consultants tell casinos to "go easy" on the comps

http://www.lvbusinesspress.com/articles/2012/08/06/news/iq_55316849.txt

well it looks like the pigeons have flown in to poop all over casino management and comp programs

nice comparison with Disney and McDonalds

I would have never though a "loyalty" program would have worked for Disney since they are mainly geared towards kids and families and that means there is a limit to the times one can visit them with the kids.....and since Disney has actually successfully taken the opposite approach to many of the now failed "local" amusement parks and made themselves into a total trip destination.....it is not like people take a "destination" trip on a whim or because they got two free nights at a hotel or some restaurant coupons.....especially when there are kids and school and kids activities to be mindful of...if Disney was to follow the lead of casino companies there would be a cheap, local filled, poorly run, low quality amusement ride park in every city over 50K people and then they would be scratching their heads why the two main properties were suffering....perhaps it is too many "comps"

and Mcdonalds...their food is just cheap, their service is usually cheaper and while I have eaten there quite often the quality is a gamble in itself on each and every visit and with each and every item and most cities only have 250+ of the damn things littering the place...they finally got so bad that my childhood memories were being tarnished and I have pretty much stopped going other than a once every 3-4 month visit to remind me why I stopped going there and the time period continues to grow

Casinos have seemed to me to have taken the worst of each of these concepts....build a destination like Vegas and then undercut it with cheap local places on every corner that suffer from poor quality and "locals" that no one in their right mind would want to be sitting around in a room with for hours as entertainment (the same reason many local amusement parks have failed they were where the trash was taken out to (probably while the parent was at the casino ))

now after they have spent decades developing the idea of comps and rewards and then spend even more to computerize it all......the pigeons are pooping on that idea...and we can see in this forum that advice is going over well :confused2:

you know your company is in trouble when the consultants move in that is the last straw before it all blows up

 

Aside from poorly run issue, Loyalty programs are not going to work for everyone. They usually are meant to encourage ADDITIONAL spending. Going to Disney, McDonalds, or millions of other places are different than a casino where you just keep spending. If a casino only had food, spa, entertainment and no casino;, then loyalty/club programs would not work there either.

 

I wonder if it was a consultant who told the owner of the Venetian/Palazzo to curtail the comps for the lower players?? I am sure they continue to regret that error. I personally won't set foot in either to gamble since I cannot be guaranteed my loyalty will continue to be rewarded.

The rewards programs for casinos is different that any other type of business. I don't increase my totaly gambling budget by playing more at any casino but I will play more of that budget in places that reward my play the most. I am loyal to certain casino brands simply because I know I will receive benefits from my play at those brands to helps offset my losses. Why go to a standalone casino (like Hooters, Westin, Lake Las Vegas, Tropicana etc) knowing that no matter how much I play I am restricted to comps only at that casino? Better to be spending my budget playing at an MGM or Harrah's property where I can use my rewards in numerous locations and with more generosity for my level of play.

When the comps dry up I move on to greener pastures. If they all dry up I am sure I will definitely cutback on my gambling budget.

 

I have to give UT a big ditto here. I agree 100% & aamof I have been thinking about what I could buy instead of go to Vegas 3-4 times a year. MAYBE A CONDO! IN VALE!

 

These consultants were just speaking at a casino marketing conference - it doesn't mean that the resorts are going to actually do what they are saying they should do.

Let's hope that these corporations have enough common sense to finally realize what their loyal customers actually want. I know that there are people from the various resorts who patrol message boards like this, reading customer feedback and comments. Hopefully they will be wise enough to take this consulting advice with a grain of salt and make much smarter decisions than they have made in the last several years.

 

Smart companies adjust their offerings on the fly in a competitive market.

I see nothing wrong with them adjusting comps.

It would be foolish for them to continue giving stuff away while not being able to pay their bills.

 

Hiring consultants means that upper management has outlived their usefulness and they lost touch with the constituencies involved in running a business successfully: customers, middle management, employees, suppliers. The board of directors needs to clean house because upper management is too chicken shit to make it's own decisions.

 

Um, what am I missing here? It sounds like the only recommendation was to get rid of all the discounts and comps for the $10/$20 player. If that's ADT, and not average bet, that doesn't sound like a mistake at all.

Sounds to me like she was saying they should concentrate their efforts on the profitable players, something that should benefit most of us. If you're in a casino looking for a free ride, I don't blame them for wanting to get rid of you.

 

100% agree. I have faith that the top execs of the major casinos in Las Vegas can come up with their own moronic ideas that are much worst.

 

They say cut back on low rollers and then give an award to B Connected? Seems to me these people are speaking out both sides if their mouths!

 

Interesting how the marketing consultants always want to neglect the lower tier customers. There is many customers at that tier filling hotel rooms, buying meals and such that if neglected will move on to where they are wanted.

Who new Disney and MacDonalds had loyalty programs?

 

Back in the day - and by "back in the day", I mean going back even only 2-3 decades ago - comps were really only for black-chippers and up. People rarely got much more than a discount room offer & a free buffet or coffee shop meal for pretty much anything less.

Personally, I think the "democratization" of comps [as I like to call it] - where everyone gets the same % back, even if they're only playing penny slots or $5/hand BJ, etc. - was a mistake, a pandora's box of entitlement that once opened has since become an albatross around the neck of the casino operators. Just take 5 minutes reading some of the posts around here and I think you'll see what I mean - people with loss thresholds in the low three figures getting self-righteously pissed off when they get their free room offers taken away or any other adjustment to the system that doesn't give them something for [practically] nothing - even if just a cursory examination of the math shows that the casinos make little or no profit off of them - Hell, not to long ago there was someone posting adamantly how as a poker player, he deserved more in comps - even though the casino makes no money off of poker players at all!

Then, add to that the fact that all the people who now come to Vegas but don't gamble started seeing all the freebies the gamblers were getting and started thinking "why not me too!?!" - so now, the casinos have been forced into giving back part of the spend on rooms and F&B for non gamblers too. So I ask you, if you're giving back 30-40% of the casino revenues, and now you're also giving back a huge chunk of the non-casino spend as well - where does that leave a profit margin?

It's hard to have a profitable business when practically everyone who walks through the door wants - or even worse, now thinks they deserve - 30-40% of their money back in freebies. If I gave every one of my customers 30-40% of their total spend back in freebies, I'd be out of business in no time flat. I really don't think casinos are any different - yes, maybe locals casinos that don't also have to support a massive hotel and food & beverage operation and only have gamblers walking through their doors - but in Vegas at least [and other markets like Atlantic City that also have fairly large hotels attached], I really don't think the business model holds up anymore when half of the customers are no longer gamblers.

True, the casinos got themselves over-leveraged in debt during the boom times - and maybe there was a time when everyone who walked through the door could be comped 30-40% and there would still be enough left over to pay for everything else. But now that half the customers don't gamble at all? That leaves a lot of resort infrastructure and staff to pay for - and let's face it, hotel rates in Vegas are not competitive to what they are anywhere else in the country [ or world] - You can stay at Bellagio or Wynn some nights for less than the cost of a Hampton Inn by the side of the freeway in anytown, USA - so while room revenues might make up a bigger part of the total cash flow, I highly doubt they are anywhere near profitable at the rates they charge today.

IMO, the casinos are left with a conundrum - they need the gamblers dropping their cash to prop up the bottom line. But if they pull the comps too much or too quickly, the gamblers leave. Sheldon Adelson learned that the hard way - he thought that because Venetian/Palazzo had some of the highest room rates on the strip, dozens of restaurants, hundreds of shops and one of the largest convention centers in the world all on site that once he pulled the comps he could still turn a profit on room and F&B spend alone - but after losing half his gamblers he quickly found out that rooms, food, beverage, shows & conventions don't bring in nearly enough cash to keep the ship afloat. And merely raising room rates drives the convention folks to cheaper hotels But if they over comp, there's still not enough gamblers leaving enough profits in the till after giving them back 30-40% of their theoretical in comps to prop up the bottom line - at least not like in the old days.

F&B in Vegas is already expensive - eating & drinking in Vegas certainly aren't cheap compared to elsewhere the way the rooms are, so there's not much room to jack up those prices. We've all seen how gamblers react to anything that brings up the HA on their favorite games [be it 6:5 blackjack or tighter slots, etc.] So really, then, what are their options? Either raise room rates drastically or cut comps somewhat.

Raising room rates drastically would seriously dent their business - all those non-gamblers who still pour into town for the restaurant scene, the nightlife, the shows, the conventions, etc. - a lot of what makes the restaurants & clubs in Vegas affordable to them - and keeps them coming in the volume needed to keep the mega-resorts full - is the low room rates. Well, a lot of those folks definitely won't be able to make the numbers work anymore if hotels in Vegas charged rates anything close to what comparable rooms would get anywhere else.

So then, what about cutting comps? They all saw cutting them too drastically is not going to work thanks to what Venetian/Palazzo did - but maybe, just maybe, if they can cut back on the comps they give out just enough so that people don't notice - or at the very least, notice & complain, but still don't stop coming - then maybe that really is the only way they can regain profitability going forward.

I know a lot of people aren't going to like what I just had to say - they're will be all sorts of "Oh, because I'm a low roller I don't deserve the same comps as a High Roller?!? That's just snobbery!" and "Jilly, you think just because you're a high roller you're better than me!" grousing - but I think if you really think rationally about what many people get in comps for their actual gambling losses - possibly even what you get in comps for your actual losses - deep down you'd probably have to agree that a lot of people - and possibly even yourself - are getting a whole lot of something for practically nothing. And in many cases, getting a whole lot more than they deserve. Comps worked when they were only for higher-end players, because higher-end players still left plenty of money on the table even after having 30-40% of their losses comped back to them. It's a lot harder for the same % of comps to make sense for people who only lose a couple of hundred bucks per multi-night trip. Plus, if you've read any of Natedogg's trip reports, you'll see that these cuts aren't just affecting the lowest of the low rollers - comp costs are getting reigned in at all levels of play - even up to the multi-million dollar whales. It's really a systemic business model problem - and to solve it, comps are going to have to be reduced at all levels - but at the very, very bottom, they might also have to be eliminated entirely.

Maybe there was a time when you could run a business giving 30-40% of your casino win back in free hotel rooms & meals - but when half of your customers no longer gamble, that business model is no longer sustainable.
The casinos let the genie too far out of the bottle - and now they have to put it at least partly back in, or they will not survive - and then nobody's going to get any comps.

 

I can agree with a great deal of what you say Jilly and especially the point about the high rollers getting cut back as well which I think goes to the point that numeno made.....the bosses will listen then do worse

also Vegas has done some of this to themselves....the room rates are very reasonable now when they need anyone with a pulse, but there was a time when the room prices were very high IMO even for the level of service.....and I feel the level of service has declined dramatically

the restaurants are very expensive now IMO because of the celebrity chef trend which adds $5 or $10 dollars per check per person or probably worse

the level of service in the clubs and pools and bars has slipped dramatically as has the attitude of the servers

back in the day the person that was not a big spender, was a poor tipper either through ignorance or frugality, was still treated well.....they did not have a snippy waitress or door man looking down on them every chance they got from then on...the staff member would just suck it up and serve as they should and sometimes they may have been rewarded at the end by someone catching on and leaving a decent tip......now some ding dong that should thank God every night she looks decent and is willing to wear next to nothing has attitude if you do not order the most expensive drinks at the pool even before they have been served and the tip given no matter the amount.....that garbage would never have flown back in the day

hundreds of dollars for pool cabanas, only being able to sit at the edge of the pool if it is crowded or if you are at a place that charges for a lounge chair

the Buffets were high quality for low prices...the staff was dressed appropriately and they served everyone like they were a high roller even if they were not or worse if they were just cheap and a poor tipper

today the casinos farm out the clubs (casino boss explained this and I can understand that answer, but I feel it is a mistake)....they farm out the pools now at some places....they farm out the restaurants.....and now some of them farm out the running of the hotels.....so really they just want to run a casino, make their take and then when the club is filled with over priced poor service, the restaurant is bad food and poor service, and the hotel is the service of a motel 6 they can tell you "oh we don't run that"

most people will not stand for that.....I realize it is a movie, but in Casino Ace RAN THE PLACE......it was equal blueberries in each muffin, ace was on the floor correcting dealer behavior especially if it hit the bottom line of the casino, Ace ran the clubs, Ace ran and ate in the restaurants.......100% of what was on that property was under the control of Ace and he made sure of that and he demanded that

I find it difficult to believe that nearly every major casino company can't find a way t run their own clubs so they have to farm them out to "the light group" or that they can't run a pool......or they need the name of a top chef on every restaurant and even then the quality can be spotty at best

what exactly is it that "gaming and entertainment companies" wish to run.....if they only want to run a casino floor then they should do like all the locals casinos and have a casino and then someone else can have a restaurant next door even if it is over priced

they can't even make a decent cheap hotdog anymore they have brought in Nathans and Pinks who serve quality that is lower than their normal chain stores

casinos have sacrificed the profit centers of restaurants, clubs, pools, and entertainment for the steady profit of renting out a part of their facility to The DBag Group or Dude Brah ClubCo or FruFru Food Inc....and that comes with more overhead....that comes with the double cost of marketing your "resort" and then having to market your DBag Day Club.....or your chef with attitude....and that comes with more overhead...so does "branding" a hotel tower in your overall "resort"

back in the day you went to casinoX and everything on the property from the doorman, bell hop, coffee shop, hotel, restaurant, club, and even the named entertainment and especially the casino was under the management and brand of casinoX and they could shift around who they made a profit off of where and how they comped each person based on where they made money on them and where they were not going to make money on them

today I would imagine even if you get a cabana at the pool comped or some restaurant comp there is some "cost" in that to the casino because someone else manages that part of the property and they are not giving anything away for free even to their "landlord" they are just paying them rent and charging too much to the guest and the landlord (the casinoZ) gets some type of discount off their comped tickets or F&B bills each month probably based on total dollar volume sent through.....so they HAVE to make that up on the casino floor.....and when someone does not gamble or does not gamble as expected then casinoZ is not making anything up at the pool, hotdog cart, Elvis Show or anything else they are LOSING money overall on that guest

one day someone will catch on and have this amazing idea that CasinoQ is the brand....there is no "celebrity cook" on the property, the pool is the pool or the pools are the pools and under their management, they will figure out they can hire their own young hipster to run a proper club, and they will make their own cheap hotdogs and their muffins will have an equal number of blueberries in each muffin... and they will make a better profit off of each guest and everyone will decide wow this new concept is amazing who know you could offer a number of things on your property all done well and under your control and then shift the profit center of each guest accordingly while treating even low rollers and bad tippers as welcomed guest

 

In reading the article, a few thoughts come to mind:

First, it doesn't say these people were hired by anybody or that anybody was really asking for their input... the whole thing comes across to me like here is a bunch of unemployed consultants basically stating the obvious and saying things that you would expect the casinos to want to hear in the hopes that one of the attending casino execs might be thinking 'wow, she really knows what she is talking about! I should hire her on for a few months'

When you really read the whole thing a couple of times the impression I get is that these consultants are all on the outside looking in and that they don't have a real grasp of how things work with casinos and their customers and that they are trying to apply unrelated real world examples to the casino industry.

A good example of that would be as somebody mentioned: what Venetian and Palazzo did in cutting comps to their low rollers and how well that worked out.

And thats actually where you can say this is all just talk from people who don't know what they are talking about and why it likely will not lead to anything:
In Las Vegas the hotels and casinos love to copy success and thats why every place has a frozen drink stand and most places have a fancy gourmet burger place and pizza by the slice places are starting to crop up and a show that ran for 10 years at one property just ends up moving to another hotel for another 10 year run... but they never copy failure, and Club Grazie really failed badly on that whole cutting back on the comps to the lower rollers.

 

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I am going to applaud that line.

 

huge profits for poker room

FYI - The poker room brings in huge profit for the casino without risking anything. Example: average 40 hands/hr multiply by $3 drop/hand multiple by 24 hours = $2880 per table without risking a dime. there is plenty of real estate in the casino, just a matter of positioning where the slot machine goes. This is the reason why ever since the poker explosion (TV) you notice there is a poker room in almost any casino.