Do casino execs care at all about gambling?

A few months ago I was in a meeting with some of the top execs at a major strip casino. It was a business meeting and had NOTHING to do with the casino. But since these guys were running the place (including the casino) I brought up the issue of their VP pay tables, which you should know pretty much suck. This casino has 7/5 Bonus even in its high limit area as well as 9/5 DDB. For those of you who do not play VP, these are not good paytables but pretty standard at some of the major properties.

When we had a dinner break and made small talk, I suggested to them that if they raised their pay tables they would:

A. still make a profit
B. attract more players and maybe make even more profits
C. fill their empty VP machines which are costing them money because they are not generating any revenue at all...

they looked at me as if they didnt understand a word I was saying.

And you know what? I dont think they did. I have had similar conversations with other execs at other casinos with the same reaction... usually a shrug.

I honestly think that many of those who run casinos and resorts today have no idea what gambling is all about. I think they all came out of "hotel school" or in the case of Loveman from "business school." They might have their research based on their surveys but if they don't ask the right questions, they won't get the right answers.

Loveman is well known for not liking gamblers.

You know I frequent Caesars. Well after every trip I get an email "survey" about how my trip was? They ask me about my host, they ask me about service, they ask me if I would recommend Caesars, they ask me if I'd return, they ask me if I used the Diamond Lounge (they did away with the 7stars lounge)... but THEY NEVER ASK ABOUT THE GAMING.

I'm sure they know what they're doing and I'm sure plenty of cost analyses have occurred. You spend alot of time around these parts where most people are somewhat educated gamblers. That is simply not the case for the majority of Vegas strip visitors which is why the hotels get away with the lousy games.

Sure they could offer up better games to attract better players...but then they lose money on the uninformed, recreational players who will play anything.

You can tell the execs know what they are doing simply by comparing their Vegas Strip casinos to ones outside Vegas. Harrah's casinos in Vegas are among the worst you can play but here in Indiana they are actually very good.

Did you think to ask them about the towels? I'm sure the top levels executives know about about the thread counts of the towels that the maids use to stock the rooms.

Gee kaypea I get the good towels. They must be the full-pay brand. PJ I'm sure you are correct but my point was that empty VP machines earn no revenue and machines with better paytables might get more players and even games with better pay tables still make a profit.

They're not worried if those empty machines are not making much profit, they're MORE worried about the players making a profit.

Ray

MoneyLA

This doesn't surprise me. It's a matter of "Operations" vs. "Corporate". It sounds as if the exec's you met were "Operations". They are concerned with making sure the casino runs smoothly...they worry about staffing issues, liquidity issues, cheaters, illegal age gamblers, making sure everything is up to code...list can go on and on. On a simpler scale, it would be similar to a fast food restaurant manager. The concern is to make sure everything runs smoothly and to handle any situations that would hinder the operations. The manager would not be concerned with the idea of pricing. Don't get me wrong, the manager might have some ideas, but that's not their duty or job function. They aren't the ones to make the decision to raise the prices of soft drinks by a quarter.

Thus, we come to "Corporate". Corporate is about profitability. Analysis Paralysis as I'd like to call it. Studying pricing, customer behavior, marginal costs and marginal benefits. These people are responsible in determining the strategy to maximize profits. Those are the people you should be running numbers to. A Corporate person does not concern about the operations (rather, it is assumed that operations is taken care). Not all strategies work. Many are experimental. We see this all the time. A particular idea isn't welcomed and backfires, so they scrap it and bring the original back.

It was a corporate person who thought of 6/5 blackjack. It was a corporate person who thought of lowering the pay tables. It's the corporate person who thought of having a $100 minimum table out on the floor even when no one plays it. It's all mathematical. Corporate takes into account volume and pricing (rate). If I pay 6/5 blackjack, how much business will I lose vs. the better rate. Since 6/5 blackjack is still around, Corporate made the correct decision to change this pricing. I don't know the loss between 7/5 vs. 8/5 vs. 6/5. But, let's say 8/5 had a 1% loss, and 7/5 had a 2% loss. Thus, a 7/5 machine could have 1/2 the usage of an 8/5 machine to make the same profit. This is probably experimented several years ago when they had both machines and they could monitor their average usage. If the 7/5 machine had better than 50% usage as the 8/5 machine, then it's easy to determine that it's more profitable to change the machines to 7/5.

Sorry for the long and drawn out explanation, but that may be why you had a bunch of blank faces when you talked about pay-tables.
My 2 cents (more like a nickel)

-Shooter

For the record, I work in the corporate finance department. We get to crunch these numbers all day long....(hence Analysis Paralysis)

These days isn't it the norm for a property to make more money with food, beverage and entertainment than with gambling? Seems to me maximize both that and gaming to make the bottom line look better. If hotels (large casino properties) are still filling rooms to 95% or better I guess they think things are alright. If this were happening in the 60's these guy's would be taking a one way trip to the desert.

I don't see how they could not care about gambling. Isn't that why they were hired to start with? They might feign disinterest, but that might just be a smoke screen like some execs in other businesses use. I think someone like Gary Loveman knows exactly what's going on in every aspect of the casino.

I'm glad to hear that because it's the good towels that keeps the hotel full of guests. Or, at least, that's what the head of hospitality concentrates on since keeping the hotel guests happy is their responsibility. They don't care about the VP pay tables because that's not their department and they have to trust the head of gaming is doing their job.

the operations guys like profits just as much as corporate. bonuses are based on profit