Hotels Skillful slots In pursuit of a winning strategy: Getting millennials to gamble By Sarah Feldberg / May 04, 2016 Share 1 Photo Credit: Illustration by Shutterstock/elenabsl -- Picture a slot machine on a casino floor in Las Vegas. Sound effects blaring, lights flashing, graphics dancing across the screen. Maybe it's "The Hangover" machine, where quotes from the movie pop up with each spin and the reels are filled with the film's characters alongside images of a hospital bracelet, a satchel and a chicken. Oh, look! Five Mike Tysons in a row! Now zoom out. A few feet away from Bradley Cooper's whirling face, perky TV host Ellen DeGeneres is smiling on the screen. "Surprise! It's bonus time," she says, before sheepishly making it rain dollar bills when someone wins on her branded slot. One row over, colorful signs advertise Blazing 7s, Buffalo Stampede and "The Walking Dead." Here and there, people stare into the shining boxes, hitting the buttons and hoping they'll hit it big. Now zoom out once again, to the line snaking down a casino hallway filled with young people in bandage dresses, too-high heels, crisp button-down shirts and 11 p.m. buzzes. They're waiting to get into a club, to join the crowd downing vodka tonics to a soundtrack spun by a disc jockey. While they're in town, they'll drink and eat. They will hit the pool and maybe catch a concert. But they won't sit down and gamble, not like the generations before them, not enough to make casino operators, game manufacturers and people across the gambling industry sleep well at night. Las Vegas has a problem. It's not that people aren't visiting the city or that they're staying out of the casinos. It's that when they do visit, they're gambling less, spending less money at the slots and tables. For young people especially, gambling seems low on the collective to-do list. They're simply not that enticed by what they see on the casino floor. And besides, Dutch DJ Tiesto is spinning music upstairs. Cleopatra Pinball, developed by IGT, is a hybrid device that combines gambling and video-game play. Gaming revenue in Las Vegas is still below its prerecession high. While Strip revenue as a whole is up, the casino floor isn't keeping pace. So to boost gambling and appeal to the next generation of Vegas visitors, the industry is evolving and adapting, developing apps for mobile betting, building social spaces into casino floors and creating an entirely new category of slot machine that feels more like a video game than the classic one-armed bandit. Those changes might not sound inherently groundbreaking, and opinion is mixed on how they will impact the city in the long run. But ask around and you'll hear some big predictions and a very bold assessment: Las Vegas is in the midst of gaming revolution. A thinning slice of the pieThe problem itself is a matter of interpretation. The good news is that Strip revenue is high. In 2015, a record 42 million people visited Las Vegas, and the Strip brought in a whopping $16.7 billion, up significantly from a prerecession high of $15.8 billion in 2007. This growing revenue is coming less and less from gaming. While gambling is still the largest piece of the Strip's revenue pie, its slice is thinning. In 2007, gaming accounted for 41% of casino revenue. Last year, gambling on the Strip brought in just 34.9%. Some argue that this isn't a bad thing, that relying less on betting is nothing to be worried about and could actually benefit Las Vegas Boulevard in the long run. But there's another issue looming on the horizon, one that has industry regulators, casino operators and game manufacturers on alert: the emergence of millennials and Generation Xers as Las Vegas' core visitor demographic. According to the Las Vegas Convention and Visitors Authority's Generational Report, millennials (born after 1980) and Gen Xers (born 1965 to 1980) made up a combined 64% of Vegas visitors in 2014, the most recent year for which data was available. They were also the least likely to play the slots or a hand of blackjack during their stay. While 71% of visitors report that they gambled while in Vegas, that figure dropped to 68% for Gen Xers and 63% for millennials. Among those who did play, millennials also averaged the least amount of time gambling (1.8 hours) and budgeted the least money ($328.31), over $200 less than the overall average of $530.11 per trip. To a lot of people in the gaming world, that looks like a problem. "You've got 100% of the floor devoted to traditional casino product, but interest when you drop below 45 years old is very low, and it falls off a cliff when you hit the cutoff for millennials," said Eric Meyerhofer, the CEO of Gamblit Gaming, a California-based company dedicated to the intersection of gaming and gambling. Catapult King is a skill-based game created by Gamblit Gaming, one of the ways casinos hope to reach the millennial market. Nevada Gaming Control Board chairman A.G. Burnett said that when in casinos, adults ages 21 to 40 or so are "interested in their phones and the games that they find on their phones and are not necessarily as interested as some previous generations in terms of baccarat or blackjack or poker tables or slot machines."While stats are not available to decipher what millennials play when they decide to gamble, Blaine Graboyes, the CEO of video-game gambling company GameCo, sees two fundamental problems with the traditional slots crowding casino floors."The gambling experience has gotten overly complicated, while the gaming experience is overly shallow," he said. "You press a button and the decision is made in a microsecond [in video games]. You're basically just waiting for an animation to play out."On the other hand, payout schemes for slots have become a zigzagging mess of hundreds of lines. "I can't really figure out what's going on with a lot of the machines," Graboyes said. And millennials? They're just walking right by. Enter skill-based slot machinesOn May 21, 2015, Nevada Gov. Brian Sandoval signed Senate Bill 9, which established a framework for a new kind of game, skill-based slot machines, to be allowed in Nevada casinos. Last September, the Nevada Gaming Commission approved regulations to govern such devices, and tech standards went on the books earlier this year. "I think the regulators heard the cries of the industry that they need to be able to offer some new types of products in a regulated fashion," Burnett said. "We agreed." Now, chance-based, skill-based and hybrid slot games are all written into the state's laws.The world got a glimpse of what those games might look like at the annual G2E gaming convention last fall. At the show, Gamblit created a lounge that showcased the company's hardware: a surface table that enables groups to play head-to-head or against the house and touch-screen tablets for solo play, a new generation of casino games for a new generation of player. Like first-person shooters, arcade classics and Angry Birds, Meyerhofer said, these games are definitively skill-based. "It's very clear as to why the skill matters," he said. "If you don't perform well, you can't expect a good return."Grab Poker is a skill-based game from Gamblit Gaming that combines elements of video-game play with poker. In Grab Poker, for instance, four players sit around one of Gamblit's interactive tables. Each player is dealt two cards, with the remainder of a standard deck flipped over one card at a time in the middle of the screen. If you see a card that you want for your hand, you hit a button to be the first person to grab it. When the first person reaches a five-card hand, just 11 more cards are flipped to fill out the other hands. Then the person with the best hand takes the pot. Gaming giant IGT is also moving into this space with hybrid slots that offer a skill-based experience during the bonus round. Texas Tea Pinball functions like a traditional slot until users hit that bonus. Then the player can choose between free spins or a game of digital pinball. Keep that silver ball bouncing around for a while and you'll earn a higher payout. Let it slip past and you're back to the basic slot game in no time. Burnett had the chance to try out a few of the prototypes during G2E 2015. "It is vastly different from slot machines and what you see normally today," Burnett said. "The ability for the player to interact with the game is way higher. I thought they were fun, personally." GameCo’s video-game gambling machine is an arcade-meets-slots device that comes with its own controller. At New York-based GameCo, Graboyes uses the term "video-game gambling" to describe the company's slot cabinet and the games it offers. "Our machine looks like a cross between an arcade cabinet and a slot machine," he said. It comes with a custom controller that resembles what you might use with an Xbox, and the company's software platform is designed to adapt mass-market video games to the casino environment. Graboyes sees video gamers as an untapped market for casinos, and he sees his company's model as a potent one-two punch: replacing underperforming slot machines with games that arrive with a built-in audience. "Ultimately, our focus is the idea of bringing in net new gamers to the casino floor, whether they're in the club or hanging at the pool or not at the casino at all," he said.Beyond Sin CityNevada isn't the only state that has recognized the need for and potential of skill-based slot machines. New Jersey has adopted the regulations, and Massachusetts is drafting its own. In Nevada, Burnett said, manufacturers are currently submitting their games, and after independent testing, he expects to see some version of Grab Poker or Texas Tea Pinball hitting casino floors in the next six months. Meyerhofer said he is in talks with a couple of notable operators, including "people on both sides of Las Vegas Boulevard."Just how his games will be incorporated into the existing casino landscape is still up in the air. They could be placed among more traditional games, installed as a block or broken out into their own environment. Meyerhofer believes that last model is the way to go, because creating a social space around the games is "fundamental. If you took new types of skill games and littered them around the floor, I don't think you'd see any success. They might even do worse."Young people, he added, want to "experience hop," to grab a drink at the bar, play a game and socialize, all within the same general space.The Encore Players Club at Encore Las Vegas is a multipurpose lounge space separated from the casino that contains gaming, a cocktail bar, complimentary billiards and shuffleboard and touch-screen tables. That's the idea behind the Encore Players Club, a sort of gaming lounge set in a corner of the casino floor at Encore Las Vegas. It has a low wall, separating it from the rest of the casino, and its own carpet pattern and ambiance. The 5,000-square-foot venue is a cocktail bar, gaming pit and social space rolled into one. The lounge includes roulette, craps and blackjack; free shuffleboard and billiards; 23 TVs; a bar; a DJ booth and eight interactive touch-screen tables where guests can play nonbetting social games and browse the drink menu or check sports odds."Previously, it was a blackjack pit, the slowest pit in the hotel," said Players Club general manager Michael Waltman. But, he said, there's a new energy emerging from the multipurpose space. "This is not a party pit," he said. "It's also not a nightclub. You don't need a membership card. There's no cover charge."Down the street at the Cosmopolitan, the resort embraced a similar concept for its new race and sports book. Of course, there are betting windows and stations, comfortable seating and massive screens, but the venue is really a social hot zone, a hybrid space designed to cater to different people at the same time with eight table games, free billiards and shuffleboard and a large central bar that serves food around the clock from the nearby Henry cafe. "We wanted to make this much more interactive," senior vice president of casino operations Brian Benowitz said shortly after opening the space in February. "We want people to be here, and we want it to be a destination."Which brings us to our final innovation in the gaming revolution, a technology-based approach designed not to create a destination but to free people from one. Sports betting mobile apps allow bettors to put down cash on their team of choice from anywhere within the Nevada state lines. While the apps are hardly new, they've been growing quickly as more casino companies realize their potential and roll out their own versions. LegalSportsReport.com, a website dedicated to the sports betting industry, counts eight different apps available to bettors in Nevada."I've been working on a platform to wager on sports for a couple of years," says Johnny Avello, Wynn's executive director of race and sports, who launched the resort's mobile sports betting app on Feb. 29. "I can see where we're going tech-wise, getting away from doing things point of sale."The Westgate sports betting mobile app allows wagers to be placed legally anywhere within the state of Nevada. The Westgate, home to the SuperBook, debuted its app on Jan. 19. Jay Kornegay, the vice president of race and sports operations, called the app the "wave of the future" and said it has already exceeded expectations for early sign-ups. To use the apps, customers must initially visit the casino in person to set up and fund an account. Once that's done, they can place a bet from anywhere in the state: waiting for their luggage at McCarran Airport, under the table during dinner, even when poolside with a cold beer."I expect within the first two years that half of our handle will be accepted via the app, and it will continue to grow after that point," Kornegay said. "The younger generation, they do everything with their phones, and it's capturing the growing market of millennials and beyond."There it is again, that watchful eye gazing toward millennials and the gaming products that just might reach them. How worried do Vegas casinos need to be? Some in the industry are unconcerned. They see the lower gambling stats among millennials as a function of age and income, an issue that every generation has faced and that will be resolved as this group grows up and makes more money. Others see big changes on the horizon."I think it's going to be huge," GameCo's Graboyes said of the impact of skill-based gaming. "Our vision is we're not that far away from a video-game casino, where an entire casino is built and designed specifically for gamers."Most in the industry are not willing to go that far, but there is a lot of agreement on the basic principle at the foundation of all these developments: There is a younger generation of patrons visiting casinos, and resorts must adapt to them and embrace them -- or risk losing big.