Question of the Day - 03 July 2017

Yes, it’s just one link in a very large chain, founded by Craig Estey in 1996.

It started with one slot parlor in a Tropicana Avenue strip mall near the Liberace mansion and has grown to 120 taverns and cubbyholes statewide, most of them holders of restricted gaming licenses (15 slot machines or fewer). However, 27 “super-Dotty’s” average 40 slots each. The company has built only 14 Dotty’s from the ground up, relying instead on plucking the low-hanging fruit off the slot-route tree. 

Chief Operation Officer Mike Eide told the Las Vegas Review-Journal, “Our reputation was that we always paid rent on time. When a tavern went out of business, we got the call. We were picking up a lot of locations. That still happens today.”

Dotty’s business model has been to cater to women with money to spare, emphasizing homey decor, smoking, and prepackaged comfort food (though generally eschewing kitchens, which would create trouble, as we shall see). “Think a grandmother’s house with gambling devices,” reporter Howard Stutz described the Dotty’s aesthetic. Instead of sports or Fox News, the TV feeds favor “Ellen” and “The View.”

“We target a 35-and-older female customer,” Eide told Global Gaming Business magazine. “The décor, the design and the flow of the property are all built around that customer. And we’ve discovered that older men like to frequent the establishments” (perhaps liking the target female customer?).

The success of Dotty’s has made a powerful enemy: Station Casinos. Estey says he rebuffed a purchase offer from Station and incurred its wrath. Whether this is true or not, Station constantly carps on Estey’s business model, arguing that Dotty’s posture as taverns is a sham, particularly the food sales. Station and Golden Gaming, a rival for the casual-gambler customer, have lobbied for changes in the way that Dotty’s and competitor Jackpot Joanie’s are allowed to operate.

They found a sympathetic ear in the Las Vegas City Council, which voted to require that food sales constitute a “significant” portion of Dotty’s revenue and that gambling be only “incidental.”

Dotty’s argued that gaming provided 67% of its income, a figure disputed by Councilman Bob Beers, who put it at 91%.

Eide is dismissive of Station and Golden’s indignation, telling GGB that Dotty’s success “didn’t happen overnight, but once we developed and refined it, the market now has understood what we did, and they [the locals casinos] want Dotty’s customers back.”

Dotty’s went big-time when Estey bought the River Palms Casino in Laughlin and the Hacienda outside Boulder City. Renovation was the order of the day for both properties.

Having enjoyed runaway success in Nevada, Dotty’s is looking at Illinois (where the Estey family already owns a slot route), as well as Pennsylvania, where the legislature appears to be on the brink of legalizing slot routes as well — much to the dismay of the big casinos.

The origin of Dotty’s, however, is in Oregon, where Estey lived and owned lodges when the state legalized video poker almost 30 years ago. He saw a business opportunity in the fact that bars and taverns weren’t geared to a female market. Enter Dotty’s. The mini-casinos didn’t take off at first, but Estey eventually tinkered the concept into profitability. 

However, state investigators found that Dotty’s was making more than two-thirds of its money off of gambling, in defiance of state law. Seeking a “friendlier gaming environment,” Estey’s eye lit upon Nevada. He also refined his business model again, outright owning and operating the slot machines instead of subcontracting that cash cow.

Two events — passage of a Nevada law forbidding smoking in establishments that had kitchens and the Great Recession — played right into Estey’s hands. Many smaller operators couldn’t cope with the double whammy and sold to Estey. Gaming regulators tried to curb Dotty’s growth by passing a rule that, henceforth, working kitchens and bar-top gaming machines had to be installed. “The underlying concern was that Dotty’s makes too much money off gaming to be considered taverns,” Stutz wrote.

For the time being, Estey seems to be keeping one step ahead of the regulators, themselves flummoxed by rules that are vaguely drawn and therefore difficult to enforce. The gaming industry continues to resent Dotty’s ability to offer gambling without the overhead that goes with running a full-fledged casino. Clark County Councilman Steve Sisolak fumes, “You don’t go into Dotty’s unless you’re going there to gamble. Nobody goes to Dotty’s for a beer.” No — but you can have oatmeal.

Oh, and how did Dotty’s get its name? Estey did a study of his demographic target base to find out what names resonated best with them. “Betty” ranked second and “Dorothy” came in tops. Shorten “Dorothy” to “Dotty” and – shazam! – a strip-mall gambling franchise was born.