Pulse

Olympic – a European Champion

By Lewis - 25 June 2019

G3 interviews Olympic Entertainment’s CEO, Corey Plummer, about his recent appointment, the acquisition of OEG, and the wider European gaming landscape about to be dynamically shaped by a new “European Champion”

Why were you interested in Olympic Entertainment Group?

In helping to acquire the business, I viewed Olympic as a strong platform to build something that doesn’t yet exist in this market – a focused Europe-wide casino entertainment company. There are several multi-state operations in Europe, but they tend to be both separate and machines-orientated. You see very few live tables-orientated companies operating in multiple jurisdictions in Europe. And so the ability to take a platform like Olympic, build on its current success and expand into other geographies, means the company can become a “European Champion” in the casino operations space.

What was the raw material that you saw within Olympic to achieve your objectives?

I saw a willingness to travel in terms of the business model. The company has a culture of market expansion. If you’re a local operator looking to expand into international markets, it’s natural to meet internal resistance from a cultural standpoint. At Olympic, the company has embraced international expansion, melding that culture throughout the management team, incorporating different languages, cultures and a history of geographic growth. We don’t need to re-educate the company in how to grow the business beyond its current geographies, Olympic has been doing that for 25 years. What I want to bring to the company is a structured approach that is more analytical and thoughtful about market opportunities. We need to study the competitive landscape, understand current customer expectations, acknowledge the essential ingredients to being successful in different markets, and introduce new elements that enable us to dominate local competitors. It’s a different way of doing things.

How does Olympic expand and compete beyond its current geographies?

If you pick up an Olympic floor plan from Estonia and attempt to drop that model elsewhere in Europe, whether it works or not is pure luck. That was the Olympic way. Now we want to enter a market with an analytical approach when we are able to understand where we need to be geographically. We are able to map the region, understand population density and access to the location, analyse competitor footprints, identify white space opportunities and appreciate what’s working in the market and what isn’t.

Are you seeking to expand the Olympic brand or is the company a stepping-stone to a large multi-national group?

Expanding into new markets and, in some cases, other verticals, is more about managing a portfolio of assets than it is necessarily about the Olympic brand. In some markets where Olympic has a valuable well established brand, we will maintain it. From a retail perspective, where we can take the brand and expand we will and where acquiring brands makes more sense, we are prepared for that too.

What are the opportunities in the European space right now?

We are looking to expand our business models into complementary markets in terms of regulation, taxes, market dynamics, number of competitors, and structures within those markets that are compatible with our own. And where we can add an online/digital presence and tie everything together with our retail locations, those are the prime targets for what we want to achieve.

Olympic is a unique company in that we operate more than 100 locations with gaming halls offering slots, bars and sports betting, plus digital gaming and live casinos based in hotels. More often than not, European operators have incorporated one of those elements within their business. They might operate live casinos, but they’re not established in hotels. In Tallinn, we operate both the casino and the hotel. Olympic brought the first Hilton to the Baltic region. There aren’t many operators in Europe offering this kind of experience.

Live casinos in hotels (Hilton, Intercontinental, Radisson Blue) enables Olympic to be more proactive with its marketing. When you operate gaming halls you are tied to the geography in which you’re situated and to the locals that feed those sites. However, when you have a product such as the Hilton Hotel Park and Casino, you can be more proactive. Here we have a different customer turnover, from locals, to business people, to tourists through to summer seasonal visitors, and this enables us to have a much broader marketing offer, which can also include digital and sports-betting products. Few operators are able to manage all these elements at the same time.

Olympic’s model enables us to be a very different type of European operator – to be a European Champion, able to migrate customers from marketplace to marketplace. Many operators offer gaming halls focused on locals with a distribution of locations and a small number of machines per site. However, to be a multi-state operator it is very difficult to migrate a customer from your arcade in one country to an arcade in another country. Our business model enables us to migrate customers between geographies, which plays into our desire to be a leading operator in multiple jurisdictions within Europe.

What does a European Champion look like?

A European Champion is able to offer diverse experiences in different places because they can provide the complete range of services to guests. We have the hotels, gaming products, restaurants and seasonality to present a different type of experience within Europe.

A European Champion is a well diversified business in terms of geography, it is flexible and able to understand how complementary products work together; casino-style slot machines, live table games, food and beverage, loyalty programmes etc. Olympic is able to migrate experiences on a seasonal and events basis. Our customers can travel between capital city locations, enjoy a concert or basketball game and stay in our hotel rooms, play in our casinos, with our hosts arranging all aspects of those experiences – that’s unique in Europe.

We can marry retail and digital experiences for customers within our local bases. In winter, we can fly customers to Malta to fish on the Mediterranean. We run large tournaments, recently hosting the Kings of Tallinn poker tournament in February, featuring participants from 23 countries. We are developing relationships with stars of the poker world, with celebrity ambassadors from sport, film and music – and you can’t do that just running a gaming hall. My years of international experience and past successes in Europe help drive these efforts at Olympic.

Are Europeans willing to travel to a destination resort?

Established European operators are very quick to tell you “this isn’t Vegas, this isn’t Macau,” in the belief that such plans won’t work. We are taking the opposite approach, asking how can we make this model work country by country. No one can tell me that Europeans don’t want to eat great food, engage with amazing entertainment, have a fabulous night out and enjoy new experiences. Other people in our industry just haven’t figured out how to package that in such a way that it makes sense for Europeans. I believe it will work – it just needs to be different.

If you are trying to emulate Las Vegas, I agree – that won’t work.

Part of the appeal of Vegas is its sheer scale, one massive location after another forming the Strip. For a one-off location to have that kind of appeal – at scale – would be very difficult in Europe. If you build a 5,000 room hotel anywhere in Europe it’s going to be empty. It’s not the way things work here. You have to consider where you are and adapt to that place. I absolutely believe the ‘idea’ can work in Europe. Olympic is doing it right now in its sports bars, casinos and hotels.

How long have you been appraising the European market?

I’ve been looking in earnest at Europe for about 10 years. Olympic is the third gaming company I have been involved in acquiring in the last two years. That’s more than 1 billion euros of enterprise value. Early on, I believed there were multiple opportunities arising from the financial crisis to create new business models in Europe by exploiting capital in new ways.

The financial crisis was an opportunity to expand having lost a large slice of the existing customer base. I believed this was the time to transition the business model to one that’s less gaming focused.
I have met a great number of naysayers who tell me “that won’t work in Europe.” When I first came to the UK people told me that celebrity chefs in UK casinos would never work. Ignoring that advice, we transformed a small break-even environment in Nottingham with a Marco Pierre White restaurant that subsequently became one of the most successful venues outside of London. We repeated that with the James Martin restaurant at 235 in Manchester. I opened the Carlsberg Sports Bar in London. People want to eat and they like celebrities – that’s just the mentality of people.

If you build a great sports bar, people will come. If you create a great steakhouse with a wine bar where people can socialise, they will come. If you add a great meeting and convention space and sell and service it properly – guess what? That type of experience is limited in Europe, but it exists in other places and it’s very successful. The key is execution. I always say to my teams, ”never hire a vegetarian to run your steak house”.

I watched a programme recently on the BBC called ‘Inside the Factory,’ which was about making mayonnaise. The reporter visited an innovation lab where they were trying to make a mayo for Europe. The process to achieve this saw the manufacturer scanning the breadth of Europe for mayonnaise, visiting the UK, Germany, Belgium, France etc. Some were sweet, some vinegary, some white and some yellow. There were all these differences, but after trial and error, testing hundreds of products on thousands of people, they created a European mayo that was highly regarded across all these different geographies. That’s what you have to do to be successful in Europe. You need to understand the right combinations that work for people. You need to understand the right psychology. If you do that, this type of process can work everywhere.

How are you seeking to compete with local competition?

I have been looking at the idea of a European Champion for 10 years, examining markets, and through my own private equity advisory firm, spent five years in detail exploring the idea of evolution and transition in multiple gaming markets. Most of the operators in Europe are solely focused on their domestic market. There are solid local heroes in their respective markets, for example, Barriere, Partouche and JOA have strong operations in France. The big difference is that while JOA has ventured beyond traditional gaming environments, they likely won’t venture beyond their national borders. I know what machines and services work everywhere, for which types of players. JOA probably remains a strong French operator, it won’t expand into Spain or surrounding markets, which is different to our business model. We don’t see ourselves as competitors for that reason.

Will an international casino model work in the wider European marketplace, which has been typically provincial?

Understanding this market is key. I’ve operated gaming all around the world. When you visit different areas of the world, it helps you to see history coming, as different parts of the world develop faster than others. North America is very dynamic on the marketing and loyalty side of this business. Australia is dynamic on the operational side, understanding the mechanics of the games and the segmentation of experiences on the gaming floors. In Europe, which remains predominately traditional, the market is beginning to transition away from closed markets and exclusive table games areas, slot machines in bars and cafes. I can see change coming and I think it is going to be exciting for Europe.

If we can steer away from the argument that “Europe isn’t Las Vegas or Macau,” and move forward, what interesting things will happen?

What’s required is capital. You need investment to transition. In Europe, regulators are insisting they want fewer machines in bars and cafes, and prefer a concentration of gaming experiences in fewer locations. That’s great – I think we can all appreciate that – but who is going to pay for it? That’s the problem.

If politicians and regulators can work with operators to find the investment, we’ll see transition moving much faster.

Telling route operators with machines in Spain, Italy or Germany that the government doesn’t support their business model anymore – “close your locations and do something else” – who is going to pay for that? Transition may be slower in Europe than some would like, but you have to be thoughtful here, you have to be optimistic and, in some cases, you have to take your ideas to the state and explain how the future can work – but it all takes money.

Japan, South East Asia, Australia, South America – there is a great deal of dynamism elsewhere in the world – why is Europe your market of choice right now?

It is easy to get caught up in massive gaming projects, but what moves the needle for a giant such as Las Vegas Sands? What moves the needle for MGM? If you look at market cap/share price, their business model consists of huge hotels, enormous casinos – and for Sands, a massive conventions business. The only place for them is somewhere like Japan, because they are willing to spend US$10bn to move the needle for their shareholders. Sands had a great property in Pennsylvania, a large one that was very successful – but when Singapore is generating 400 million EBITDA per quarter, you need a major project to move the needle. 100 million EBITDA in Pennsylvania just isn’t an interesting long-term proposition. Japan is in the crosshairs, but it’s a long haul process of lobbying, studying, planning, designing, investing and building. When you finally open your US$10bn resort in Okinawa prefecture, that’s an incredibly long process over many years, which is hard work in a different way. I’m building in Europe today because I see how the pieces fit together.

There are major resort projects either being built or under-planning right now in Europe – Melco in Cyprus and Hard Rock in Spain. Are they your direct competitors?

I think the difference is that Olympic Entertainment Group is already successful in the European market with a range of operational models that we continue to expand upon. We operate in markets in which we have a multitude of locations in the right areas that are especially good at servicing local clientele. It’s a service model that’s very successful and we know it works in multiple geographies.
Melco is entering Europe for the first time. They know how to build a resort and have been successful in South East Asia – but the operating model from Macau and the Philippines is very different to Europe, and even more complicated in certain parts of Europe. It’s an especially steep learning curve for operators like Melco, which means I don’t see them as competition. I don’t think they have the same kind of ambition. They have a project – they may have another one – but I don’t think their goal is to build multiple resorts all across Europe. In terms of Hard Rock, it is a great brand that also has restaurants and hotels. I think that if Hard Rock expands seriously into European gaming the market will benefit as a whole. I think that we need to educate the consumer as to what’s possible and Hard Rock could play a part in achieving that goal.

When are we going to see the next step in terms of Olympic expansion into Europe?

You’ll see the next step in the near-term. We have analytically mapped all of Europe and know where value adding targets are located and what appears to be actionable. One of the challenges we face early on is that many of the local operators see publicly listed digital companies with extremely high valuations and believe their local retail business should be valued in the same way.

While we have been able to educate some, others need to understand it’s unrealistic to expect those multiples for their businesses. In fact, many of the digital acquisitions were over priced and we’re starting to see those multiples falling. I think this is part of the game.

I was able to work with the capital investors to acquire the company because I saw the value of the Olympic model, both now and into the future. I outlined the strategy for the business and the value creation plan – it is my vision. It has been for many years. We all know that private equity tends to be short-term investors in their specific portfolio companies, but my vision for Europe is long-term. The shareholders are supportive of that vision for Olympic and I am committed to that ambition for Europe.

The company has been very successful for 25 years doing things a certain way, and to become much bigger we need to add new capabilities. There is a transformation process and an expansion and growth process to manage. It involves the same processes as many private equity deals, with agreements built upon establishing relationships over many years.

Integrity, commitment and focus are key parts to building quality relationships between management and private equity. The same goes for entrepreneurs and management teams we want to work with and acquire businesses from. It’s all about timing, relationship building and validation, and it’s a process that I am very comfortable with.