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The Trouble in the Casino - By: Victor Royer

This is a true story. It is still happening, right now, at a major Las Vegas casino resort. I decided to write about it because what is happening there is symptomatic of the gaming industry as a whole. I’ll explain shortly. But first, here’s the premise for this article, and the reason why it was written:

Up until very recently, gaming revenues were falling. Only in the past couple of months have we seen a rise in casino win, on the Las Vegas Strip, and in general. This is a fact, well documented by respected research. This fact has also been reported in gaming industry magazines and publications, and in mainstream press. But the market is still volatile, and has not settled into an observable pattern that can speak of some predictability in revenue maintenance, or reasonably-accurate growth forecasts.

This is particularly so for gaming revenues, which have seen a stark fall relative to past standards. All of this still leaves operators scrambling to find out what to do, and analysts scratching their heads. Is the attrition of gambling revenue because the guests are younger, and no longer interested in traditional casino action? Or traditional slots? Is the mad dash for all things Facebook and Twitter the solution? Actually – No. As far as gaming revenue is concerned, there is a much simpler answer:

One – gaming operators are increasingly investing hundreds of millions of development and marketing dollars into building endless expansions of non-gaming attractions. This has the effect of siphoning off their casino revenues, because by doing so they are directing their visitors, clients, and patrons away from a hugely profitable area of operations – namely the casino – and instead directing them to a low-profit expanse of costly developments, none of which motivate the customers to go and gamble.

Two – gaming operators have lost the ability to understand, appreciate, cultivate, and reward their casino players, specifically their mid-level and Premium Players, those who are the backbone of each casino’s operation. These are the customers who drive profitability. They are the ones who feed the slots and table games. By diverting them, and their interests, away from the casino and into the increasingly more sprawling non-gaming attractions, each such casino resort is cannibalizing itself and taking profitable customers away from where they are the most profitable, and instead funneling them to attractions where their per-head profitability is minuscule, to a point of near-absurdity.

A casino player who is worth $300,000 per year to a casino resort operator may not be the biggest of all “whales”, but they are certainly not something worthless. In fact, they are a solid, loyal player, whose action should be respected, appreciated, cultivated, and rewarded. One would think that this is a no-brainer, right? Especially for casino operators, who are supposed to know this, and be smart enough to recognize it, appreciate such patronage and loyalty, cultivate it, and reward it. You’d think that would be the case, right? Well – you’d be wrong. And that’s where this Casino Resort in Las Vegas comes into this picture. Because what is happening there, right now as you are reading this article, is directly symptomatic of the greater “disease” now infecting casino operations throughout Las Vegas, and elsewhere.

The story I am about to tell you concerns a regular casino player at this casino, who has played there for the past 13 years. Let’s call him Mr. Jones, for the purposes of this article. Mr. Jones plays an average of 4 days per week, about 4 to 8 hours per day.

This has been his pattern for all the past 13 years of his loyal patronage to this casino in Las Vegas. His worth to the casino is about $300,000 per year. Over the 13 years, Mr. Jones has accumulated over 17 million Player’s Club points – when he remembers to use his cards – in all of the various forms that such player points have taken over the 13 years that he has played there. His total worth to the casino over these 13 years is well over $10 million in action and profits. But that’s not all.

Mr. Jones has friends, colleagues, and clients, whom he has introduced to this casino over these 13 years, and who have likewise become premium players. Many of them are from outside of Las Vegas, and come 2-3 times per year, but they are all well-off. Some of them are worth $10,000 per visit when they come to play, while a few others are worth well over $100,000 per visit while they

In total, Mr. Jones – overall, through his activities – is worth about $8 million per year to this casino in gaming action and profits that directly result from his play, and his influence with other players. But Mr. Jones did not stop there. He loved this casino so much that he also told everyone he could reach about it, as the “best place to play in Las Vegas.” He has provided countless millions of dollars of free publicity to this casino, as well as untold millions of value in good will.

So what happened to Mr. Jones? Was he valued, respected, cultivated and rewarded by this casino for his patronage, support, loyalty, and good will? You would think so, wouldn’t you? Well, in a word – No. You see, this is what happened to Mr. Jones. For the past five months, Mr. Jones played almost every day at this casino. During this time he lost over $100,000, and provided this casino with several million dollars worth of action. So did his friends and colleagues and clients during that time-frame.

At the beginning of April, this year, Mr. Jones had an idea. He wanted to feature this casino in his Social Media Newsletter, in which he wanted to tell his 300,000 subscribers – all of whom were documented casino enthusiasts – about this casino, and their games, and why he loved it there so much. He wanted to tell everyone – not just his subscribers – about this casino, their games, facilities, restaurants, and so on, and why he liked it there so much for all these years. Because he also wanted to create a multi-media presentation about his experiences at this casino, Mr. Jones hired a video crew and equipment, and a production facility, and was prepared to make this into a nice promotion. And all of this for free. No cost to this casino.

But then Mr. Jones spoke to one of this friends, who also played at this casino as a premium player, and whose action was worth a lot more to this casino than Mr. Jones. This friend pointed out that during all of his play at this casino, Mr. Jones had never received any kind of player appreciation gift, or loyalty reward, or a player-retention incentive. In other casinos, said the friend, they give premium players free rooms, free air fare, free trips, and even give them back a percentage of their losses. Did Mr. Jones ever get anything like this from this casino for his 13 years of loyal play, and his $10 million in casino loss? So Mr. Jones thought about this, and suddenly realized that no – he did not. Nothing. Not ever.

A few dollars in trinkets, yes. A few dollars on the monthly calendar, yes. But 20% cash back for all his losses? Never. How about 10% of his losses back, as a player-retention incentive? Well, in a word – No. Nothing. Not ever. So, Mr. Jones decided to ask this casino for a small token of their appreciation, a tiny contribution to the costs of the Newsletter that Mr. Jones put together to promote this casino. Did Mr.Jones ask for 20% of his $10 million in loss over the past 13 years? No. Did Mr. Jones ask for 10%? No. Not even that. So what did Mr. Jones ask for from this casino? He asked for a mere $9,500, as a token. A token of appreciation. Something to thank him for his 13 years of loyalty. A tiny fraction of his total worth to this casino.

Less than 1% of all his action over the past 13 years. Just himself. Not even counting the action and worth of his friends, colleagues, clients, and the countless others he brought to this casino over the decade. And what was Mr. Jones going to do with this money? He was going to spend it to promote this casino in his Newsletter, and in his Blogs and postings, and spread the word and good will about this casino throughout the world. On top of this, hewas prepared to invest even more of his own money, in addition to his casino action, just to make that presentation really nice. He loved this casino that much. And what did this casino do? Did they thank Mr. Jones? Did they offer him this petty-cash money readily, thankfully, and immediately? Did they value Mr. Jones as a player, a customer, and a loyal patron? Did they value the millions of real dollars that Mr. Jones brought to this casino over the years? Did they value the countless millions of dollars of free publicity and good-will value that Mr. Jones and his Newsletter wanted to bring to this casino? Did they value Mr. Jones’s play and action in their casino? Did theyeven realize that just over Memorial Day weekend Mr. Jones would lose more in their casino than the entire sum of what he asked for as a gesture of appreciation from this casino for his patronage? Did this casino understand any of this? Well, in a word – No.They told Mr. Jones that they won’t give him anything. They put him through a maze of midmanagement presentations to a point of absurdity. They dragged him through a ringer of corporate
nonsense to a sickening level. In the end, they told Mr. Jones to go and jump in a lake. Take a hike. We don’t care about you, your money, your loyalty, your action, your good-will, your friends, or anyone. Go away.

So, Mr. Jones left. So did his $300,000 per year in action. So did his friends, and their $8 million per year in action. So did all the good-will, and everything that Mr. Jones wanted to tell the world about how nice and welcoming it was to play in this casino. After 13 years of loyal play, and all that Mr. Jones had done for this casino, and all that he was going to do for this casino with his Newsletter – after all this – Mr. Jones wasn’t even worth $9,500 to them. Not for his loyalty. Not for his patronage. Not for his efforts to promote this casino. Not for his total worth to the property as a happy guest, player, and ambassador. Nothing. Not even worth that tiny petty-cash token of appreciation.

Meanwhile, this casino’s executives are jetting it up all over the country, spending hundreds of thousands of dollars in trips that do nothing to help profits, patronage, or the bottom like. Just one trip less, or even just one lunch less on any one of those trips, and Mr. Jones could have had his petty-cash reward, and be happy, stay as a player, and keep on spreading the good word. And then, as an added insult to Mr. Jones, subsequent to his rude dismissal by that casino, he then found out that this casino allocated millions of promotional and marketing dollars to a New York company, to make TV commercials. And the purpose? To get more “local” Las Vegas players to that casino. Wasn’t this what Mr. Jones was already doing? Wasn’t this what Mr. Jones had proposed as his idea to promote this casino? Did Mr. Jones get any of these millions? No, he did not. How can a New York company know the Las Vegas market? Or anything about driving casino players to this casino? Mr. Jones was already worth over $10 million to this casino as a player. His friends, and players to whom he recommended this casino, were cumulatively worth $8 million more – each year – to this

In all of this corporate frenzy and scramble to do “something” to boost casino revenues, why did this casino’s executives throw away $18 million in revenue and player action, and replaced it with a cost of several million dollars to an out-of-state company to do the same thing that has been done before, and that has already been proven to not work? Why did this casino ignore Mr. Jones, his
Newsletter, his 300,000 casino-player subscribers, his loyalty, his action, his endorsement, his recommendations and his good will? It seems insane. Does it not? So, why are gaming revenues plummeting? That is why.This example is directly relevant to everything that is happening in casino resort operations today.

No one in positions of authority apparently understands or appreciates these situations, circumstances, and impact, just as here outlined for what happened to Mr. Jones at this casino. Mr.Jones, by himself, may not be the biggest of all “whales”. But he, and others like him, are the backbone of casino profitability. And, directly so to the entire operational profitability of the casino resort itself, as a whole.

How is your property doing? Are you also throwing away $18 million per year because you can’t give your Mr. Jones are little token of appreciation? How sad it is that our great industry today has become so mired in bookkeeping and endless corporate meetings, that those in charge can no longer see the forest for the trees. I hope that this casino will contact Mr. Jones, and make it right. They should, because what happened to Mr. Jones there is the most short-sighted managerial faux-pas that I have ever witnessed in my 32 years in Las Vegas.

Let’s hope that better minds will prevail, and that management of casino operations will stop this attrition before it is too late. Giant errors like this one, with Mr. Jones, are precisely what is killing the goose that lays the golden eggs. Namely – the profitable casino player.

Victor H Royer is President of Gaming Services & Research. He is a 32 year veteran of Las Vegas gaming, a 25 year consultant to the gaming industry, and author of 40 books on casino games and gaming. In addition he has researched and authored more than 300 industry reports on the subject of player preferences, marketing, player development and customer relations. He can be reached at: DrVHR@aol.com