Global Gaming KS, LLC - Lottery Facility Manager Application Form 400-01 Submitted to Kansas Racing and Gaming Commission on 17 September 2010, p. 33 Global Gaming Solutions, LLC & Global Gaming KS, LLC Responsible Gaming Plan • Global Gaming Solutions, LLC believes that informed and educated employees can be a very effective tool in identifying many of the most serious consequences of problem gaming. • All employees will be trained on Responsible Gaming in Orientation. This will also continue to be an ongoing training throughout their employment. • All employees will be trained on current Global Gaming Solutions, LLC. Responsible Gaming Training Curriculum along with any Responsible Gaming already in place by the Kansas Racing and Gaming Commission. • All Employees will also be trained on form 580-01 (Application for Kansas Voluntary Exclusion Program for Problem Gamblers). Responsible Gaming Objectives: Our goal is to promote awareness, educate and train our employees on responsible gaming by focusing on the areas listed below. - Provide employee education through problem gaming training by understanding what gaming is and isn’t - Identify signs & symptoms of problem gamblers - Understand management’s commitment to addressing problem gaming - Understand the role of supervisors and employees in providing assistance to a patron or a co-worker - Awareness of Local and National Resources - Problem Gambling in the WorkplaceGlobal Gaming Solutions, LLC, p. 1Responsible Gaming Plan (updated September 2010)
Global Gaming KS, LLC - Lottery Facility Manager Application Form 400-01 Submitted to Kansas Racing and Gaming Commission on 17 September 2010, p. 34 Empowerment: - The management of Global Gaming Solutions, LLC. wants employees to feel empowered in offering assistance to patrons and co-workers in need. - Employees should share their observations and concerns with a manager or supervisor. Responsible Gaming Is: - Meant to be fun, entertaining and recreation. - Sticking to limits with regard to time and money. Not spending more than you can afford to lose. - Gaming that DOES NOT cause problems at home, on the job, legally or financially. - Gaming does not take the place of personal relationships. - Gaming that does not become an obsession. When gaming is not fun, entertaining or a recreation anymore, chances are something is wrong!Global Gaming Solutions, LLC, p. 2Responsible Gaming Plan (updated September 2010)
Global Gaming KS, LLC - Lottery Facility Manager Application Form 400-01 Submitted to Kansas Racing and Gaming Commission on 17 September 2010, p. 35 10 Questions about Gambling Behavior: 1. You have often gambled longer than you had planned. 2. You have often gambled until your last dollar was gone. 3. Thoughts of gambling have caused you to lose sleep. 4. You have used your income or savings to gamble while letting bills go unpaid. 5. You have made repeated, unsuccessful attempts to stop gambling. 6. You have broken the law or considered breaking the law to finance your gambling. 7. You have felt depressed or suicidal because of your gambling losses 8. You have borrowed money to finance your gambling. 9. You have been remorseful after gambling. 10. You have gambled to get money to meet your financial obligations. If you or someone you know answers “Yes” to any of these questions, consider assistance from a professional regarding this gambling behavior.Global Gaming Solutions, LLC, p. 3Responsible Gaming Plan (updated September 2010)
Section VI Attachment 3Opening Marketing Plan by Global Gaming Solutions, LLC for Sumner County, KansasPurposeThe opening marketing campaign is designed to maximize exposure to the target market, i.e.greater Wichita, Kansas, and a radius of 100 miles around the new casino. While someprograms can and will reach beyond that distance, one key goal will be to rapidly grow a stronglocal customer base. The location of the facility, adjacent to Interstate 35 (the KansasTurnpike), means that significant marketing resources should and will be devoted to alsobuilding a robust stream of ongoing transient traffic.Another key objective of the opening campaign and the early months in operation will be toestablish the Casino complex as an exciting new destination in the region.The gaming resort will offer a broad range of entertainment, relaxation, and recreationactivities. These include but are not limited to the many varieties of gaming, lounges,restaurants, a hotel and live entertainment events. While most guest visits will be motivated byone primary activity, the guest’s entertainment experience will be ultimately be judged by thesum of the visit to the gaming resort. These visitors will determine their satisfaction with thetrip and, in turn, their desire to return for a repeat visit, not by whether they win or lose, per se,but by the overall entertainment value created from the total experience.We envisage a soft and grand opening with a marketing spend of $1 million for the activitiesoutlined below.Competitive ConsiderationsThe primary gaming competition within the 100-mile radius of the casino will come from Tribalfacilities south of the Oklahoma border on the I-35 corridor. The closest of these isapproximately 25 miles from the Sumner County site. These facilities, all of which are smallerthan the proposed Wellington complex, are operated by the Kaw Nation, the Otoe-MissouriaTribe, The Tonkawa Tribe and the Iowa Tribe of Oklahoma.Global Gaming Solutions’ experience marketing to patrons along the I-35 corridor is that whilemany customers of existing nearby casinos will give the new facility a try, over time mostpatrons that are local to those existing facilities will remain part of their loyal customer base.That is why this marketing plan will direct most resources to the target greater Wichita marketand attracting patrons travelling on I-35. 221
The ProductThe new casino will initially offer a full range of gaming options, with 1,300 slot machines, videopoker, and table games, including blackjack, poker, craps and roulette. The slots will featurethe latest and most successful games from all major manufacturers--IGT, WMS, Aristocrat,Konami and more. The facility is being planned to allow for growth, with available space for upto 2,000 slots and to nearly double the amount of gaming tables.Global Gaming Solutions partners with some of the leading food service, hotel and travelfacilities providers so that the complex will incorporate, on day one, branded food serviceoptions and a brand name hotel. The plan also includes the capability of opening a secondcontiguous hotel as the business grows and demand increases.The first class showroom will offer a steady stream of entertainment, from contemporary, rockand country music stars, to competitive boxing cards, to seminars and other special events.With the full support of an enthusiastic local community, it is anticipated that the area nearbythe new casino will rapidly be developed with additional amenities—ideas for a travel plaza anda speedway are already being floated—that will further enhance the entertainment value ofthis new “destination.”Grand Opening / Soft OpeningManagement plans to open the new facility in a “soft” manner, where there is limited pre-opening media advertising. While there would be a coordinated newspapers/billboardsbranding campaign in front of the soft opening, the larger, full scale advertising media blitzwould occur in support of a Grand Opening about 90 days later.This allows for an adequate period of time to “get the kinks out” of the operation, where up to80% of the workforce is new to their jobs and the multiple divisions of the facility can be stresstested. In our experience, this is the most effective way to open a new gaming venue. Theearly returns will still be outstanding with the limited advertising enhancing the publicity thatthe excitement of opening the new casino generates.Patrons visiting the facility during the soft opening period will have a wonderful time as thestaff becomes comfortable in their roles at the rapidly growing, multi-venue destination.Midway through the soft opening period, the full scale media campaign will get underway,leading to a spectacular Grand Opening. By that time, the facility and staff have the inevitable 222
opening learning curve out of the way and larger numbers of patrons are sure to have a mostpositive experience when they visit.Marketing OutlineObjectives: • Generate Awareness and Brand Recognition in the market and region Position the Casino as a partner to the community Position the Complex as an entertainment destination throughout the region Plan aggressive events schedule during first six months of operation • Build Players’ Club Interest during Pre-Opening and Soft Opening periods Distribute 10,000 Players’ Club Cards locally prior to Soft Opening Use mail or other targeted media to distribute 20,000 additional during SoftOpening • Identify and Utilize Business Partners to generate energy and awareness for opening Partner with Chamber of Commerce and local travel related businesses Utilize I-35 Corridor marketing opportunities • Build local pool of prospective Casino employees and conduct employee recruitment campaign Use local office and web-site to launch applicant database Conduct multiple job fairs (local and elsewhere) four months prior to openingPublic Relations: • Engage local media and community leaders to distribute news and other information • Create & Maintain Publicity/Public Relations Office • Create an Internet presence as a key Public Relations and Marketing Tool 223
• Fully functional web site for distribution of information, Players’ Club recruiting, etc. • Web site to include news media center for distribution of releases, photos, video, etc. • Create and maintain social media presence—Facebook, Twitter, etc. • Establish web-phone applications for information and entertainment • Provide updates on progress through publicity releases, web site releases, etc. • Distribute Press Kits for key events such as Groundbreaking, Soft Opening & Grand Opening • Educate the local community as to the benefits the Casino Destination will bring to the area Jobs Roads and other infrastructure improvements Encouraging tourism Building customer traffic to local businessesEvents • Groundbreaking Ceremony and Celebration • Host Job Fairs in conjunction with community to fill 1,000+ Casino, Restaurant, Event Center & Hotel positions • Sponsor Golf Outings and other events in conjunction with local community • Host special pre-opening Early Member night as a preview for early signups • Host an exclusive Invitation-Only VIP Night for key suppliers, supporters, local business leaders, etc. 224
• Grand opening and on-going entertainment events. Please see attachments for a list of performing artists that we can contract on a regular basis, along with a list of actual performance concerts that were held at our Riverwind Casino in the last 12 months.Community PartnershipObjective: To work with the city of Wellington and Sumner County to become a valuedmember of, and make positive contributions to, the community. • Contribute to Sumner County economic growth • Job training/solicitation partnership with applicable local education facilities • Partnership with Wellington Chamber of Commerce to promote tourism • Partnerships with existing local entertainment and retail businessesRecruitment • Generate awareness among residents of Wellington and Sumner County of the opportunities and benefits of working in the Casino, Restaurants, Hotel and Events Center at the new Complex • Utilize advertising media, social media, online job boards and the website to support recruiting initiatives Casino Gaming positions – Pit Bosses, Slot Managers, Dealers, Croupiers, Slot Hosts, etc. Casino Support Positions – Security, Technicians, Valet Services, Human Resources, Finance, etc. Food & Beverage services – Hosts/Hostesses, Waiters/Waitresses, Cooks, etc. Marketing & Players’ Club positions • Staff and train team members in advance of the Soft Opening Utilize extensive Tribal training resources to provide a robust education and training program Recruit and train staff to provide superior customer service in all areas of the operation 225
Promotions • Solicit Players’ Club signups during Pre-Opening and Soft Opening periods • Utilize interactive contests via website and social media to promote brand awareness and excitement • Use website, social media and local partners to build e-mail addresses database • Enhance web search engine visibility via key advertising and placement vehicles • Wherever possible partner with suppliers and local businesses for Opening and ongoing promotions • Establish sponsorship and or improvement plan with local golf course • Sponsor local events in Wellington & Sumner CountyDirect Mail • Create advertising and marketing campaigns to generate Opening awareness and excitement • Feature the strongest amenities of the property: The latest and most popular slot machine games A complete assortment of table games Multiple restaurant, sports bars and other food options World Class Event Center featuring scheduled entertainment Comfortable brand name hotel at the Casino • Use market research to determine most effective messages and then direct mail and online resources to deliver • Focus inner market promotional message on gaming product, restaurants and special events 226
• Focus outer market message to promote gaming, special events and hotel • Create a special database to target group sales opportunities, bus lines and tour operators • Work with local businesses and Chamber to enhance target listsAdvertising • Create brand awareness interest and excitement leading up to the Soft Opening through: o Outdoor Advertising Packages – Billboards, including a “Coming Soon” flight near the Casino o Newspaper Advertising – Teaser campaign directing readers to website and/or call center o Light radio and or TV presence in support of Pre-Opening campaign • Roll out large Grand Opening campaign 30-40 days prior to spectacular Grand Opening Weekend o Replace pre-opening Billboards with “Now Open” message and Grand Opening promotion o Ongoing Newspaper campaign driven by special events and promotion schedule, including a special insert in Wichita Eagle and Wellington Daily News on the weekend prior to Grand Opening o Purchase large radio and TV packages to run in 10 days leading up to Grand Opening o Hype website address/Players’ Club offers in all radio and television advertising • Communicate concise, consistent messages focusing on: o The exciting and convenient new entertainment destination 227
o The largest Casino in the region with the latest, most popular games o Great Food, Brand Name restaurants and sports bar o Live entertainment in the Casino, and o Celebrity concerts and special events in the World Class ShowroomInternet Presence • Create easy-to-use website and purchase search engine and other online advertising to direct people to the site • Feature the website address in all marketing materials and advertising venues • The site would include six distinct main menu selections: 1. The Players Club Interface for signups and ongoing support 2. The Gaming Options – The latest and most popular slots, video poker, Blackjack, Poker Room, Craps and Roulette 3. Showroom Special Events with link to ticket/reservations interface 4. Promotions Schedule 5. The Hotel – with link to online reservations mechanism 6. Hospitality options with separate sections featuring: Restaurant/Buffet Sports Bar Casino Center Bar Food Court optionsSummaryGlobal Gaming Solutions, LLC, its business partners, investors and management, are committedto creating a first class entertainment destination in the heart of Sumner County. In support ofthat commitment, we are dedicated to providing the substantial resources necessary toexecute the Pre-Opening and Soft Opening marketing plans we have outlined here. 228
We will build and nurture a strong partnership with the local community, supporting localendeavors and maintaining constant open channels of communication with the people ofSumner County.We intend to be a true partner to the city of Wellington and will work in concert with localofficials, local businesses and citizens of Sumner County to improve the community, provide jobopportunities, contribute to improved infrastructure, promote tourism and attract futureeconomic growth in the region. 229
Examples of talent available for concert and performance booking at this current time.Oldies...The TemptationsHermans HermitsThe Four TopsOldies Pop...KC and The Sunshine BandKool and The GangThe CommodoresAl GreenClassic Rock...Three Dog Night38 SpecialREO SpeedwagonStyxForignerJoan JettBlondieCreedence ClearwaterPeter FramptonAir SupplyAmerica 230
Travis TrittWillie NelsonPopKenny LogginsMike McDonaldChris IssakHuey Lewis and The NewsCurrent PopTrainBetter Than EzraGin BlossomsEverclear 232
Talent appearing at Riverwind in the last two years:2009 Riverwind Casino Entertainer ActsTony Bennett Cheap TrickPercy Sledge The B 52sForeigner Merle HaggardTravis Ledoyt Lee Ann WomackHermans Hermits Tracy LawrenceWillie Nelson Rodney AtkinsGeorge Jones Ingrid HoffmanStarship Gin BlossomsRicky Skaggs Johnny RiversCross Canadian Dionne WarwickSinbad HeartGlen Campbell Dierks BentleyAsian Night Melissa EthridgeOak Ridge Boys Kevin FowlerBilly Squire Brian McKnightTracy Lawrence 4 TopsMichael Bolton Pat GreenBoyZ II Men Asian NightGene Watson Bonnie RaittRon White Randy TravisPatti Loveless Little Big TownJewel Gary Allan 233
Creedance Chubby CheckerNeil Sedaka Kenny GRat Pack Tribute2010 Riverwind Casino Entertainer Acts To-DateBB King Roberta FlackUFC Fight Merle/KrisTravis LeDoyt One Night Of QueenLarry The Cable Guy Mel TillisAsian Night Gary Allan CancelEli Young Band Josh TurnerJoe Nichols Moe,Gene and TGJeff Foxworthy Gary AllanDiamond Rio ReoGavin Degraw Darius RuckerTemptations Ronnie Milsap 234
Global Gaming Solutions, LLC and Emerging Brands Inc are dedicated in ensuring the responsible use and sale of alcohol Emerging Brands is a strategic business partner of Global Gaming Solutions, LLC. Emerging Brands has 15 years of experience in the management and operation of restaurants, pubs, and eateries where alcohol is served and consumed. In the process, Emerging Brands have strictly adhered to the “TIPS” policy on alcohol sales. We have repeatedly disclosed our intention to have Emerging Brands operate the day‐one, six food and beverage outlets at WinSpirit Casino and Destination. As such, we intend to apply Emerging Brands’ “TIPS” policy and adapt it to comply with applicable local and state regulations in Kansas. The “TIPS” program stands for “Training for Intervention ProcedureS.” This program is run by a company called Health Communications, Inc. of Arlington, Virginia. “TIPS” has been a global leader in education and training for the responsible service, sale and consumption of alcohol. “TIPS” is a skill based training program designed to prevent intoxication, underage drinking and drunk driving. The classroom training is based on building of each individual’s fundamental skills. The “TIPS” trainers provide the knowledge and confidence the attendees need to recognize potential alcohol‐related problems and how to effectively intervene. Emerging Brands Inc has three TIPS trainers on our management team, one of whom is fluent in Spanish. We have been teaching “TIPS” training for over 10 years throughout our company. We feel so strongly about this program that we train all our managers, servers, host, and bartenders with the “TIPS” program even though it is not required by the state. Our goal is to instill confidence in our team members when dealing with alcohol related situations. The training staff engages participants in a dynamic exchange of ideas and personal experiences to help everyone learn in the classroom. Classes are taught in three different stages, informational, skills training and practice/rehearsal. TIPS classroom training is designed to give all the participants an opportunity to learn on all different levels. Each individual will be given a closed book test and required to pass in order to be TIPS certified. The TIPS certification is good for three years and is a nationally recognized program.
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 1 December 8, 2010 Mr. Patrick Martin Interim Director of Kansas Racing and Gaming Commission 700 S.W. Harrison, Suite 500 Topeka, KS 66603‐3754 Dear Patrick: In the December 7th Lottery Facility Review Board’s conference call, Chairman All asked that applicants provide any additional market studies, data or other information we believed to be relevant to the revenue projections in the South Central Zone. We have filed here additional market research including a case study from Worth County, Iowa; a second poll of Wichita residents; research from Lang Research of Canada; and KDOT/ KTA actual traffic data. We have also filed actual data from our Riverwind Casino below. We would ask the Review Board to carefully review the case of Worth County, Iowa. In 2005, Cummings and Associates did a market study for the Iowa Racing and Gaming Commission evaluating the revenue potential at that location. In that case, we have both the study and actual results to compare. Comparison results show that actual revenue generated was double that of the Cummings original projections. As you will see in the attached CBRE analysis, there are stark parallels between Worth County and Sumner County. The CBRE analysis is attached. We have strenuously argued that the Cummings model is flawed in certain circumstances, and brings a result that is skewed. We maintain our position that there is not a material revenue difference between Exit 33 and Exit 19. Not all information presented here has previously been provided to the Consultants or to the Review Board. We request that this information be forwarded to the individual members of the Review Board. To begin with, Cummings has acknowledged the following three points: 1. Our analysis on deconstructing his Gravity Model and what drives the gravity model assumptions is accurate 2. If you believed CBRE’s analysis of factors in the model that drive revenue differentials, then you would conclude as CBRE did that material differences attributable to a competitor’s attractiveness do not exist. 3. NO changes have been made to the Cummings Gravity Model since its use in the Sumner County bids in 2007/ 2008. These points are fundamental to the analysis that follows.
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 2 The Cummings Gravity Model attributes revenue differentials between Exit 33 and Exit 19 to two broad assumptions, these being: (1) incremental distance between the exits, and (2) relative competitive attractiveness of Northern Oklahoma tribal facilities. In 2008, the Cummings model projected a 23% revenue difference between a site at Exit 19 and Exit 33. This year the differential appears to be 27%, though no changes in the model have been disclosed. We do believe that Cumming has made a change in how he calculated traffic intercept, at Exit 19 from the previous year which may account for some of the difference. As we previously discussed, approximately half of the percentage difference can be attributed to distance (the extra 12 minutes to Exit 19), and the other half is attributed to the relative attractiveness of competition. Sometimes the common sense approach should prevail. The Cummings model assumes that “revenue declines by 38% as distance from the population center doubles”. What if one casino was 1 mile from the population center and was projected to generate $100 million? Would a site one mile further away generate only $62 million? Distance matters, but common sense perspective on the distance differential would produce a much smaller percentage difference (perhaps reducing this gap to closer to 5%) having regard to real human behavior and the travel behavior of people in the Midwest. In other words, 12 minutes does not result in the rate of decline in revenue that is suggested. We believe the Worth County, Iowa results justify that position. Testing the distance relationship in the South Central Zone is complicated. There is no real world situation you can look at that provides actual data to prove the Cummings model is accurate (or not), except for possibly Worth County. The distance relationship used by Cummings was created by market research (a survey) in Mississippi. Additional analysis involved reviewing player’s club data. Both of those approaches require a lot of interpretation, and have some clear short comings. (See the original CBRE report.) Given that we know something is wrong in the Cummings Model’s application in Iowa, we think it is reasonable to ask Wichita residents whether distance really matters and how much. CBRE suggested that we get some direct market research through a poll of Wichita residents. While it isn’t perfect, any data provides information that is valuable. Polls are used to predict behavior all the time. In election polling there is immediate feedback with empirical data (called election results). Jayhawk Consulting has a strong track record of success in polling public attitudes in the Wichita Market. While not perfect, the local market research provides a reasonable measure of the public attitude on the issue of distance and its impact on gaming revenues, which gives us some alternative guidance as to the impact distance has on visitation. The original poll used registered voters who had voted in the last two elections. Jayhawk Consulting suggested using that sample basis because in they found that the results were more reliable than a sample using the general public. The complete polling data, and results are provided as an addendum.
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 3 Jayhawk Consulting found that there was little or no difference in attitudes regarding an additional 10 minute driving time to a local casino. “We can say with complete certainty and professional confidence that … there would be no real difference in the number of gamblers, or amount of gambler participation, with a casino location difference of 10 minutes travel time.” Questions have been raised about the decision to limit the sample to registered voters in the Wichita area and whether that sample would accurately reflect the general public attitude on the issue at hand. An additional suggestion was the sample size was inadequate although Jayhawk Consulting concluded that it is statistically valid. A final suggestion was that these consumers cannot predict their own behavior and that models are therefore more accurate. However, to test the assumption of any bias by registered voters, to address the question of sample size, and to see if material differences exists in consumers trying to predict their own behavior, a second poll was conducted on the weekend of December 4th. This poll focused on the general public (not just registered voters) with a further sample of 400 consumers, another sample regarded as statistically valid. The results are strikingly similar to the first poll and support the first poll’s conclusions. Both poll surveys by Jayhawk Consulting are appended to this document. Registered Voters General Public Gambled in the last year 21% 18% Would Visit a casino 20 27% 34% minutes south of Wichita 30 Minutes south of 26% 33% Wichita Average Visits 20 minutes 8.18 4.87 Average Visits 30 Minutes 8.16 4.65 The comparison of these results brings some very interesting information. There are some significant differences in the profile between frequent voters and the general public. But both polls suggest that distance is not a major issue in the minds of both groups. There are hints in the data that suggest that distance does matter, but not as much as the Cummings model assumes. For example in the frequent voter poll, the percentage of people who would gamble at the facility 30 minutes away dropped by 1% point. That suggests a distance impact of 3.7%. In the general public sample the same 1% drop occurred. That suggests a distance impact of 2.9%. The average visits data also carries a suggestion of a distance factor in the general public polling data. The decline of 0.22 in average number of visits (between 20‐minute and 30‐minute travel times) would suggest a distance impact of 4.5%.
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 4 This is consistent with our belief that the distance factor, based on our market experience, is approximately 5%. The polling did not limit participation to those people who had gambled in the last 12 months, rather it included anyone who indicated that they would likely gamble at a casino. We have also provided data from our Riverwind Casino property located on I‐35 highlighting the majority of customers travel in excess of 25 miles (or 30‐minute travel time) from the metropolitan area of Oklahoma City to this facility. This is despite the customers having closer alternatives. Oklahoma City Central Business District is located at the intersection of I‐35 and I‐40. Within 100 miles of this central location there are 42 casinos in Oklahoma. As discussed we own Remington Park, Newcastle Gaming, Goldsby Gaming and Riverwind Casino. The following are distances to the closest casino properties to Oklahoma City (OKC) and the direction from the above intersection: 1. OKC to Remington Park – North on I‐35, 10.3 miles (clean drive on I‐35) 2. OKC to Lucky Star – West ‐ Northwest, 32miles (clean drive) 3. OKC to Firelake Grand Casino – East on I‐40, 26.6 miles (clean drive on I‐40) 4. OKC to Riverwind – South on I‐35, 22.25 miles (congested drive on I‐35 through Norman) 5. OKC to Newcastle Gaming – Southwest ‐ 22.4miles (clean drive via freeway to west) 6. OKC to Goldsby Gaming – South on I‐35 next to Riverwind Casino, 23miles (congested drive on I‐ 35 through Norman) Seventy percent of customers in our player tracking data base come to Riverwind Casino from North of I‐40 or farther away than 25 miles or a typical drive time of 30 minutes. If I‐35 is congested through Norman, this drive time will be longer. This means they appear to choose to go to Riverwind Casino even though getting to Remington Park would be the closest or Firelake (with some similar amenities to Riverwind Casino) would take less time and the minimum distance is 22.25 miles. This result is despite numerous competing facilities which is not the case in Sumner County. This practical data supports our assertion that drive time and distance from Wichita on an easy I‐35 run to Exit 19 does not diminish the propensity of gamblers to attend the facility in material ways as suggested by Cummings. We also supplied CBRE’s analysis demonstrating that the relative attractiveness of Northern Oklahoma’s tribal gaming facilities was overestimated in the Gravity Model analysis, and if adjusted results in a significant reduction in the revenue differential between Exit 33 and Exit 19. These adjustments were attributable to overestimating the Power Rating of slots and several other factors. Cummings has acknowledged that if you believe the adjustments by CBRE to Cummings’ assumptions used to drive the revenue calculations in the Gravity Model, then this conclusion is correct. A copy of this report was previously provided and is titled: “DISPROVING THE EXIT 33 MYTH: Exit 19 the Best Bet for Kansas”.
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 5 Essentially, Mr. Cummings is saying in his assumptions on attractiveness that the Oklahoma tribal casinos are better than ours. In response, we draw your attention to a foot note in Cummings’ own study this year in the South Central Zone: Footnote 6, on page 15 (of 90) of the Cummings report: “I will cite, as I did in 2008, casinos like the Eastern Shawnee Travel Center, Peoria Gaming Center and Little Turtle Facilities in Oklahoma. These are ugly little “gasinos,” right next door (in two cases) to physically much more attractive full‐scale casinos (and just down the road in the third case), but they were all packed with customers when I visited. They clearly offer the gaming experience that many players desire. I am therefore cautious in discounting the ability of less‐physically‐attractive casinos to compete against those with more glitz.” This footnote suggests that the “Gasinos,” or as we call them Travel Plazas, compete directly and successfully against a much larger and nicer casino next door. As we have discussed in great detail, we operate travel plazas as an amenity targeted to an entirely different market which greatly enhances our total revenue picture. This causes Cummings to make an attractiveness assumption that is inappropriately higher than justified in the market. This demonstrates a minimal understanding of the I‐35 corridor and the distinctive nature of that market. Richard Wells notes in his revenue study that the customers of a travel plaza are not accounted for in the gravity model. Those customers are travelling through the area and do not show up in population estimates. Cummings attempts to equate customers of a travel plaza to the general population within the area, which is an inaccurate association. As a result, he applies a higher than appropriate attraction factor to tribal casinos in Oklahoma, which skews his assumptions in his revenue projections. Wells assigned an incremental revenue adjustment for the travel plaza of $5 million and 100,000 visitors. Cummings appeared to assign a travel plaza revenue adjustment of $2.9 million and 20,000 visitors. That adjustment, however, also included a deduction of $2.2 million because our project did not include direct access. However, in reviewing the Cummings projections for Marvel Gaming, Penn Gaming and the Generic Casino at exit 19 in 2008, both projects were given $5.9 million in a traffic intercept estimate called “frontage traffic.” Neither the generic casino, Marvel Gaming or Penn gaming had direct access proposed at the time those projections were made. None of the previous exit 19 applicants proposed a travel plaza type development. This was a change in the methodology used in the previous round. The methodology change means the actual incremental value Cummings placed on the travel plaza was actually $700,000 in revenues.
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 6 The results of the Cummings Iowa study strongly suggest that the attraction factors used in the Kansas study are flawed. I‐35 is an important economic engine for development in Kansas and Oklahoma. Literally, millions of dollars of economic opportunity drives up and down the corridor. Using traffic data from the southern border of Kansas, approximately 14,000 vehicles a day enter or leave Kansas via I‐35. This means approximately 8 million people in cars and trucks drive by Exit 19 every year. That population base is larger than Dallas‐Fort Worth. It is also a population base that the gravity model will never successfully predict. Development of full service travel facilities that offer a wide range of food, competitive fuel prices, and other comfort amenities is a tool that has generated millions of dollars in gaming revenues for the Chickasaw Nation. The strategy for our proposed Travel Plaza involves robust services for travelers. It also involves deployment of gaming machines to match the market place, including truckers – who we like to call the “high rollers” of the highway. Our Travel Plaza development is planned for Year‐3 to allow time for the main facility to be fully up and operational and traffic patterns established. We have an agreement with the Kansas Turnpike Authority that we would not open the Travel Plaza until after our direct turnpike access is fully implemented and operational. In collaboration with CBRE, and use of data specific to our Travel Plaza operations, we project the total traffic capture gaming revenues at the facility will exceed $10 million p.a. conservatively. We advised the Review Board that we counted over 300 trucks parked nightly near our proposed location, stopping under federally mandated rest requirements. The truck drivers will stop where they have the capacity and the best amenities. This count represents roughly 7.5% of the total daily truck traffic on I‐35 alone (total count is 4,060 trucks daily) and even excludes truck traffic on Highways 160 and 81. Again, we previously provided the traffic data from K‐DOT and KTA. This data is appended to this document. To put that in perspective, using our projected daily win per patron, the 300 trucks that are already stopping in the immediate area would be the equivalent of $7 million in gaming revenues. In addition, for each 100 cars representing 150 patrons (1.5 passengers per car) would account for an additional $3.5m in gaming revenue in its own right. As casual travelers stop at our facility, we also expect to add them to our players club data base and will use that data to build a customer base that extends beyond traffic intercept. Finally, the analyses by both Wells Gaming Research and Cummings’ credited us with more incremental gaming revenue by the Travel Plaza than the Equestrian Center by Peninsula Gaming.
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 7 We have also included analysis by CBRE supported by research by Lang Research, Canada, highlighting a 34.3% premium in visitation spending by customers of our proposed auto sports facility v. Peninsula Gaming’s proposed Equestrian Center. This analysis has also been provided to the Consultants. The table below highlights the effect of the above adjustments to the suggested revenue differential between Exit 33 and Exit 19: Basis of 2010 Bids In 2014 Dollars ($million) Adjustments Difference (as predicted 27% $50.9 by Cummings’ Gravity Model) (Reported as 22% in 2007/ 2008 analysis with same assumptions. Why?) Distance Exit 33 to Exit 19 14 miles. In effect, the Gravity Model says that gaming revenue declines by $3.6 million for each mile, or $200,000 per 100 yards (the length of a football field). This prediction is not supported by market research or by actual consumer behavior. Adjustments: ‐ Attractiveness ‐ CBRE’s Analysis 8% $15.4 ‐ Riverwind data ‐ Distance ‐ Two polls of 10% $19.2 Wichita residents by Jayhawk Consulting ‐ Riverwind data ‐ Travel Plaza ‐ Actual data 7% $13.5 ‐ Net Difference after 2% (negligible) $2.8m Adjustments In summary, if our adjustments are made as we our analysis clearly demonstrates, the difference in revenue between Exit 33 and Exit 19 is a minimal 2% or $2.8m, assuming that Peninsula Gaming selects Site A at Exit 33. Finally, all of these differences are calculated assuming that Peninsula Gaming will build at Site A with I‐35 access. It would appear to be a reasonable likelihood that given the current constraints with this site, that Peninsula Gaming would have to utilize Site B which is located some two miles east of I‐35: in order to maintain their proposed development timetable (having regard to planning needs, infrastructure needs, zoning needs, and several outstanding legal challenges).
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 9 Attachments and Other Supporting Information: 1. Jayhawk Consulting Services, Report of Public Opinion Survey, conducted August 27 and 28, 2010. 2. Jayhawk Consulting Services, Report of Public Opinion Survey, conducted December 3, 2010. 3. CBRE’s Analysis of: Cummings & Associates Track Record in Generating Gaming Revenue Projections in a Competitive Environment – Worth County (Iowa) Parallels with Sumner County (Kansas). 4. “DISPROVING THE EXIT 33 MYTH: Exit 19 the Best Bet for Kansas”, 33‐page report prepared with the assistance of CBRE. 5. Traffic Volume Map of major roadways in the vicinity of Exit 19 off I‐35, as provided by Traffic Engineers Wilson & Company. 6. CBRE Analysis of Auto Racing v. Equestrian Visits with Lang Research Supporting Information. 7. Information about CBRE’s Global Gaming Group and their casino industry qualifications
Additional Matters for Review Board’s Consideration Attachments and Supporting Information08 December 2010 p. 10 Attachments and Other Supporting Information: 1) Jayhawk Consulting Services, Report of Public Opinion Survey, conducted August 27 and 28, 2010.
REPORT OF PUBLIC OPINION SURVEY August 27 and 28, 2010PURPOSE Global Gaming Solutions (GGS) contacted JayhawkConsulting Services (JCS) to conduct a public opinion surveyto determine how voters in Wichita, Kansas feel about thedistance they would have to travel to attend a casino intheir area. Specifically, would they go to a casino located30 minutes from South Wichita in the same numbers as theywould one only 20 minutes away. The following is the reportof the results of that survey. These results areconfidential between JCS and GGS. With the submission ofthis report, these results become the property of GGS andany release of the information herein is theirresponsibility.PROCEDURES This survey was conducted by telephone on August 27 and28, 2010. Calls were made from a list of voters, residingin Wichita, Kansas who voted in the last two generalelections. Although this survey has no connection to animpending election, we have found through the years thatinterviewing frequent voters gives us a more reliable "feel"of the total population. Frequent voters, almost bydefinition, are more active citizens in their community andmore accurately reflect that communitys attitudes regardingthe important issues of the day. We completed a total of 400 interviews. This numbergives the survey results with a sampling error ofapproximately plus-or-minus 4%. 1
RESULTSFirst, have you, in the past year, gone to a casino togamble?Yes - 21%No - 79% (IF "yes")How many times?(The following are the actual responses, not percentages, ofthe 83 persons who answered "yes" to the previous question.The number in basic text is the number of times one had goneto a casino, and the second (bold face) number is the numberof persons who made that choice.)1 - 20 4 - 3 10 - 2 24 - 42 - 27 6 - 2 12 - 4 30 - 23 - 12 8 - 3 18 - 1 52 - 3If a destination casino were located on Interstate 35, about20 minutes south of Wichita, would you visit it?Y - 27%N - 64%Not sure - 9% (IF "yes")How many times per year, would you go?(Again, the following are the actual responses of the 107persons who answered "yes" to the previous question. Thenumber in basic text is the number of times one would go toa local casino, and the second (bold face) number is thenumber of persons who made that choice.)1 - 8 5 - 7 12 - 8 50 - 22 - 26 6 - 3 15 - 3 52 - 33 - 16 7 - 6 20 - 44 - 15 10 - 3 35 - 3 2
If the casino were 30 minutes south of Wichita, would youstill be likely to visit it?Yes - 26%No - 64%Not sure - 10% (IF "yes")How many times per year, would you go?(Again, the following are the actual responses of the 105persons who answered "yes" to the previous question. Thenumber in basic text is the number of times one would go tothe more-distant local casino, and the second (bold face)number is the number of persons who made that choice.)1 - 10 5 - 10 12 - 7 50 - 22 - 25 6 - 5 15 - 3 52 - 33 - 12 7 - 5 20 - 44 - 14 10 - 2 35 - 3SUMMARY First, we would note that about 1 in 5 (21%) residentsof Wichita attended a casino to gamble within the past year.We have no frame of reference or recent past experience toknow if that is low, high or about the average for a Kansascommunity. Secondly, the percentage of people who would go to acasino goes up, to 27%, if the casino is located about 20minutes south of Wichita. This difference is significant,statistically speaking, for a sample of this size. However,we were a bit surprised that bringing the casino to within20 minutes of Wichita only increased participation by 6percent. In other words, reducing travel time from severalhours down to 20 minutes did not have the major impact onparticipation that we had expected. Thirdly, on a related matter, adding another 10 minutesof travel time to get to the casino made no significantdifference in the amount of participation by the public.Our results showed a drop from 27% to 26%, but thatdifference is not significant as a statistical measurement. There is one other comparison which we feel needs to bemade regarding the results of this survey. We know thatthere is no difference between the number of participants asit relates to the "20 minute" casino and the "30 minute"casino. But what about the number of times they may attend? 3
Looking at the earlier question, would gamblers go lessoften if the casino were further away? To determine theanswer to this question we developed what we will call the"gambler participation" scale. It works like this - for the"20 minute" casino, 8 people said they would go 1 time peryear, that equals 8 points. Also, 26 people said they wouldgo 2 times per year for 52 points, 16 said they would go 3times for 48 points, and so on. Using the same procedurefor the "30 minute" casino, 10 said they would go 1 time peryear (10 points), 25 would go 2 times (50 points), 12 wouldgo 3 times (36 points) and so on. Using this method for comparison, the "gamblerparticipation" score for the "20 minute" casino is 875, oran average participation, per gambler, of 8.18, and thesimilar numbers for the "30 minute" casino are 857 pointsand an average, per gambler, of 8.16. Were not sure atwhat point this difference would be significant, but surelya difference of 0.02 on a factor total of about 8, must beof almost NO validity.ANALYSIS We can say with complete certainty and professionalconfidence that, based on our survey of 400 randomly-selected Wichita voters, there would be no real differencein the number of gamblers, or amount of gamblerparticipation, with a casino location difference of 10minutes travel time. In fact, given the comparison ofparticipation currently, with as much as several hourstravel time, and the level of participation with a casinopractically in ones own "back yard", we could say with someconfidence that travel distance is of very low priority whena gambler considers how much they will be involved. We hope this information will be of assistance toGlobal Gaming Solutions as you pursue your goals, whateverthey might be. We appreciate this opportunity to be of assistance.Please contact us with any questions you have about thesurvey or this report. 4
Global Gaming KS, LLC Response to Review Board’s follow‐on questions 06 December 2010 p. 11 Attachments and Other Supporting Information: 2) Jayhawk Consulting Services, Report of Public Opinion Survey, conducted December 3, 2010.
REPORT OF PUBLIC OPINION SURVEY December 3, 2010PURPOSE Global Gaming Solutions (GGS) contacted JayhawkConsulting Services (JCS) to conduct a second public opinionsurvey to determine how general public in Wichita, Kansasfeel about the distance they would have to travel to attenda casino in their area. Specifically, would they go to acasino located 30 minutes from South Wichita in the samenumbers as they would to a casino only 20 minutes away. A second major purpose of this survey is to compare thefeelings of the general public with those of "frequentvoters" who were polled in an earlier survey. This will beexplained more fully in the "procedures" section, whichfollows. The following is the report of the results of thissurvey. These results are confidential between JCS and GGS.With the submission of this report, these results become theproperty of GGS and any release of the information herein istheir responsibility.PROCEDURES This survey was conducted by telephone on December 3and 4, 2010. Calls were made from a list of residentslocated in Wichita, Kansas. As mentioned, in an earliersurvey, we interviewed only "frequent voters", those who hadvoted in the last two general elections. Most of thepolling our company does is for candidates running forpublic office. To best serve their needs, it is mosthelpful to know how those who are likely to vote, feel abouttheir race. Our experience has shown us that the bestpredictor of who will vote in the future, is those who havevoted in the past. However, in this survey, we are not predicting theoutcome of a possible future election. Further, we have noevidence of any correlation between the voting habits of aperson and their gambling activities, or lack thereof.Therefore, our sample for this survey is the generalpopulation without any further identification. We completed a total of 400 interviews. This numbergives the survey results with a sampling error of 1
approximately plus-or-minus 4%.RESULTSFirst, have you, in the past year, gone to a casino togamble?Yes - 18%No - 82% (IF "yes")How many times?(The following are the actual responses, not percentages, ofthe 73 persons who answered "yes" to the previous question.The number in basic text is the number of times one had goneto a casino, and the second (bold face) number is the numberof persons who gave that as their response.)1 - 25 5 - 2 12 - 8 52 - 12 - 12 6 - 4 18 - 13 - 9 9 - 2 20 - 24 - 2 10 - 2 24 - 3If a destination casino were located on Interstate 35, about20 minutes south of Wichita, would you visit it?Y - 34%N - 52%Not sure - 14% (IF "yes")How many times per year, would you go?(Again, the following are the actual responses of the 136persons who answered "yes" to the previous question. Thenumber in basic text is the number of times one would go toa local casino, and the second (bold face) number is thenumber of persons who made that choice.)1 - 25 5 - 10 12 - 8 52 - 12 - 29 6 - 4 15 - 3 NS - 2 (*)3 - 22 7 - 6 20 - 24 - 19 10 - 3 24 - 2(*) No specific number of times 2
If the casino were 30 minutes south of Wichita, would youstill be likely to visit it?Yes - 33%No - 52%Not sure - 15% (IF "yes")How many times per year, would you go?(Again, the following are the actual responses of the 133persons who answered "yes" to the previous question. Thenumber in basic text is the number of times one would go tothe more-distant local casino, and the second (bold face)number is the number of persons who made that choice.)1 - 24 5 - 9 12 - 9 NS - 2 (*)2 - 33 6 - 4 15 - 33 - 23 7 - 4 24 - 24 - 15 10 - 4 52 - 1(*) No specific number of timesSUMMARY First, we found that, among the general public, about18% had been to a casino within the last year. In othercasino polling we have done around the state of Kansas, wewould note that a participation rate of about 20% is verytypical of a Kansas community. Also, it compares closelywith a participation rate of 21% by frequent voters, anumber obtained in the earlier survey. The percentage of people who would go to a casino ifone were located about 20 minutes south of Wichita isconsiderably higher, at 34%. Given these two responses, we can make the followinggeneralizations: 1. members of the general population are slightly lesslikely to have gone to a casino within the last year than"frequent voters" by a 18% to 21% margin; 2. but, members of the general public are much morelikely to attend a casino located in close proximity toWichita than are frequent voters, by a margin of 34% to 27%. 3. Also, though only 18% of the general populationcurrently go to a casino, on an annual basis, that numberjumps to 34% when the casino is located close to Wichita. 3
A second major comparison within the survey is whetherpeople would drive an extra 10 minutes if the casino waslocated 30 minutes from Wichita as compared to one only 20minutes away. On the survey among frequent voters, they were just aswilling to drive the extra 10 minutes with a participationresponse of 27% for the "closer" casino, and 26% for the onefurther away. Clearly this is not a statisticallysignificant difference. On the current survey among thegeneral public, we got higher, but equally similar results.In this group, 34% would go to the "20 minute" casino and33% would still go to the casino located 30 minutes away.Again, the difference is clearly within the margin ofsampling error. In our earlier report, we presented our "gamblerparticipation" scale. Its a way of comparing not only thenumber of people who might go to a casino, but includes thenumber of times each of them might go. The scale iscalculated as follows: If in a particular group, 8 peoplesaid they would go to a casino 1 time per year, that wouldequal 8 points. Then, if 26 people said they would go 2times per year, that would be 52 points, and if 10 said theywould go 3 times that would be 30 points, and so on. Considering this survey of the general public, andusing this procedure for the "20 minute" casino, 25 saidthey would go 1 time per year (25 points), 29 would go 2times (58 points), 22 would go 3 times (66 points) and soon. We arrived at a total of 652 points, or a per personfactor of 4.87. For the "30 minute" casino, the total was609 points, or a per person factor of 4.65. Again, adifference of 0.22 between the two factors is so close as torepresent no statistically significant difference. There is, however, a significant difference between the"gambler participation" scale for the general public,averaging approximately 4.7 and the scale for the frequentvoters, averaging about 8.17. This demonstrates thatfrequent voters would attend a casino more often than thegeneral public. One caution however, there was a span ofabout 3 months between the time these two polls were done,and economic, and other factors could have changed. 4
ANALYSIS The results of this survey allow us to say withcomplete certainty and confidence that the attitudes of thegeneral public, like those of frequent voters, show there isno real difference in the number of gamblers, or amount ofgambler participation, with a casino location difference of10 minutes travel time. There is evidence that frequentvoters are a little less likely than the general public togo to a casino near Wichita, but among those who go, thevoters are more likely to go more often. This is somethingwe noticed based on a cursory review of the responses ofthis survey. However, any specific data of value wouldrequire further investigation. We hope this information will be of assistance toGlobal Gaming Solutions as you pursue your goals, whateverthey might be. We appreciate this opportunity to be ofassistance. Please contact us with any questions you have about thesurvey or this report. 5
Global Gaming KS, LLC Response to Review Board’s follow‐on questions 06 December 2010 p. 12 Attachments and Other Supporting Information: 3) CBRE’s Analysis of: Cummings & Associates Track Record in Generating Gaming Revenue Projections in a Competitive Environment – Worth County (Iowa) Parallels with Sumner County (Kansas).
CBRE’s Analysis of:Cummings & Associates Track Record in Generating Gaming RevenueProjections in a Competitive Environment – Worth County (Iowa) Parallelswith Sumner County (Kansas)Based on a brief look at his prognostication record, Cummings &Associates appears to be pretty accurate when it comes to projectinggaming revenue for casinos with limited competition (Boot Hill in FordCounty and several monopolistic casinos in Iowa are good examples).However, Cummings’ projections have in some instances proved wildlyinaccurate. In 2005, Cummings & Associates completed a report for theIowa Racing & Gaming Commission called “Analysis of Current Marketsfor Casino Gaming in Iowa, with Projections for the Revenues and Impactsof Potential New Facilities.” In the report, Cummings projected gamingrevenue from a Worth County casino of between $34 million and $39million (in 2005$). In actuality, the Worth County casino has generatedgaming revenue of between $74.0 million in 2007 to $79.2 million in 2009.The similarities between Worth County, Iowa and Sumner County, Kansasare striking. First and foremost, both the casino in Worth County andSumner County are located with excellent access off heavily traveledareas of I-35. In addition, the Worth County casino competes with 19 tribalcasinos across the border in neighboring Minnesota. Across the borderfrom Sumner County in Oklahoma are several tribal casinos. Both theWorth County and Sumner County casinos will try to attract many of theircustomers from a single metropolitan area. In the case of Worth, themetro area is Minneapolis-St. Paul (located 110 miles to the North), and inthe case of Sumner, the metro area is Wichita.After speaking with experts familiar with the situation in Iowa, it is likely thatmuch of the revenue disparity between Cummings’ projections and theactual result is due to significantly greater amounts of gaming spend fromresidents of Minneapolis-St. Paul and neighboring cities in Minnesota andthose driving by the facility on I-35. Spending from these customer groupswere not fully accounted for in the Cummings’ projection.In the white paper that we have previously presented, we have discussedin detail how the Cummings model is somewhat limited when factoring insurrounding competition – especially in a situation where there is so muchin the way of competing casinos. It is very likely that the Exit 19/Exit 33situation is one of those instances where the competition will not have asgreat an impact on the Sumner casino as the Cummings would indicate.The Sumner casino market is unique in that it faces different levels ofcompetition at varying distances and varying levels of quality. Although
Cummings claims that all his formulas and inputs are backed up by “realworld” empirical evidence, the projections that were made in WorthCounty, Iowa certainly leave the door open for the possibility that someexogenous variables can impact the projections.Inputs in Cummings Worth County projections that could have caused thediscrepancy between projected and actual results: • Understating the Impact of Having an Optimally Located Facility on Interstate 35 – Market intelligence indicates that the traffic going to/from Minneapolis along I-35 is helping generate “significant amounts” of incremental revenue for the facility. o Relevance in KS – It provides some anecdotal evidence that a travel plaza would be a lot more powerful of a revenue generator for a facility off I-35 than Cummings is projecting. • Rate of decline of spending as distance is increased – On page 5 of the Iowa report, Cummings says “This is a relatively “long-distance” attraction; if you double the distance, revenues decline by about 38%. For comparison, race tracks generally exhibit distance coefficients of about -1 to -1.2: if you double the distance, visitation declines by 50% or more.” o Relevance in KS – If the rate of decline is not as severe as Cummings projected for Minneapolis residents going to Worth County, the same could be true as it relates to Wichita residents to Sumner County. Keep in mind, that a casino off Exit 33 or Exit 19 will devote a similar majority of marketing/advertising spend towards Wichita. A lower rate of decline in spend, for Wichita residents, would lower the gap between Exit 19 and Exit 33. This assertion has been justified by the market data collected by Jayhawk Consulting Services in August 2010 regarding Wichita residents’ attitudes towards visiting casinos in Sumner County. • Relative appeal factors – Were the Cummings appeal factors too high for the Minnesota casinos relative to a Worth County casino? For example, the Minnesota tribal casinos do not offer craps, and the Iowa casinos do offer craps. o Relevance to KS – If the same error were made in KS, more revenue would be pushed from KS residents to the OK casinos for either Exit 19 or Exit 33 even they are of a lower quality (at least the ones along the border and they do not offer craps). However, because of Exit 19’s closer proximity to OK,
significantly more revenue is allocated to the OK casinos than Exit 33. If lower appeal factors were used for the OK casinos, less revenue would be siphoned into OK thus narrowing the revenue gap between Exit 19 and Exit 33.• Spending Elasticity with Size – Did Cummings give too much credit for the sheer size of the Minnesota casinos? The Minnesota casinos have more than 15,000 slot machines compared to the Worth County casino, which was only sized at with 520 slots and 18 table games in Cummings’ projections. Using the Cummings model, where the number of machines are weighted at close to a 1:1 basis, virtually no Minneapolis spending would be directed to a Worth County casino as collectively, the Minnesota casinos would be about 30 times more attractive than a Worth County casino. o Relevance to KS – If the same error were made in KS, more revenue would be pushed from KS residents to the OK casinos for either Exit 19 or Exit 33. However, because of Exit 19’s closer proximity to OK, significantly more revenue is allocated to the OK casinos than Exit 33. If lower spending elasticity with size factors were used for the OK casinos, less revenue would be siphoned into OK thus narrowing the revenue gap between Exit 19 and Exit 33.
Figure 1 – Worth County, Iowa Competition MapNote: There is a tremendous amount of competition to the north of Worth County casino(signified by the blue star).Source: CasinoCity; GGS estimates
Global Gaming KS, LLC Response to Review Board’s follow‐on questions 06 December 2010 p. 13 Attachments and Other Supporting Information: 4) “DISPROVING THE EXIT 33 MYTH: Exit 19 the Best Bet for Kansas”, 33‐page report prepared with the assistance of CBRE.
DISPROVING THE EXIT 33 MYTH: Exit 19 the Best Bet for KansasPrepared by:Global Gaming Solutions, LLC inCollaboration with CBRE.October 2010
DISPROVING THE EXIT 33 MYTHTable of ContentsThe Problem Statement ................................................................................................... 4 The Participants ............................................................................................................. 4Proofing the Problem ....................................................................................................... 7 Distance Is the Overriding Factor In Determining Casino Spend .......................... 7 The Attractiveness, Proximity and the Amount of Competition ............................ 8Defining Piece of New Evidence ................................................................................. 15Solutions ........................................................................................................................... 16 Summary of the Four Solutions .................................................................................. 16The Resolution ................................................................................................................. 19Appendix ......................................................................................................................... 20 Appendix #1 – Technical Analysis of Solution 1 ..................................................... 20 Appendix #2 – Technical Analysis of Solution #4 .................................................. 20 Appendix #3 Recreation of State Consultant Gaming Revenue Model for Exit 19 and Exit 33 ............................................................................................................... 24 Appendix #4 – Jayhawk Consulting Services Report............................................ 29 -2- October 2010
Index of TablesTable 1 – Sumner County Competition Grouped by Geographic Zones (Estimated as Projected in 2008) .......................................................................... 14Table 2 – Revenue Difference After the Four Solutions (2007$ Millions) ................. 18Table 3 – Scoeff Calculation Using the State Consultant’s Estimate – “Population A” Example .............................................................................................................. 21Table 4 – Adjusted Scoeff Calculation Using GGS Estimate - “Population A” Example .................................................................................................................... 23Table 5 – Recreation of State Consultant Model (2008$ Unless Noted) ................ 24Table 6 – Recreation of State Consultant Model (2008$ Unless Noted) – Exit 19 Slot Spend Detail ..................................................................................................... 25Table 12 – Recreation of State Consultant Model (2008$ Unless Noted) – Exit 33 Slot Spend Detail ..................................................................................................... 27 -3- October 2010
The Problem StatementThe problem this white paper explores is that in 2008 one of the State’sconsultants implied there was a 23% revenue gap between essentially identicaldestination casinos off Exit 19 and Exit 33, respectively.The ParticipantsGlobal Gaming SolutionsGlobal Gaming Solutions (GGS) is an experienced casino developer andoperator. The entity is best for known for its two highly successful casinos locatedoff Interstate 35 in Oklahoma. One of those casinos, WinStar, is the third largestcasino in the world, proving that the entity has experience in developing andoperating multi-million dollar destination casinos.GGS’s expansive knowledge of running casinos on the I-35 Corridor hasprovided it with the knowledge to create the amenities and marketingphilosophies that maximize both revenue and the customer experience.GGS is seeking to construct and manage on behalf of the State the casino inthe South Central Gaming Zone off Exit 19.The State of KansasIn 2008, the KS legislature passed SB 66 – The Kansas Expanded Lottery Act. SB 66authorized up to four state-owned casinos in four gaming zones: 1) theNortheast Zone, which consists of Wyandotte County; 2) the Southeast Zone,which consists of Cherokee or Crawford counties, 3) the South Central Zone,which consists of Sedgwick or Sumner counties, and 4) the Southwest Zone,which consists of Dodge County. Slots at the State’s racetracks were alsopermitted. This paper focuses solely on the state-owned casinos, and the SouthCentral Zone specifically.In each county within the gaming zones, a local referendum was held to allowvoters a choice to allow casinos or not. All counties in the State voted to allowcasinos except for Sedgwick County. That meant the South Central licensecould only go to Sumner County.The Kansas Lottery CommissionThe Commission is charged with setting up the procedures for, and entering into,gaming facility management contracts with third party entities. In addition tomanaging the casinos on behalf of the State, the winning third party entitieswould also construct the facilities. -4- October 2010
The Kansas Lottery Kansas Lottery Gaming Facility Review Board (KLGFRB)The independent KLGFRB was appointed by the Governor, Senate and House ofRepresentatives to evaluate potential gaming facility managers. SB 66 says theBoard may employ any experts, consultants or other professionals at theexpense of a prospective gaming facility manager to provide assistance inevaluating a lottery gaming facility management contract submitted to it.Past Gaming Facility Manager ApplicantsIn 2008, Harrah’s Sumner Gaming, Penn Sumner LLC, and Marvel Gamingformally submitted applications to be the gaming facility manager in the SouthCentral Gaming Zone. Both the Penn Sumner and Marvel Gaming proposalswere off Exit 19, while the Harrah’s Sumner Gaming proposal was located off Exit33.State ConsultantsIn 2008 and again in 2009, the KLGFRB retained Cummings & Associates, amongother consultants, to explore the gaming revenue potential for the South Centraland three other Gaming Zones. In this paper, Cummings & Associates is referredto as the “State’s consultant.”State Consultant ReportsSeveral times throughout this analysis, reference is made to reports that werepreviously conducted by Cummings Associates for the State of Kansas andother clients. The three main reports referenced are as follows: • Cummings Associates, Casinos’ “Gravity” According to Reilly – Amended, May 25, 2006 • Cummings Associates, Projections for the Market Potential of the Four Gaming Zones in Kansas - DRAFT, May 26, 2008 • Cummings Associates, Projections for the Likely Gaming Revenues of Marvel Gaming, LLC - DRAFT, July 16, 2008For the remainder of this writing, the above three reports are referenced asCummings May 2006, Cummings May 2008, and Cummings July 2008,respectively. -5- October 2010
State Consultant Revenue Projections for Exit 19 and Exit 33In Exhibit C-4 of the Cummings July 2008 report, the analysis projects thatidentical casinos would generate slot/table revenue of $174.2 million off Exit 33(Harrah’s) and $134.7 million off Exit 19 (Penn National). In other words, theanalysis is projecting a casino off Exit 19 would generate about 23% less than alike casino off Exit 33 because of the approximately 11-minute further drive forWichita-area customers. The Cummings July 2008 projections were very similar tothe projections made in the Cummings May 2008 report.Jayhawk Consulting ServicesJayhawk Consulting Services (JCS) conducted a public opinion survey to thetest the attitudes of how distance influences the casino visitation habits ofWichita residents.Add JCS bio to clarify why they should be listened to. JCS is a respected pollingcompany with X years of experience, etc. -6- October 2010
Proofing the ProblemEvidence will be brought forth, including real world data, examples andsituations that will show that the perceived revenue gap should not be taken asa foregone conclusion.The 23% revenue gap, as estimated by the State’s consultant, between twohighly similar casinos off Exit 19 and Exit 33, has not factored in additionalempirical data relevant to the analysis or come to a reasonable conclusion thatcan be drawn from that data.There are two fundamental areas that form the basis of the 23% revenue gap asestimated by the State’s consultant. They are: 1. Distance is the overriding factor in determining a population’s spend at a particular casino. 2. The attractiveness, proximity and the amount of competition around a casino influences how much of the population’s spend that particular casino will capture.Distance Is the Overriding Factor In Determining Casino SpendThe State consultant presents data it has collected that the gaming spend oftypical adult populations declines at a rate of 38% as the distance away from acasino is doubled. GGS’s research indicates that distance is not always theoverriding factor in how often people will visit a casino, and that theapplicability of the State consultant’s data to all casino markets and situations isnot always relevant.The evidence that the State consultant uses to justify why the 38% rate ofdecline is applicable is based on survey data it collected from Mississippi casinosand an analysis of players club data from two anonymous casinos. Theconsultant takes the visitation counts (from Mississippi) and the casino spend(from the players club data examples) and divides it by the adult population inthose areas to determine the spend per adult. The State consultant thenmeasures the rate of decline in spending as distance is increased from aparticular casino.However, the State consultant’s methodology undoubtedly overstates the rateof decline in spending for casinos generally and the South Central Zone casinospecifically, as distance is increased for several reasons.The first reason is every market in the U.S. has some form of casino competition,and no market is completely insulated. Both the Mississippi casinos and the twocasino examples cited by the State consultant will have some of the gaming -7- October 2010
spend from the more outlying populations siphoned off by surrounding casinos.For example, even within 50 miles of the Mississippi casinos are casinos in NewOrleans. Therefore, distance is not the only reason New Orleans residents are notvisiting the Mississippi casinos, but rather the fact that there are three casinos inthe New Orleans area that are taking their play.Kansas is conducting an open RFP process to get a top-notch casino built. Theproposed facilities in Kansas are extremely different from multi-level casinoriverboats built in the early and mid-1990s or even many of the riverboat casinosbuilt more recently in Iowa (where the State consultant has experience), andare not likely to experience the same rate of decline. The Sumner casino will beof higher quality, be land-based, and have better access (right off I-35) thanvirtually any other regional casino in the U.S.For these reasons alone it is more likely than not that the rate of decline inspending would be lower than the State consultant cites.Other reasons the State’s consultant likely overstating the drop in gaming spendrelate to the inherent self-selection bias of players club data and casinomarketing philosophies. Players club data is not a perfect proxy for actualgaming revenue because not everyone signs up for a players card or uses theirplayers card. In fact, more outlying populations are less likely to use a playerscard because they are less likely to be aware of the players club or may not visitthe casino often enough to accumulate awards. However, the outlying residentsare still visiting more than the players club data indicates.Furthermore, casinos only have a finite amount of advertising dollars that can bespent to attract players. The advertising dollars typically are spent in areas closerto the casino. Whether a casino is built off Exit 19 or Exit 33, either one will spenda similar high dollar amount of their advertising budget in Wichita. In these otherexamples, part of the explanation for visitation dropping with distance is the factthat casinos target their advertising budgets on the close-in populations andspend less on more distant markets. This is especially true when there could befour different cities 25 miles away (one to the North, one to the South, one to theEast and one to the West) that a casino would have to split its marketing budgetfour ways. In the case of either Exit 19 or Exit 33, virtually all of the marketingdollars will be plowed into Wichita.The key question is how the spending decisions of Wichita residents will beinfluenced by distance, and not by examples that may or may not be relevant.The Attractiveness, Proximity and the Amount of CompetitionContrary evidence exists to the State consultant’s thesis specifically as it relatesto the attractiveness, proximity and the amount of competition. -8- October 2010
The first prong to the State consultant’s argument (discussed above) is thatbecause Exit 19 is located eleven minutes further from Wichita than Exit 33, thatthe visitation rates of Wichita residents will be lower.The second prong to the State consultant’s thesis is that by the Exit 19 casinobeing eleven minutes closer to the Oklahoma Border Casinos that those casinoswill capture a greater amount of the Wichita (and surrounding county)population’s gaming spend than they would if the casino was located off Exit33. Because of the large number of casinos and slot machines, the Stateconsultant’s analysis predicts that significantly more Wichita resident gamingspend will go to the Oklahoma Border Casinos if the South Central Zone casinowere located off Exit 19 rather than Exit 33.The Attractiveness of CompetitionWhen the State consultant is determining how much of a population’s gamingspend will be spent at one casino versus another, the two key determiningfactors are the two casinos’ relative distance from the population and therelative attractiveness or appeal of the two casinos.The State consultant’s assumption is that a facility of the kind proposed inSumner County was next door to one of the Oklahoma Border Casinos (with thesame number of slots) that the Sumner Casino would only generate 22.2% morerevenue than the typical Oklahoma Border Casino. ((110 / 90)-1)=22.2%(The typical Oklahoma Border Casino in this case does not include higher qualityfacilities such as Quapaw Downstream Casino, the Firelake Casino, the HardRock Casino in Tulsa, or the Riverwind Casino outside of Oklahoma City.)While this assumption may not seem unreasonable, it greatly understates thequality disparity between casinos competing in location-neutral markets. Also,empirical evidence exists that is in conflict with this assumption. The Borgatadramatically outperforms most casinos in Atlantic City, for example, as doesWynn Las Vegas compared to Circus Circus just down the street on the LasVegas Strip. The situation also exists in Lake Charles, Louisiana, for which moredetail is provided.Lake Charles ExampleLake Charles is a regional gaming market located in southwestern Louisiana thatconsists of two riverboat complexes and one racino approximately 25 miles tothe west in Vinton. Key to the understanding of this market is that two riverboatcomplexes have essentially no location advantage over one another. The onlydifference is in appeal and attractiveness. The newer, $370 million L’Auberge du -9- October 2010
Lac generates nearly three times the win per slot machine than the older Isle ofCapri riverboat complex.Figure 1 – Lake Charles Casinos Delta DownsSource: Google Earth Fair Share Analysis - Total Gaming Fair Share Analysis - Total Gaming L Auberge du Lac Delta Downs 151.0% 148.4% 150% 140.5% 145.5% 150% 120% 103.3% 98.4% 120% 95.6% 95.0% 98.0% 83.1% 90% 90% 60% 60% 30% 30% 0% 0% 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 - 10 - October 2010