Is Sports Betting An Amenity? Not Anymore

Investing in a sportsbook and making it a destination, say two experts, is the best way to maximize profit
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When talking about adding a sportsbook to a casino, it’s not unusual to hear stakeholders refer to it as an “amenity.”

In states like Tennessee or Virginia or Wyoming, however, where there are no casinos and sports wagering is only available digitally, it is the main attraction. And for companies like DraftKings, FanDuel, or PointsBet, where sports betting is the flagship business, it is definitely not an amenity.

But in states like Colorado or Illinois or New Jersey, where casinos were big business before wagering became a states’ rights issue in May 2018, operators consistently call is an “amenity,” an “add on,” or just another way to draw foot traffic.

Vic Salerno, owner of USBookmaking, which recently completed a deal with Elys Gaming Technology, is among those who believe that stakeholders — particularly those in Indian Country — must shed that mindset in order for sports betting to reach its highest revenue potential.

“It’s not an amenity anymore,” Salerno said at a panel last week at the National Indian Gaming Association’s mid-year conference in Temecula, Calif. “The hotels got into the business and that’s when it was called an ‘amenity’ … but I think for all tribal casinos it will be a necessity.”

Rob Lekites, GAN’s vice president for North America sports betting, echoes Salerno’s thoughts — and takes them a step further.

“I don’t view it as an amenity,” he said. “It can be, should be a revenue center for your casino. It’s mostly a different customer who has never been to your casino before, and it’s a chance to be a new revenue stream.”

Low margin, but an opportunity

As sports betting has proliferated — it’s legal now in more than 30 U.S. jurisdictions, with more coming — how it’s viewed in the industry is changing. There is no question that wagering is a low-margin business. Sportsbooks traditionally have a hold, or revenue after paying out bets, of around 7%. And from that 7% (or $7 an any $100 wagered), the book must still pay taxes, overhead, and other bills. But as wagering from digital devices has taken hold, operators are finding there is money — a lot of money — to be made.

And there are multiple ways to make that money: by converting casino customers to sports betting customers and by converting those who wager in person into those who wager on their phones. Either way, the key is to get customers into the sportsbook and keep costs down.

Both Lekites and Salerno encourage the use of on-site mobile and kiosks as a way to trim costs and increase business. On-site mobile allows bettors on property, whether in the sportsbook, on the casino floor, at the pool, or in their resort room, to place a bet via mobile device.

“If you’re a small operation and you’re doing $100,000 in handle, and you’re paying ticket writers $25 an hour, then it’s not going to be very profitable,” said Lekites, who stressed that good food and beverage and alcohol can be key in drawing in customers. “But if you can do it via on-premise mobile or kiosks, then you can start to be profitable.”

Salerno, whose company is partnered with many small operations, including the Sky Ute Tribe in Colorado and the Grand Central Restaurant, Bar, and Sportsbook in Washington, D.C., said that as in all betting, sports wagering favors the house, and over the long term, even small businesses will see a profit. But it’s not always a straight line.

“We just opened a small place in Washington, D.C., in a bar, and the first month, our hold was 35%, and [the other] night, we lost $8,000, but it was our first losing day,” he said. “Over a long period of time, you’re going to win.”

Grand Central is the only independently owned, neighborhood retail sportsbook in the nation. Patrons can currently bet via kiosk and one teller window, while an on-site mobile app is set to launch in 2022. The bar has 21 state-of-the-art televisions, and the sportsbook is open 24 hours.

Let’s make a deal

Both Salerno and Lekites said a critical part of opening a sportsbook is picking the right partner and setting up a deal that works for both sides. Tribes across the nation have taken different approaches. In Michigan, the tiny Bay Mills Indian Community partnered with behomoth DraftKings to create the DraftKings Sportsbook at Bay Mills in addition to a DraftKings-branded digital app that is available statewide. In Arizona, the Gila River Tribe partnered with BetMGM to operate up to four BetMGM-Gila River branded sportsbooks.

But there is also an opportunity to use a “white label” operator, and keep the tribal brand front-and-center. The Sky Ute did just that in its partnership with Elys Gaming, as did the the Santa Ana Star Casino (also partnered with Elys) in New Mexico.

“You have to decide as a tribe, do you want to partner with [big] operators? Do their retail solutions result in them putting their brand on your retail floor? Do you want something that is more profitable than, say, the sports bar, and then a partner who is going to implement that technology?” Lekites said. In that situation, there will be “someone who will train people. … Face it, 90% of the people that work at your place don’t know anything about sports betting. And on the rev-share side, you get a good deal.”

Salerno explained that deals can range from a “safe” situation in which the casino essentially rents space to an operator and gets a monthly check but assumes none of the risk for wagering, to a setup where the casino takes on some of the risk and ultimately gets a bigger paycheck.

“If you want to be profitable, then you have to take some of the risk,” Salerno said.

Photo: Shutterstock

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