Post by
Thelongview on Mar 29, 2022 4:45pm
Gamehost 2.0 - The Gamehost of Tomorrow!
As all of you know, I have been an owner of GH since November 2020. The following does not need to be said but will be said nonetheless: I am not on the Board of Directors of our Company, nor have I ever been.
However, to get the full benefit from this post, let us assume it is written by a Board member who goes by the name of TLV, and is directed to fellow Board members and to management:
There have been a lot of changes at Gamehost since it became an income trust in 2003. Some of the bigger changes have been the opening of the Deerfoot Inn & Casino in 2005 and our ninety four room Encore Suites in 2016. Along with these two openings, we have expanded / renovated our lodging and casino operations on a regular basis, every few years.
While the above has produced satisfactory results, it has all been the same game plan: Put a casino next to lodging to get synergies and attract more customers to our casinos by offering entertainment such as concerts and comedy acts (other forms of entertainment have been offered but these are the main two). We can only go so far with this model.
Now, don’t get me wrong. This is not a criticism of our Company. We have excellent properties, in great locations, and are well operated by a solid management team. If you send me back in time to the year 2003, I would not have objected to any of the above changes and operating style of management. It was the right strategy to use at that time.
We are no longer in the year 2003. Our core customer is now nineteen years older. The age of majority in Alberta is eighteen and we now have customers that were not even born when our stock first started to trade in 2003. We don’t want to alienate our older customers but we can’t afford to ignore the future of our business – young individuals and young families. They will be with us for a half-century and they want a different experience. We must act now.
Why now?
I would like to express a sense of urgency. It is true that we do have time to make the changes but we must keep in mind that it will take time for us to implement these changes.
The timeframe for these changes has been expedited due to the AGLC lifting the moratorium on new casino licences and the new four-step plan that has been put in place in the licence issuing process. While it is true that the AGLC will ask all existing casino operators their views on this matter – and we along with our competitors shall object to having new licences issued - in the final analysis only the AGLC will decide the outcome as only their opinion really matters.
Cases can be made on both sides of the argument as to if new licences should be allowed but we cannot close our eyes to this new development and simply keep our fingers crossed that it all works out okay for us. We must assume that new competition will be allowed to form and we must defend against this. By making changes today, we will be a stronger company that remains the preferred destination of our customers for decades to come.
What should we do?
I’m going to focus on Grande Prairie. Calgary has many competitors and is well served and Fort McMurray is a different demographic animal.
Our competitive advantage is our location. It is where we could be attacked and since we have almost no competition in Grande Prairie, it is where we could see competition appear. We need to strengthen our competitive advantage. We can’t continue to just offer lodging, concerts and comedy to attract customers to our casinos. There is a large part of the population we are ignoring.
Where do young, middle age, older people and families go that they all have in common? What can we offer that a competitor, present or future, has more difficulty in offering? The answer to these two questions is restaurants.
Gamehost is in a singular position in this regard. In Grande Prairie, a progressive city, we own land between our casino and hotel that can be used to build an infrastructure of restaurants. Until just recently, the land between these two buildings could not be built upon due to the Grande Prairie Regional Hospital being built. Now that it is completed, the City of Grande Prairie has removed this restriction and we are free to build if we desire to.
We also own a commercial building across from our casino that used to house a restaurant. This structure may need to be rethought and converted into a more usable model to reflect a more 2022 restaurant environment.
We have the construction know how to take on a project like this as our VP, Darcy Will, has been in construction since his teenage years and in particular has worked on constructing and renovating many restaurants over the years. In addition to this, the infrastructure can be built at cost since Darcy still owns a construction company that to this day does all of the work on all of our other buildings, for cost.
None of our current competitors and likely none of our future competitors have these advantages.
In short, we own land between our casino and hotel as well as across the street from our casino. We have the experience in building restaurants and we can do it at cost. This forms the beginning of the expansion of our competitive advantage in Grande Prairie.
It is by far, better to entrench ourselves into the daily lives of our customers and potential customers, before competition appears, as this will cause habits to be formed that are more difficult to break later on. Psychology books will all tell you that lifestyle habits are difficult to change when they’ve been around for a while and especially those that involve emotions. That is why Coca-Cola is so popular. Consumers usually drink it when they are having fun and over time the feeling of fun gets associated with the beverage. Think of Pavlov and his dog.
For the rest of this post I will address you as TLV – private investor and shareholder.
Why restaurants?
The restaurant industry is one I know very well. I have been studying it for close to twenty years: QSR, Fast Casual, Casual, Fine Dining, Pop Up, delivery, restaurant branded grocery products, restaurant tech, apps, robots, demographic tastes, inter-provincial and international tastes, supply chain economics, menu pricing strategies, etc. There is not another industry in which I have more detailed knowledge.
My single largest holding and one in which I've been a shareholder of since May 2004 is also in this area and it will most likely remain my single largest holding forever (management is aware of this). I have learned so much about the industry from conversing with management over the years.
Other than during 2020 and 2021, (due to pandemic although the rebound in 2021 has been nothing short of astounding) the dollar amount as a percentage of total income spent on food outside of the home has been rising. This has been increasing every single year for over forty years.
We have developed into a culture that revolves around food consumed outside of our homes and there are many reasons for this. The reasons would take too long to go into detail here, and some are not as obvious as you may think, but the trend will continue to be higher. That is clear.
Right now we are attracting people directly to our casinos. The concerts and comedy routines are held inside of our casinos. This is direct attraction.
With restaurants it will be indirect attraction. Customers come to a separate structure to consume food. They are either on the go (work or other destination) or they are there for leisure. They see the casino next door. Over time this will result in more restaurant customers being customers of the casino as well. We make the Grande Prairie hub (casino and hotel) into a leisure hub by incorporating food as a destination spot of its own with the knowledge that this will translate into more total gaming dollars being spent over time.
This restaurant structure also needs to be profitable and self-sustaining of which it could most definitely be. I can tell you that we should not own the restaurants but simply own the buildings. We should lease out the space. You don’t want to be entering the restaurant industry if you don’t know what you are doing. The real professional management teams will destroy you. They are that good.
The local demographics (age, tastes, family types, individuals etc.) will dictate which concepts you can lease the space to and what formats should be used (QSR, Fast Casual, Casual etc.). You want a profitable concept so that it increases foot traffic and also that it does not tarnish the image of our casino. If you have a poor business next door it does hurt the luster of the environment.
You also want your restaurant tenants to be franchisees and not direct owners of their restaurant. They will have much better margins and be more profitable. They have a much higher success ratio by being a franchisee.
The type of concept is crucial. It has to be popular but not a fad. If our building is not constantly leased we will be less profitable or even lose money as the fixed costs of owning the structure remain.
I am in the province of Quebec. The various culture groups in this province are really into food and have been for decades. There is tremendous competition here. One area that has been on fire for about twenty years now has been breakfast restaurants. In the beginning it was traditional breakfast food. About ten years ago it started to evolve and the food being offered was greatly elevated and started to become gourmet. Since about 2016 or so it has radically changed again and the food is unreal now. You are getting incredibly gourmet and creative food that basically could be served all day and evening long. These concepts, and there are many, are packed and I mean packed (pre pandemic but once again I am seeing huge demand). I know for a fact that breakfast is not that big in Ontario (well in certain local spots it is but not in Ontario as a whole – different culture and tastes) but it is quite big in Alberta and I am told it is increasing rapidly and will continue to grow.
The infrastructure that we build should contain multiple restaurant concepts so as to be seen as a food destination of interest.
If successful further land could be purchased if available and continue the food / leisure destination approach.
Conclusion
Our competitive advantage would be deepened if we create a leisure destination hub in Grande Prairie that includes a casino, hotels and multiple popular restaurant concepts that attract a larger and varied group of people. People that would not normally go to a casino.
The end result would be a deepened competitive advantage that would be more equiped to ward off competition and generate increased profits for owners.
This is the Gamehost of the future. A more difficult business for competitors to hurt.
A destination for fun!