Kansas Racing & Gaming Commission Casino Proposal http://krgc.ks.gov/

1. MARVEL GAMING
RESPONSE!
KANSAS LOTTERY GAMING FACILITY REVIEW BOARD!
JULY 25, 2008!

2. Roger Wagner!
President and COO!

5. Roger Wagner!
President and COO!

6. Contention with the Wells
and Cummings Reports!
•! Based on our extensive experience operating
in similar markets, we strongly disagree with!
–! The extremely low projected revenue for a
Sumner County casino!
–! The further exaggerated difference in projected
potential gaming revenues between a Mulvane and
Wellington location!

7. CB Richard Ellis review of
Cummings Report!
•! Identified 6 reasonable scenarios which when
conservatively applied to the Cummings
Report!
–! Closes most of the gap between it, and the CB
Richard Ellis and Marvel Gaming Projections!
–! Does so in a clear and concise manner!

8. Clarification of the CBRE
May 2007 Report!
•! CBRE was never commissioned to prepare
any analysis for Marvel prior to January 2008
as reported incorrectly by the Wichita Eagle!
•! That report!
–! Studied the opportunity in Kansas considering a
Wichita Dog Track with slot machines, competing
within the market!
–! Did not contemplate the type of development
proposed by Marvel Gaming!

9. If I Was On Your Board…!
•! Why should this board believe Marvel’s
projections and the CBRE analysis, rather than
the state sponsored reports which provide a
different conclusion?!
•! Trailhead’s cumulative projected direct
economic benefits far surpass those of the
other developers. Why should the board
believe you can deliver those benefits?!

10. The Eleven Minute
Difference!
Atlantic City, NJ and
Tunica, MS wouldn’t exist!
If developers relied on the
analysis methods used by
Cummings!

11. Wellington and Mulvane
Propensity Analysis!
Estimated Gaming Revenue from WELLINGTON, KANSAS CASINO in first stable year (3rd full year) of operation
Estimated
Distance Population Wellington Propensity Potential Annual Average Revenue Potential Wellington Wellington
from Casino over age 21 share Gamers Visits loss per trip in Market Trips Share of Market
0- 10 miles 7143 100% 45% 3214 25 $41.00 $3,294,709 80359 $3,294,709
10-25 miles 106180 95% 40% 42472 18 $65.00 $49,692,240 726271 $47,207,628
25-50 miles 374934 80% 35% 131227 15 $82.00 $161,409,087 1574723 $129,127,270 )$**"&+,-&(
50-100 miles
TOTAL RESIDENT GAMERS
395323 40% 26% 102784 12 $92.00 $113,473,514 493363
2874716
$45,389,406
$225,019,012 !'("#'%&
Okla Tourists +100 miles 1297091 8% 40% 518836 6 $90.00 $280,171,656 249041 $22,413,732
All other Tourists +100-200 miles 2805999 2% 40% 1122400 2 $100.00 $224,479,920 44896 $4,489,598
Invited Premium Gamblers 1700 100% 100% 1700 1.2 $2,500.00 $5,100,000 2040 $5,100,000
Transient intercept on I35 & 160 29000 100% 100% 29000 1 $40.00 $1,160,000 29000 $1,160,000
TOTAL TOURIST GAMERS 324977 $33,163,331
TOTAL POTENTIAL GGR $258,182,342.80 $838,781,126 3199693 $258,182,343
!"#$%&
Estimated Gaming Revenue from MULVANE, KANSAS CASINO in first stable year (3rd full year) of operation
!"#$%$&'$(
Estimated
Distance Population Mulvane Propensity Potential Annual Average Revenue Potential Mulvane Mulvane
from Casino over age 21 share Gamers Visits loss per trip in Market Trips Share of Market
0- 10 miles 64490 100% 45% 29021 25 $41.00 $29,746,013 725513 $29,746,013
10-25 miles 300622 95% 40% 120249 18 $65.00 $140,691,096 2056254 $133,656,541
25-50 miles 93250 80% 35% 32638 15 $82.00 $40,144,125 391650 $32,115,300 ./*01&$(
50-100 miles
TOTAL RESIDENT GAMERS
413419 35% 26% 107489 11 $92.00 $108,778,807 413832
3587249
$38,072,583
$233,590,436
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Okla Tourists +100 miles 1297091 8% 40% 518836 6 $90.00 $280,171,656 249041 $22,413,732
All other Tourists +100-200 miles 2633898 2% 40% 1053559 2 $100.00 $210,711,840 42142 $4,214,237
Invited Premium Gamblers 1700 100% 100% 1700 1.2 $2,500.00 $5,100,000 2040 $5,100,000
Transient intercept on I35 & 160 29000 100% 100% 29000 1 $40.00 $1,160,000 29000 $1,160,000
TOTAL TOURIST GAMERS 322224 $32,887,969
TOTAL POTENTIAL GGR $266,478,405.53 $816,503,537 3909473 $266,478,406

12. We Disagree with the
Projected Revenues!
•! All three proposers project revenues an
average of 31% higher revenue than the
consultants.!
•! Projected models vary widely when compared
to actual performance. In one case, the
operator generated almost double the
projected GGR.!

13. Operators generally
outperform analyst
projections!

14. We Disagree with the
Projected Revenues!
•! Your consultants project much lower patron
trip frequency and lower annual growth rates
than we see in actual performance especially
in emerging markets and new developments.!

15. Probe Consultants!
•! Shows strong health in the financial
demographics of the main feeder markets to
Wellington!

16. Huge Difference in Cummings"
and Developers Projections!
$70M lower than Harrah’s!
$71M lower than Penn’s!
$79M lower than Marvel!

17. Being too cautious can be
as dangerous as being too
aggressive.!

18. We’re planning a!
“Right Sized”!
facility based on reliable
projections.!

19. The developers and
lenders (and in this case,
the state of Kansas)
depend on reasonable,
attainable projections.!

20. We Disagree with Civic
Economics!
Their method of “harmonizing”
payroll assumes that all three
operators market and operate in
a common, generic manner.!
This is demonstrably untrue.!

21. Horseshoe and Hollywood
Tunica, MS Employees!
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22. Our employee workforce
is substantially different in
a “big way, by design”.!

23. Correcting the Mulvane
Labor Pool Analysis!

24. Correcting the Mulvane
Labor Pool Analysis!

25. Correcting the Mulvane
Labor Pool Analysis!

26. Our Experience!
Gaming Operations!
•! 7 in Nevada!
•! 4 in Atlantic City!
•! 4 in Chicagoland!
•! 4 in Mississippi!
•! 1 in Louisiana!
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27. Our Perspective on the
Cummings Report!
•! Difference of opinion on six key variables
based on our experience and data.!
–! Impact of Distance on Spend!
–! Power Ratings!
–! The “Wichita Bypass”!
–! Not enough projected revenue from OKC!
–! Effect of Hotel Rooms!
–! Different Table Games Product and Operation!

28. The Distance Factor!
•! Cummings decreases gaming spend by 38%
for each doubling of customer distance for
Riverboat facilities in general, and Trailhead in
specific!
•! He decreases gaming spend by 50% for
Racinos because of lower attractiveness to
gamers!
•! Christensen uses a lower factor for land-based
casinos, so why not here? CBRE applies a
33% Decrease!

29. Effect of the Change on
Projected GGR!
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30. The Power Rating!
•! Cummings assigns 90 to OKC/Tulsa casinos and
110 to Trailhead!
•! This is only a 20% premium for Trailhead if you
put a typical Oklahoma casino next door!
•! There are many cases where the top property
earns double that of the lowest property within a
market!
–! Tunica, Shreveport, Lake Charles, Northwest Indiana!
•! CBRE reduces OKC/Tulsa Power Ratings to 65!

31. Effect of the Change on
Projected GGR!
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32. Wichita Bypass!
•! Cummings model proposes that Wichita
customers will drive by a closer superior
Sumner County facility to visit a inferior
Oklahoma property farther away.!
•! CBRE disagrees and proposes that Wichita
customers will not drive past a superior
property to visit a more distant, inferior one.!

33. Effect of the Change on
Projected GGR!
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34. Not Enough Revenue from
OKC/Tulsa!
•! Cummings refers to opportunity to exceed his
projections and we believe increased revenue
from OKC/Tulsa is one of the primary reasons
why this will occur!
•! Gravity models cannot accurately forecast
spending in a situation where a large city has
inferior casinos closer to a far superior property
that is more distant!
•! CBRE increases market GGR increasing Trailhead
GGR by $20.0M from this market!

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36. Effect of the Change on
Projected GGR!
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37. Hotel Rooms!
•! Each hotel room built at a casino generates
about $75k in GGR per year!
•! CBRE applies incremental growth to GGR by
$22.1M!

38. Effect of the Change on
Projected GGR!
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39. Table Games!
•! Very high cost associated with removal of
blackjack antes!
•! Most tribal operations lack Marvel Gaming’s
financial capacity to take high limit wagers!
•! OK casinos do not offer craps or roulette!
•! CBRE applies incremental growth to GGR by
$7.0M!

40. Effect of the Change on
Projected GGR!
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41. Effect of the Change on
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42. Effect of the Change on
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43. Effect of the Change on
Projected GGR!
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44. Next Up!
Jon Wolfe!
EVP of Operations / CIO!

45. We Are Accountable to
Achieve Projected Results!
•! Owners and Boards require attainable
projections with a stretch to achieve.!
•! Our projections are tied to reality through
bonus targets.!
•! We are focused on success, only satisfied with
leadership positions in the markets in which
we compete.!

46. Horseshoe Performance in"
Hammond, Indiana!
•! Purchased Empress Casino in Hammond,
Indiana in 1999.!
•! Rebranded to Horseshoe and grew revenue
by 40% over next three years!

47. Empress / Horseshoe in
Indiana – 1998 through 2008!
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PL=,.--& F+&*+,-.-/+.& F+&*4,,4/5-&

48. Number One Market Share
in Louisiana Riverboats!
•! Horseshoe Casinos under our management
enjoyed #1 spot in market share and
gross gaming revenue in all Louisiana
Riverboats from 1998 until sale of company in
2004.!

49. Turnaround Post-Harrah’s
Owned Properties!
•! Colony Resorts purchased four faltering
Harrah’s casinos which immediately lost over
20 percent of revenue, and two existing
operations in Las Vegas and Atlantic City!
•! We were hired to recruit a team to arrest the
declining performance!
•! Under our management, we increased gaming
revenue to levels, never achieved by Harrah’s,
even with their Total Rewards™ Program!

50. BALLY’S Tunica!
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51. Best Deal for Kansas!
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52. Best Deal for Kansas!
•! Alternate Scenario!
–! Reduced GGR to CB Richard Ellis projections!
–! Reduced FTE Employees to 1,400 from 1,500!
–! Retains a $153M lead over Harrah’s and!
–! Produces $438M more than Penn National!

53. Best Deal for Kansas!
No matter how you slice it!
we provide the Largest
cumulative economic benefit
through!
Revenue Share, Jobs and!
Voluntary Contributions!

54. State-Wide Kansas Lottery
Loyalty Card System!
•! Card-based loyalty systems provide revenue
premiums for the companies that use them!
•! Penn President estimated a 10% premium at
his presentation on 7/10/08 in Belle Plaine!
•! Our own experience at Resorts showed an
8-10% revenue enhancement!
•! At State’s Discretion, Marvel volunteers to be
the first casino to integrate with a statewide
lottery loyalty system!

55. Next Up!
Doug Lawrence!
Managing Partner!
Capitol Consulting Group!
Burlington, KS!

56. Economic Fiscal Impact!
Property Tax Revenues!
Key Dates!
January 1, 2008 (2009)!
January 1, 2009 (2010)!

57. Economic Fiscal Impact!
Property Tax Revenues!
•! Actual Tax Levies!
•! Actual Tax Revenues Paid to
Local Government!
Will Be Lower!

58. Economic Fiscal Impact!
School Finance Formulas!
Will Create!
Unintended Outcomes!

59. Economic Fiscal Impact!
Though Flawed, The study
highlights some real life
differences involving
Wellington and Mulvane
sites!

61. Thank You!!