Gamehost

Source: Exec Digital Canada

Date :10/31/2007 4:50:14 AM

Community based gaming

CFO Craig Thomas talks us through the ‘offbeat philosophy’ at Gamehost Income Fund that has delivered seventeen consecutive quarters of growth

Written by Megan Santosus and Produced by Kevin Patey

As a successful and growing gaming and entertainment company, Gamehost Income Fund maintains something of an offbeat philosophy. “We are committed to maintaining a community-based gaming model,” says CFO Craig Thomas. In essence, that means that Gamehost isn’t after the high roller contingent that frequents gaming hotbeds like Las Vegas and Atlantic City.

Instead, the Red Deer, Alberta-based company is after attracting “occasional” gamers—local customers who are drawn to the entertainment and dining offerings at the company’s casinos who may spend some time—and money—at the slot machines and gaming tables while they are there.

Industry niche

Such a strategy is instrumental to fashioning Gamehost into what its executives describe as “a brown paper bag company.” By sticking close to its roots in Alberta and serving its local markets, Gamehost has focused on making the most out of its niche in the industry. “We keep very close to the core things that make us successful,” Thomas says. Rather than play up the glitz and glamour many associate with gaming, Gamehost bills itself as a purveyor of fun and entertainment and a “community-based” gaming company. “We do not market ourselves as a gaming company,” Thomas adds. “Our home is Alberta, we focus on Alberta, and we know the market very well.”

So far, Gamehost’s strategy is paying off. The company and its investors have enjoyed 17 consecutive quarters of growth. Much of the growth, Thomas says, mirrors the economy of Alberta itself. With the oil and gas industry booming, Gamehost has benefited from the province’s burgeoning population and the disposable income that comes with it.

In June 2003, Gamehost became a publicly-traded company when the unincorporated trust was combined with the gaming and hospitality assets of Service Plus Hospitality Ltd. Currently, Gamehost operates two casinos in Alberta: The Boomtown Casino in Fort McMurray, and the Great Northern Casino in Grand Prairie. The company owns the Service Plus Inns & Suites hotel chain with three locations as well as a commercial strip mall. Gamehost also owns a 40 percent stake in Deerfoot Inn & Casino, a 13-acre complex in Calgary consisting of a hotel, convention center and casino.

In Fort McMurray, Thomas says, Gamehost’s strategy is particularly relevant. As something of a frontier town, there’s a significant portion of the workforce that is transient, relocating to the area temporarily and primarily for work. With plenty of disposable income and few other options for entertainment, Gamehost aims to attract those people to The Boomtown Casino, whether for a comedy show, dinner or both.

Internal tracking

As at all of Gamehost’s casinos, Boomtown customers need to pass through the gaming floor in order to get to other facilities. The idea is to have them spend $100 or so playing the slot machines or table games.

Unlike its gaming competitors, Thomas adds, Gamehost isn’t trying to turn its casinos into destination attractions designed to replicate Las Vegas. The competition tends to “overbuild, thinking they’ll get outside visitors, where with our community-based gaming model, we build for the local population,” Thomas says.

The gaming industry in Alberta is highly regulated very high barriers to entry. Thomas says that Gamehost’s local focus is extremely beneficial in such a tightly controlled industry. “The management here is very hands-on and very knowledgeable about our site operations.” From the CEO down, top executives are onsite at Gamehost’s facilities regularly. “We know what goes on with the customers,” Thomas says. “That gets to be difficult when you move outside your jurisdiction.”

All of the gaming equipment is actually owned by the Alberta Gaming and Liquor Commission (AGLC), an agency of the Alberta government. Gamehost operates the casino facilities and works to maximize operations by maintaining tight internal controls.

For example, all slot revenue is administered by the AGLC that maintains a central data warehouse for reporting daily activity on the machines. “We do our own tracking from an internal perspective,” says Thomas. “We count the cash that goes into the machines and reconcile our numbers with the reports from Alberta Gaming,” he says. It’s not unusual for the reports from the AGLC to have some irregularities. As Thomas explains, if Gamehost didn’t track its own numbers, the company could be forfeiting revenue owed by the AGLC or could inadvertently hide thefts from employees.

Another strategy for maximizing operations has been deploying so-called ticket-in and ticket-out technology which Gamehost is now in the process of rolling out. Rather than dispense coins when customers win, slot machines dispense a ticket with credits Customers can then use the ticket to continue playing or cash it out. “It’s very transportable and easy to move from one machine to another,” Thomas says. Plus, by eliminating trips to the cashier, the technology enables Gamehost to reduce the amount of labor needed to keep the casino running smoothly.

With the gaming industry so highly regulated, Gamehost’s expansion and growth plans revolve around acquiring existing properties. One option, Thomas says, is to buy the remaining 60 percent stake in Deerfoot Inn & Casino. “As a public company,” Thomas says, “we have to maintain our growth.”