Sponsored Content by QCI
Transcript
Deana Scott:
Ravers, Deanna Scott here. Welcome to Raving on Air, sponsored by Tribal Gaming and Hospitality Magazine. Visit tgandh.com for all your operational insights. Today, I have the pleasure of speaking with David Farahi. He is the former CEOO of Monarch Casino and Resort Incorporated.
Deana Scott:
David, thank you so much for joining us. Your story is one that’s kind of legendary in the industry. People always like to think about those folks that started when they were young and they have this story of success. And when I think about that, I think about you and what you’ve done in the industry. So thanks so much for joining us today.
David Farahi:
Thank you. That’s high praise. I appreciate it. I don’t know if I deserve it, but I appreciate it.
Deana Scott:
Well, if you’re an operator, and for everybody in the trenches right now, which, the last couple years has been tough if you’re on the operating floor. But you know what it was like beforehand. You started at 16. You’ve worked every frontline position. Can you imagine today what those positions look like?
David Farahi:
Extremely, extremely challenging. I was blessed in my 14 years at Monarch to work alongside just an incredible, incredible team from the frontline all the way to the senior leadership. Hardworking, dedicated folks. Over a third of the team, the management team at Monarch had been with the company for over a decade. And that’s really what allowed the company to kind of go through the challenges of COVID so successfully. Short staffed, hundreds of positions having to deal with guests that were not happy. X was closed or Y wasn’t working as smoothly as it was supposed to, because we just didn’t have the staff and we couldn’t hire enough people. So it was very challenging and we were only able to get through it because, like I said, worked with an amazing team of really hardworking people.
Deana Scott:
I think that it isn’t over right, right? The staffing challenges and the operational issues are going to be with us for some time. Given your experience, especially in the Colorado market, and in the Reno market, do you think there are some key takeaways as operators that we’re going to have to do going forward to stay relative?
David Farahi:
I think we’re just going to have to keep on figuring out ways to do more with less, less people for sure. And I always used to say to the team, anybody can figure out a way to save money and negatively impact the guest experience. The trick is being able to improve the bottom line without affecting the guest experience. So it’s going to take a lot of creativity. It’s going to take some technology. And at the end of the day, we’re in the entertainment business. We’re competing for people’s entertainment dollars. And there’s never been a time in history where there’s so much competition for those entertainment dollars. So we have to up our game for the gaming industry to continue to grow and be successful. We have to improve the guest experience so that they choose to spend those entertainment dollars with us.
Deana Scott:
I know you have quite a connection with the Reno market, and Raving’s headquarters is in Reno. And I love Reno. Have you seen a difference in markets from just the experience of what’s been going on over the last couple years? Are both markets that you’re closer to experiencing the same struggles?
David Farahi:
I mean, in terms of labor shortages, for sure. But to put it in perspective, Reno is kind of the oldest, most mature regional gaming market in the country. Reno today is still 25% below in gross gaming revenue what it was in 2000; not 2007, not before the great recession, but in 2000 when Native American Gaming started opening up in California and then Oregon and Washington, and just drying up all of our feeder markets. So when Monarch moved into Colorado, people said, “Oh, Colorado is a competitive market.” It is, but it’s nowhere close to Reno. Reno is a very, very competitive market. I mean, some people say it’s hellish, and it’s so hellish, you can see sparks. Which is Reno’s sister city, Sparks.
Deana Scott:
That’s very funny. You’re a comedian, too. No, you’re right. I mean, it is one of those markets that when you look at the properties there and the operators, what I love about it is that you have really hands on operators in the Reno market. Now with El Dorado being owned, the bigger Caesar’s question is another question I probably have for you. But still, you have family owned businesses in that Reno market, and a lot of them. And what I feel that has done is you absolutely see more interesting connection between the employees and the properties, which I think we’ve lost some of that in the bigger markets. So-
David Farahi:
Yeah.
Deana Scott:
… I still have hope for Reno.
David Farahi:
It is.
Deana Scott:
It’s coming back.
David Farahi:
Oh, it is. I mean, and Reno is a fantastic market where we’re receiving a lot of California refugees from Northern California. Like you said, it’s more of a hands-on operator market between our family and a couple other families that are really involved in the day to day operations. One of my contemporaries said we’re like the Yankees and the Red Sox, and we just make each other better through our competition. And I think that that’s right. And in terms of value for your gaming dollar, there might not be a better place than Reno in the entire country. Just the quality of the experience that you can get for the dollar in Reno is really quite remarkable.
Deana Scott:
I totally agree with you. So go Reno.
David Farahi:
Yeah.
Deana Scott:
But one thing that I think has changed and the acquisition of Caesar’s for sure, and then all of the other consolidation and because of your finance and banking background and operational experience, how do you think the consolidation of all of these properties into a few larger corporations will impact the entertainment experience of casinos?
David Farahi:
It’s a really interesting question. The area of the business that I study the most is slot machine analytics. That’s where we make most of our money, and that’s kind of my area of expertise. If you look at a key performance indicator called THEO win per hour, which is really just the cost to play a slot machine for an hour. It’s gone up tremendously in the last 20 years, just tremendously. And everyone listening in is probably like, “Yeah, we all know. Hold percentages have been going up.” It’s not just hold percentages. So there are different things that drive THEO win per hour. Hold percentage is certainly one, and a lot of these corporates have been increasing the hold percentages on their slot machines, which diminishes the player’s experience. But it’s not just that. THEO win per hour is also driven by the game speed and the volatility and the button panel configuration. And what’s been happening over the last 20 years is that all four of those things are changing to the detriment of the player’s experience.
David Farahi:
So I know everyone has probably seen those headline articles that some study was done and if the player can’t feel hold percentage, it doesn’t matter. I disagree with that, but let’s put that on the shelf for a second. There’s no question that a player walking up to a slot machine that used to be able to cover all the lines for 20 cents, and is now forced to pay 35 cents to cover the lines, is going to feel that difference. That’s a massive increase in the cost to play the machine, going from 20 cents to cover the lines to 35 cents to cover the lines. The game speed being ratcheted up by all the manufacturers, by sometimes 10 or 20% is a big impact. You just put those two things together and it really increases the cost to play the machine. And then you increase the hold percentage and the volatility, and God save us.
David Farahi:
So that’s a really long way of saying, I think we in the industry need to be very mindful. And I think, frankly, the tribal operators have done a better job of this than a lot of the publicly listed gaming companies. We need to be mindful that we don’t make our form of entertainment too expensive.
Deana Scott:
Yeah, I totally agree with you. I worry about the 90 day quarterly earnings driving the experience more than a longer term look at your customer’s experience. And those two things are opposed many, many times.
David Farahi:
I agree with you. I agree with you.
Deana Scott:
Well, there are a lot of smart people out there, including you talking about this stuff, hopefully keeping us on track to make sure that the experience continues to improve. David, I really appreciate your time, your story, and look forward to learning more about the things you’re up to in the coming months and years. So thank you for taking a little bit of time to share with us.
David Farahi:
My pleasure. Thanks for having me.
Deana Scott:
On behalf of all of us at Raving, we thank you for joining us. If you’re looking for more operational insights, visit betravingknows.com. And from all of us at Raving, be safe and happy.