Game plan: The business of Bingo

Bingo halls want to attract a new crowd with flashy new digs and entertainment–and save their business, too.

Andy LaCroix is the poster boy for optimism, a bundle of smiles, handclaps and dance moves as he shimmies his hips at an old lady hobbling by with her walker. No, he’s not at a seniors’ singles dance–although the environment is conducive to one. It’s a Saturday night, the lighting is dimmed and a Frank Sinatra impersonator with shellacked hair is leading a tuxedo-clad, four-piece band onstage through a rendition of “Fly Me to the Moon.” LaCroix is actually in a bingo hall in Barrie, Ont., owned by Boardwalk Gaming & Entertainment, a Toronto-based company that runs 21 such facilities in Canada, making it the largest bingo operator in North America.

LaCroix, Boardwalk’s director of northern Ontario operations, works the crowd, greeting everyone and hugging the regulars. Judging from the way the 47-year-old deals with the patrons–including a silver-haired man he slaps on the back and tells with a wink, “Some girls told me they were looking for a dance partner”–you’d never guess that LaCroix’s industry is slowly dying, or that its operators are desperately worried.

You might be wondering why you should care about bingo at all. The reality is, it is big business. The game generates up to $80 billion worldwide annually, pays out millions to charities in Canada and brings in millions more in revenue for provincial governments. It’s also a business fighting for its life as profits rapidly decline, one that’s undergoing its biggest change in decades just to stay alive.

In Ontario, which generates the most bingo revenue of any province, the number of halls has plummeted by almost half since 1998, to 118. The game produced $1.1 billion in gross revenue back then, but those figures are now down 15%, and the industry will be lucky to see $850 million by the end of the current fiscal year. Bingo operators have been crushed by the rise of casinos and racetracks tangled in government regulations and saddled with an image problem that keeps newcomers away. Perhaps most damaging of all is the provincewide smoking ban, implemented in May. Hall owners estimate more than half of bingo players are smokers, and within just a few weeks of the ban some saw a drop in attendance of 20%. Two halls have already closed in Hamilton, six of Windsor’s seven halls went into receivership in early August and others have scaled back their hours of operation.

But Boardwalk, along with others in the industry, has a plan. They start with the name. According to president and CEO Jordan Gnat, “We call them ‘gaming centres’ now. ‘Bingo halls’ are what my grandma calls them.” To attract new players and boost profits, bingo operators have to give clients more value for their dollars. That means snazzier facilities, new ways to play, improved customer service–and some unconventional solutions.

The live entertainment at Boardwalk is one part of a multimillion-dollar attempt to modernize bingo. Boardwalk Barrie underwent renovations and reopened, in September 2005, as part of a pilot project, in partnership with the Ontario Lottery and Gaming Corp. (OLG), to revitalize the industry. Boardwalk ditched its straight tables, folding chairs and bare fluorescent lighting and reopened with sparkling grey booths, neon lights and electronic bingo terminals (provided by the OLG), which offer more cards, automatic dabbing and a feature that allows customers to play bingo against the computer during breaks between games, so the spending never stops. Boardwalk also installed a digital video board outside the building to showcase its entertainment and blast music between games to boost the energy level.

Three other Ontario halls have undergone similar renovations, and another is slated to open in Toronto later this year. The OLG, the Crown corporation responsible for most electronic gaming in the province, shelled out about $500,000 per hall (none of which is taxpayer money, it insists) to install e-bingo terminals, while the rest of the renovation costs (anywhere from $500,000 to more than $1 million) were borne by the individual operators. If the pilot project is successful, bingo halls across Ontario will be transformed; if it fails, bingo’s number could be up.

But tonight, it seems nothing can get LaCroix down–not even the smoking ban–as he excitedly points out the throngs of patrons stepping outside for a cigarette during “Sinatra’s” perfo,rmance, and pointing them out again when they return. “Look at that. Two beautiful ladies!” he says to a pair of women as they walk by, giggling like schoolgirls. Once they’ve passed, however, LaCroix sighs and suddenly looks tired. “You try doing this job,” he says.

No one ever said saving an industry would be easy.

If the recent pilot project is any indication, bingo has become serious business. It wasn’t always that way. In fact, it was hardly a business at all until the 1950s. Before that, the game was relegated to church basements and county fairs, where players competed for clocks, teddy bears and relatively small amounts of cash.

In the ’50s and ’60s, entrepreneurs established permanent bingo halls and allowed charities to use their buildings for a cut of the profit. Since there were no provincial regulations at the time, business owners and charities negotiated these deals informally. It wasn’t until 1969 that the government stepped in to tighten regulations. The initiative was an effort to enforce fairness, prevent price gouging and ensure a steady revenue stream to charities. And the province could take a small cut for itself, naturally.

Bingo began to shed its church-basement trappings, and while venues were far from glamorous, they spread, unhampered by competition. In terms of legalized gaming, Canadians did not have many other options.

Len Stuart has watched the industry develop during his 40 years in the business. He started, at age 19, with bingo-supplies manufacturer Bazaar & Novelty, which supplied most operators in Canada. When its owners sold the company a few years later to B.C. billionaire Jimmy Pattison, Stuart decided to go solo. He started with one printing press (Bingo Press & Specialty) and three employees; by the mid-’90s, he had bought out Pattison and was running a $200-million-a-year business, providing nearly every bingo hall in Canada and about half of those in the United States with game cards and other supplies.

By then, however, Stuart was nearing retirement age. He sold his manufacturing business without hesitation, in 1994, for $70 million–a wise decision, given the turn bingo was about to take. A less savvy move, Stuart admits, was getting into the business of bingo halls. In 1997, he bought 100% of Sarnia, Ont.-based Bingo Country–with 38 halls in Ontario and two in British Columbia–becoming the largest hall owner in North America. (Since Bingo Country is a private company, the sale price was not disclosed.)

At that time, bingo operators were being hit hard by the growth of casinos and racetracks. “The casinos just exploded,” Stuart says. “No one could have predicted how much damage they were going to do.” The first Ontario casino opened in Windsor in 1994. Today, there are 10 in the province, in addition to 17 racetracks equipped with slot machines, which the Ontario government permitted in 1998. Together, casinos and racetracks in Ontario generate more than $3 billion annually, more than $700 million of which flowed to provincial coffers last year.

As casinos continued to expand in the ’90s, bingo withered. The market was saturated and there were more than 200 halls in Ontario alone. William Grosberg, who has organized charity bingo for B’nai Brith Canada since the 1950s, says the province was content to keep licensing bingo halls since it was getting a cut of the action–but it didn’t have the foresight to realize that there just weren’t enough players to sustain them all.

Because bingo developed in local communities, only a handful of companies own multiple facilities. The strain on the industry caused many single-hall operators to shut down, but even the more financially sound multi-hall owners were forced to consolidate.

The revenue model for Ontario bingo has been part of the problem. As in other public-private partnerships, the regulations are complicated, but they essentially break down like this: Each bingo game has to be authorized by either a municipality or the province (provincially licensed games typically have larger jackpots). Before any prizes are paid out, the province or municipality will skim up to 3% of the prize board from each game. Owners also pay a $10,000 annual licensing fee to the province in order to operate each of their facilities. All told, the province pulls in a few million from the game each year–the figure stood at $7.4 million in 2005.

The majority of the cash goes to charities, which take 60% of revenue after prizes are paid out. The remaining chunk goes to the hall operators. Of the $973 million generated by Ontario halls in 2004, only $98 million was left for operators after prizes were paid and charities, the province and municipalities got their cuts. Most of the tab for running a bingo facility is paid by the operators, and their take hasn’t been adjusted to compensate for rising costs and falling revenue.

Paper bingo falls under the realm of the Alcohol and Gaming Commission of Ontario (the OLG is responsible for e-bingo), and because of the regulations, hall operators were at a loss about what they should do to fend off the rise of casinos. They could experiment by adding more bingo games throughout the day, but, with attendance dropping, that would increase the risk of giving away more money in prizes than a hall could make in profit. Any changes to game play would have to be approved by the commission, and requests to implement other forms of gaming, such as slots, poker and blackjack, were turned down. Casinos and racetracks were provincial cash cows, and competing gaming operations in bingo halls could cannibalize that business.

Stuart, however, wasn’t about to give up on bingo. Even as he saw profits dwindle, he believed that if he found a partner possessing political and business savvy, he could lobby government to loosen restrictions on the industry and, as he puts it, “bring bingo to the next level.” He put half of his halls up for sale in 2002.

After two years of offers that didn’t pan out, Stuart found what he was looking for in 34-year-old Jordan Gnat, who was then working in Toronto for private investment firm the Kilmer Group. Gnat was immediately interested when Stuart’s offer came across his desk. “You’re always intrigued by businesses you know nothing about,” he says. Gnat had a friend in the industry, Michael Orser, who owned a chain of bingo halls in Ontario. Gnat asked Orser for advice and ended up in a partnership–Gnat would buy some of Orser’s halls, and together they would partner with Stuart. In 2004, the companies–Orser’s Penetanguishene-Huronia Bingo and Stuart’s Bingo Country–joined forces to form Boardwalk Gaming & Entertainment. (The value of the deal has not been disclosed as all are private companies.)

In June of that year, Gnat (who remains with the investment firm) began devoting the majority of his time to leading Boardwalk–and delving into a business that was only about to get worse.

Sitting in his downtown Toronto office two years later, Gnat doesn’t look like a man presiding over a doomed industry. Like Andy LaCroix in Barrie, he brims with optimism. On a nearby whiteboard, the words “Speed date bingo” are scribbled. “We were just playing around with different concepts,” Gnat explains. The idea is to play a few numbers of bingo with someone, chat and move on to the next person. “I don’t think it’s applicable for us,” he concedes, “but if you think of bingo as a brand, are there ways the brand can be extended?”

Brand extension for bingo may seem like an odd concept, but it’s the kind of thinking the industry needs to remain competitive. “My goal is to convince you that bingo is not what you think it is,” Gnat says. Part of the reason why he got involved with the game in the first place, he insists, is because he saw lots of opportunity to do just that.

It’s not hard to see bingo has a long way to go when you visit an old-style hall. The owners of Delta Bingo, Canada’s oldest chain, with 10 facilities in Ontario and one in Maryland, say it’s an exception in that it has more or less remained profitable. And those in the industry agree that Delta halls are among the best in the province. Still, Delta’s location in Toronto’s west end was half-empty on a Thursday night in May. Just outside the smoking section, a sign counted down the days until Ontario’s smoking ban takes effect, while inside the ill-lit room, players puffed anxiously on pre-game cigarettes, turning the air blue.

Murals adorn the walls, showcasing the Rat Pack, Elvis and a leisure-suited Tom Jones exposing ample chest. The room went silent when the game began, aside from the hum of the air-ventilation system. The only other sound was the trundling refreshment cart pushed through the aisles by a ponytailed guy in a red bandana. Game faces were on. Even the wet, hacking coughs stopped.

Some of these players were bingo diehards who would play even without Frank Sinatra impersonators. While the industry can’t afford to lose them, it also has to have an eye for new blood. Currently, the OLG estimates 8% of the adult population in Canada play bingo. An additional 10% to 15% are potential players, meaning they’ve tried the game before but were turned off by things such as the condition of the hall or inadequate customer service.

British Columbia was the first to recognize the need for change, in 2004. The British Columbia Lottery Corp. converted bingo halls into what it calls “community gaming centres,” or CGCs. Five are in operation and seven more will open by the end of the year, with costs ranging from $2 million to $16 million.

Not only were e-bingo terminals installed and the facilities renovated to look more like casinos than Legion halls, some with restaurants and lounges, the gaming options were expanded as well. When the appeal of bingo ends, there are slots, keno and electronic blackjack to entice players to stay and newcomers to visit. The crux of the strategy is rebranding bingo as something entirely different, which is why almost all CGCs (although most are owned by different private operators) run under the Chances Gaming Entertainment banner, with no reference to bingo. “There’s too much baggage around bingo,” says Marsha Walden, BCLC’s vice-president of bingo gaming.

Orchestrating a similar change in Ontario will be more difficult. Players can still smoke in B.C. Not so in Ontario, where slots and keno are also forbidden. However, the Alcohol and Gaming Commission of Ontario recently permitted municipalities to develop their own interim revenue models to ease the financial strain on the operators. The interim period ends in January 2007, at which point the municipalities may implement permanently the changes. But what bingo operators really want is more control over what happens in their halls. “Other gaming facilities were allowed to diversify and expand, much to the expense of bingo,” says Toronto hall owner Leonard Parente. “Our point all along has been we should be able to diversify.”

Discussion in Ontario on how to diversify began more than six years ago. Hall owners, then represented by trade association Registered Gaming Suppliers of Ontario, were overwhelmingly in favour of installing slot machines in their facilities. The Ontario Ministry of Economic Development and Trade, which ultimately oversees gaming in the province, had previously ruled against slots in bingo halls–but that didn’t stop some operators from trying again, especially when they projected slots could generate an additional $3 billion in gross revenue.

Recognizing the government would likely turn down slots, some owners broke away to form their own trade group, the Commercial Gaming Association of Ontario, to partner with the OLG and push for e-bingo. In January 2005, the Ministry gave the go-ahead. Boardwalk’s Barrie location was the first to undergo renovations and opened that September. The primary goal of the project is not to send bingo profits soaring, but to stop the losses and hold revenue around $1 billion. While players have taken to the e-bingo terminals, it’s going to take more than electronics to stop the industry’s slide.

A couple of weeks after the Frank Sinatra impersonator has left the building, another party is underway at Boardwalk in Barrie. Onstage this time is Karaoke Mike, a young man clad in western boots, a cowboy hat and a Boardwalk hockey jersey, stomping his feet and effortlessly twanging his way through a Garth Brooks number. Next to the stage, as always, Andy LaCroix is sporting a big grin–and clapping along.

Before the performance, LaCroix explained part of his job is to interact with the customers. “We’re here to entertain people,” he said. His exuberance is indicative of the industry’s attempt to create an “entertainment experience,” equivalent to a night of dinner and dancing, and give customers the sense they’re getting more than just a few rounds of bingo for their money. That’s key if bingo operators plan to compete with the variety of entertainment options available to consumers, which Boardwalk’s Gnat expects to do. “My competition is everything,” he says.

That’s why Boardwalk is bringing in live entertainment–not just Frank Sinatra impersonators, but Billy Joel, Shania Twain and Beatles tribute artists, too–and offering karaoke on Friday nights, led by MC Karaoke Mike, a crowd favourite, judging by the applause and whistling he gets from the largely middle-aged female audience.

Others in Ontario’s pilot project are following similar paths. Bryan Robinson at Kawartha Club Bingo, in Peterborough opted for a lounge feel, complete with a fireplace and cushy chairs. Jeff Holmes at Treasure Chest Bingo in Kingston installed a six-metre-high waterfall, two fireplaces and covered surfaces with stonework and dark cherry wood.

Holmes is also working on improving food options. Bingo and greasy grub go together like, well, bingo and smoking. Treasure Chest offers healthier choices, like salads and wraps. There are six kinds of coffee, eight kinds of tea, plus cappuccino and espresso. Holmes also created a VIP room and stocked it with e-bingo terminals, two plasma-screen TVs, an Xbox, a pool table and high-speed wireless Internet. “If we didn’t go dramatically different, it would be very hard to break bingo’s negative stereotype,” he says.

The OLG refuses to release numbers on just how successful the project has been. It recently submitted financials to the Ministry of Public Infrastructure Renewal, but won’t talk specifics until the government either approves the project for expansion or rejects it and forces it to wind down. If hall owners are to be taken at their word, the results are promising. Holmes says he’s seen an 18% increase in attendance since renovating, while Gnat says attendance increased by more than 10% at the revamped Barrie Boardwalk.

Whether that growth can be sustained or whether it just reflects a boost in consumer curiosity is anyone’s guess. But Gnat is willing to wait and see. “You need to have patience to understand how long it really takes for stuff to get done in this industry,” he says. “If you don’t, then you’ll become very frustrated very quickly.”

Gnat will need every ounce of patience, since the revitalization effort is still in its infancy. In the short-term, bingo has to contend with the smoking ban; in the long-term the game must remake its image. Gnat remains optimistic the ban can help with that. “Smoking has been the reason we haven’t been able to transform the industry,” he says, adding that some of the new players visiting his facilities were waiting for a smoke-free environment before venturing in.

Still, traces of the industry’s past remain, even at the renovated facilities. At Peterborough’s Kawartha Club, you can see it in how the classy atmosphere–where even a suit and tie wouldn’t look out of place–clashes with the clientele, for whom sweatpants and NASCAR T-shirts are de rigueur. Or in how one employee with a handlebar moustache and ponytail makes for an awkward fit in his new uniform of black shirt, burgundy vest, black pants and shiny black shoes. Or how in one corner stands a cardboard cutout of Elvis Presley in a glittering jumpsuit. Some things, it seems, may never change.