Olympic Entertainment Group is the largest casino operator in eastern and central Europe. With casinos in eight different countries—Estonia, Latvia, Lithuania, Poland, Slovakia, Belarus, Italy and most recently Malta—Madis Jääger has his hands full. As chairman and CEO of the group, Jääger concentrates on customer service to elevate his companies from his competitors. He admits non-gaming revenues aren’t the focus, but understands things like bars, restaurants, entertainment, and in some cases, hotels can make the difference. He spoke with GGB Publisher Roger Gros during the ICE trade show in London last month.

GGB: Tell us about your casino which opened recently in Malta.

Madis Jääger: About five weeks ago, we opened the largest casino in Malta, which, in terms of our size, really is the largest for us too. It’s really the crown jewel of the casino industry in Malta as well, located in a city center of entertainment in the Intercontinental Hotel. So the natural flow of people and the crowd congregates there. Prior to deciding to locate in Malta, we did a survey of our potential competitors and saw a real opportunity from the service point of view. Maybe I’m too arrogant to say this, but you cannot really compare our service to the competitors. It’s still about the service and provision of the games, loyalty programs and the attitude. It’s not only about pure gambling.

Do you have one casino that you consider your flagship property?

While the Malta property is bigger, I’d have to say our property in Riga (Latvia), the Voodoo Casino. It is really the attraction point of all of the Latvian entertainment. We have expanded and enlarged the casino from time to time, and it is becoming a hub, where people have to come just to see what is happening.

They even do not come to gamble; it’s more like a type of Las Vegas thing. People can gamble, but you can have a great restaurant with a very nice bar. So I would say it best illustrates what an Olympic casino should be.

Tell us about the casino you are planning to open in Tallinn in Estonia.

We are building right now a Hilton hotel, which will be the first Hilton in the Baltics, opening this summer. This will become our flagship casino, which means that we will be moving the majority of the business from the existing casino we operate now. The new casino will be triple the size of the existing one, with some very new things as well that we have not introduced before into the casino market there. So, it’s not only about the gambling. It’s not about the bars or some entertainment, but some new features, some new elements that we hope will be positively accepted by the customers.

What’s different about this project than your other casinos?

This one we are building from the ground up. Our model up until now has been we are tenants in a building that belongs to somebody else. This forces you into some sort of framework, or there are always some restrictions, about the floor layout, what is the entrance to the street, what is the entrance to the hotel, etc. With this Hilton project in Tallinn, we are integrating the casino with the hotel. This will give us the best layout, the best connections to the conference room where we can host poker tournaments, to the lobby, or to wherever. So, the whole product will be more or less like a small destination resort, which will attract tourists from Russia, where the casinos are not allowed. We’ll also attract players from Finland, Sweden and Norway. I believe that it will have a great future.

Olympic operates in multiple countries with very different regulations, tax rates an

Back in 2009, Jamie Odell, CEO of Australian slot manufacturer Aristocrat Leisure, Ltd., made a commitment to improve the legendary slot-maker’s North American business. Odell’s five-year plan to accomplish that goal was to focus on growing the company’s inventory of premium games.

In the ensuing five years, Aristocrat brought in the best design talent in the industry, secured licenses to create blockbuster games from The Walking Dead to Britney Spears, and created show-stopping presentations like the Arc Double and the Behemoth that draw crowds to the slot floor.

But one move at the end of that critical five-year period arguably has done more to boost Aristocrat’s gaming operations portfolio than any other—the 2014 acquisition of Tennessee-based Video Gaming Technologies for $1.28 billion.

The VGT acquisition stood out among the mega-mergers and buyouts of that year, because unlike the others, it did not represent a consolidation, but rather an expansion, giving the acquiring company something it never had—a foothold in the Class II Native American gaming machine market.

More than a foothold, in fact. VGT was and is the largest supplier of Class II games in the U.S. Its 20,000-plus units in the field (mostly in the Class II heartland of Oklahoma) account for nearly 40 percent of the total Class II market.

From just about any angle, everything about the VGT acquisition made sense. “First, we weren’t in the Class II space, so it was an accretive move for us to get into that market,” says Brooks Pierce, Aristocrat’s managing director for the Americas. “Secondly, VGT was a very well-run company in a strong business that we thought we could integrate nicely, which we have. And lastly, the attractive part about it was the gaming operations nature of the business.”

Class II Pedigree

Aristocrat always had great relationships with tribal gaming operators in Class III compacted markets, and if the goal was to augment those relationships in the Class II space, it couldn’t have chosen a better partner than VGT.

Founded in 1991, VGT was one of the first suppliers to realize the potential of the Class II tribal business which was created only three years earlier with passage of the Indian Gaming Regulatory Act. The company quickly established itself in the Oklahoma market.

“VGT was one of the first companies to come into Oklahoma, and built a market share pretty quickly,” says Jay Sevigny, president of VGT. “Most importantly, VGT grew right along with a lot of the tribal gaming, and developed a lot of trust. We think of it as a shared partnership, and today, our relationships are very, very robust.”

In many ways, VGT provided the final piece of the puzzle in Aristocrat’s resurgence, which saw adjusted ship share rise to 23 percent in the fourth quarter of 2015. The Class II business completes a package that already had seen gaming operations business soar, from the company’s traditional casino business to its newer social casino offerings, made possible by the 2012 acquisition of social content supplier Product Madness. Pierce says the majority of Aristocrat’s North American business is now gaming operations content.

But the addition of a burgeoning Class II business to Aristocrat is only one benefit of the union. After all, this wasn’t a strong company taking over a weak company. Each company had developed technology that propelled it to the top tier of its market.

“Unlike some of our competitors’ acquisitions where they were reliant upon synergies to make it pencil, ours wasn’t that way at all,” says Pierce. “It all tucked in very nicely, and now we’ve just grown the business together, and leveraged the best of Aristocrat and the best of VGT.”

The integration of technologies already has begun. Last summer, VGT unveiled Easy Money Jackpot, its first-ever wide-area progressive link, at 11 casi

The principals of Global Market Advisors, Andrew Klebanow, Steve Gallaway and Bill Bryson have vast experience in the casino industry, so when they bring the focus to an issue, they can drill down and get to the bottom of the problem. In 2015, several articles in GGB magazine raised the awareness in the industry of the steadily rising hold percentage on the slot floor and what impact that has on players and operators. And their long experience in Asia has made GMA the “go to” company to hire when you’re considering investing in any Asian country, especially Korea, Taiwan, Russia, Vietnam and Cambodia.

How did you come to the conclusion that slot payback percentage was a problem?

Klebanow: We conducted player focus groups in Las Vegas and around the country, and the one message that was consistent was that slots were getting tighter. Now, that could have been anecdotal, but once we started looking at the data, it became clear that not only was the slot hold increasing, it was far more dramatic than we had thought, up to 40 percent over the past 10 years.

Now, the casinos say the hold is only a point or two higher, but it’s really much higher than that, isn’t it?

Gallaway: If you have a 10 percent hold game and you increase it by two percentage points, you’re really increasing that hold by 20 percent. And this is on top of how much the average bet has increased. Historically, the higher denomination the machine, the lower the hold percentage. So when pennies were introduced, the reasoning was those machines should have the highest hold. But a penny game is not a penny game anymore. When you have an average bet of $1.50 or $1.75, and compare it to the average bet of a quarter game, 75 cents, the average bet of a penny game is twice that. So that gives you half the time on device, coupled with a much tighter machine. It’s impacting the customer experience negatively.

GMA is very active in Asia, with many clients. What’s the current consensus on the government crackdown in Macau?

Bryson: We’ve seen this many times over the years, but this crackdown has had some serious legs. The first was aimed at government officials who were illegally taking money to Macau. The second was a crackdown on conspicuous consumption, which went beyond gaming, the large purchases or very public events. And the last crackdown was on the people who market to Chinese to gamble, the junketeers. That’s the most troubling aspect of this crackdown, and it shows me that this might be going on for a while.

How is Macau going to survive?

Bryson: I think the operators are going to have to take a second look at markets they’ve by and large neglected for years because the Chinese market was so huge.

Gallaway: That being said, the Asian gaming market is so large, you still have 300 million-plus middle-class Chinese, and while it is now going through a recession, they will get through it. Trying to predict China’s policy is very difficult, but as China goes through a recession, some neighboring countries are going to benefit.

How about Vietnam, where you have several clients? There’s one big resort there and proposals for more.

Klebanow: There are very few markets in the entire world where a $4 billion resort makes sense, much less in an emerging economy like Vietnam.

Gallaway: And the only way a $4 billion project could even begin to be feasible—and it definitely is not—would be if you had a guarantee that you could attract the high-level junkets

Washington state hosts one of the most unique gaming industries in the U.S. With tribal and commercial casinos, the state is a often a beachhead in the gaming industry. Chris Stearns, a member of the Navajo tribe, and an expert in Indian gaming law, was appointed to the Washington Gambling Commission in 2013 and recently reappointed to a term that will last until 2021. He has paid close attention to iGaming and possible implications in Washington state, as well as the spread of illegal gambling in the state. He spoke with GGB Publisher Roger Gros at G2E in Las Vegas in October.

GGB: Give us a thumbnail sketch of what the gaming industry is like in Washington and what your area of responsibility is there.

Chris Stearns: We oversee not just the regulation of the commercial games, which are operated by card rooms—pull-tab, punch board, bingo operators, raffles—we are also a law enforcement agency, so we prevent illegal gaming. And in fact, that is a large part of what we do. And then when it comes to tribal gaming, because of the way the federal law is structured, we co-regulate with the tribes. I think Washington has a really good structure, when it comes to the tribes. We’re one of the few states where there is no revenue sharing. That’s worked out well, both for Washington citizens and for the tribal nations.

Do the tribes pay any kind of regulatory cost?

They do. Under the compacts, they pay the cost of regulation. There are also small payments, but significant in terms of the actual number and the size, to localities to help mitigate things that come with gaming—crime, traffic and such. And then there are also contributions to a responsible gaming program.

Tell us about the “mini casinos.” Are they really that small?

Some are, but, some we call “enhanced card rooms,” and they can be pretty large in size. They’re located in urban and rural areas, and they’re pretty popular. There are some limitations that they have, that maybe tribal operators don’t have. But in general, they’re very popular.

You’ve been very interested iGaming as it might pertain to Washington state. Give me some of your thoughts on where iGaming is going right now.

We’ve been following it for about three years or so. Back then, it seemed like the next big thing, but I’m glad we’ve paid attention to it. One of the things we do is to give the governor and the legislature all the information they need, so we’re not just in a reactive stance, but we can proactively see what’s happening. So, we thought iGaming was something we should be studying.

Tribal casinos in Washington are all on reservation land. Is there any movement toward off-reservation casinos?

Yes, there are two active requests for the Bureau of Indian Affairs to put land into trust. They have approved the first part of a two-part step for the Spokane tribe. And the Spokane tribe has proposed to have land and gaming operation near the city of Spokane. There’s some controversy, and that decision now rests with the governor, to decide whether or not he’s going to concur.

The second instance is that the Bureau of Indian Affairs took land into trust for the Cowlitz tribe, which is on the I-5 corridor, but much closer to the Portland metro region. And that decision by the Bureau of Indian Affairs is under litigation.

When someone becomes an executive at a tribal casino, is the tribal gaming commission responsible for doing the licensing of that official or is that the responsibility of your agency?

We also license individuals who work at Class III facilities, so we do