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Class II foretells future of slots

Mar 30, 2004 7:12 AM

(This is the final in a three-part series on Class II gaming machines.)

By David Stratton

As pointed out in two previous articles, Class II slot machines are gaming devices that look and play like standard Class III slot machines, and even feature brand-name themes such as Wheel of Fortune, Cleopatra and Blazing 7s.

Moreover, the expected market for Class II slots is so lucrative, manufacturing giants such as IGT and Bally Gaming have acquired subsidiaries to help position themselves to meet the demand of a market that has yet to be defined.

This week, we take a close-up look at what the Class II casino of the future will look like. That casino is embodied in the Seminole tribe’s Hard Rock Hotel & Casino that opened earlier this month in Tampa, Florida.

The $100 million Hard Rock hotel/casino is very much like the so-called Las Vegas-style casino/resort: 250 hotel rooms, 90,000-square-foot casino, several restaurants, sports bar, meeting facilities, Olympic-sized pool and health spa.

The sprawling casino features 40 table games, a poker parlor with about 30 tables, and 1,810 slot machines, all of which are Class II machines. Overseeing the slot operation is long-time Las Vegas casino executive Charlie Lombardo, who most recently ran the slot operations at Caesars Palace.

"The casino here is a full-blown Class II operation utilizing the latest technology," Lombardo said. "Not only is the Class II technology cutting edge, but it precursors how slots will be operated in the near future.

"In fact," Lombardo continued, "in five years you won’t be able to tell the difference between a Class II and Class III casino."

According to gaming analysts Bill Schmitt and David Katz of CIBC World Markets, about 60 percent of the slot machines feature IGT games which are run on the Sierra Design Group (SDG) Class II platform. Most of the remaining games are Aristocrat, WMS and SDG brands.

On a visit to the casino last Wednesday (March 24), CIBC’s David Katz noted that slot play was very strong, even on a weekday at mid morning.

"We were somewhat shocked to find patrons waiting in line to play the Wheel of Fortune game at 10:30 in the morning," Katz said. "By the time we departed, the games were standing room only."

Based on the heavy action, Katz estimated the Wheel of Fortune machines were generating more than $2,000 a day in net win. Overall, he said he "would not be surprised if the facility generated $500-$600 per machine per day on average."

If correct, that would be about double what the average Las Vegas Strip slot machine generates.

"Given the current level of play, we would expect the facility to expand its slot offering by 500-700 machines within 12 months without any physical plant expansion," Katz said.

The hotel-casino itself, Katz noted, was on par with any Las Vegas resort such as Boulder Station. Because it is a Hard Rock resort, it has many of the design elements and ambiance of the Hard Rock in Las Vegas, but is spread out over a larger venue.

Most important to slot makers, as Lombardo pointed out, the Class II system of games, which also includes SDG’s centrally-controlled operating and accounting system, could foretell the slot floor of the future: identical slot boxes located throughout the floor with games determined by a central system. Such a system would be capable of "changing out" games without having to replace the slot machines.

"The importance of these Class II facilities, besides creating significant new market opportunities today, could be a future Class III opportunity for the equipment suppliers," Katz said.

In essence, Katz continued, the Class II slot floor has "created a real-time test-bed for what could be the Class III slot floor of the future."

Downloadable slot games and centrally-controlled Class III slot machines are nothing new; they’ve been in development for the past five years.

But so far, they’ve not reached the regulatory stage. But, Katz predicts, that stage could be near, perhaps within the next two to three years.