| Lakes Entertainment: Shuffle Up and Deal |
| Casinos | |||
| Written by Eric Slack | |||
| Saturday, 01 November 2008 | |||
 This company knows building casinos takes financial, legal, construction, and management expertise, but true success requires a commitment to customer service.
 Lyle Berman, chairman and CEO The organization’s primary business remains managing and financing casinos for Native American tribes. Currently, Lakes manages two casinos, the Cimarron Casino in Perkins, Okla., and the Four Winds Casino in New Buffalo, Mich. In December, the third Lakes property will open with the Red Hawk Casino in Sacramento. The organization also has projects in development in San Diego and Oklahoma City, although neither has started construction. Lakes’ strength stems from an understanding of the markets it serves and of the process involved in completing a Native American project. The process begins by meeting with a tribe to show them that Lakes is the company that can help navigate the financial, construction, management, and legal issues that come with building a casino. Typically, tribes don’t have all their legal rights to open at first. Lakes lends them money for lawyers and lobbyists to help them get those rights. Working in tandem with the tribe, Lakes hires architects and general contractors to create the site. Once the casino is open, management contracts run for about seven years. In return, Lakes is paid back all the money it lends and usually gets around 30% of net profits, but it can take time to get the casino up and running. “One of the problems is that in many cases there are competing casinos that try to delay our projects,” said Berman. “They know they can’t eliminate it and will lose eventually, but delays are one more day without competition. In Michigan, we spent seven years before we prevailed, about the same in Sacramento, and we are still working in San Diego.” Creating a product that will suit the market is easier. In the casino business, many companies offer essentially the same product. The goal is to take a commodity, gambling on slots and table games, and make a Lakes casino unique and different. Architecture is the first step, and food is the second important differentiator, especially for local gamers—customers who regularly visit. Lakes takes pride in offering a variety of restaurants from high-end to moderately priced destinations, all with high-quality food. A service culture Another critical aspect of emerging and local gaming is customer service. Lakes doesn’t want satisfied customers; it wants to provide over-the-top service. But it is easier to talk about that in the board room than it is to train every employee to deliver outrageous customer service. “We have proprietary training that everyone has to take, from the GM to the janitor. Customer service is foremost in our minds,” Berman said. “We have a VP of training at each site, and everyone is focused on service. It starts at the top, and if the GM believes in it and VPs believe in it, it will trickle down. Starting at the top is the only way.” Lakes conducts monthly customer surveys to rate the casinos on food quality, dining service, service on the game room floor, and game assortment. That provides the organization with benchmarks, but what’s important is the relative score. If a casino rates at 90% satisfaction on a category one month and the next month the score is down to 85%, something is going wrong. By consistently seeking feedback from customers, Lakes can react to problems and also find out where it is exceeding expectations. Individual facilities may tweak training and customer service programs based on local circumstances, but the foundation of each Lakes casino is centrally controlled. A GM onsite can’t raise the price on food without corporate approval but can give a high line of credit because that needs to be done immediately. Anything that doesn’t have to be done on a moment’s notice, Lakes prefers GMs seek corporate approval. The company is also careful to make sure amenities suit the local market and the capabilities of the facility. People vote with their dollars when it comes to the success of slots, for instance, and Lakes constantly looks at its assortment of machines, changing, adding, and removing them every few months. Also, not all of its casinos will have hotels. The Four Winds Casino would be the second-largest on the Las Vegas strip in terms of gaming size, and it has a 165-room hotel attached, but neither Cimarron nor Red Hawk have their own hotels. Also, none of its casinos currently have major entertainment facilities, but the company does intend to build them on future sites. When a casino first opens, the company casts a wide net with heavy general-media marketing to get people in the doors. Frequent players join the players club, which gives them rewards based on rate of play and allows the company to build a database to support direct marketing. While the company also looks to bring in travel customers for any location with a hotel, the vast majority of its customers are day trippers. Great customer service, quality food, and a comfortable atmosphere is the only way to keep them coming back. Lakes also looks for diversification. While Native American gaming is a solid business, it has the drawback of management contracts that eventually expire. The company is looking to build its own casinos in Vicksburg, Miss. and is sponsoring a ballot initiative to build one casino in Ohio. The company also started the World Poker Tour (WPT) in 2002, revolutionizing the game and creating a worldwide brand. Berman himself is a member of the Poker Hall of Fame and a WPT finalist. Berman projects Lakes will have five casinos up and running in the next few years. Maintaining the focus on customer service with a wider portfolio of casinos will be a challenge but one Berman believes Lakes is ready for. “Running five casinos will be challenging but will also give us a nice pipeline and a rosy future,” he said. “Once we open them, we will see substantial cash flow, and we will look to diversify with the cash we generate.” |
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