Monday, October 21, 2002
Copyright © Las Vegas Review-Journal
MGM Mirage, IGT strike deal
Casino giant will switch nearly all slots to cashless models under pact
By JEFF SIMPSON
GAMING WIRE
MGM Mirage and slot powerhouse International Game Technology have reached an $85 million deal that would see the nation's most profitable casino operator convert almost all of its existing slots to IGT's EZ Pay ticket-in, ticket-out system.
In a deal to be announced this morning, MGM Mirage plans to install IGT's EZ Pay system in nine of its largest casinos, a commitment that includes the purchase of 7,000 new slot machines and the retrofitting of 11,000 more devices with the EZ Pay ticket-reading hardware.
Installation of the new machines and retrofits is under way and expected to be completed by summer.
Retrofitting existing slots with ticket reader-printers and new software costs between $600 and a couple of thousand dollars per device, and new machines, before volume discounts, cost about $10,000 each.
Operators say the costs are more than offset by reduced coin handling expense, additional revenue earned by machines that stay in service longer and increased customer satisfaction because hopper-fill delays are eliminated.
The deal is a big plus for MGM Mirage, said Bobby Baldwin, president and chief executive officer of MGM Mirage subsidiary Mirage Resorts.
"The company is interested in providing the maximum amount of customer service, and the ticket-in, ticket-out has proven to be very popular," Baldwin said. "Customers aren't interested in barriers to their play. They want it, so we're providing it."
Baldwin declined to say how many jobs would be eliminated because of the technology change, promising that most workers would be retrained for other jobs.
The MGM Mirage purchase is a big contract for IGT, said company Vice President Ed Rogich.
"This deal clearly demonstrates that our EZ Pay ticket system is a viable solution that's approved by regulators and is secure," Rogich said. "This is another huge endorsement of our system, and a great kick-start for our fiscal year (which began Oct. 1)."
The company's EZ Pay system is currently operating or on trial at 100 different casinos. More than 60,000 machines use the system, about 10 percent of the total U.S. slot floor, Rogich said, numbers that will jump appreciably because of the deal.
"Anyone in the industry's going to see this for the dramatic step it is," he said.
Although MGM Mirage controls an estimated 60 percent of the Strip's high-roller table game market, Baldwin said slot play is very important to the company.
Gamblers lose about $140 per day on each of Bellagio's 2,400-plus slots, about 40 percent more than the Strip average, Baldwin said.
"Our employees will now have more face-to-face time with customers as opposed to filling time handling coin," he said.
About 68 percent of the 600,000 slots on U.S. casino floors are IGT machines, Rogich said.
Ticket-in, ticket-out technology uses paper tickets for slot payouts and has gained rapid acceptance as operators watched systems already in place increase slot revenue, cut coin-handling expenses and eliminate hopper-fill delays.
Some operators elect to set the slot machines to accept coins, others elect to go 100 percent paper, but Rogich predicted MGM Mirage's Strip properties would retain the ability to use coins.
"In the Strip environment I think you'll always see coin," he said.
MGM Mirage is the first major operator to commit to converting as much of its companywide slot floor to the new technology, although Park Place Entertainment last year reached a deal to convert seven casinos to ticket-in, ticket-out systems, an agreement that included the purchase of about 15,000 new IGT slots in three years.
Many other operators have converted a big percentage of their slot floors to ticket-in, ticket-out devices, including Station Casinos, Coast Casinos and the Palms, Rogich said.
Mandalay Resort Group has an EZ Pay trial under way at Luxor, and Harrah's executives said recently they are working on a companywide conversion to an in-house system.
Both Rogich and Baldwin compared the introduction of ticket-in, ticket-out technology to the rapid break-out of bill validators in the early and mid-'90s.
"We looked at the bill validator model when Mirage Resorts converted, and we found a 7 percent to 8 percent increase in slot win," Baldwin said.
Mirage Resorts replaced about 7,000 slot machines with new devices with bill validators in the space of two months, a swap Rogich said recognized that technology spending can be a major revenue enhancer.
The MGM Mirage properties slated to make the switch to IGT's EZ Pay system include: Bellagio, The Mirage, MGM Grand, Treasure Island, New York-New York and Golden Nugget in Las Vegas; three Primm casinos; MGM Grand in Detroit and the Beau Rivage in Biloxi, Miss.
