As the global economy steers its way out of the “Great Recession” and begins to adjust to a “new normal,” gaming operators have to look back at their experiences during the glory days leading into 2008, temper them with the lessons learned from 2009 to 2012, and digest it all in order to reset their understanding of the needs, wants and expectations of what is a very different customer base today and in the future.
Welcome to the new casino landscape, where developers and operators reconfigure their businesses in every marketplace and re-evaluate the way they manage their gaming and non-gaming revenue centers while attempting to decipher an ever-changing economy and consumer profile.
The first phase of the RD&E evolution saw casino properties begin to move away from the traditional approach of building retail, dining and entertainment venues as loss leaders to drive casino revenue. This rang true in the early and mid-2000s as casino executives enjoyed increasing win per unit, robust non-gaming revenues, and escalating profit margins resulting from a hyper economy and a more differentiated guest with excess discretionary spend.
Although the economic woes of the past few years saw the pendulum swing back towards RD&E as more of a loss leader again to solely drive visits, the most recent year is beginning to bring a bit more stability to the world, and at the same time a reality check for operators realizing that there are new waters to chart. We have reached the next phase in the RD&E evolution, where there is no longer gaming vs. non-gaming: success relies on managing revenues in all areas.
The Next Phase
During the first evolutionary phase of RD&E, non-gaming amenities became the buzzword in the industry for many years. Operators infused new celebrity chef restaurants, powerhouse entertainment productions, multi-faceted retail centers, elaborate spas, luxury hotels and significant meeting complexes into their assets with increasing cost and expectation. Non-gaming revenues grew quickly and in some markets even outpaced gaming revenues.
As the economy declined, operators began to adopt new strategies to react. The business moved closer to a casino-centric focus where non-gaming elements were used oftentimes as credits and promotions to entice customers to visit properties and spend money wherever possible. But this too was just a temporary holding pattern, and not a step backwards for RD&E.
Instead, gaming leaders appreciate the fact that a compelling retail, dining and entertainment program continues to make sense for today’s modern casino enterprise. A strategically positioned RD&E program is not only a secret weapon, but more importantly could spell the difference between success and failure.
Those in the know realize that gaming and non-gaming are not separate. To truly unlock the full potential within their four walls, they need to focus on them as one. It is all about synergy.
In today’s world, an enlightened operator is creating a combination of assets that are woven together to provide the highest level of product possible, thereby offering unparalleled guest value and thus strengthening the competitive differentiation and positioning of the entire operation. Customers in casinos are as likely to play a mechanical reel slot machine or hit the BJ table as they are to attend a corporate retreat or spend a weekend in the hotel, pool and restaurants or throw a party in the club and catch a show.
We have sophisticated guests who are buying a complete entertainment product: a package of experiences bundled together and delivered seamlessly throughout every square inch of the property. Not all that different than a grocery store, guests have many potential selections competing for their wallet. They come in to gamble, or they come in to dine, or to shop or see a show. And not surprisingly, they come in to do all the above and more.
The Key To Unlock the Door
The concept is not necessarily revolutionary, and the theory is currently being executed by many operators in different manners and at varying levels of sophistication, integration and effectiveness. And that is where the opportunity truly exists.
Casino operators may look at this convergence as a marketing tool for acquisition and loyalty, or a margin-driven exercise to increase revenues while decreasing associated expenses, or even possibly a new phase in the development or capital refurbishment space where non-gaming venues house gaming amenities and vice versa so there is an integrated offering of experiences.
Either way, executives in this space need to harness multiple tools in order to truly reach the next step in the evolution, to reap true success in the future and to completely unlock the door by quantifying and qualifying the complete value of every guest.
One of the most compelling discussions and initiatives in the industry today is the focus on the enterprise value of our consumer.
A guest spending a night in the luxury suite may be just as valuable as a guest playing hours on a dice table. A corporate traveler coming in regularly and entertaining clients at a nightclub can be more profitable than the player coming in on an RFB comp. When you look at the cumulative consumption data on our guests in every revenue center, you begin to get a full picture of their true value.
Then, take that information and understand the profitability of that spend in each area and look at what it cost to drive that trip or maintain that loyalty. And then finally, factor in how often this guest will make the same purchases and how that property can ensure that frequency over time with the associated cost. We have a new strategic formula to drive our marketing and optimize the utilization of each of our revenue-producing assets.
Tech & Transformation
This is exactly the theory that is outlined above. We are beginning to define a theo value to a non-gaming guest as we do the gamer. And in many cases they are one and the same. The question is really, “What are they spending their time and money on and how do we get them to come back and do that frequently?”
The next evolution in our space is to fully value the real estate in our properties, whether gaming or RD&E and hotel, and to do the same for our guests that consume these different offerings.
Casinos are slowly beginning to embrace this philosophy. The challenge is the level of systems in place, the ability to capture all spend data and warehouse it in a manner that generates total customer profitability and value, and last but not least the true operator “buy-in.”
Technology is the first threshold that must be mastered, and consultants, data manipulators and even slot manufacturers are beginning to offer solutions to overcome this obstacle. When systems are put in place and we are able to measure consumption in all areas attributed to that one patron, we can begin to apply the costs associated with supplying that product and the marketing expenses necessary to drive that trip into a formula that allows us to synthesize who our best guests are in each and every part of our business. From there, we can ensure we focus on filling our buildings with guests who yield the highest value.
New equipment and systems are a constant evolution in our industry, as they are in most others. We continue to focus on improving the overall guest experience while at the same time being profitable, but technology has been and will continue to be an incredible resource that allows us to do both in an efficient and effective manner.
Whether it was bill validators or TITO on the slot floor, shuffler devices in the pit, electronic hotel check-ins, or wireless in the rooms, advancements in technology have been core to our success. Areas of interest where there is more opportunity are the convergence of mobile devices that integrate into the entire entertainment experience. These devices will allow us to arrive at the property and be recognized the minute we walk in the door.
Check in to our room while we walk by the front desk and activate our hotel room door with the RFID connection. Watch any programming we want in the rooms. Serve as a gaming device in our rooms, on the casino floor, or even out at the pool. Make all our dining and show reservations with just a touch and allow us to manage rewards points, comps, promotions and invitations in the palm of our hand 24-7. Not to mention, share our experiences with our closest friends and family each and every moment along the way.
In this vision, the goal for us as operators and marketers is to offer these products in a manner that is not intrusive but complementary to the guest’s needs. It is up to us to harness all of this information over multiple revenue centers and sources to give people what they want, exceed their expectations, and truly value a guest based on their enterprise worth—and then provide them with the customized and personalized marketing and incentives that enhance their experience. And then, imagine the service possibilities when casino hosts and hotel concierge are one and the same.
Going above and beyond on the service component is enhanced by our ability to motivate consumption that benefits the property. More importantly, we are providing exactly the types of purchases and/or play that the guest is expecting us to provide them. Everyone wins. This is where our industry is rapidly heading.
Where Do We Go From Here?
Although there is no clear-cut strategy that applies to all gaming operators, it is a proven fact that a compelling program of retail stores, dining establishments, clubs and lounges, hotel rooms, spas and meeting space, and a well-conceived entertainment product are still very much critical components of the successful casino hotel.
In this challenging time, leveraging an entire campus of amenities will allow operators to build competitive advantage, customer loyalty and long-term profitability. If nothing else, this unique period of time allows everyone to re-evaluate where we have been and where we are going, and retool our boxes to offer the best experience possible.
The smart casino operator has already realized this, and has laid out a strategy to address these opportunities to achieve a better tomorrow.