Scientific Games, IGT, MGM and Caesars: Too BIG to change?
A Gaming Economists views on the failings of Game Designers & Casino Resorts by Nicholas G. Colon
Over the past 18 years I have been embroiled in the casino gaming universe. My journey has been unconventional and not uninteresting. I picked up the classic text “Beat the Dealer” by Ed Thorp in the late 1990s. After years of study and play I went on to manage a derivative of the M.I.T. blackjack team for 5 years, and in a natural progression I ended up leading a game development team that solved optimal play strategies for two of the most complex casino games ever in 2 Draw Video Poker and the slot game Casino Solitaire by Solitairus (both games have been patented and are in casinos, so don’t get any ideas). In my most recent venture I have taken on the role of an analytical consultant for a few gaming organizations.
Although I am by no stretch of the imagination the pinnacle of human intelligence, I am dumfounded by the perpetual failures of the gaming community when the adaptations that are necessary to sustain revenue growth are ignored by the major game design and development firms, as well as most casino operators.
For more than a decade many of the major gaming companies have endured substantial reductions in value. Table 1 illustrates the stock price drops of a few major gaming firms over the last decade.
These are not the performances that one expects from companies with a firm grasp on what the consumer wants. There are a few companies that have defied this trend with the most notable being the WYNN properties; with the MACAU division exceeding all rational expectations. Well done Steve.
With many of the primary companies that make up the gaming industry having their stock prices fall by such drastic amounts, it is appropriate to evaluate the overall approach that each variable in the revenue equation produces. Armed with a decade worth of player data from a property conglomerate, and a close relationship with a former VP of Operations from that conglomerate, real numbers can be examined, and accurate conclusions can be reached.
Over the past several years casino operators have seen their player bases erode. Since the early 2000’s, gaming operators have been managed under the traditional 80/20 rule.This is where 80% of the gaming revenue is generated by 20% of their players. Over the past decade, these percentages have shifted to 80% of the revenue coming from 15% of their players, and at some properties, the majority of revenue is garnished from less than 10% of a property’s player base. These declines have been observed across most gaming jurisdictions. The collected data suggest that the wants and needs of the traditional recreational player are not being met. This lack of fulfillment can be derived from the casino game developers and the casino operators alike.
As one may expect there are many contributing factors, but I found the dominating force can be summed up in the statement: “players are not getting an appropriate time-cost value play experience.” Simply stated, a player wants more “bang” for their buck, which is not an unreasonable request.
Based on this premise, the “Bang” the player is looking for is “ENTERTAINMENT.” It is the most vital element of the value proposition, followed by time and lastly, cost. Entertainment is a composite of many things. This includes but is not limited to: value, engagement, interaction and fun. Each variable has weight of importance but that derivation is beyond the scope of this article. Additionally, the ways that value has declined over the last decade can also be identified. The data determines if the eroding player base trend is product based or is caused by something outside of the casino operators’ control. The evaluated data revealed several factors that reduced the “Time Cost Value” proposition that players are looking for. They are as follows.
1. Advances in technology that are designed to increase customer service, have a negative impact on the “Time Cost Value” proposition, when a player uses time to measure their visit value. An example of this is TITO (Ticket -In-Ticket-Out). By going from coin-based play that moved cashing out at a machine from a person- to-person interaction, to a computer interaction, where the transfer of funds between machines or cashing out is expedited, the time-on-site for the same dollar investment decreases; This results in a perceived loss of time value related to a casino visit. I was amazed when Ms. Patty Hart stated in an interview that cashless gaming was one of the biggest investments for the future of IGT. I may chalk this up to a momentary lapse in judgment; she still may be getting over that YAHOO debacle. The powers that be were not as forgiving because she was ousted as the CEO with the recent GTECH & IGT merger. In all fairness she still remains on the board as vice chairmen.
TITO was a major investment for all game development firms. It took a Herculean effort to get all major development firms to agree on a platform that would be universally accepted across each of their each individual game consoles. Getting competitors to agree on a cashless ticket concept was no easy task. After this massive investment in both time and money, no gaming executive will admit that it was the wrong play regardless of what the data suggest. I don’t expect this to change anytime soon. But numbers don’t lie cashless gaming has a negative impact on a players time cost value proposition.
2. Product evolution also creates its challenges (pay attention manufacturing executives). Slot games that were once simple 3-coin, single-denomination games have become penny games that offer a multi-line, multi-credit option. And because the player is forced to make a determination on the number of credits to play per spin, players have falsely fallen into the perception the more lines that they play, the better chances they have to win more money. The result was the players’ average wager was significantly increased. The increased average-wager results in a huge initial increase of product win for the casinos i.e. the slot machine has a greater hold percentages. It worked because the players paid for, and received more time on device. The increase time on devices came from the manufactures setting up pay models where some amount of money was returned to the player on approximately 45% of all spins. This was thought to be a successful strategy at first. However, the percentage increase on time on devices was not enough to compensate the player for the increased cost. This monetary bump seen by operators was short lived.
A quick comment on hold percentages; the hold percentage has long been the standard that gaming executives measure how effective their games are. Max Rubin, the author of “Comp City” and a long-standing member of the Advisory Committee at the Global Gaming Conference, recently posed the following question to a highly respected Las Vegas Table Games executive: “would you rather have a 10% hold on a million dollar drop or would you rather drop $500K and HOLD 15%? Not surprisingly the executive said the 15% on the 500K. This validates James Grosjeans’ (arguably the most brilliant gaming theoretician and practitioner of the current generation and perhaps ever) idea that the hold percentage is nothing more than a false idol that gaming executives blindly worship.
Max recently chaired a panel of professional gamblers at a Las Vegas Gaming Convention and asked them if any of them had ever even heard a professional Blackjack or Sports bettor discussing hold percentages and he was almost laughed off the dais! In the glory days of Nevada gaming when Benny Binion and Bill Harrah were kings, I doubt very much that they thought about what the hold percentages of their games were. What these gaming pioneers looked at was “How much money are we bringing in?”
Hold percentage is not as vital as executives think. Consider a game that pays back 200%; and a scenario where out of 1 million players one person wins $2 million and the rest of them nothing. Virtually all of the players would feel like they were shorted. How you make players FEEL when they gamble is the single most important thing that casino operators and game developers should understand, yet the B-School whiz kids that they employ do not have a clue how to measure this and therefore dismiss how players feel. Making a player feel that they have gotten value for the money they spent is the way to get the player to play more.
Returning to the product evolution argument; operators and developers have erroneously overlooked the rate that a player plays at, more to the point the number of visits a routine player (a property’s bread and butter player) makes per month. With this increase in average wager, players were seeing less and less value (in time) for their money. This resulted in players losing substantially more dollars for a slight increase in playing time. This led to lower loyalty from regular players. Specifically losses were greater than the player could tolerate—over time.
Using some clever mathematical modeling, a reduction in time-based value as high as 50%, when compared to the cost of play effects was seen in the data. Simply stated players are less concerned with the cost of the game and more concerned with the time value they get per dollar spent. This makes total sense because consumers are still regularly spending discretionary dollars for fine dining, concerts and sporting events.
To illustrate the cost of play difference, consider the effects on a routine player i.e. one who visits a site twice a week and plays on an average of 2 hours per trip. For the 2 variations of games we will assume an average wager of $.75 for the traditional 3 coin quarter game and $.90 for the new multi-line, multi-credit games.
3 Coin Quarter Player
The average spin rate of a slot is 10 spins a minute, therefore over a 2 hour play period this represents a total number of spins of 1200. With an average wager of $.75 and a 10% hold this represents a player lost of $90 for a single trip. With a routine player coming 2 times a week this represents a total loss for the month of $720
New Multi Line, Multi Coin Games
With an average spin rate of a slot is 10 spins a minute over a 2 hour play period this represents a total number of spins of 1200. With an average wager of $.90 and a 10% hold, this represents a player lost of $108 for a single trip. With a routine player coming 2 times a week this represents a total loss for the month of $864. The total effect of this cost of play example is a $144 increase in loss per month. This is a 20% increase in loss rate or a 20% decrease in value to a player.
3. A second product challenge has been the introduction of lower denomination (the multi-line, multi-credit) games. Because game designers believe that the player wants a big win to create the “OMG” effect, $.01 games that have top prizes of $1 million dollars, $100,000 or even $10,000.00 have the unintended consequences of creating a mathematical necessity for large volatility in these types of games. This means a whole lot of losing players for that one jackpot. This holds for the linked mega jackpots on the floor and the big jackpots seen in the bonus rounds of many of todays’ games. In some cases the top prize has a 1 win in 15 million spin hit ratio. This volatility effect that accompanies lower denomination (multi-line, multi-credit) games has an effect on the players’ “Cost Time Value” proposition. The range of negative impact on experience is between 6.9% and 29%. This range can be attributed to variations in a games theme and the amount of time the game has been in market. This is according to the simulation work done with the attained data. The alternative is creating lower variance games with a higher “Cost Time Value” proposition. This can be achieved by reconstructing pay tables so rare events pay less, and events that occur more frequently pay more.
Imagine a million players each depositing 1 dollar in a slot machine. The high variance model would call for 20 winners each winning 20,000 dollars. In the value based gaming approach there would be 1000 winners each winning 400 dollars. In both instances, the win is a constant 400K; the value-based gaming model redistributes the winnings so that more players receive a positive experience and at the same time slows the burn rate of the player (rate at which a player loses money). It is likely that the frequent smaller winners will at least play a few more spins, increasing the casinos “handle” or amount that is wagered. Alternatively, it is highly probable that the big 20k winners will cash out following a big win. Creating value for a player is a key concept because gaming devices are competing for the same dollars where value is defined by a 2 hour show, a fine dining experience or shopping in the Forum shops at Caesars Palace.
4. An additional hidden product challenge which relates to points 2 & 3 above is that operators set House Advantages (HA, weighted in rate) based on the denomination of the game; the lower the denomination the greater the HA. Traditionally this was done to compensate for the lower wagers per spin in the 3 coin denomination era. This means that players are paying an increased HA rate when moving from a higher denomination game, 3 coin quarter to a lower denomination game, multi-line, multi-credit game. The player is wagering more money and at greater risk when moving from traditional 3 coin machines to a multi-line, multi-credit game.
5. The final product challenge I will discuss is another consequence of points 2 and 3. While evolution in gaming products seems to have an initial value to an operator, the data suggests that the value is short lived. These products burn out a players experience quickly. This results in operators having to replace product (conversions or purchase) at a quicker rate then with the old 3 coin denomination games. The overwhelming number of product options available to an operator, make it impossible for them to get anything close to a perfect product mix. Ironically, brand loyalty has diminished significantly over the past decade, and many of the themed licensed products have shelf lives of less than a year.
The “new” products being developed by vendors are similar in style and payout structure, and most importantly play experience. Essentially, a game has changed its theme. The Wizard of Oz slot game, Wheel of Fortune and many more are all essentially the same game with a varied premise. Granted some games have unique bonus features. Even if these features are activated 10% of the time. 90% of the time the game structure is universal. If I had a sandwich with 9 pieces of ham and 1 piece of bologna, I still say I have ham sandwich.
Players are attracted to a games’ theme, but the experience stays consistent with other multi-line, multi-credit games. We can definitively prove this because there are several knock off version of IGTs’ Wheel of Fortune game. These versions do not even approach IGTs’ play rates. The Wheel of Fortune game is the strongest brand of all time even though it is a participation machine, and has one of the poorer payback structures of all the games on the floor. This is because everyone recognizes the Wheel of Fortune brand name, simply because it has been on TV for over 30 years. Would the Wheel of Fortune game be as popular if the game show was canceled in 2001?
Also, with the themed slot scenarios gaming manufacturers currently produce they are leaving money on the table. Every new themed game a manufacturer puts out requires a royalty cost to a licensing company. I am assuming Pat Sajak’s likeness does not come cheap for IGT. Aristocrat and Scientific Games most likely have the same issues with Clark Kent, Dorothy and Toto respectively. The standard approach by manufacturers is to cost average the themes. By having multiple games under the same general concept they are able to average down the cost per unit. The Superman 1, 2 and 3 games by Aristocrat illustrates this perfectly as does the variety of Wizard of Oz games that sit under the umbrella of Scientific Games.
The games being put out by most gaming manufacturers have become so redundant in form that there are many computer programs available where a “mathematician” can input the number of symbols per reel and the par sheet values are calculated. I have spent that last year trying to enlighten various gaming manufactures’ executives on the ineffectiveness of their approach. These appeals fall on deaf ears. If the employee reviews of IGT found on glassdoor.com are to be believed it is a culture of oppression, incompetence and lack of vision among management. In all fairness any attempt to
change from the norm tends to be met with resistance from management. After all no one ever gets fired for saying no.
The end result for the current strategy is that revenue trends for operators have an initial boost for every new multi-line, multi-credit game they put on their floor. This bump rapidly flattens and falls after a few quarters. This forces operators to invest heavily in new product via purchase or conversion, and to create trials for products that have little or no appeal to new social or younger slot player. The current generation of slot players which started their gaming experience on the traditional style of product, 3 coin denomination games, supports the current slots market, at a higher level than in the past. This is seen from the 80/20 rule migrating to the 80/15 and 80/10 revenue percent to player base ratio. This ratio will continue to fall. As the older generation makes fewer and fewer trips to casinos, there will be no players from the younger generation to take their place unless adaptations are made. Simply stated the millennial generation does not play slot machines in the current form.
For those that who still hold reservations about the ideas presented thus far consider the efficiency ratings of the $.01, $.05 and $.25 denomination games for all of Nevada. Efficiency ratings refers to the number spins actually experienced divided by the possible spins in a years time over all machines as derived from the Nevada Gaming Boards own data. An assumption of 3 seconds per spin has been taken. The efficiency ratings of the three lowest denomination slot machines are, in order: 0.08% for the penny slots, 4.5% for the nickel slot machines and 8% for the quarter slots. This means that 99.2%, 95.5% and 92% of the time respectively, and on average, the machines on a gaming floor of casino are empty. This does not account for the bonus round watching on many slot machines. However; even adding 10 or 15 % to this value still yields awful numbers. The data is derived from the Nevada Gaming Commissions revenue report year ending 2012. The penny slot games make up 79% of the games in this subset with approximately 49,500 units. The nickel slots make up around 6 % of the machines with 3950 units, and the quarter machines make up the remaining 15% with approximately 10,000 units. There are additional slot machines with higher denominations and multi- denominations but they have been excluded to illustrate the ineffectiveness of the high- variance low-denomination games.
The combination of low wagering and high-variance games was not always the dominating approach in Nevada or across the gaming realm. So what happened? How did this approach take hold? In the late 1990s when the US economy took on the appearance of a runaway freight train, similar to the one in Denzel Washington’s film Unstoppable. Casino operators and game developers alike were looking for ways to boost already exceptional revenues by attracting a new type of player (echoes of the Gordon Geckos’ phrase, “greed is good” comes to mind here). The answer was coupling a family friendly environment and a low denomination game so that the middle class American family could experience the highlife that was previously only accessible
through romance novels and a trip to the local cinema. This approach worked famously as long as casino operators were able to comp rooms, shows and some food.
This approach had not yet fully taken hold of the industry when the tech bubble burst in the early 2000s. There was still time to make adjustments if the economy was allowed to correct. Rather than let the natural economic cycle run its course, in his infinite wisdom and perhaps channeling John Keynes, Alan Greenspan decided to lower interest rates and ease lending restrictions to the point where the man who tries to wash my car windows on Santa Monica Blvd could get a loan to purchase a home
With the money continuing to flow to the middle class family and millions of new “paper rich millionaires,” the operators continued along their same path into the “Danger-Zone,” as Sterling Archer would say. Not only did game developers not revaluate their game design strategy, the operators doubled down on real estate expansions and new development projects. Somewhere around 2007-2008 the economy began acting like a giant Jenga tower: the higher it got, the more unstable it became. Eventually, and with great force came the crash. The real estate assets were reduced to only a small fraction of their previous value, and the middle class family no longer had the discretional income to spend on a family vacation to a casino resort. The family friendly environment in non- gaming experiences and attractions (along with the runaway economy) drove the play, but the games themselves did precisely nothing to bring people to the gaming resorts.
With no guests to fill the recent room expansions, the casino operators were put in a tremendous financial hole. To increase revenue casinos massively reduced all low-level wager comps, and automated the comp system and removed the decision-making ability from the casino hosts. On more than one occasion while I was playing with an average bet of 100 dollars and I asked for a comp from a host the response was “The Computer Won’t Let Me.” This begs the question why even have a host if the computer makes the decision? Casinos are reducing comps and at the same time wasting valuable marketing dollars on the salary of an employee that has no function. In another absurd move to boost revenues casinos resorts began charging a “resort fee,” on top of the daily room rate. All the while game developers continued to focus on creating product for the type of customer that is no longer showing up, simply because the revenues were good when the economy was strong. Game development firms and casino operators made the same mistake that many companies make. They believe the past is the future.
Both “Day-Tripper” and resort casinos tried every trick in the book to boost revenues except those that would increase value for the player. Mainly loosening the slot payouts and offering comps to the player. In most cases the operators went in the opposite direction. Destination resorts ratcheted down the paybacks to extraordinarily low levels on high-traffic area machines. When an operator executive was questioned about this the response was “I can’t give away the keys to the kingdom.” Of course if there is no one in the kingdom but the king then it’s not a kingdom at all. It is just a guy with a golden hat that he will eventually have to pawn to pay the cleaning crew.
When less and less players are showing up to play the games a resort offers, the revenue from the gaming aspects of the resorts shrinks. So in turn the gaming operators have less money to spend on new game purchases. As a result gaming development firms are not selling as much and therefore not generating as much profit. This reduction in revenue forces game development companies to make operational adjustments. Any MBA including the one writing this article can tell you when a company has an inferior product in an increasingly competitive market place there are only few options they have. The first is to change the name of the product frequently. This is what game developers are doing. The head of mathematics of a major game development firm in stated in a talk with me that they put out approximately 60 new themed games a year. The second option is to merge with a competitor. GTECHs’ recent purchase of IGT and Scientific Games buying of Bally’s Technologies illustrates this clearly. I can see an anti-trust lawsuit on the horizon if this trend continues. The third option from the operators’ perspective, is to get rid of the vendors’ product. Yet, there are only a couple of major game developers out there and because the cost of entry to the market is so high for a new game (around 1 million dollars for development and certification), it prohibits any new innovative companies from entering the marketplace. As a consequence wholly new game concepts are rare, and almost unheard of when done independently. The few major firms have pseudo monopoly on the market place.
I have attended the G2E gaming expo in Las Vegas for the last 5 years and it is virtually impossible to get through the clutter of 100’s of machines that look and act alike. The developers seem to put all of their energy into creating the next great brand, such as “Willie Wonka” or “Ghostbusters.” They do very little to change the actual play of the games themselves.
With a general understanding of some of the revenue crushing aspects the next question is what steps can be taken to reverse the trend in casino gaming? And more importantly what evidence do we have that they will actually work? First, gaming executives must recognize there is fundamental flaw in the way they are approaching game design and resort operations.
There are actions that can be taken by both developers and operators to increase their revenue. Developers can steer away from the current higher cost, higher variance model and opt for the more linear value based approach. Developers should focus on creating games that are interactive to the player and create a greater “Cost Value Proposition”. In traditional slots the outcome of a game is decided as soon as a player hits the spin button,
the reels and videos just for show. In a world of smart phones where people are constantly interfacing with devices, gaming organizations need to create games that fit the expectations of the Millennial-Generation by finding ways to enhance a players’ experience, and by attracting new social players.
One solution is to focus on developing decision based games. In the current market Video Poker is a decision based game and, although the house advantages are usually half, or less, of what is seen on typical slot machine it generates huge revenue for operators. Live poker is also very popular. Partly because of the decision process involved; but it may have more to do with people wanting to feel “smarter” then other people or to feel like they have a sense of control. How a game makes a person feel is vital, and often ignored aspect of game design.
Casino games that have an increased number of decision points create engagement between the player and the game console. This approach is frowned upon by some gaming executives because of the uncertainty in being able to get a new math model approved by the Gaming Certification Labs. As one game development executive headquartered just outside of Phoenix AZ said to me “the certification procedures have not been put in place for those types of games.” Essentially meaning companies like GLI would not know how to handle new approaches. This is understandable because new decision based gaming models have so many permutations that standard computers can take as much as 18 months to run a single pay table evaluation when done by brute force computation, essentially making the submission time prohibitive.
I have submitted two games that were thought to be unsolvable by current methods and technology; I know firsthand what road-blocks gaming labs and regulators can put in your way. These games were ultimately approved after several explanations to the GLI certification managers. Development firms must move away from the cookie cutter mathematicians and move towards the problem solvers and critical thinkers. They need to employ mathematicians and game designers that can think outside of the current boundaries of static probabilities and move to interactive decision driven gaming, where creative optimal strategy derivation is a required by the mathematician.
Devising decision-based games that have a narrow house advantage leads to profits that are higher than traditional slot machines that are run on random number generators. Video Poker is the prime example. Games that are set to 98 or 99% payback routinely pay out between 94-96%. This is because almost all players do not put the required study time needed to know what the optimal play is for a given hand. At the same time every person thinks they know what the right play is. Players want options when they play. The money made from the errors in the play by standard player will more then compensate the dollars lost to the handful of professional players and comp wizards.
The actions operators can take to increase the value for the players are straight forward. The most immediate action that could be taken is increase customer service to the player. Eliminating as much of the computer cash-out services and customer rewards kiosks as possible, will cause the player to spend more time in the casino for the same amount of money. This increases their time value proposition. Creating “Touch Points” between players and customer service representatives has tremendous value. Of course this requires the staff to have interpersonal skills. Interpersonal skills are tough to come by when 90% of the population has their heads buried in their smart-phone. Operators have to move away from the philosophy of reducing overhead by automating staff. Casinos would like nothing more than to have what Max Rubin has dubbed “Vending Machine Gambling” with virtually no human interaction. The B-School graduates that run these outfits need to understand the psychology of a customer in terms of wants and needs and less about the maximization of profits by way of service elimination.
Another immediate action is to reduce the hold percentages on all machines. This also increases the value proposition to the player. The player experiences more time of entertainment for the same amount of money (or same amount of entertainment time for the less money). And because the efficiency ratings on low level machines are so horrifically low adding an additional 20% of time value will not displace any awaiting patrons. Lastly, offer some finger foods to players as they play on machines or at the tables (or up the food comps). This will give the player more value per dollar spent, and will cause the player to play longer and with more frequency.
These modifications will have positive impacts on both types of land based gaming environments. The first being destination-based gaming. Using Las Vegas as the template we know that in addition to casino gaming, the resorts offer restaurants, entertainment and shopping. In value-based gaming winnings are redistributed from a few large winners to several moderate winners. This creates more time on device value because the player wins at a more frequent rate and in turn slows the burn rate. For the casual player who plays for an hour before dinner and an hour after dinner it means that they will lose less money and take those saved dollars and purchase something from one of the shops or go and see a show. For the player who plays for several hours at a time it means a slower burn rate and a more positive experience and an increased chance that the player will return.
In a decision based model of value based gaming the win outcome is not determined until the player has made a decision, this engages the player. We can conclude that a player will be more attracted to these types of gaming products because the burn rate slows and a sense of control is experienced. If the player plays more because of the interaction and engagement the goal of increased time on device is achieved. If the player plays the same amount then they have more discretionary income to spend on the secondary amenities of food, entertainment and shopping.
The revenue of gaming resorts are currently split 50-50 between gaming and non-gaming sources. I am suggesting that value based gaming will increases the total revenue the property generates because at minimum effectiveness gaming revenues will remain constant with increase time on devices and nongaming revenue will increase. I believe this will be the case because as the burn rate slows more dollars will be made available for spending. The spending can come in the form of playing more or purchasing goods and services from the property. When goods and services are purchased more from a store located on a property, the revenue for that store goes up. In turn the cost of leasing that space also goes up because the space is more valuable
Conversely, in high-variance gaming when a win is achieved it is a large win and the majority of those dollars leave the property with the player. If we were treat the casino resort as a self-contained ecosystem with the fuel being the dollars that are wagered, the velocity of money will increase logarithmically in value based gaming. Players are content because their overall value has increased and a positive experience has been had. Operators and vendors are content because they have all increased their revenue stream.
The second aspect of land-based gaming is local-gaming. Local-gaming caters to a casino regular. These “locals” casinos are virtually every casino outside of Las Vegas and Atlantic City. This also includes secondary market of gaming devices found in bars and restaurants in jurisdictions where gaming is legal. The “locals” casinos now make the majority of gaming arenas in both Canada and the United States. The value based approach to gaming via the time-on-device games have tremendous benefits to the “locals” market operator. The value based product type draw new players to the property, and they keep current players satisfied. In the locals markets specifically, bars and grills, the value based approach will keep the player playing longer and consuming more food and beverages, where the majority of the owners profits are made. The CEO of a development firm just north of Los Angeles responded to this approach with “Drinks in Nevada are free at bars when you gamble.” This is correct; yet, states other than Nevada do have gaming in bars and most aren’t allowed to comp alcohol. Further more, the new casino construction outside of Nevada is exponential compared to inside Nevada. States are issuing more and more gaming licenses because they need the tax revenue.
The million-dollar question is “Will this approach work? And if does work, by how much will it increase the revenue and profits? To answer this lets look a few casino resorts that are embracing the value based gaming approach.
In Las Vegas there are a few casinos that are great to play because these casinos cater to what a player wants while they play. The first is South Point Casino, south of the strip on Las Vegas Blvd. South Point has very loose slot machines, and players play longer. The second is the Orleans just off the Las Vegas strip on Tropicana Ave. This casino not only has fantastically loose games and great blackjack rules but if you are playing with a decent average bet the pit boss will comp meals, rooms and show tickets without hesitation. Another great experience I had was at the Horseshoe Casino in Tunica. They too, are not hesitant to comp a player. The best words ever spoken by a pit boss was by the high limit pit boss at the Tunica Horseshoe named Bill when he said “I don’t want your money I just want your play.” Bill is too smart to be a pit boss.
Bill seems to adhere to the Jack Binion philosophy of catering to the player. A few months after Jack moved into the Tunica market, his Horseshoe casinos blackjack games were winning more than the three top competitors' operations combined. This is public record. His Hold Percentage was significantly lower than any of the nearby casinos. Jack knew and still knows hold percentages do not pay the bills. He has often been quoted as having said, “I have never cared about how much I hold. It’s all about how much I win!” And he’s right. If any Las Vegas Cosmopolitan executives are reading this, do yourself a favor and get rid of the 6:5 blackjack games on the floor.
Several years ago my aunt and mother retired to southern California retirement community. During this time I have visited the two women who raised me several times a year. One of most looked forward to activities, is the taking of their bi weekly trips to the Barona casino near San Diego. Because I am in the gaming industry I wanted to find out why. When I asked several of the residents of her community “Why do you like coming to the Barona so much?” They almost universally responded: “because they treat us well there.” I decided to take a day trip to the casino with them and see first hand what this meant.
When I entered the casino the thing I noticed right away was that the machines and table games have almost 50% of their seats occupied. I have never seen this before so I explored a little further. The double deck Blackjack tables have great rules like re- splitting aces and late surrender. The latter is extremely rare on a double deck game. And there are plenty of open tables. The roulette games are all single zero games. They have the loosest pay tables on their novelty games. They also have very liberal video poker pay tables. The Barona has a veritable army of change persons that interact and pay attention to their players. This eliminates the need for almost all of the kiosk and change machines. And the Barona has done just that. They did have 2 kiosk and change machines on their floor the last time I was there. Lastly, the Barona serves food to their players at ALL table games and machines. All these player centric modifications have a causality effect that makes players stay and play. To confirm that this was not a fluke I returned to the Barona several times over the next few months. And the result was always the same. There are people in the seats playing their games.
In short, the casinos that have adopted the old-guard casino policies as set forth by Bill Harrah and Benny and Jack Binion, like South Point, Orleans and the Barona will always dominate their markets. The will dominate their markets because they understand and their players and cater to their needs. I am not a teacher but I am pretty sure there is a lesson there.
In the final analysis much of the casino gaming industry has dug itself into a tremendous hole over the past decade. They have done this by alienating players that drive their business. Some may disagree with the solutions offered here and I welcome those criticisms. My intention is to get the decision makers thinking about what changes they can make to reverse the negative trend we are seeing, because it is clear that current methods are not working. The gaming manufacturers and resort conglomerates must lead the way and move towards the ideology that the founders of this industry’s lived by. I will continue to work on ways to make this happen. I welcome any conversation that any game manufacturer or resort wants to have. Any movement in this direction can only be a positive for the casino gaming industry.