Research Library

Integrating a Nightclub at Your Gaming Property

Casinos throughout the world have long looked to Las Vegas for product innovation and ideas to enhance their customers’ entertainment experiences. With the explosive growth of nightclubs at casinos along the Las Vegas Strip, operators in other jurisdictions have begun to add new forms of nightlife to their casinos, including big-box nightclubs and ultra-lounges that target new demographic segments. Successful night club operators, like Light Group, Pure Management Group and N9ne Group, have opened some of the most successful operations and companies like Titan
Nightlife Group are exporting the Las Vegas nightclub concepts to Indian casinos.

Unfortunately, the world of nightclubs is a decidedly different place than the world of casinos, comprised of different customers that are motivated by different wants and needs. While both groups of customers have high levels of disposable income and are willing to spend copious amounts of money for that entertainment, they come from different demographic groups and the activities that they enjoy can conflict with one another. Failing to manage how these two worlds interact can lead to conflict and prevent the casino from maximizing its overall profit potential. Often strategic decisions are made without thorough analyses, preventing casinos from fulfilling their revenue potential. It is useful to examine two instances in which the behaviors of nightlife customers and casino customers conflicted and how management made decisions without complete information.

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Measuring Slot Handle Performance

One of the most often used measures of casino business volume is Slot Handle. Often examined on a daily basis, “Slot Handle” or “Coin In” is the amount of money played through all of the electronic gaming devices on the casino floor. The general assumption is that slot handle, multiplied by the casino floor’s aggregate hold percentage, will yield a fairly accurate measure of daily slot performance. Unfortunately, not all slot handle is the same. In fact, in most casinos there is both good slot handle and bad slot handle and failing to fully appreciate how they differ can have a significant effect on a casino’s overall profitability.

Good handle is slot handle that is generated by people wagering on traditional reel slot machines, multi-line video slot machines as well as video poker machines with conservative pay tables. They appeal to players that seek gaming entertainment and are not under any allusion that they can make a living gambling in a casino. The hold percentage of these games is high enough to allow the casino to offer cash back allowances, complimentary dining privileges, mail offers and other perks in order to reward loyalty. Bad handle is generated by gamers wagering on video poker machines that have very generous pay tables and therefore inordinately low hold percentages. Individually, these machines are characterized by high wagering volume (slot handle) and at the end of the day have favorable win per unit per day (WPUPD) averages. However, despite their acceptable WPUPD averages, they often generate bad handle. For this discussion, bad handle is coin handle generated by players who are consistently not profitable to the casino. The total amount of money won from these players, if any, is eclipsed by the perks provided to those players.

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Planning for a New Buffet

As casinos expand from simple gaming centers with limited amenities to multi-faceted gaming entertainment destinations, gaming operators often increase the number and size of food and beverage operations as part of their expansion programs. Very often such expansions include a two-meal or three-meal buffet operation. There is a generally held belief that a casino should have a buffet in order to appeal to a broader base of gamers, feed large groups of people quickly (such as buses), give gamblers a quick meal option and to create an additional attraction to people who might gamble but have not yet demonstrated an interest in visiting the casino. Conversely, there is a belief that buffets, if designed and executed poorly, do little more than increase food costs, attract a marginal segment of the dining public that has little interest in gaming and place an undue burden on overall profitability. It is for these reasons that prior to starting construction of a new buffet the casino operator must first thoroughly research the market, develop a buffet business strategy, and then develop a predictive model that forecasts food revenues, expenses and incremental gaming revenues that would be derived from diners who gamble in the casino.

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Time is the Enemy of the Player

Not long ago the leadership team of an Indian casino near a major metropolitan area made a strategic decision to attract premium Asian-American table game play. With a clear mandate that the tribe wanted this initiative done correctly, the general manager instructed his marketing team to thoroughly research the value of this gaming segment, identify the amenities and marketing programs necessary to attract and retain this segment and to develop an implementation plan.

The marketing team did an admirable job. They first retained a consulting firm to estimate the size of the market’s premium table game market. They conducted focus groups in the primary feeder market. They flew to Las Vegas and met with colleagues who operated premium table game rooms at Strip hotels. They even sent a member of the team to Macau to see how premium table game operations were conducted in Asia.

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10 Ways to Make Your Rewards Program More Successful

Casino player reward programs and the tools to identify and reward players have become the most important elements in casino marketing plans. Nevertheless, for most gaming operators, player reward program participation rates remain low relative to some of the most successful reward programs in the industry. Despite the importance of player reward programs, most operators fail to enroll the majority of players into their rewards program and give those players enough incentive to use their players club cards every time they place a wager.

When evaluating the success of player rewards programs, casinos often look at tracked or carded win as a measure of reward program effectiveness. Tracked win refers to gaming revenue that is generated by people using their reward cards while gaming. Tracked win tends to measure the usage pattern of the casino’s heaviest users (those people who visit most frequently and have the highest handle volumes). The tracked win rate refers to the ratio of tracked win to overall gaming win. Even so, most casinos’ tracked win rates are low, often hovering in the 25-35% range. Conversely, the most successful gaming companies, notably Harrah’s Entertainment and Station Casinos, have tracked win rates in excess of 80%. At the very least, a casino with a successful player rewards program should be enjoying tracked win rates in excess of 50%. Anything less indicates problems that may not be readily apparent to the gaming operator.

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Adherence to Leadership Principals

Many gaming organizations have come to understand the importance of operating with consistent principles of leadership. The notion is simple: all managers need to adhere to standards of leadership so that all employees know what is expected of them and what the consequences may be if they choose not to meet those expectations. To this end, managers are taught how to communicate expectations, follow up when expectations are not being met, counsel employees and, if necessary, discipline them. Gaming organizations often go to great lengths to teach managers how to lead in a consistent manner, employing outside consultants or developing leadership training programs in house.

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How to Calculate the Player Reinvestment Rate

The terms “player reinvestment” and “player reinvestment rate” are often used to describe the costs associated with the suite of benefits that casinos bestow on their players. However, despite the frequency with which these terms are used, there is no industry-wide definition that describes the specific components that make up player reinvestment. To better understand how the industry defines player reinvestment, a survey was conducted among casino operators in a number of jurisdictions including Indian casinos, riverboat/barge casinos and Nevada casinos.

A key finding of the research was that in the evolution of most casinos, understanding what a property’s player reinvestment rate is does not become an important issue until two seminal events occur: 1) the casino institutes a host program and 2) it begins to mail out cash and free play offers to various segments of its database. Then, as discretionary comp costs and mail redemption costs rise, casino leadership begins to ask, “So what is our player reinvestment rate?”

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Making Nightclubs Work

For years casino operators from around the world have looked to Las Vegas in order to spot emerging trends that could be adapted to their markets. The opening of Caesars Forum Shoppes in 1993 inspired other gaming operators to add shopping malls in order to broaden their reach into new markets. For example, the Viejas Casino in Alpine, California and the Horseshoe Casino in Bossier City, Louisiana developed stunning factory outlet malls to broaden their appeal and casinos in Atlantic City developed first-class shopping malls appurtenant to their casinos.

The more recent phenomenon of so-called “celebrity chef” and “eatertainment” restaurants in Las Vegas inspired casinos in regional markets to also add locally and nationally recognized restaurateurs to their food product offerings. Mohegan Sun features a restaurant by Boston-based Todd English, who opened Olives at Bellagio in 1998 and dozens of casinos now feature nationally recognized brands such as Ben and Jerry’s, Hooters and Wolfgang Puck Café.

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What Can We Learn from Macau

As gaming markets mature and individual casinos’ databases become established, casino operators are able to better understand the demographic makeup of their core customers. With few exceptions many Indian casino operators have come to recognize that Asian Americans, in particular immigrants from China, make up a sizable minority of their customers and display an almost passionate love of casino gambling. To better serve this important segment, many casinos have introduced noodle bars, expanded Asian food offerings in their buffets, added Chinese speaking hosts and printed collateral material in various Asian languages. Some have also brought in Asian entertainers. While these programs make sense, they are essentially tactical plans that
are put in place on a hunch rather than understanding that player segment’s wants and needs. They fail to recognize that not all Asian American gamers are alike and each nationality has its own particular appeals.

For most domestic markets, Chinese Americans are the most dominant Asian gaming segment. Notwithstanding some markets may be comprised of other nationalities. Therefore, it is critical to first understand which Asian nationalities comprise the largest part of the casino’s demographic mix. If Chinese Americans are indeed the largest, then it is important to understand their unique wants and needs. And to really understand what motivates Chinese gamblers, you have got to go to Macau.

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“New and Better” works

The rapid growth of Indian gaming has created an unusual dilemma for the leaders of many tribes. In the years following the passage of the Indian Gaming Regulatory Act, many tribes attempted to develop casinos. Unfortunately, it was unclear how successful these gaming properties would ultimately be, particularly for those tribes whose reservations were far removed from major population centers. Access to traditional capital markets was difficult. Amidst this uncertainty many casinos were developed using low-cost construction techniques or existing commercial structures were converted to gaming space.

As the industry matured and as properties were able to demonstrate their viability to the investment community, the cost of capital dropped and many tribes were able to replace their temporary structures with more attractive, full-service gaming/entertainment properties. Conversely, other tribes chose to keep their original properties and gradually expand them, all the while continuing to employ low cost construction techniques. Many of these casinos generated outsized revenues relative to their invested capital. The logic for many in tribal leadership was, why
incur additional debt by replacing low-cost structures when revenue streams were growing? The emerging dilemma was, why spend the money if one did not have to?

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