Pampering, Purchasing, and Partying: More opportunity for increased revenue

Providing customers with experiences that exceed their expectations significantly improves the operator’s ability to attract and retain customers.

These experiences can be created in a casino resort environment in spa, retail, nightlife and entertainment in both destination and regional gaming markets. Customers who provide feedback
tend to be inclined to offer both positive and constructive feedback that focuses much on their non-gaming experiences.

Incorporating non-gaming amenities as a complement to the gaming experience provides customers a more complete and hospitality-driven visit. These concepts are not new. Carefully planned and well-executed non-gaming amenities provide operators with significant opportunities to increase revenue, profit, and ultimately, customer loyalty.

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Changing the Face of the Industry

In this, our second in a series of discussions about the role of non-gaming amenities in both destination and regional gaming markets, we focus on the extraordinary and ongoing evolution of hotels, and how to assess, strategize and implement change.

The “lens” we use is comprised of five attributes that, when integrated, provide operators with a framework to create a comprehensive strategy for developing a new hotel or rebranding and refurbishing an existing one: the strategic assessment lens. This approach has helped several operators create new development and rebranding strategies for successful restaurants, bars, nightlife, entertainment and retail venues, casinos and hotels.

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The 5 Ps of F&B Success

In today’s business environment, casino operators must find ways to enhance and maximize the appeal and gross operating income of their food and beverage venues. An effective food and beverage strategy should not only attract and retain gamers, but generate profit through proper pricing and planning.

Las Vegas Strip operators have clearly demonstrated how profit can be gleaned from F&B operations. Bars and restaurants today are a significant generator of EBITDA (earnings before interest, taxes, depreciation and amortization) for many Vegas resorts. Outside Vegas, many operators have discovered how well-run restaurants and bars with quality food offerings can benefit the bottom line.

While regional casinos differ substantially from those on the Strip, they can apply the same practices to turn a profit from dining.

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The Tipping Point: Rising slot hold percentages are driving players away, and revenue down

Gaming revenues, and in particular slot revenues, continue to decline in most U.S. gaming jurisdictions. This pattern of decline began at the onset of the recession and has continued even as the economy improved.

Casino operators often cite increases in gaming supply in adjacent states and a slow economic recovery in their markets as reasons for this decline. While the recession certainly affected discretionary spending during the height of the recession, hitting casino gambling hard, the U.S. economy has largely recovered. Gaming revenues, though, have not.

Key macro-economic indexes have returned to pre-recession levels. Two indexes, employment and consumer confidence, have long served as bellwethers for gaming revenue forecasts. In August 2013 the U.S. unemployment rate stood at 7.5 percent, down from 8.2 percent for the prior-year period. By August 2014, the unemployment rate dropped to 6.4 percent. In August 2013, the consumer confidence index stood at 80.3, up from 75.3 in 2012. By August 2014 it rose to 82.0.

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Killing the Gaming Experience

Regional U.S. gaming markets continue to see month-over-month declines in gaming revenues. Analysts tend to blame the weather, the economy, market saturation, increased competition in neighboring states, and of course, Obama for this decline.

What has yet to be cited is that the gaming entertainment experience has fundamentally changed over the past few years, and many casinos no longer deliver the experiences that players have been used to historically.

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Marketing Strategies That Get Results

The effects of the recession continue to linger. While some gaming operators have begun to enjoy a modest amount of gaming revenue growth, for most that growth has been tepid. To grow market share many operators have resorted to the same tactics that have been used for years in the gaming industry: drawing drum promotions, hot seat promotions, point multipliers and increases in the amounts of free play that players receive as part of their monthly mailers. While many casinos have employed new technologies such as kiosks and electronic drawing drums to better manage these promotions, they essentially use the same tactics that previous generations of casino marketers have done to get bodies in the door.

What the recession has taught casino operators is that tactical offers that are created without sound strategies are rarely effective. They may increase traffic, shift play from one time
period to another but they rarely have an impact on profitability. The following are some of the best marketing strategies of 2013 that astute gaming operators have implemented..

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Seven Keys to Casino Success

The success of Singapore’s recently established casino industry, along with the unprecedented growth in gaming revenues in Macau, has attracted the interest of governments throughout Asia. Several are considering instituting new policies that will permit the expansion of casino gaming in their countries in the form of so-called integrated resorts, as a means to boost
economic and tourism growth and generate tax revenues.

The examples of Macau and Singapore, together with those of other Asian countries that did not manage to enjoy quite as much success with their casino initiatives, have helped identify seven factors that are critical to the success of any new gaming venue in the region.

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How to Catch and Keep the Big Fish

Executives in the casino industry have long used euphemisms to describe various types of customers. One term often coined to describe a premium player is a whale. The term originated in Las Vegas and was used to describe gamblers who wagered very large amounts on each hand. As casinos proliferated throughout the United States the term began to be used more broadly to describe each casino’s best customers. All casinos have a few players that make an outsized contribution to the property’s gaming revenue. They may not be whales in the traditional sense, but they are still pretty big fish and every casino operator wishes they could find a few more. To this end, they build luxurious hotel suites, offer fine dining along with other amenities and employ hosts to service their most valued customers.

To better understand how some of the largest casino operators identify and capture big fish, a rather expensive research project was conducted. Two markets comprised of ten casinos were selected. These markets contained some of the nation’s most recognized casino brands. At each property a researcher joined the casino’s rewards program, requested two players’ club cards
and asked the rewards program representative for directions to the high limit slot area. The researcher then was required to find two $5 slot machines (reels) with medium to low volatility, and play them simultaneously at $10 a spin for two hours or until the researcher generated $10,000 in coin handle.

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Rethinking the Three-Tiered Rewards Program

The tiered rewards program has emerged as a valuable tool to acknowledge loyalty among the casino’s most valuable players and allows the casino operator to bestow certain privileges on them. Tiered rewards programs are based on the Pareto Principle, also known as the law of the vital few, which states that 80% of the effects come from 20% of the causes. Applied to business, it means that 80% of business volume comes from20%of customers. In reality, an examination of most casino databases shows that upwards of 85% of business comes from 15% of customers and it is for this reason that tiered rewards programs are created: to provide higher levels of service and amenities for the casino’s most important customers and to publicly acknowledge their loyalty.

When embarking upon a tiered rewards program, most casino operators initially employ a three-tier model consisting of a base tier, a middle tier and a top tier. There is no qualification
required for the base tier while the latter two premium tiers require substantial amounts of gaming activity in order to achieve premium tier status. The base tier normally contains
the bottom 90% of the total database. The middle tier contains the 90%-98% segment and the top tier contains the top 2% of the database.

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How to Increase Gaming Revenue in an Economic Downturn

The economic downturn continues to impact gaming revenues in markets throughout the United States. In the face of declining or stagnant revenues, casino operators continue to look for new ways to grow gaming revenue. Some have allocated resources to new media such as social networks, yet none have been able to monetize these new channels of communication. Others have simply turned up the volume of promotions, offering more drawings for cash, vehicles or simply giving away stuff to get people into the door. While those efforts often increase foot traffic, they don’t necessarily have a positive impact on profitability. So what new methods are there for a casino operator to grow revenue? The answer often lies within its own database.

Casinos have long recognized the value of their databases. With the advent of newer slot system technologies casinos have over the last decade introduced tiered reward programs to better acknowledge the value of higher value customers. Caesars Entertainment has long been at the forefront in utilizing a tiered reward program to acknowledge those customers and develop them into very loyal customers. Customers in those premium tiers, referred to as Platinum, Diamond and Seven Star levels, receive a suite of benefits so great that they often gamble exclusively within the Caesars brand family of casinos. They would rather aspire to the next higher tier than spend their gaming dollars at another casino.

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