Is the Las Vegas Strip starting to re-assess pricing models?
First published in CDC Gaming reports, May 2019
The cost of a trip to Las Vegas has been increasing almost exponentially for many years, with both highly visible changes (resort fees, parking charges) and more subtle increments (slot payout percentages, drink prices) contributing to the savage attack on the Strip visitor’s wallet.
It’s also fair to say that it would be difficult to point to areas where service levels have increased apace – while the resort experience is still a very high quality one overall, the queues for check in and general impossibility to find a waitress on most megaresort gaming floors attest to the fact that it’s clear cost cutting is at the heart of most business plans.
Only last week MGM announced 254 jobs, largely at management level and above, were to be cut, and there’s another round coming soon, including staff level roles. Anecdotal comment in online forums and social media suggest that it’s a case of service level teams having to do more with less – not exactly encouraging for the imminent Las Vegas visitor.
This salami slicing of dollar value has been going on for while – I wrote this piece : https://www.gamblinginsider.com/in-depth/1928/las-vegas-risks-pricing-itself-out-of-the-market
over three years ago, and things have unquestionably become noticeably more expensive since then. I’ve spent at least 30 days in Vegas since that article was written, and one incident encapsulates perfectly how rapacious the processing of customer money has become. Just last year I was playing slots at … a major top end Strip property, and after a half hour fruitlessly waiting for a floor valet to take a drinks order, we got fed up and headed for the sports bar. Sitting down to play video poker, it came as no surprise that drinks weren’t comped, but what did come as more of a shock was the fact that the bill for two beers was $28!
From the casino executive’s point of view, it’s tough to look at making major changes – if the culture has been about cost control for years, with some strategic innovation mixed in (for example the growth of the lucrative nightclub culture) then in a short termist world, who’s going to be the person who stands up and says “nope, we’ll forego some easy income because it’ll be good for us in the longer term”. People get fired for short term problems, and turkeys generally aren’t in the habit of voting for Christmas (or Thanksgiving).
However, this week’s announcement that Wynn are cutting mandatory self parking charges was a very interesting one. It may be that this is a simple marketing exercise, but it also may be that it’s the beginning of the backlash that many believe is long overdue. Blanket stats are of course available for Nevada and Las Vegas visitation, but naturally operators have access to numbers in real time, and if this is the beginning of a readjustment to falling visitor numbers, perhaps there’ll be more to follow.
There is an interesting parallel in the UK, though, in retail banking. For decades now, if you bank with one of the big names, your high street experience has been getting steadily less and less personal, and worse and worse overall. You want to speak with someone? Make an appointment. You want something that isn’t absolutely standard? Nah, too much trouble. You want your mum’s local branch to be available, since she’s not so internet savvy? Tough luck, we’re closing it since it costs too much.
In the UK, the rise of Metro Bank has been fascinating. They’re taken a completely different approach from the prevailing one, with a view that the customer does in fact care about service. They’re open evening and weekends, and they have people on staff who can make decisions. I went in recently to open a new business banking account, and the reception team member had to repeat herself twice – my mind simply couldn’t process that there’d be someone on site who could sort that out for me in ten minutes, no need to book for next week.
I’m not a financial analyst, but the fact they’re opening branches at a rapid rate would suggest to me they’re onto something, and letting all your competitors go the cost slicing route, eroding service and relying on automation at the expense of personal service wherever possible might open up a gap for someone to exploit.
Clearly there’s a parallel here to the casino world – an even more service orientated business. Yes, there’s a huge amount of brand loyalty in Las Vegas, but you only need to look through any related Facebook group to see the level of dissatisfaction with being treated like a walking wallet by your favourite casino. Is there an opportunity for an operator to switch to the other end of the pendulum swing and offer the experience that people will switch operators to sample?
Enhanced service costs money – a lot of money in the labour intensive world of casinos – but bank staff aren’t cheap, and the above example suggests that people may indeed care enough to switch to get the experience they want. The key is of course spend per head– it’s no use increasing your levels of business if the customers don’t spend at a suitable level, either on the room itself or, if we’re trying to avoid horrific pricing policies on F&B and other ancillaries – on gaming. It’s a tougher question when you add in this element, and looking at the very top tier in Vegas – Cosmopolitan, for example, or Wynn – the opulence of the resort is part of the key to attracting the bigger spending players. However, right at the top of the tree, business development is ruled by loss rebate offers, private flights, and the reputation and cachet of the casino itself.
It’s the medium spender who’s been shut out by Las Vegas of late. While the average gambling spend per person per Vegas trip is around $500 per person per trip, the disillusioned element are perhaps the $3,000 - $25,000 market. Their comps have been whittled away, their bankroll gets eaten at a frightening rate by ancillary costs, and they just aren’t getting treated the way they might expect their spend would merit. This group is the one that may most matter to the savvy operator, and we will see over the next couple of years if anyone wants to make significant changes to seriously up the proportion of this cohort by treating them more like a human being and less like an ADT (Average daily theo) statistic.
Paul Sculpher
