Slots no longer seen as elixir to what ails dog and horse racing
TALLAHASSEE -- For years, the owners of the dying dog and horse racing industries have seen salvation in the cherry-spinning fortunes behind slot machines.
Their vision was to convert their vast real estate into bold entertainment venues with blue-lighted rooms lined with slot machines, some offering dog racing as a novelty or thoroughbred derbys as a nostalgic draw.
As Florida legislators decide whether to ratify a deal with the Seminole Tribe that cements into place the parameters of gaming in the state for the next 20 years, no one is talking about one thing: Slot machines are declining, too.
Market research studies show the massive millennial generation, 21- to 34-year-
olds who outnumber baby boomers, consider slot machines boring and table games only slightly more appealing. The studies show they prefer theme parks and restaurants, adventure travel and games of skill. And, researchers warn, unless the gaming industry finds a way to capture this tech-savvy generation with online gambling or games delivered to their homes and offices through smartphones, even the games the industry is hoping to rescue will die.
"We can't assume, as we have in previous generations, that as people enter prime gaming age they are going to gravitate to the same games their predecessors did. It's just not going to happen," said Michael Pollock, managing director of the gaming-research company Spectrum Gaming. "Slot machines, as they are presently constituted, are clearly vulnerable."
The Legislature must ratify any gaming compact with the tribe but, even Jim Allen, CEO of the Seminole Tribe's gaming empire, acknowledges for any compact to win enough votes to pass the House and Senate, the parimutuel industry must be offered a lifeline.
The Sarasota Kennel Club Dog Racing track, 5400 Bradenton Road, with a poker room, restaurant, clubhouse and greyhound adoption service would be affected.
The industry wants a lower tax rate for its existing slots casinos, an end to the requirement horse and dog tracks run races to keep their gaming licenses -- known as decoupling -- and an expansion of slot machines in select communities.
Legislation moving through the House would ratify the compact and allow for some decoupling, a lower tax rate, and two additional slots licenses -- one in Palm Beach County (intended for the Palm Beach Kennel Club,) and another in Miami-Dade County (likely sought by Genting, the Malaysian company that bought the Miami Herald's bayside property, or the cqFontainebleau Miami Beach).
Last week, the Senate Regulated Industries Committee agreed to ratify the compact, but it also passed a bill offering up a massive expansion of slot machines in Florida.
Decoupling ahead
Senate Bill 7072 would not only authorize decoupling and lower the tax rate on slot machines from 35 percent to 25 percent, it would also authorize slots licenses in Palm Beach and five other counties that have passed countywide referenda to bring slot machines to dog and horse tracks. The bill also opens the door for more than 30 other counties to do the same.
The impetus for this is owners of the state's once-vibrant parimutuel industry admit they have reached a point of no return.
"There is no hope for the parimutuels to ever become what they once were," said Dave Jonas, owner of Casino Miami, home to one of the state's last jai-alai frontons.
"I don't believe parimutuels can be saved," said Izzy Havenick, vice president of his family owned Magic City Casino and owner of greyhound tracks in Miami-Dade and Lee counties.
"It's slow. It's boring. If you live in Florida, it's hot and rainy," Havenick said. "Most people under 40, they will never go outside and look at the racetrack. Unless there is some way to make dog, horse racing or jai-alai exciting again, I don't see the parimutuels surviving as tracks."
Havenick, who at 38 is the youngest parimutuel operator in Florida, sees the irony in the request to save a fast-dying industry with a slow-dying industry.
"Maybe I'm the young, naive one in the group, or maybe I'm the only one who sees the world differently than they do, but we might be mortgaging the future to save ourselves in the present," he said. "In 10 years I don't know if we will look back and say this was the right fight to have or not, but right now our only salvation is to have these machines. Do I think it's shortsighted? Yes. But the problem is we're not being given much of a choice. ... Our hand is being forced."
Research by Spectrum Gaming, MMGY Global, and the Boston Consulting Group show the gaming market in Florida and the nation will be very different in 10 years.
Because millennials have grown up with the Internet and mobile devices, they are accustomed to gaming online, including daily fantasy sports and team competition games such as Call of Duty, research shows.
Millennials total about 84 million, compared with 78 million baby boomers, and the Boston Consulting Group predicts the younger group will spend about $1.3 trillion a year on travel and entertainment, but gambling ranks low on its list.
According to MMGY's 2015 Portrait of American Travelers, only 9 percent of millennials took a vacation primarily to gamble last year, but 21 percent took a theme park vacation and 12 percent took a cruise.
"The emergence of the millennial generation, as it comes of age -- and it's going to be happening very quickly and very visibly -- is going to put pressure on the entire gaming industry," said Pollock of Spectrum Gaming. "Will lotteries and casinos cease to operate in their respective silos or will they converge with some form of online offering? These are things a lot of states are grappling with."
Already seeing change
Jonas of Casino Miami says the shift from slot machines to other entertainment options has already begun.
"If you go to Las Vegas, nobody is playing slot machines," he told about 100 gambling officials from around the nation at the annual Florida Gaming Congress in January. "The pools are packed. The restaurants are packed. The nightclubs are packed. The slot floors look like you can shoot a cannon through them."
Even Allen, the tribe's gaming chief, acknowledges the popularity of slot machines may be at its peak. He holds up his iPhone and notes the millennial generation "knows how to work this better than all of us, 10 years from now, when they're at the legal age, they're going to look for some form of entertainment associated with this."
The compact negotiated between the tribe and Gov. Rick Scott in December, allows the Seminole Tribe exclusive operation of slot machines outside of Miami-Dade, Broward and Palm Beach counties and the exclusive right to play blackjack, craps and roulette at its seven casinos in exchange for $3 billion in guaranteed payments to the state over seven years.
Although the compact is written for 20 years, the tribe is willing to guarantee payments for only seven years. Allen said he is confident slots and table games will be popular during the years of the guarantee but the question of whether they will sustain much longer "has merit."
During the seven-year payment period, the tribe hopes to make the most of its monopoly status by using the proceeds of its expanded gaming empire to build a $1.8 billion expansion at its complex near Hollywood, complete with an 800-room, 36-floor silver hotel, shaped like the body of a guitar, and second, 500-room hotel tower, at its Hard Rock Casino in Tampa. end print trim
Jonas of Casino Miami, warns by agreeing to the compact the state could prevent any flexibility that the parimutuel industry needs to evolve and rebound.
"I'll argue in 10 to 15 years, if we allow the compact to lock us out, slots will become dinosaurs," he said. "We'll be left without an industry."
For the free-market advocates in the Florida Legislature, it's an uncomfortable question: Should the state continue to give the tribe a monopoly and artificially prop up the parimutuel industry with a product also on the decline, or does it stand down and watch parimutuels, one of the state's oldest industries, disappear?
"A lot of us feel they should go out to the free marketplace and survive," said state Rep. Richard Corcoran, R-Lake O'Lakes, who will be House speaker starting next year. "If they don't, they don't, and if they do, great. But I don't think they should keep coming to us for some sort of statutory benefits. That just doesn't work." end print trim
Flexibility required
Pollock of Spectrum Gaming and parimutuel leaders say if the state wants to preserve the jobs associated with gaming, its approach to regulation must be more limber and flexible.
"It's going to require states and operators to talk to each other more," Pollock said. "There must be an ability to approve new games that respond to new technology," and that includes "more flexibility in tax policies."
For example, Pollock suggests if the state lowers the tax rate, it should also demand the lower tax rate result in economic activity that "makes the state better off than it otherwise would have been with a higher tax rate."
"It requires a different type of thinking and a lot more thoughtfulness," he said.
Dan Adkins, owner of Mardi Gras Casino in Hallandale Beach, Hollywood, said the state is at a crossroads -- either respond to gaming with more flexibility or watch the industry, and the state revenues from it, decline.
"If you are going to allow an industry to grow, you have to let them make choices," he said. begin print trim "Dog racing is dead, but should it be my choice to stop it without having to subsidize somebody? At the same time, if there's a new product out there, I should be able to take advantage of that evolving technology. That's how businesses grow."
"By getting rid of dog racing, I can free up all that land, and I can put in a new facility and put in the amenities that will attract people into my building," he said.
Gambling won't disappear
In the end, Pollock believes gambling won't disappear.
"One of our critical points is that human nature doesn't change, technology changes," he said. "People are social creatures and are going to look for places to be entertained. And risk taking is not going to go away. But providing the right offering to the new ways of thinking will be the key."
This story was originally published February 20, 2016 at 12:00 AM with the headline "Slots no longer seen as elixir to what ails dog and horse racing ."