How do Las Vegas casinos make their money?
The answer may not be what you think.
Since the 90’s, Las Vegas has transformed itself from Gaming Capital of the World into a destination for world-class entertainment, food, retail, and everything in between. Activities that once served as loss-leaders to get gamblers in the front door and up to the blackjack tables now produce over half of all revenue at many large casino operators.
According to the American Gaming Association’s “State of the States” report, 27-percent of casino customers in 2011 said they never or rarely gambled during recent visits. That number has been steadily increasing each year and as dozens of states open their borders to gaming in the face of large budget deficits, success in the “gaming industry” will ironically come from non-gaming revenue streams.
How are the Florida Panthers doing as a franchise?
The answer may not be what you think.
Jonathan Willis at the Edmonton Journal recently dug into the audit records of Broward County, Florida and noted that the Panthers aren’t exactly the hockey wasteland they’re often made out to be:
The bottom line is that the Panthers’ current ownership did not get into hockey to lose money, and according to the county auditor they haven’t lost money. Florida, commonly presented as one of the league’s have-not teams, and an example of the dangers of over-expansion, is nothing of the sort: it’s a healthy business, carefully presented to appear like a money-losing operation.
Granted, the Panthers as a hockey team ranked 26th out of 30 in the 2011 NHL Franchise Valuations ($162 million), have only made the playoffs once in the past 12 years, and based on Forbes estimates haven’t turned an operating profit over the same period — but there’s more to the story.
“I often tell people, we’re in the entertainment business and we happen to own a hockey team,” says Michael Yormark, President/CEO of Panthers parent company Sunrise Sports & Entertainment. “For us, it’s just about providing as much entertainment as we possibly can for our community.”
The home of that entertainment is the newly-renamed BB&T Center, ranked 13th among US venues by Pollstar in terms of tickets sold and non-sporting events hosted. Located in Sunrise, Florida (just west of Ft. Lauderdale and 35 miles north of Miami), SS&E and the Panthers have no shortage of competition.
The Miami Heat are positioned to compete for an NBA championship on an annual basis. The Marlins may not have any semblance of a professional baseball roster anymore, but they still have a beautiful new $634 million ballpark. Then there’s the Dolphins and University of Miami of the football world — all fighting for sports fans in a region that’s limping its way out of a nasty recession.
But Yormark isn’t concerned.
“From the moment I came to this marketplace nine years ago, I said we weren’t going to compete with these other franchises head-to-head from a sports perspective,” he explains.
“We’ve got a niche in the marketplace with our hockey team and a very loyal fanbase, but our value proposition is all about the entertainment. It’s 170-200 events a year, almost two million people in this building on an annual basis, and we have been successful. You can’t judge us just based on wins and losses as it relates to the hockey team.”
Yormark hasn’t had any Panthers wins or losses to worry about this season as the NHL lockout enters its third month. Instead, he’s been working to pack the BB&T Center with every boxing match, basketball game, Cirque du Soleil, and Bon Jovi concert imaginable.
“I think, as a company, we learned during the last lockout that we can’t be solely reliant on the hockey team for success,” he says. “You’ve got to constantly recreate yourself and be looking for ways to diversify your company.”
The Panthers quietly took a major step towards diversification in late July when they signed a partnership agreement with Vegas casino operator Boyd Gaming to try to bring a large casino-resort to Sunrise. The proposed casino would be built on land surrounding the BB&T Center and adjacent to the Sawgrass Mills shopping center, the second most-visited tourist destination in Florida after Disney World.
Despite the Broward County location being a potential gold mine for all parties involved, there are still significant hurdles to overcome before any plan becomes a reality. NHL officials have already OK’d the idea of a casino being so closely intertwined with one of its teams, but the Boyd-SS&E team will need additional state legislation to take full advantage of the opportunity.
Gaming currently exists in a number of different forms in Florida — racetracks, poker, slots, table games on Native American reservations, Internet cafes — but nothing is permitted on the scale that Boyd is planning. With other major casino players like Las Vegas Sands and Malaysian giant Genting Group already investing in their own South Florida mega-plans, it seems like Boyd and the Panthers are setting themselves up to take advantage of the inevitable gambling explosion in whatever form that may be.
Yormark recognizes the challenges, but is still excited about the potential.
“The casino hotel would create more of a 24/7 destination for our site,” he says. “We are beginning to make a shift into the real estate business with this new venture. When you think about 30 million visitors each year across the street at Sawgrass Mills, the millions that already come to our site for concerts and shows and hockey games, and the traffic that’s going to come to this magnificent casino hotel, this really becomes the hub of entertainment in South Florida.”
“That’s the vision, and that’s what makes it so exciting for us.”
All things considered, any potential casino decision is still a number of years away. That hasn’t stopped Yormark and the Panthers from taking the next step on and off the ice.
Boca Raton businessman Cliff Viner purchased the team in November 2009 and with the help of new General Manager Dale Tallon has already turned the franchise around. Prior to coming to Florida, Tallon played a substantial role in reviving the Chicago Blackhawks and built most of the roster that went on to win the 2010 Stanley Cup. In just two summers, he’s already taken a perennially underachieving Panthers team and positioned them for long-term success.
Despite a major roster overhaul last offseason, Florida won the Southeast Division in 2011-12 and qualified for the playoffs for the first time in twelve years. Yormark says that small taste of winning on the ice had South Florida residents lined up outside the arena looking for a way to become part of the action.
“Even when we made it to the playoffs, people questioned whether we were going to be able to sell tickets. We had four sellouts in the first round alone. We saw a lot of kids and teenagers coming out in the playoffs because it was the hot thing to do. They were wearing the red hats and the ‘We Believe’ t-shirts and they jumped on the bandwagon. It’s a lot easier to market a franchise from a grassroots perspective when you have the help of a winning team.”
While ESPN (and others) are predicting the Panthers to take a step backwards in 2013 — or whenever the NHL returns — Tallon has assembled an impressive stable of prospects that should ensure long-term success for the franchise.
Yormark and his staff are already taking steps to position the team for success off the ice as well. Last month the team unveiled Club RED, an all-inclusive super-premium club located at center ice at the BB&T Center that features premium food, valet parking, tickets to every arena event, and all the amenities you might expect from, say, a Las Vegas casino resort.
“We weren’t reaching that super-premium customer in the marketplace,” Yormark says. ” We needed something that would enable us to get into a conversation with somebody that probably looked around our building and didn’t see the exact opportunity they wanted within our existing clubs and suites.”
Despite complaints from a number of season ticketholders displaced by the new club, a project like this would have been impossible to pull off a few years from now when the BB&T Center is packed to capacity after a few more playoff runs.
Now, with an impressive facility, a star-studded event lineup, a hockey team on the rise, and the Boyd partnership in their back pocket, the Panthers could achieve the one thing no hockey fan wants to admit is possible in the sunny South Florida market: Success.
“We know we still have a lot in front of us,” Yormark says, “but we’ll try to celebrate the small wins along the way and just keep focused on the big prize.
“Here’s when we’ll finally celebrate: When the building is sold out every game. When we have this magnificent casino-hotel next to the facility. When we raise the Stanley Cup after winning in our own building and then can go to the casino-hotel after to spend the night with all of our friends and family and players and their families. At that moment, we’ll be able to step back and say, ‘you know what? We’ve arrived.'”