Building momentum: Rank on fulfilling its online potential

With a lengthy history and deep rooted links with the bingo and casino land-based worlds, Rank is now making clear inroads in the digital space. In 2015, the Maidenhead-based operator’s online business appeared to be in decline and a long-term strategy to kick-start the business was at the forefront of CEO Henry Birch’s priorities. Fast-forward two years and Rank’s digital brands appear to be booming. Although online only makes up 15% of the operator’s overall revenues, the firm’s full-year financials revealed profits for the 12 months up to June 2017 were up 63%.

Rank’s digital revolution is clearly in full swing. But after digging a little deeper into the figures, the clear standout is Grosvenor Casinos’ online business which saw 2017 revenues soar 44%. Although Mecca’s online revenues grew a mere 2%, the figures likely represent a wider industry trend that is seeing casino on the rise and bingo very steadily declining. “We are looking to grow all parts of our business. That means continuing our rapid digital growth, which is underpinned by much of what we have already done,” Henry Birch tells EGR Intel.

Since his last cover interview with EGR, Birch has spearheaded a plethora of major tasks that he insists were key in driving digital prosperity. In 2016, for example, all online brands were migrated onto a new Bede-powered platform and the company’s internal digital operations were consolidated into one team. Having been fully integrated for the better part of six months, Birch heaps praise on the new system for having given the operator “a firm bedrock from which to build its business”.

Henry Birch, Rank Group CEO

With the internal restructure came the cutting down of staff members, as Mecca and Grosvenor’s gaming teams were merged to cover both brands. But since the shift, Rank has hired more staff members than it initially let go, particularly within the Gibraltar office. “You want to have the best people working across both [brands],” Birch notes.

This new approach gave way to perhaps the biggest internal modification Rank has seen in the past few years: the move to a new headquarters in Maidenhead. In 2015 the operator closed its UK digital office in London Victoria and consolidated its operations, splitting them between Sheffield and Maidenhead. “Morale is really positive and people are working in much greater collaboration,” Birch reveals. “We launched a new set of company values this time last year, which had a really positive impact as well.” The closure of the Victoria office resulted in cost savings of £8m for the group, money that will likely be pumped back into the operator’s ongoing digital investment.

Leveraging assets

Interestingly, although 50% of Rank’s retail customers admit to gambling online, a mere 3.5% do so with Rank-powered brands. To remedy this, a targeted customer acquisition strategy has been set in motion, leveraging the operator’s now hugely successful live casino product to cross-sell retail and online customers. Birch previously revealed to EGR that live casino was one area the firm had hugely underperformed in and, with its leading retail casino presence in the UK, was perhaps the core vertical to take full advantage of.

“Morale is positive and people are working in greater collaboration”

With that in mind, an innovative dual-play roulette solution, powered by Evolution Gaming, will offer players the ability to join a live game beamed online from inside one of the operator’s London-based Grosvenor casinos. Birch believes the move will highlight to retail customers that there is a digital product they can access and vice versa. It will encourage digital customers to recognise Rank’s massive land-based casino network too.

An additional £3.9m investment has also been made into a Playtech-powered single-wallet solution. “It’s a key piece that should unlock the value [of our customer base],” Birch notes. Players will be able to shift funds seamlessly and log-into their online account at any of the Grosvenor Casino venues.

And Birch remains optimistic that the company has achieved substantial growth without having previously tapped into these cross-selling opportunities. “When I look ahead, we’ve got a long runway of things that will continue to drive our digital business,” he adds. “We’re not in the position where we’re sat here scratching our heads thinking ‘now what’, we’ve got more opportunity than we can deliver at the moment.”

Marketing is another area Birch believes the firm has not yet fully tapped into. In July Grosvenor Casinos announced its first major sponsorship deal with Fulham Football Club, a move that ties into the relatively recent launch of the brand’s sportsbook. In Birch’s view, the firm’s wider strategy has been mapped out to better leverage Rank’s retail customer base and increase overall customer acquisition for the online business. On this front Birch pledges to make better use of PPC and affiliates.

Proof of prosperity

Further proof of the firm’s prosperity is in the recent and upcoming launches of new digital brands: the slots-focused bellacasino.com and online arms of Rank’s Enracha and Luda bingo businesses. “We recognise that in terms of the digital landscape there are different types of customers out there, and you can take different approaches and use different brands,” Birch notes. But is there room for even more brands in an already saturated market? “I think the digital world is evolving and that leaves room for, and welcomes, multiple brands and multiple propositions,” Birch adds.

Taking bingo-led firm Stride Gaming as an example, he asserts that plenty of operators launch multiple brands and are very successful with them. In his view, the success of a new brand varies depending on its approach and how well it can attract new customers. “Any decent size operator will always have a certain level of customer churn that can at least partly be addressed with a multiple brand strategy,” the CEO comments.

Rank’s new Maidenhead HQ

On the apparent slow-down of gaming growth that a number of top tier sportsbooks have reported this year, Birch reflects on his time as head of William Hill Online, during which, he says, a successful gaming-only brand was launched despite common wisdom that sports betting operators should only maintain one mega brand.

“I think in the case of both Paddy Power Betfair and Ladbrokes Coral, they seem to have both grappled with whether they should focus on one brand at the expense of the other. Ladbrokes Coral decided they were happy with running both, which to my mind seems to have been the right decision.” Launching a new brand requires an open mind and a quicker and more nimble approach, and while it is perhaps more of a challenge for sportsbooks and poker products, Birch says a multi-brand approach can be helpful for bingo and casino brands to build customer retention and loyalty.

Branching out

In the same capacity, Rank is targeting a new demographic with the aforementioned bricks and mortar Luda bingo clubs, the first of which was opened in Walsall in August. An approach that seeks to recognise shifting consumer habits, Luda targets the “convenience-gamblers”, specifically those that might wish to stop off and play a couple of games of bingo while drinking a coffee. The concept behind Luda is to enable customers to drop in and drop out of the club without having to dedicate the time to a slew of games, as players in a Mecca club would do.

“It’s very difficult to retro-fit a Mecca club to a more convenient gaming-style offer,” Birch says. “Our challenge with the core Mecca bingo is that we’ve got an existing estate of bingo clubs where we have a large core customer base that come and play with us, but actually we’re slightly restricted in terms of what we can do.”

Birch recognises the industry-wide slump bingo has been facing for some time, noting that although the vertical has moved out of some parts of the UK, the core mechanics of the game remain popular. With this is mind, the operator is also targeting younger players with its latest approach by hosting one-off late night events in its flagship Mecca halls. However, Birch says the group is not investing vast amounts into the project and will use its existing team in the development. “The bingo industry remains sizeable and I have no doubt it will continue to flourish long into the future,” Birch confirms.

The first Luda bingo club branch was opened in August

The chief executive aims to place Rank one step ahead of wider industry movements, as he defends the performance of Rank’s retail business. “Our retail businesses had a more challenging year but finished the financial year in good shape, with a stronger second half performance. Overall we made about £37m of operating profit in our first half, versus £47m in the second half,” he adds.

Grosvenor Casinos, which makes up 65% of Rank’s retail revenues, suffered a 14% decline in year-on-year profits for 2016, a drop which Birch attributes to higher outgoing costs, a lower gaming margin and a rising national living wage. But he has no doubt in the long-term existence of retail, explaining the overall experience of a bingo hall or casino just can’t be replicated online. “A bingo club is part transactional and part experiential. That transactional part can be digitised but the experience part – playing surrounded by people in your community, the buzz and anticipation in the club, food and drink – cannot,” Birch insists.

Birch goes on to say: “Grosvenor is the largest retail casino operator in the UK but I don’t think we yet have the brand recognition or relevance that we should, which means there is a lot of potential for growth. We haven’t engaged in the large scale marketing and advertising that other gambling brands have done so we may not yet have ‘man-on-the-street’ recognition but there is a real affinity for the brand among our existing customers and gamblers more broadly.”

Success in Spain

Spain, however, has a thriving bingo industry. Slightly behind the times, Birch says the market is extremely reminiscent of the UK sector five to 10 years ago, and in that capacity Rank’s Spanish Enracha business is booming.

“We’ve doubled our profits in the space of two years and we feel there is more to come,” Birch notes. He attributes this to the Spanish economy starting to pick up.

Although online makes up only a small percentage of the pie, Rank is set to launch its Enracha online business imminently, as the country’s digital market is anticipated to reach €500m this year. The brand has nine clubs spread across the country and its core markets are, unsurprisingly, Barcelona and Madrid. According to figures published by the Directorate General for the Regulation of Gambling, Spain’s online GGR for Q1 2017 rose to a record €127m, up 22.6% on the previous year.

“We’ve doubled our profits in the space of two years and we feel there is more to come”

But Spain is as far into the European market as Rank is willing to extend its reach right now, despite facing potentially stringent regulatory changes in the UK. Outside of the UK, Birch closely follows European movements, revealing his belief that in time grey markets will disappear as each country races to regulate and formulate its own unique tax framework.

“You’ll either have legal or illegal markets. It’s no surprise that if you’re operating on an untaxed, un-regulated basis, your margins are probably very good. In the future if you’re going to have to pay taxes it’s going to be a less attractive market,” Birch comments.

Birch believes the local industry has lost the confidence of politicians, regulators, opinion formers and the consumer. The ongoing CMA investigation, launched last October, has sparked an opportunity for social responsibility-focused firms like Rank to ask themselves what they can do to be even more customer-friendly. “We haven’t been contacted by the CMA,” Birch confirms, “but equally I’m not complacent enough to say there are not things we can do to improve and be more customer-focused. We definitely continue to ask the question of ourselves.”

Recent advancements in the investigation have resulted in the competition watchdog targeting five top-tier operators, a move Birch accepts as the “right thing to do”. He adds: “As an industry, we need to get these things right and if terms and conditions are overly aggressive and overly customer un-friendly, it’s a very short-termist approach for the industry and for operators to take.”

Taking responsibility

Birch is also keen to improve the operator’s already heightened responsible gambling strategy. “This involves not just working on improving processes and honing our propensity models, which help us indicate patterns of potentially problematic play, and associated interventions, but looking at how we can be more innovative and forward thinking around our products and services with respect to responsible gambling,” he tells EGR.

“I can’t see that the industry is going to come out of that review unscathed”

The implications of the wider regulatory clampdown the triennial review will undoubtedly result in are much more worrying in Birch’s perspective. He is sure the remote gambling sector is as likely to face backlash as the hotly debated FOBTs in the retail market.

I think it is very dangerous to say we’re fine and no-one needs to worry, because you don’t know what’s going to happen in terms of regulation. If you look at the wider political world and the speed and randomness of change, arguably the one thing you can predict is unpredictability,” Birch warns.

“I fully expect there to be some changes one way or another, on advertising and on social responsibility measures. I can’t see that the digital gambling industry is going to come out of that review completely unscathed. It may be for better or it may be for worse, but I think there will be some impact.”

One of the most notable impacts the triennial review has had is the slowing-down of a once thriving M&A culture in the UK gambling industry. Like other operators, Rank has chosen to keep its head down for the time being and further drive organic growth. The group made headlines last year with its ambitious bid for William Hill, in a deal with 888 that eventually fell through. “I wouldn’t rule out looking at smaller acquisitions in the meantime, but I think the whole industry is waiting for the government to decide what it’s going to do in terms of the review,” Birch confirms.

Ultimately, Rank is leveraging its traditional roots and recognisable brands to build itself a new, millennial-friendly image and to further push its online presence. In line with this, the group’s legacy app was launched in the Play Store in August following Google’s lifting of the ban on real-money gambling apps. Add to that the shift to new digital and CRM platforms, and a new contact centre in Sheffield.

Birch is also optimistic for the future of retail, pledging to continue to innovate and improve customer experience. He certainly isn’t afraid to try new concepts and is confident of moving Rank up the ranks of the EGR Power 50 list this year. “Yes, we would expect to see some progress on that front,” he concludes. “I would be disappointed [if not], given that we have outstripped the market in terms of both revenue and profit growth and also in terms of product development, like introducing sport and relaunching poker, improving our live casino and a number of other things.”