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The Benefits of Transparency - and the Pitfalls of the Status Quo

Discussion in 'Comps' started by Polemarch28, Nov 27, 2012.

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  1. Polemarch28

    Polemarch28 Tourist

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    I recently read a book that detailed the evolution of comps and hosting over the last few decades, and the central theme was a movement towards economic analysis and data, away from the old model of a host's discretion.

    This caused me to give great thought to the practice of comping, from a business perspective. These are my musings:

    Why The System Needed To Change:

    In the past, hosts had far more leeway in terms of what they could offer their players, because the data wasn't maintained, respected, or understood. Over time, the data systems have become far more robust, allowing casino management to build revenue models, test hypotheses, and apply a scientific method to comps, as well as all other aspects of casino management.

    Some people lament this, as they feel the data-driven model is generally less generous and more mechanical. It treats their play as an economic commodity, as opposed to a relationship built on loyalty and fun. And psychologically, I can relate to those laments. There has always been a black box in which comp decisions are made, which allowed for a certain element of mystery. When you get that comp you're hoping for, you feel special, and that engenders loyalty. It brings you back.

    But the major downside of the opaque comping past is that without paying attention to the data, tremendous incentives existed for inefficiency and even corruption. Hosts were able to play favorites, or take care of players they perceived as being worth more to the casino, but without hard data to truly matching comps against revenue.

    In an environment in which some players were more sophisticated about gaming the system than others, the squeaky wheels got the grease, even greasing their hosts sometimes, while other deserving players went severely undercomped. The result of that is twofold, and both are bad. Overcomping certain players, resulting in a financial loss for the casino, and undercomping other players, resulting in losing business to more competitive gaming companies.

    In the more modern approach, players are comped at a level based on the revenue they generate. Models are continually tweaked to optimize revenue at the right cost.

    Where the Status Quo Still Fails:

    Garbage in, garbage out.

    The system is now more oriented around data-driven models. Those models rely on good data, and in many cases, this is where the models fall apart. Casinos still do a poor job of accurately rating play. Average bets and time played are sometimes tracked inaccurately, or not entered at all, resulting in understated numbers for players in certain classes. Players in other classes still get overcomped, due to excessive or favorable ratings.

    Another failure is the inadequate accounting for non-gaming costs and revenues when calculating gaming benefits. A smaller player and a larger player both consume non-gaming costs, both variable and overhead. They both take up space at a table, requiring a dealer. They both drink beverages and need to have them served by a cocktail waitress. They also both spend money in the casino, but the amount of money they spend is not necessarily linear. Some models take non-gaming revenues into account, specifically in terms of rewards programs, but comp decisions are usually more strictly tied to gaming.

    What Needs To Change - For Efficiency:

    • Increase the transparency of the comp process.
    • Make average bet and time played more easily accessible to the player. Drive more transparent and accurate rating at the tables - make those ratings visible on a player's club account.
    • Apply more consistent standards to offers and comps, and tie them to a fairly transparent standard of ADT.
    • Improve the education of hosts, marketing, and gaming management as to the true math that underlies ADT. Avoid slavishly messaging an oversimplified model of time played, shifting instead to a more accurate ADT / coin-in approach.
    • Factor overhead and typical variable expenses into each player on a more fixed/estimated level, as to avoid systematically overcomping and undercomping.
    • Provide more transparency internally and externally as to what players of certain levels can expect, as to avoid the corrupt and poorly informed practices that lead to inequitable comp practices, and as a result, a loss of customer satisfaction.
     
  2. Polemarch28

    Polemarch28 Tourist

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    *bump* - giving the thread one more try :)
     
  3. Tellafriend

    Tellafriend High-Roller

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    what is the name of the book?
     
  4. shokhead

    shokhead I'm no big spender!

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    A host can still do anything for anybody except for 99.9% of the people on this forum. Less for us and the same for the .1%. Really, hasn't changed much.
     
    Here we go again!
  5. Polemarch28

    Polemarch28 Tourist

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    The book I was reading was called Whale Hunt in the Desert: Secrets of a Vegas Superhost. I read it earlier this year, and recently read most of it again, because it was an entertaining read.

    But the ideas I expressed in my post were my own - the book was more just about the history and evolution of comps/hosting. It got me thinking about the business side of casinos a little more. I am basically a consultant for a living, so I tend to think about business from the corporation's perspective. Usually, doing what's best for the customer is also best for the corporation in the long term. The best companies find a way to keep their customers happy and loyal.
     
  6. CenterfieldNine

    CenterfieldNine Low-Roller

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    How ironic... I'm currently smack dab in the middle of the first time through this book. Very interesting thus far! Poor Mr. Alamo, sucked the feller dry.(thats where im at haha)
     
  7. Nevyn

    Nevyn VIP Whale

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    I don't think there is a failure here. In machines, this is reflected in higher hold for the cheapest games.

    In table games, it is reflected both by worse rules, and by not rating players below a certain threshold.



    • Why? Casinos don't necessarily want their comps more transparent. They might be up front with their whale, but they still want Vince Vaughn thinking if he wears a suit they'll give him the rain man suite.

      Likewise, I don't think they want more players arguing with pit bosses about how they are rated for a session.

      But most importantly, they don't want to comp you with perfect efficiency. They want to comp you the minimum amount that keeps you returning. So they don't want you to know the moment you've played enough to pay off your room comp.

      This post reads like you consider the comp system to be a public entitlement of gamblers that needs to be administered equitably. But its not, its a marketing tactic designed to bring in revenue.

      Casinos don't care if it is equitable. They don't care if you are undercomped as long as you don't know or don't care that you are undercomped. In fact, they'd prefer it. They do care about overcomps, but I think they are likely already pretty good at preventing those, and will continue to get better.
     
  8. shokhead

    shokhead I'm no big spender!

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    To many reg joe's think/want to be treated like a whale. Part of that is nobody other then Vegas big shots ever heard that term before. Now because some guy drops 5k 2 or 3x a years and gets some rooms comped he thinks he is or should be a whale. Like Nevyn said, its a marketing tactic designed to bring in revenue. It's vegas's gamble. They bet me $700 in free rooms for a week that I'll blow $2500. Bet they win more then we do. BTW, the comps ike total rewards do another thing, makes non whales fell special, abit like a whale{truth is not even}How many on here that go enough and get their rooms comped kinds brags about that win vegas comes up in a conversation? Oh, my rooms are free, I never pay. I have. Vegas loves that.
     
    Here we go again!
  9. Polemarch28

    Polemarch28 Tourist

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    I agree with the idea of marginal return, and naturally the business wants to maximize their revenues relative to their costs. But systematically undercomping players has an effect on incentives.

    This may not matter for $25 players, but I tend to think that your average $200 player has more awareness than you're giving them credit for. Undercomping the $200 player sends him or her across the street. And even though it's still nickels and dimes compared to the $50,000 player, those nickels and dimes add up.

    I don't care about equitability, nor do I see it as an entitlement program. I see it as a marketing program. One that I believe works more effectively when people feel they're getting a good deal.

    For me personally, it ruins my experience when I find out my play is being underrated, because the pit crew forgot to enter my rating at all, or because they put me at a $250 average when I was betting $500 for 90% of the time. Applying consistent standards removes all the guesswork. Cultivating better data removes disincentives to efficiency.

    People love the ability to earn points and incentives - not just in a casino - but anywhere. Look at rewards programs for all manner of products. They work better when they're more transparent. It gives people another game to play.

    When businesses get cheap and try to cut corners, thinking their customers won't notice, the result is usually negative. The best businesses spend a little extra to provide a premium product, because they trust their customers to be able to tell the difference.
     
  10. Nevyn

    Nevyn VIP Whale

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    There's no such thing as undercomping from a casino's point of view. The right comp level is the minimum amount it takes to keep you playing there, as long as its not over the level the casino considers profitable.

    And for a player, undercomping is strictly a factor of expectation. Some players base this off what they've gotten in the past. They don't care about the details or the math, they just expect what they've been able to get. You can either meet that expectation or you can't.

    For others, its just about feeling "taken care of".

    For either of those two groups, more transparency serves only to potentially raise their expectations. Not good for the casino.

    The final group know exactly what the casino gives others, and want their X% of theo, and want to be rated correctly. But they are also the ones most likely to be asking pit bosses how they were rated, and checking in with their hosts, and complaining if someone got a rating wrong or if they get undercomped. So it is tough for them to fall through the cracks.

    Right, but transparency gives everyone the same metric on what constitutes a good deal. If someone feels good about what they are getting even though they are getting less than others, does the casino really want to point out to them that they aren't?

    Better data is great, but you have to factor in the cost of the better data to its benefit to the casino. If you're talking about just training pit bosses, fine. If you're talking about an advance electronic chip tracking system micro recording each bet, or more staff resources devoted to carefully measuring play, you are spending more than you're getting back.

    And again, you are the type of player who gets annoyed by this. But are also the type most likely to say "what did you have me at?" Or avoid a pit that underrated you. Or complain to your host about it.
     
  11. Polemarch28

    Polemarch28 Tourist

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    True, these are all good points. I am that kind of player, and I'm probably in the minority.
     
  12. sco5123

    sco5123 VIP Whale

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    While the casino may lack transparency to protect themselves, they may be losing out in the end.

    With any relationship I have, consistency enhances my loyalty. If any business is to survive, they need a relatively sizable, strong, loyal customer base.
     
  13. Goosey

    Goosey Low-Roller

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    Do you want the casinos to install readers on all tables that read exactly the number of hands you played and the size of your bet? That's going to be inconvenient for players who frequently take a break and let their significant others play for them (at much lower bet levels) and I bet your average would still come out to be closer to $250 even when you bet $500 most of the time. With pit bosses rating your play, you at least have a chance of being rated at $500. And what about pit bosses who give a higher rating to players who tip well (not an infrequent occurence)? Do you want to remove that discretion?

    It seems like you favor accuracy even if it means eliminating the ability of hosts to excercise discretion. I don't think that's the best business practice. Shit happens and even the most consistent players can have bad trips or trips where they were overcomped because they didn't play much. Do you want a host to cut back on offers for future trips because of the bad trip? Be stingy on comping their charges for the trip? Should the casino not take into consideration the fact that a normal $30K theo player lost $30K in much less hours than usual?
     
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