United States

Build Your House Out of Bricks

Posted on April 16, 2006

About fifteen years ago, Steve Wynn, then CEO of Mirage Resorts, gave a speech to an audience of alumni and students at a prestigious college of hotel administration. He began by reciting Grimm’s fairy tale of The Three Little Pigs. At first the audience collectively laughed as Mr. Wynn began his recitation but it soon became evident that Mr. Wynn was to recite the entire fable. And so he did.

Mr. Wynn later explained that the lessons taught in this fairy tale were important to the hospitality industry and equally applicable to casino developers as to children. Build a house out of bricks rather than straw or wood and you will be able to weather any storm or wolves that threaten your house. Since its opening in 1989 the Mirage withstood the introduction of more than a half dozen new competitors. Fifteen years later the Mirage continues to compete with the best properties in Las Vegas. In the coming months the Mirage will introduce new nightclubs, restaurants, a Beatles themed Cirque du Soleil show and an improved volcano attraction. Room rates and slot win per unit have and continue to remain well above the market average. After all,
the property was built out of bricks.

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Rising Gas Prices and the Possible Effects on Casino Visitation

Posted on October 16, 2005

The steady rise in gasoline prices over the past year and the possibility of further increases in the near future is a growing concern among gaming executives as well as financial analysts that watch trends in the gaming industry. While casinos in a number of jurisdictions have recently enjoyed steady increases in visitation and gaming revenue, the question that is on many peoples’ minds is, “how will rising gas prices affect the gaming industry?” The question is of particular concern to managers of Indian casinos since the majority of Native American gaming operations are located outside of metropolitan areas in rural locations that require patrons to drive further and expend more fuel than if they were to participate in other entertainment options closer to home.

A recently completed survey by a research company in Nevada attempted to gauge the effects that rising gas prices will have on drive-in traffic from Southern California. The study noted that 48 percent of respondents said higher gasoline prices would deter them from planning vacations to Las Vegas and that 57% said fuel costs are affecting their decisions to go on weekend trips. At first blush, the results of this survey would cause casino managers in all US jurisdictions to be concerned. However, the Las Vegas Sun newspaper reported that as gas prices rose earlier this year, auto traffic to Las Vegas increased. From January to August of 2005, gasoline prices in California increased by 40% but auto traffic on Interstate 15 at the Nevada-California
border increased by 30%. Las Vegas continues to enjoy historically high levels of visitation and gaming revenues. Even with gas prices hovering at $3.00, people continue to drive into the city from Southern California for gaming/entertainment vacations.

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Be The Best Locals Casino You Can Be

Posted on September 16, 2005

As casino markets mature, there is a propensity among gaming operators and, in particular, Indian tribes, to diversify their businesses away from simple casinos. For some, the logical next step in the development process is to build full scale resorts, complete with golf courses, spas, elegant hotel rooms, ultra lounges and other amenities that appeal to new and different
customer segments. The basic assumption is that the local gaming markets are reasonably served and, in order for revenue to grow, a tribe must bring in new, different and far wealthier tourist segments.

The fundamental problem is that resort hotels are expensive to build and difficult to operate. They require a highly trained staff and an experienced sales team. A resort hotel stands a better chance of being successful if it is located within a resort community but that often means they must compete with branded hotel chains with international reservation centers. In addition, a resort hotel may alienate the very customers that made the casino successful as it often holds little appeal to local gamers.

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E-Marketing to Casino Customers

Posted on August 16, 2005

Email and the Internet have quickly become an integral part of the lives of most Americans. Most readers of this publication rely on the Internet and e-mail for daily communication with both friends and business associates. This behavior is no different for the general population.

Currently, it is estimated that 61.2% of adults use tl1e Internet regularly. While it is generally assumed that younger age groups comprise the bulk of Internet users, usage among older demographic groups has increased significantly. Today, the 47% percent of the US population over the age of 50 uses the Internet regularly and their usage rate is increasing faster than younger demographic segments. In 2000,45.8% of people aged 55-64 used the Internet. In 2003 that number jumped to 56.7%.

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Creating the Right Player Reinvestment Strategy

Posted on March 16, 2005

As ga1ming markets mature, and revenue growth slows, casinos struggle to find ways to remain competitive, grow market share and gaming revenue. Inevitably, casino operators are forced to increase the amount of marketing dollars that they spend in various forms of player reinvestment. As spending increases, marketing leadership is faced with answering such questions as “what is the casino’s player reinvestment rate” and “how much is the casino spending to reward and retain gaming customers?”

Unfortunately, these are not easy questions to answer. First, player reinvestment is an ill-defined term. Not all casinos define player reinvestment in the same way. Some use it as a catchall phrase to describe all marketing expenditures while others use the term only to describe comps issued through the property’s casino management system, bonus points redeemed for cash and redeemed mail offers. Others attempt to better define the term to describe all of those expenses that are expended to foster loyalty and encourage repeat visitation.

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Selecting the Appropriate Advertising Agency

Posted on July 16, 2004

There is a tendency among people who are recruited for leadership roles in gaming organizations to change things. The logic is that, by shaking things up, the organization’s business performance will improve. New marketing directors and property managers often target the casino’s advertising agency as one of those institutions that must be changed.

The motivations to change a casino’s advertising agency are varied. There is often a tendency to criticize current advertising as ineffective. There is also a desire by the new manager to bring in an agency that he/she had worked with in the past. Rather than first evaluate the capabilities of the existing agency and to provide new direction, the new marketing director or property manager will sometimes summarily dismiss the current agency as incompetent and bring in an agency that he/she knows can do the job .

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Effective Billboard Design

Posted on March 16, 2004

Virtually all casinos rely on outdoor advertising tocommunicate with their existing and prospective customers. This mode of communication, in the form of traditional “bulletin” style and “30-sheet” rotator billboards, has been embraced by gaming operations for decades. Casinos in competitive markets seek the best locations and in turn, bid up the price of available boards. Billboards are often purchased deep inside secondary competitors’ markets and in markets that are far beyond logical market definitions. In fact, the hunt for available outdoor space often takes casino marketers outside of their traditional markets and into regions where they cannot hope to penetrate.

Outdoor advertising is also expensive, often comprising up to one third of a casino’s advertising placement budget. Yet despite these high costs, casinos continue to rent outdoor space in illogical locations, deliver messages that are not salient to drive-by traffic and create murals that are often illegible or unreadable. Much of the outdoor advertising that casinos employ is simply ineffective.

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But Did the Casino Make Any Money?

Posted on December 16, 2003

At a recent presentation of casino performance before the tribal council, the casino manager distributed handouts illustrating gaming activity. “Handle is up,” he proclaimed as the council members examined bar charts showing year over year handle growth. “Business is growing. The casino is experiencing consistent increases in handle from prior years. We’re driving revenue.”

The casino’s marketing director then walked the council through an analysis of recently completed direct mail campaigns, special events and promotions. For each of these campaigns the marketing director presented a profit and loss statement showing the profit made. “Our direct mail program has been very successful. Marketing has been able to drill down into the database and mine very profitable customers. Our theoretical win continues to improve and for each direct mail campaign, we have been able to generate on average, theoretical win in excess of 75% of expenses. Our marketing is working.”

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A Behavior Based Approach to Market Segmentation

Posted on October 1, 2003

Market segmentation has long been recognized as a fundamental tool of casino marketing. Casinos throughout the United States segment their customers based on a variety of criteria. Casinos in Las Vegas use criteria such as convention, tour and travel, retail and invited guests. Atlantic City casinos h ave additional criteria defined by mode of transportation and distance traveled such as bus line run, bus charter, inner market and outer market.

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It’s Labor Day Again?

Posted on August 16, 2003

Recently, a casino manager of a large local-oriented gaming property had an epiphany. He realized that Labor Day was only six weeks away and he wanted to do something for his regular players. He assembled his marketing team and together, created a plan to give each customer a gift on the holiday if they earned a certain number of slot club points. The general manager defined some caveats: the gift had to have the casino’s logo on it, it had to be something patriotic and it could not cost more than two dollars. The purchasing director and marketing director then ran off to contact their vendors and see what they could find.

Unfortunately, the items that were available in sizable quantities were limited. None of the samples impressed the general manager. Further, some of the available items could not accommodate
the casino’s logo. Worse, all of the items presented cost well in excess of two dollars. Meanwhile, the ad agency was contacted and asked to start work on an ad. However, until the item was selected, the agency could not produce anything more than thumbnail sketches.

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