Staying on Track

In the gaming industry, areas for pioneering new routes for revenue expansion is becoming limited. The one market open for exploration is Internet gambling. Currently, most casino revenue, at least in the United States, is generated by public companies. In Nevada, for example, over 75 percent of gross gaming revenues are generated by public gaming companies. These companies must answer to the public markets and ultimately, must find ways to drive revenues to higher levels if they are to increase shareholder values. This can be done by, either increasing revenues in existing markets, or entering new markets. But, the number of new or underserved gaming markets is steadily declining as gaming has proliferated over the past two decades. While some opportunities exists for traditional, land-based casinos, particularly in Asia, the more obvious market to exploit is the Internet.

This is a place where the market is quite fragmented and no strong brands have yet to emerge. Moreover, a sense of urgency has emerged as U.S-based casinos see casinos from Australia and other countries getting a first player advantage on the Internet. Internet gaming is, therefore, a topic of great interest in the boardroom of several U.S. gaming companies. This is obviously big business. According to Bear Sterns, an investment banking, securities trading and brokerage firm, the Internet gaming market was about $2.5 billion last year and should rise to over $5 billion next year. Name brand casinos could garner a significant share of this market because they already have brand recognition, substantial customer bases and can cross market their Internet and land-based products.

Legal Issues Concerning Online Casinos

This may have been the motivating factor for a push in the Nevada legislature earlier this Spring. The 2001 Nevada Legislature passed legislation authorizing the Nevada Gaming Commission to license interactive gaming operations in Nevada. While this legislation clearly lays the groundwork for the eventual legalization of Internet gaming in Nevada, it requires state regulators to undergo an in-depth analysis of numerous issues related to the legality of interactive gaming before licensing may proceed.

Besides Nevada, two other U.S. jurisdictions are taking a hard look at interactive gaming. The U. S. Virgin Islands has also passed legislation that would enable its gaming commission to authorize and license interactive gaming. In New Jersey, proposed legislation would permit Atlantic City casinos to do the same thing. Yet, all eyes remain on Nevada because it was first to act and is, for most concerns, the gambling capital of the world.

According to Nevada's new law, state regulators may not license Internet gaming until they have determined it can be "operated in compliance with all applicable laws." Interactive gaming systems must also demonstrate that they are reliable and secure, and the technology used must ensure with "reasonable assurance" that Nevada operators only accept wagers from players of legal age, and from jurisdictions where online wagering is legal. Determining whether Internet gaming can be "operated in compliance with all applicable laws" requires an analysis of federal, state and international law.

The Federal Wire Act

The federal law perceived as the biggest potential obstacle to interactive gaming is the Federal Wire Act. Yet the plain language of the Wire Act supports an interpretation that it only applies to betting on sporting events or contests. This interpretation stems from the language, "Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility ... in the placing of bets or wagers on any sporting event or contest ..."

Under this interpretation, the Wire Act only prohibits use of the Internet by bookies taking bets on things like football, baseball, horseracing, etc. The act would not prohibit other online gaming like blackjack and poker. Until this year, there was no case law on this issue. A 2001 Louisiana Federal District Court case ruled that the Wire Act only prohibits sports-related gambling on the Internet and does not present an obstacle to other types of online casino gaming. The court stated "Internet gambling in connection with activities other than sports betting is not illegal under federal law."

As it now stands, this is the only case law on point with respect to the Wire Act's application to non-sports betting on the Internet. Although the case is on appeal to the 5th Circuit, the strong arguments supporting this interpretation suggest that this debate may soon be settled by a circuit court opinion determining that the Wire Act does not apply to non-sports betting. The recent 2nd Circuit opinion affirming the conviction of Jay Cohen — an offshore Internet casino operator who engaged in sports wagering — does nothing to affect this interpretation. The 2nd Circuit said nothing about Internet wagering on casino games and therefore did not disturb the Louisiana federal court interpretation that the Wire Act only prohibits online sports-related wagering.

Federal Gambling Laws

Other federal laws related to gambling were designed to complement the states' ability to prosecute and enforce their own gambling laws. They usually require a violation of state laws before they are triggered and are unlikely to present obstacles for prospective operators of legally-licensed interactive gaming sites. Among these laws are the federal Anti-Gambling Statute; the Travel Act; the Wagering Paraphernalia Act and the Lottery Ticket Transportation Statute.

Any move by Congress to prohibit Internet gaming would render any of the arguments about interpretation of the Wire Act and other federal laws moot. Certain members of Congress have worked diligently in the last several Congresses to pass legislation that would either prohibit Internet gaming directly, or prevent use of the means to gamble on the Internet — e.g. ban the use of credit cards for wagering online. Despite the push for legislation by these members, nothing has passed to date.

The latest and probably the last best chance that Congress has to pass an Internet gambling prohibition is Internet Gambling Payments Prohibition Act HR 2579 (the LaFalce bill) or the Unlawful Internet Gambling Funding Prohibition Act HR556 (the Leech Bill). These two bills appear almost identical. Both bills seek to prohibit the use of any fund transfer methods. This would include credit cards, debit cards, bank transfers, checks and the like. One provision marks a distinction as old as Alexander Hamilton and Thomas Jefferson. The Leech bill applies only to "illegal" gambling while the LaFalce bill applies to all gambling. Under the Leech Bill, the term unlawful Internet gambling "means to place, receive or otherwise make a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable federal or state law in the state in which the bet or wager is initiated, received or otherwise made." In other words, the Leech bill would recognize state's rights to legalize interactive wagering (where it would become legal and therefore exempted from the prohibition), while the LaFalce bill would federalize the issue and preempt states from legalizing interactive wagering even within their own state.

As written, albeit poorly in places, this legislation from the Leech bill would actually help the Nevada casinos, but hurt the offshore Internet operators. As a practical matter, Nevada casinos that enter the online market will not be taking bets from other states without it being legal in the other state and an agreement on tax revenue sharing. So, if Nevada casinos are prohibited by federal law from taking credit cards to allow persons to make bets from states where it is illegal to do so, it does not impact their Internet plans. In contrast, the non offshore operators would be frustrated somewhat because they currently accept bets from gamblers in the U.S. regardless of state laws. Until new fund solutions can be arranged, under this legislation they would be prevented from accepting funds in these formats where Internet gambling is illegal.

Congressman John LaFalce, a moralist, wants to extend the ban to all Internet gambling. This would prevent any U.S. company from conducting any Internet gaming either in the United Sates or with someone physically located in the United States. In other words, they could not locate their servers in the United States or take bets from the United States, even on an intrastate basis.

Nevada's Next Move

Besides ascertaining all applicable federal laws, Nevada regulators will need to understand the laws of the 50 states to ensure that potential online gaming is not offered in jurisdictions where it is illegal. They have engaged a national law firm to undertake this review. Several states have passed laws specifically outlawing Internet gambling. Only a few states, like Michigan and South Dakota, have laws that leave the door open for possible future licensing of state operators.

While 48 states authorize some form of gambling, most states have laws making all gambling illegal unless specifically authorized by state statute. These generally applicable laws make Internet gaming illegal until state legislatures specifically authorize it.

A recent case in the 11th Circuit Court of Appeals held that an Internet site should not be subject to place-based city zoning regulations, because it operates in "cyberspace" rather than in a specific location. Therefore, traditional prohibitions against general, location-based gambling may not apply in cyberspace. Moreover, the fact that a growing number of states felt the need to enact legislation specifically outlawing Internet gambling suggests that this argument may be persuasive. For instance, the Connecticut Attorney General has conceded that when it comes to Internet gambling, the law, at best, is gray.

Some insiders have speculated it will take as long as two years for Nevada regulators to make the findings required by the legislature. I do not subscribe to this belief. Once the process gains momentum, it could take considerably less time. The process began on July 31 and Aug. 1, when the Nevada Gaming Commission held two days of Interactive Gaming hearings. During these hearings they entertained testimony from a variety of individuals who discussed these legal and technological issues.

Finding the web page you are seeking can be a chore, and having your hospitality company's web site prominently listed in search engines and directories can be an even larger one. Estimates vary, but between half and two-thirds of all web sites are found through search engines and directories. It takes research and diligence, not luck, to be well placed on these portals. Herein are suggestions on how to succeed with this marketing goal.

The number of search engines and web sites is staggering and growing quickly. Currently there are over 2,000 search engines and almost one billion web pages on about three million servers. VeriSign, which acquired Network Solutions in 2000, ended that year with more than 28 million active domain names in its registry. With all of these web sites, it is challenging to have one's company be found by surfers, much less rank highly amongst the given choices.

The concept is simple — users want to intuitively and successfully find desired sites and hoteliers want them to find their sites. Success does not require investing lots of money, but instead requires an understanding of how search engine ranking algorithms work and change over time. A few hints help too.

Search Engines and Directories

Online businesses are constantly inventing new search engines or improving existing ones. Microsoft and America Online have both announced revamping of their search sites. GoogleTM replaced Inktomi as the supporting search engine technology behind Yahoo!®. The goal is to balance total pages indexed with an intuitive way of showing search results.

Programmers are constantly trying to outsmart the search engines, in order to get their pages at the top of search results. Years ago it involved tricks like hiding certain keywords in the same color as the background. Today engines attempt to discern and disqualify pages like this, while the ongoing pursuit for high placement continues. New tricks, some of them unethical, are constantly appearing. To ethically gain high placement is possible, but it takes a combination of factors.

There are several types of indexing sites. The first uses web "spiders" or "crawlers" that visit submitted sites and subsequently add links to the search engine, such as Entireweb.comTM. The second method, increasingly common, uses human editors to evaluate submitted sites and then place them into specific subject categories, a technique used by Yahoo!. This latter method uses the science of ontology (the study of the essence of things) to determine how to catalog things. Take Carnegie Hall for example. Should it be categorized in a directory under arts, architecture, New York, Andrew Carnegie, or classical music? It is in fact found in one Yahoo category, New York > New York > Carnegie Hall. Only humans can make these decisions consistently.

Submitting Your Site

Submitting web sites to either of these types of sites is usually free and requires little training. Like always, however, the devil is in the details. Most sites take several months before submitted sites appear. The correct category and relative placement within that category require specialized knowledge and ongoing homework, which is discussed shortly.

There are also sites that sell relative placement, the best example being OvertureTM (formerly GOTOTM). There one selects search terms (keywords) believed to be relevant to a web site. One then bids competitively for those words, ranging from a few cents to several dollars for every person who would subsequently find the site. The higher the bid on words, the higher an individual site appears on a search query. Clients pay only for those people who then select (click through) to their sites. This highly targeted method is more expensive and takes only a few days to setup. Presently there are few, but increasing, search engines that use this method.

One twist on this is the sale of keywords. In Microsoft and Netscape's newer Web browsers there are built-in keyword navigation features, turned on by default, that allow users to type in plain words instead of longer Web addresses (URLs). Although this method is easier on users, it puts the control of keywords into the hands of the database owners. In the case of Microsoft Internet Explorer, for example, this owner is RealNames. That company sells examinations, recommendations and placements using keyword-driven visits for a few hundred dollars or more annually. The company will not necessarily sell words that are common or industry-related, but will sell specific names, such as a unique company name. For example, Netscape manages its own keyword database comprised of strong brands and trademarks, also selling keywords.

Why It's Important

There are disaster stories for web sites. One foodservice company found through a search of its company name only returned results pointing to a competitor. The foodservice company had no strategy, while the competitor used META tags containing the first company's name.

Recently a hotel chain found a protester's site showing up very high on searches of its name, due to the protester's prominent use of the company's name on his web site.

A third hotel found that only its competitors showed up when its name was entered as a keyword. This was due to the competitor having purchased the company's initials as a keyword. The lesson is simple: if a company wants to build its brand, it needs to research how to be well placed on the Web.

Sample Methods

Methods vary depending upon how and where the site is to be listed. Search engines are constantly changing the algorithms by which they index pages. The bottom line is that it depends on a changing and often undisclosed number of variables. Link density (how many sites link to a site), link popularity, cross-linking, page length, word frequency and word placement all influence the algorithms.

Options for high placement are to hire a professional (be extremely wary of fly-by-night search engine submission services) or learn the techniques yourself. Regardless of the choice, ensure that your technologists/programmers understand your desires. Should you do the programming yourself, the following suggestions are examples of what should lead to improved search engine placement.

  • Use the TITLE html (hypertext markup language) tag wisely. Choose between four and eight concise words that name your company and its fundamental purpose.
  • Use META description and keyword html tags for every page and subpage (although a decreasing number of search engines are keying from them). Include your title as the first keyword and ensure that words are not repeated. Be sure to use relevant words that are in your text.
  • Use the description tag wisely but specifically, without repeating the title, and with no more than 25 words. Avoid unnecessary capitalization.
  • Use NOINDEX and NOFOLLOW html tags to keep undesired pages from being indexed. Most sites only want to steer customers into its front or other specific portals, but not directly into deep content that may not provide context.
  • Use ALT html tags with all graphic images. If your company name is only found in a graphic, do not expect search engines to parse them.
  • Place the title of your page in a html tag on the main page.
  • The actual content of your pages is crucial. Ensure your lead paragraph includes relevant words and phrases on which you want viewers to search.
  • Name your individual html files judiciously. The search engines will also look to the actual URL and file names for site placement.
Science, Not Chance

Realizing the importance of active, descriptive, and high-return web site links in search engines is crucial to hotels and clubs. As more surfers use the Web, a hotel's ability to be easily found is absolutely essential. After realizing the importance, companies need to take action. This is a process, not a destination. A hotel needs to constantly check and recheck how it appears to users. Vigilance and awareness will help keep a site in front of the right customers.

Michael V. Mitchell, M.M.H. is a manager with Andersen's technology integration services group in Boston. He is the North American program manager for that group of specialists.

The Bottomline, published bimonthly, is the official publication of HFTP, and is received by HFTP members as a member benefit. The editorial content of The Bottomline is determined by a team of experts. Members of the HFTP Communications Committee represent a variety of industry segments and areas of expertise in accounting, finance and technology. Besides the magazine's six regular issues, two special issues are published yearly. The Bottomline is an HFTP member benefit and is only received regularly by members. Go to www.hftp.org to get more information on HFTP membership.

Based in Austin, Texas, HFTP is the professional association for financial and IT personnel working in hotels, resorts, clubs, casinos, restaurants, and other hospitality-related businesses. The association provides continuing education and networking opportunities to more than 4,300 members around the world. HFTP also administers the examination and awards the certification for the Certified Hospitality Accountant Executive (CHAE) and the Certified Hospitality Technology Professional (CHTP) designations. HFTP was founded in 1952 as the National Association of Hospitality Accountants.

Wendi Williams
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HFTP