Successfully rolling dice on a gambling business

Eighteen years ago, Marc Murphy and Mike Chaput were living in California, when a friend contacted them with an unusual proposition.
Colorado had just legalized limited-stakes casino gambling in three mountain towns. How would they like to pull up stakes, move to Cripple Creek and open a casino?
Chaput and Murphy opened Bronco Billy’s, one of Cripple Creek’s original casinos, on Oct. 2, 1991.
They had about 100 slot machines in a renovated building on Bennett Avenue.
Since then, the business has expanded to four adjacent buildings, and includes two restaurants, four bars, and 700 “devices,” as slot machines are now called.
Within the first few years of legalized gambling, the local industry underwent a shakeout, as small, underfinanced operations either closed or merged with competitors. The skyrocketing growth of the early 1990s slowed drastically, as the industry matured.
The survivors, which today line both sides of Bennett Avenue, had to adapt to a different business environment.
There are over a dozen casinos in Cripple Creek, each offering virtually identical products — gambling devices and poker tables. The odds of winning (or losing) don’t differ significantly from casino to casino, with most devices offering payout ratios between 91 percent and 96 percent.
There’s little to differentiate one casino from another, except the physical plant, amenities and customer service.
Murphy said that customer service is by far the most important factor in maintaining market share.
“We know that our competitors are literally next door and across the street,” he said. “So once you’re inside, we have to give you good reasons to stay.”
In common with all of its competitors, Bronco Billy’s uses a “reward card,” which players insert into a designated slot on the device. The card accumulates points based upon play, which can be redeemed for cash, hotel rooms or meals. In-house promotions designed to reward customers for continuing play also are used.
While the popular image of a casino is that of a money machine, a can’t-miss business that literally brings in rivers of cash to its owners, the reality is a little different, Murphy said.
Casinos, he said, are one of the last businesses whose receipts and expenditures are predominantly in cash. That simple fact demands complex security systems to deter theft and fraud.
And Murphy and Chaput anticipate that the next year will bring more bad news than good for Cripple Creek’s casinos.
Murphy said that casinos’ exemption from the statewide smoking ban probably will be repealed — and that will make a big difference.
“Lots of our customers smoke,” he said, “and even if they all continue to come and play here, we’ll still lose.”
That’s because customers will have to leave their machines and go outside to smoke, thereby reducing their “time on device.” If 40 percent of the slots suffer TOD reductions of 10 percent (six minutes an hour), that translates to a revenue loss of 4 percent.
Ed Libby, Cripple Creek’s mayor, agrees that the industry is facing a crossroads, which make economic diversification even more important for the town.
“The activities of owner/operators have been focused on a very specific demographic, and they’ve been very successful in reaching that demographic,” he said. “But if you look at population growth in the Springs, it’s significant — but not as much in the elderly demographic that we market to.”