Q&A: John O’Reilly on changing player demographics and competition in casino

Rank Group last week reported a 15% downturn in full-year underlying net gaming revenue (NGR) to £585m for 2020 but the drop-off didn’t tell the whole story.

The operator’s transformation strategy had paid dividends before the coronavirus pandemic hit. In the eight-month pre-Covid-19 period to 29 February, NGR climbed 11%. Operating profit rocketed 61%, with profit growth in all divisions except for Mecca (-4%), including a 121% uptick in venues.

Below, Rank CEO John O’Reilly describes a year of two halves for the casino giant and talks to EGR about how the global pandemic might affect the business moving forwards.

EGR Intel: How much of your digital growth was from customers transitioning online with venues closed?

John O’Reilly (JO): We saw good digital growth in H1 before we even got to lockdown. As we entered lockdown, we benefited across both Mecca and Grosvenor from our venues being closed. In Grosvenor, the strength of the omni-channel offer is proven by the fact that half of our online revenue now comes from omni-channel customers. From March through April and May, we were benefiting. Over time, I think that omni-channel benefit dissipates, plus you haven’t got a flow of new customers from venues to digital, so that did start to soften through June and into July. That was the reality, but now with our venues open in the last couple of weeks, we are starting to see revenue pick back up.

EGR Intel: Have you noticed a change in customer demographic since venues reopened?

JO: In Mecca our customers are undoubtedly younger. On the one hand, that is a reflection of some changes we’ve made to the proposition. But more significantly, I think it is due to a concern among our older customers. For customers over 70, visits are down 60%. When they come back and experience it, it’s fine thereafter and they come back regularly. But getting our older customers through the door is the challenge right now because the lockdown campaign was run on fear really by telling people to stay indoors.

EGR Intel: What proportion of the Mecca business is built on customers aged 70+?

JO: Quite a high proportion but they typically spend less.

EGR Intel: Analysts are bullish due to the pre-Covid performance. They believe you can take market share from businesses that did not make it through the pandemic. Is that how you see it?

JO: We are very focused on what we’re doing and a bit less focused on what our competitors are doing. Clearly there are a number of casinos that have not reopened. There are only 127 casinos to start with. In the bingo world, some of our competitors have been a bit slower than us to reopen, so we have benefited a little bit from that. Inevitably, this has been a tough period for a lot of businesses. It has put a lot of strain on cash and cash resources. We were blessed really by being in a strong position coming into this, which means we’ve been able to navigate our way through and compete strongly coming out.  This is not a short game, that’s for sure.

EGR Intel: You said you were disappointed with the Stride Gaming performance as its proprietary brands were brought in line with Rank’s responsible gaming standards. Is that complete now?

JO: You never stop with safer gambling; it is always about providing that safety net and trying to identify those customers that are playing to excess. Our focus is on reducing friction to allow customers to play, rather than stopping them playing, quite frankly. We’ve done a lot of hard yards to ensure that we are protecting the vulnerable within our digital businesses. You can always do more, but we’ve done an awful lot.