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Casinos embrace penny slot games

Dec 14, 2004 6:22 AM

 

The results of Goldman Sachs’ annual Survey of Slot Managers reveal that casinos have heartily embraced low-denomination machines such as 1¡ and 2¡ games, and that ticket-in, ticket-out technology is fast-becoming the norm in most modern casinos.

Also noteworthy is the rapid turnover of machines on the slot floor of mid-sized casinos, whose replacement cycle has approached that of the largest (2,000-plus machines) casinos.

"This year’s survey reinforces our positive view on the slot manufacturers, because it provides solid indication of an accelerated replacement cycle and more cashless sales," said Goldman Sachs analyst Steven Kent. "We found that last year was a very big year for cashless and this year operators are looking to incorporate more cashless onto their slot floors."

Kent added that the demand for cashless technology and the shorter shelf life of slot machines are being fueled, at least in part, by the popularity of low denomination and multi-denomination games.

"We continue to believe there is potential for the manufacturers, which should result in strong earnings growth over the next few years," Kent said, adding that Alliance Gaming and IGT should benefit most over the next couple of years.

Overall, the demand for low- and multi-denomination machines has been fueled by the popularity of penny and two-penny games.

The games are especially popular at local casinos, such as Station and Coast, where a significant portion of the customers are retirees who look for greater value from their gaming dollar.

But even high-end casinos, such as downtown’s Golden Nugget, have jumped on the low-denomination bandwagon. Within the past few weeks the Nugget has added a wide variety of penny and two-penny machines.

Besides attracting budget-conscious players, casinos like the games because of their relatively higher hold percentage and high play rate.

Kent said that 57 percent of slot managers said they would increase the number of low-denomination machines on the floor, and that 72 percent said they would also add more multi-denomination.

Multi-denomination machines typically include low-denomination games. For instance, IGT’s latest Game King machines usually offer slots, video poker and video keno in denominations such as 1¡, 2¡, 5¡, 10¡ and 25¡.

The survey also indicated the continuing proliferation of coinless machines.

The survey said slot managers in 150 casinos spread out over 19 states, revealed that 77 percent of casinos now incorporate cashless gaming (ticket-in, ticket-out technology), compared to only 39 percent last year.

Polling also revealed that most slot managers, 59 percent, said their goal is to have a floor that was 100 percent cashless, although two-thirds of them said the process would probably take at least another year to accomplish.

Operators are also finding that customers are actually starting to prefer cashless machines over the coin-drop slots. At the onset of coinless technology, they were concerned that long-time customers would be hesitant to adopt the new technology.

The third major finding — that mid-sized casinos are moving toward "younger" slot floors — reflects a more aggressive approach to replace older machines with newer and hotter games.

Specifically, 58 percent of the casinos surveyed that expressed a desire to replace at least 15 percent of their machines this year were small- to mid-sized casinos; last year, only 44 percent of the casinos who intended to replace that many machines were in the small- to mid-sized category.

Kent pointed out that part of the findings is the result of larger casinos already having achieved their replacement goals, but that it is clear that smaller casinos are following the larger casinos’ lead by being more aggressive in changing out their machines.