In 2015, United States lottery ticket sales were approximately $70 billion, according to the North American Association of State and Provincial Lotteries. In that same period, sales for beverage alcohol were approximately $25 billion.
Meanwhile, most restaurants live and die by their food and beverage sales. Operators of pub-based venues with a significant portion of their revenue coming from gaming achieve a level of profit their competitors often envy. Recent economic difficulties have operators re-evaluating their business models, and many who rejected the idea in times past are now considering this as part of their future business models.
Why would people want to build their concepts around slot machines? Here are 5 answers.
Reason #1: Gaming adds a significant profit center outside of food and beverage.
While people can only drink or eat so much, they can wager large quantities of cash and never be satisfied. There are some bar operators I talk to who have their entire lease paid for by the revenue collected from VLTs, or video lottery machines.
VLTs enable large upswings in sales that are not typically achievable from food and beverage. Some people have told me stories about customers walking in to their bars and literally putting thousands of dollars into these machines within minutes. Although this does happen with food and beverage sales, it is much less common and requires more overhead to cook that much food and serve that many drinks. The machine can do the same thing with much less overhead. That kind of profit potential is exciting, and one of the big reasons why these machines are so lucrative.
Reason #2: Bars operate with less problems in a slot machine environment.
Selling night life may be exciting but it’s much easier to build a business around gaming customers. These guests don’t cause the same problems as the nightclub crowd. There are fewer fights, less late nights, less problems with governing authorities (like police and fire), and less noise complaints from neighbors.
The staff that work at these venues also cause less management problems for owners. They are easier to deal with and have a higher level of integrity. I can also attest that pub operators just seem to be more relaxed and laid back than their nightclub counterparts—they are less stressed about their businesses. It’s because operating these kinds of businesses requires much less maintenance than businesses with a nightclub concept.
Reason #3: The demand is there.
It’s much easier to build a customer base that is focused on gaming. Many operators fail when they build their business around an entertainment offering. Eventually, that concept is no longer “cool,” which results in a customer base that eventually dwindles so low the venue must close.
Gaming is in demand, will always be in demand, and is always “cool” whether the economy is going up, down or sideways.
Reason #4: Customer demographics are more diverse with slots.
You can get people of all races, shapes, sizes, sexes and ages to game, whereas your demographic from your food and beverage offering can be much narrower. This automatically makes your business more valuable as you can now serve more customers overall than a business that lives or dies by its entertainment offering.
Reason #5: It builds lunch and afternoon business easier than conventional food and beverage offerings.
Building a successful lunch and afternoon happy hour is a difficult task. However, it becomes much easier if gaming is one of your offerings. If food and beverage are the only things you offer, your lunch will be dependent on the quality of your food and beverage, a never-ending struggle when you factor in the cost of prep, constant innovation, quality control, portion control, and all the other things involved in running a kitchen.
If gaming is part of your concept, that’s one more reason people have to come in at lunch. I have one client that has 22 slot machines in their 2,000-square-foot bar and there are people literally waiting at 10:30 a.m. on a Monday for the doors to open so they can come in and play slots. By 11:00 a.m., there are usually 5 to 10 people sitting at machines and a person sitting at the bar getting lunch that would not be there if it was just about the food and drinks.
Visit this resource to learn about your state’s video poker laws.
About the Author
Kevin is an operations consultant with over a decade of experience working directly with bar, restaurant and nightclub owners on all points of the spectrum, from family-owned single bar operations to large companies with locations on an international scale. Kevin works with them all and understands the unique challenge each kind of company faces.
He operates an inventory auditing practice out of Calgary, Alberta, Canada with Sculpture Hospitality (www.sculpturehospitality.com) that helps bar and restaurant owners enforce policy through regular inventory audits. He is also the author of Night Club Marketing Systems – How to Get Customers for Your Bar (available on www.Amazon.com), and a regular contributor to Nightclub & Bar.