profitable situation,” he said.

Salerno agreed, saying when William Hill operated in Nevada, it had more than 100 locations from the Las Vegas Strip to the most rural parts of the state similar to the location of a small tribe in California.

“What we found is that if you scale it right, we had some locations that were only kiosks, it worked out really well,” Salerno said. “You have to watch your costs like any other business, but I feel you can make it profitable.”

Salerno acknowledged the financial risks associated with sports betting but emphasized that over the long run it is going to be profitable.

Salerno cited the example of USBookmaking parent company Elys' recent opening of a retail sportsbook at the Grand Central sports bar in Washington, D.C.

“For one month our [hold] was 35 percent. It was incredible. And then [last week] it was our first losing day, losing $8,000 on two ten-team parlays. So yes, there’s risk but overall take that risk because in the long run you’ll be profitable.”

Lekites said if a tribal casino sets up risk parameters, it will be fine, but there are also specific risks with retail wagering.

He recommended that staff at tribal casinos understand who is making the bets, because sometimes they may have to intervene.

“It happens at every property,” Lekites said. “I’m sorry you can’t make five of the same bets in a row. There are some risks, but you can’t look at sports betting on a daily, weekly or monthly basis; it has to be on an annual basis.”

To reduce the risk, Salerno said that at one of the tribal casinos in New Mexico partnered with USBookmaking players are required to use their loyalty cards to place a wager. Lekites opposed any loyalty card requirement, however, noting that casinos do not require that for slot machines or table games.

In terms of structuring a deal with a third-party operator, Lekites cautioned tribal operators about having a competing brand on their casino floors, instead of continuing to build their own casino brands.

“Sports betting provides a unique opportunity to do that,” he said. “First and foremost, you must decide as a tribe if you want DraftKings, FanDuel, WynnBET or BetMGM. Because their retail solution results in them putting their brand on your floor.”

Lekites noted that there are other partners that will provide the technology to promote the casino brand, as well as the resources to train casino staff.

Salerno said there are several ways to structure a deal from revenue guarantees to revenue shares or just charging a third-party provider rent.

“But if you’re going to be profitable, take part of the business,” Salerno said. “The more the risk, the more the reward.”

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