Frank Fahrenkopf, president and CEO, American Gaming Association
Gaming in the US is a diverse and fiercely entrepreneurial industry, with big personalities and big opinions. Keeping the industry together to protect its interests, often in the face of deep-rooted opposition, both socially and politically, is the job of the American Gaming Association and its president and chief executive, Frank Fahrenkopf.
“This is a very competitive industry,” he tells InterGaming. “People who run these billion dollar enterprises are strongly driven and very, very competitive. The fact that we've been able to keep them mostly harmonious over the last 16 and a half years and at the same table able to work together on common interests and to solve common problems is important.”
Having served his third and final term as chairman of the Republican National Committee, Fahrenkopf was practising law in Washington DC when he was approached by Steve Wynn, Chuck Mathewson, chairman of IGT at the time, and Raymond Avensino, head of Hilton, to become the AGA's first chief executive in 1995.
“They came and visited me and I agreed to take on the job for one year to get the American Gaming Association up and running. That was over 16 and a half years ago.”
Fahrenkopf became involved in gaming when he went back to his hometown of Reno, Nevada, from law school in 1965. To this day, gaming remains the state's major industry and so his first foray into the business came when he served as an attorney for gaming companies, representing them before the Nevada gaming authorities and litigating for them.
“That was my initial introduction and I did that for a period of 16 years before I came to Washington with Ronald Reagan,” he says.
His career both in law and politics has enabled Fahrenkopf to build personal relationships with many key figures, making him arguably one of the most well connected individuals within the industry in the US. During his time in Reno, for example, lobbying at the Nevada legislature ensured he got to know a young assemblyman from Las Vegas, Harry Reid. These days, Reid serves as the Senate Majority Leader on Capitol Hill.
Taking on the role of co-chairman of the non-partisan Commission on Presidential Debates, meanwhile, brought Fahrenkopf in touch with presidential candidates and leaders of both political parties. This, he explains, has enabled him to approach problems from a neutral perspective - something that serves him well when advancing the agenda of the industry.
“Both political parties have elements that are rabidly anti-gaming for different reasons,” he says. “In the Republican Party it tends to be those on the far right who normally would be libertarians and don't want government involved in telling people what to do but when it comes to gaming, because of their religious affiliations, they view gaming as sinful and therefore oppose all gaming legislation.”
Surprisingly, their political foes - the Democratic left - are as equally opposed to gaming, albeit for very different reasons.
“They are not focused on sin or no sin,” continues Fahrenkopf, “they just don't believe that people are smart enough to make their own decisions about how to spend their money and the government must protect them from themselves.”
Getting the message out there is an ongoing process and each time a new Congress is elected there are a host of new politicians - 112 in January alone - who probably know very little about the industry and what it means in terms of taxation, jobs and capital investment. Building stronger relationships with elected officials, both at a Congressional and state level, is therefore a key aim for the AGA. It will no doubt prove crucial if the association, along with other major organisations, is to win the argument in favour of legalising online poker.
This “strange marriage” between the left and the right in American politics has traditionally seen even the most moderate within Congress err on the side of caution when it comes to gaming legislation, fearing a backlash from their more passionate colleagues. At its worst, it has produced clear attacks on the industry, such as the National Gambling Impact Study Commission Act of 1996. Here, the newly created association fought hard to defend the industry it represents.
Paradoxically, in the wake of the global recession many of these same politicians are now exploring the possibility of either bringing gaming to their states for the first time or expanding the existing offering. There's a lot of legislative proposals, in Fahrenkopf's words, “kicking around”, whether it's adding slot machines to racetracks in Kentucky or opening commercial casinos in Florida and Massachusetts.
“Historically, times of recession have been when there have been growth opportunities presented to our industry,” he says. “When the economy is bad, governors and state legislators are faced with very difficult decisions.”
Few seek to cut benefits for their citizens but equally, raising taxes across the board to pay for them would potentially drive away capital investment and economic development. Instead, many are turning to gaming.
“They look to the gaming industry - and we saw it particularly with the growth of riverboat gaming in the late 80s and early 90s - because we're a privileged industry, it's not a right to open a casino. Gaming taxes are higher than for most businesses, we're a labour-intensive industry and so we're an industry that becomes very attractive.
“In the last 10 years we've seen continued growth in the states that are looking for ways to generate additional income and probably the biggest growth came in the racino industry. With racinos, all you're doing is changing the mix of gaming that takes place at the venue.”
Converting a racetrack to a racino with the addition of slot machines or in some jurisdictions tables as well, avoids zoning battles and other problems casino developers have to contend with. Both segments of the market are expected to see new projects drawn up, perhaps inspired by the success seen in relatively young jurisdictions such as Pennsylvania.
“Bearing in mind that there are just two states out of 50 that don't have any gaming at all, the question is what they are going to add to their mix,” Fahrenkopf remarks. “Florida and Massachusetts are clearly where there seems to be the most focus and you also have the Genting development in New York, which is going to be a billion dollar project. Those are the ones that leap out but you've got a lot of things under consideration in various jurisdictions.”
The diversification of amenities on offer continues to broaden the appeal of gaming properties throughout the country as gambling is increasingly viewed as just one part of the overall entertainment mix. By further developing the gaming offer in combination with retail, dining and other facilities, the industry can further strengthen its position within the US economy. The Las Vegas model is now being applied to jurisdictions across the country.
“One of the reasons we've come through since the fall of 2008 with the industry still on its feet was the use of technology and innovation and that is going to be the key to success in the future,” Fahrenkopf states. “We've got to realise that people have more entertainment choices and are going to be more selective so we have to develop new ways to bring them into our properties and offer them an enjoyable entertainment experience to continue bringing them back.
“We've weathered the storm and we continue to hope that the US is going to come out of this recession and, as the recovery gets on track, we'll continue to grow and be a major part of it.”
Thankfully, the numbers are up again. The commercial gaming sector saw growth of just over 3.31 per cent for the first six months of this year. Considering the way the economy nosedived with the onset of the 2008 crash, there is now light at the end of what has been a very dark tunnel.
“I think 'we survived' would be the best way to put it,” Fahrenkopf admits. “Everyone in this country, whatever business you were in, was hit by the cut back in discretionary spending. With some of our major companies, we were also hit by the lack of liquidity that took place in the markets after 2008. There were many of our companies, both domestically and abroad, that were involved in billion dollar building projects that suddenly faced the prospect of not being able to refinance, not being able to borrow additional money and not being able to issue bonds or preferred stock - it caused tremendous difficulty.”
The situation improved slightly last year, however, as the industry began to find its feet again.
"Through it all we have survived and we're now seeing that last year was the first year in a number of years where we actually had an uptick. We're only up one percentage point compared with 2009 and, while a one per cent increase is not indicative of a complete recovery, the recovery of the entire economy is slow and laborious.
"So far the numbers for 2011 show that we're headed in the right direction and in June we were up about 3.31 per cent. Again, being up 3.31 per cent for the six months is not magnificent but it shows we levelled out a couple of years ago - last year we were up a little bit, this year we're up again. Hopefully this economy will get cooking and we'll see things start to move up again."
