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Striking the Right Balance In Vegas to Maximize Resort Profitability

Striking the Right Balance In Vegas to Maximize Resort Profitability

For decades, the pricing of hotel rooms at a casino was basic and static. There was a rack rate for cash-paying customers, a comp for high-rated players and perhaps one “casino rate” in between.

NB: This is an article from Duetto

Advancements in back-of-house technology and strategy allow for much more dynamic pricing today, but the factors that go into reinvestment have also become more complicated.

Integrated resorts must determine how to price their inventory by room type and customer segment for their cash rates, and then they need to account for changing consumer preferences in their reinvestment strategies. For instance, convention guests might not gamble, but they’re more likely to spend more on rooms and food and beverage. The same might be true of large groups that might never have visited Las Vegas before — perhaps thousands of fans of an NFL team playing the Raiders in Vegas for the first time.

Of course, the gamers in a casino’s loyalty program have significant value to the property as well, which should be reflected in comps and upgrades. But there is more data available today to make more sophisticated reinvestment decisions, so that the call center or front desk is not giving away too much to lower-rated members.

As the city evolves over the next few years, casinos’ success in Las Vegas will depend in large part on their Revenue Strategy. This requires a mind-set shift toward greater collaboration between the hotel and casino teams, where a shared set of data helps both groups work toward the same goal: greater total resort profitability. Rather than these separate teams fighting over a bigger share of a room block in order to hit individual revenue targets, having them work together to decide which guests and segments will fill which rooms and for what price will result in a better bottom line.

Because room prices and reinvestment rates can be flexed by date, segment, room type or distribution channel, the casino can produce an unlimited number of prices between rack rate and comp. The more price points a property has available to meet its demand, the closer it gets to capturing the entire revenue opportunity on a given night.

The Importance of Non-Gaming Spending

Much of the future growth in visitation and spending in Las Vegas will be driven by amenities and offerings beyond the gaming floor. As such, properties will need to invest in revenue and property management systems able to track and analyze more than just gaming spending.

There are guests who might not gamble but will still spend significant amounts on retail, F&B, golf, or other amenities. That spending adds value to the bottom line, so it should also factor into the theoretical win associated with every guest.

If integrated resorts can base all marketing and reinvestment strategies on a more holistic picture of a customer’s potential value — with a theoretical win that comprises non-gaming spend as well as gaming spend — they are much more likely to maximize total resort profitability.

The hotel becomes more important to a casino in this scenario. In the past, the hotel might have been viewed like a dormitory for stowing all the comped gamers for the night. But in a modern casino Revenue Strategy built for Las Vegas in 2020 and beyond, the hotel becomes a major revenue and profit center.

When the casino’s different departments work together to yield hotel rooms for the highest possible revenue and profitability, it prevents lower-rated players from filling up a block of rooms. In fact, casinos can do away with antiquated room blocks and just fill the hotel dynamically and strategically. The highest-value room types will still be available for the high rollers when rate setting and reinvestment decisions are made more judiciously.

This blog is taken from our whitepaper,Vegas 2020: A Vision for the Future of Gaming. Download your free copy here.

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