Customer loyalty programs have had a strong foothold in the casino business. In 1997, then-consultant Gary Loveman (current CEO of Caesars Entertainment) moved the industry forward by developing the first customer loyalty program in the business, the crown jewel of Caesars—Total Rewards.
In its early days, Total Rewards tracked the spend of casino guests merely for their play. This was a somewhat simple task, as the revenues generated in the casinos in the Caesars portfolio (then named Harrah’s) were predominately from slots. The Total Rewards program also tracked the theo, or theoretical spend, of table game customers.
Casino marketers across the industry quickly saw the value of understanding what guests were spending and when they were spending it, so many other casinos followed with their own loyalty programs, including the Venetian’s Grazie, Station Casinos’ Boarding Pass and Isle of Capri’s IsleOne, just to name a few.
Nearly a decade later in 2010, the first major overhaul came to Total Rewards and the program was expanded to track non-gaming spend as well. Guests were earning and redeeming rewards for hotel, food and beverage, entertainment, nightlife and some retail spend. Since then, MGM re-launched its loyalty program, m Life, which uses a similar approach to Caesars in tracking total customer spend across the resort.
These legacy customer loyalty systems were originally built as marketing tools to answer the question, “Who are our customers and what do we need to offer them to return to our resorts?” versus being the core for a comprehensive revenue management, profit-optimization tool.
Although the value of the data collected by these systems is finally being realized by many functions beyond casino hosts, there are still two significant shortcomings of today’s most sophisticated marketing programs. Even in these revamped programs, there is still a differentiation between casino and non-casino guests.
The implication of a second-class citizen status to the non-casino customer inherently causes the systems to miss the opportunity to objectively compare customers based on their profit value, which should be the determinant of what hotel room rate customers pay and who receives a complimentary offer. Insights from spending behavior in the casino versus other outlets can improve the relevance of personalized communications, which drive dramatically improved response rates, but prices and offers should be based on total customer profit.
The second and most profound shortcoming of today’s loyalty systems exists in the logic upon which the systems are built; to be truly effective, revenue management must be the foundation of loyalty programs. When so many customers are eligible for discounts and multiple teams manage those customers, it is essential to have a strong revenue management function that can dynamically set independent rates and strategies for each segment and channel.
Today, casino resorts hold weekly and daily meetings to coordinate sales, marketing and revenue management, but there are countless occasions where opportunities are squandered. Motivating customers to return is one challenge, but resorts need to be careful to ensure that loyalty programs are optimized to stimulate demand at the right time and the right price, and this requires unified decision-making, not open dialogue.
For a revenue manager to succeed, a system must be used, because there is too much complexity to rely upon business intelligence reports or intuition. Unfortunately, revenue management system implementations in the gaming industry have failed or have not unleashed the full potential of the system. In most cases, the revenue management system is not being used appropriately. Technological, procedural and cultural obstacles have stymied every attempt so far. As an industry, marketers need to refocus on solving these problems so loyalty programs will reach their full potential.
Seizing The Opportunity
Tucson-based Casino Del Sol has the chance to build a comprehensive strategic marketing platform from the ground up. With its new hotel, which opened on November 11, the property will evolve into an integrated resort destination, with additional revenue-generators including rooms, spa, convention, F&B, pool and retail sales. President Mark Birtha seized the opportunity and tapped Duetto Consulting to lead the design and implementation of the industry’s first enterprise-wide, integrated profit optimization tool that truly harnesses the power of revenue management across all resort functions.
For the first time in the casino resort industry, this integrated profit optimization tool is the basis for all resort operations, and it is operated by trained revenue management professionals to achieve profit optimization across the resort.
“In planning the opening of Casino Del Sol Resort Hotel, I knew I wanted to build a different system, one that would inform each function of our casino resort and enable our team to deliver the best possible customer experience and ultimately maximize profits across the board,” says Birtha. “From the front desk to casino marketing and food and beverage to casino hosts, each and every revenue center will have relevant data to make strategic operational decisions.”
The tracking of the total spend is built into each customer touch point, realizing a tremendous improvement over the legacy systems, which, in many cases, are dependent on team members manually crediting guest loyalty accounts for non-gaming spend.
A more complete, accurate view of the guests’ total spend is the foundation of Casino del Sol’s industry-leading system, designed by Duetto. Building on that foundation is Duetto’s revolutionary organizational structure that for the first time in the industry places revenue management at the center—making, advising and informing all decisions.
“Our revenue management team will provide the intelligence that will be the basis for all of our decisions,” Birtha says. “For example, the marketing team will be closely aligned with revenue management to extend unique pricing and offers to both casino and non-gaming guests based on their total profit contribution. We know that placing revenue management in the hub of our operation will enable all of our other resort functions to put the most valuable customer in our property at all times.”
Duetto Consulting will continue to work with the Casino Del Sol team monitoring customer behavior to build and evolve campaigns that are relevant and rigorously tested. Through Duetto’s processes, Del Sol will continue to acquire new guests, and unlike many legacy systems that merely stimulate additional visits, the Duetto system will enable Del Sol to grow customer spend.
A Roadmap For Others
There are few in the casino hospitality industry that will have the opportunity Casino Del Sol has: to build a comprehensive loyalty program from the ground up—a system that serves as a business intelligence tool for each department across the entire resort.
Casinos with legacy loyalty programs, even those that have piecemealed a solution together to track spend across the entire resort, will realize profound benefits from following the roadmap created by Duetto Consulting. Resorts need to take the opportunity to build a comprehensive technology infrastructure that utilizes revenue management at the core to leverage every aspect of the resort to drive enterprise value. The focus should be to place a property’s most valuable customers in limited commodity opportunities (rooms) that provide for the highest potential revenues with the best operational margins.
Resort operators need to rethink their approach to staffing the revenue management function. A successful, highly functioning revenue management department cannot be tacked on to the duties of an existing resort operator or managed by someone pulled from the front desk. To realize all the benefits, this function needs to be managed by talented, well-trained employees with a blend of experience in technology and statistical analysis. Yes, these individuals will have a higher salary requirement, but the resort operators will be hard pressed to find a higher ROI on individual hires than those in revenue management.
Of course, after the right people are identified to lead revenue management, the organizational structure needs to change to ensure that other executives do not have the power to undermine the function by overriding rates on a whim. Team members from hotel operations, casino marketing, convention sales, online sales, call centers, etc. simply do not have the time needed or in many cases the skills to understand the highly complex algorithms needed to accurately calculate the right rate at the right time. These functions must collaborate with revenue management and not simply undercut the revenue management team by unilaterally overriding rates or decisions. Similarly, dynamically yielding rates can only be realized if strategic marketing functions are integrated with revenue management.
Once the right team is in place in an environment where their work cannot be undermined, the team must have access to a robust revenue management system, data warehouse and analytics platform. The first step is for resorts to fully utilize a system to generate a bid price that is used as a threshold to determine room rates for specific types of guests on any given day.
While these systems are a good start, what they lack is the capability to transform the bid price into a selling price, which requires taking into account the patrons’ willingness to pay (price elasticity) and their likelihood to respond to an offer. Current systems also lack the ability to accommodate specialized business rules that may not be statistically sound but are imposed for strategic or organizational reasons.
Casino resorts can ill afford to continue to turn their backs on profit optimization. Embracing the dramatically different approach to the revenue management function through strategic staffing and enterprise-wide system improvements will maximize profitability and enhance customer satisfaction.