Cotai Vision. Urban. The. Casino. SPECIAL SECTION: Retail, Dining & Entertainment. Sheldon Adelson s transformative plan for Macau

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1 WILL JAPAN SAY NO? MASSACHUSETTS UPDATE MAKING YOUR MARK, PART II ARCHITECT PAUL STEELMAN May 2013 $10 Vol. 12 No. 5 Cotai Vision Sheldon Adelson s transformative plan for Macau The Urban Casino Why cityscape casinos are the wave of the future By Gary Loveman Official Publication of the American Gaming Association SPECIAL SECTION: Retail, Dining & Entertainment The latest trends in the non-gaming revenue stream

2 The Big Bang The explosion of non-gaming spend in the casino industry By Carolan Pepin and Roy Student It s been almost a decade and a half since an interesting statistic was reported that non-gaming revenue out-produced gaming monies for the first time ever on the Las Vegas Strip. What may have started as a local occurrence now has advanced into markets not only all across the U.S. but beyond, into countries and continents all over the gaming world. Looking back, that measurement heralded a new evolution for casinos. From that date forward, the gaming industry changed, grew and matured into what are now described as integrated resorts versus simply casinos. Today, nearly every gaming market reports that combined revenues from rooms, entertainment, food, drinks and retail sales are growing ever faster, and in many instances, far outperforming total gaming revenues. Many experts expect the spending shift to continue well into the future as casinos transform by diversifying and adding even more amenities. The fact is that the majority of our domestic revenues come from spend on our non-gaming amenities, explains Josh Swissman, corporate marketing VP of MGM Resorts International. However, most of our customers don t see themselves as gaming or non-gaming customers. Rather, they are interested in a holistic experience. Guests 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, agrees Mark Birtha, vice president and general manager of Station Casinos. Today, casino patrons are not purely those who jump on a video poker game or throw the dice on a craps game; instead, they are purchasers of multiple experiences bundled together and consumed at the casino hotels that have the best mix of products available to them. Birtha states that one of the most compelling initiatives in the industry today is to truly focus on the enterprise value of the guest. A patron spending an evening in the nightclub may be just as valuable as a guest playing hours on a BJ table. A corporate or group traveler coming in regularly and purchasing that highlevel suite or entertaining clients out for dinner can be more profitable than the guest coming in on an RFB comp. Thus, aggregating spend data on guests in each revenue center, applying a profit margin assumption against each consumption, and quantifying reinvestments and frequency are becoming the new formula by which casino operators not only value guests but begin to market to them and build loyalty. You can see this in the way that gaming companies are approaching their loyalty and rewards programs, says Natalie Osborn, senior industry consultant for software supplier SAS. Rather than focusing on just high-rollers for gaming, casinos are rewarding patrons who are high rollers in non-gaming areas of operations, such as spa, retail, food & beverage and entertainment. Identifying those valuable patrons requires a complete picture of all patrons spending behaviors and a careful analysis of their preferences, Osborn says. Casinos need to delve deeper into the patron base and identify those whose activities go beyond the casino floor. The New Non-Gaming Model Our M life loyalty program was expanded in 2011 to reward members for their spend on rooms, dining and entertainment in addition to gaming activity, states MGM Resorts Swissman. M life members earn tier credits for all of their nongaming spend, which allows them to advance to higher tiers and enjoy more exclusive benefits. MGM Resorts is not alone, as many casino resorts have modified their traditional gaming revenue only approach to player rating and have created unique and more customer-centric methods of understanding and taking advantage of both gaming and non-gaming customer spend, says Tom Soukup, vice president of systems R&D for slot-maker Konami Gaming. According to Soukup who authored the book Visual Data Mining: Tools and Techniques for Data Visualization and Mining traditionally, players were rewarded on a slot theoretical win value that was calculated as wager multiplied by the theoretical value of the slot machine, and table game theoretical win value calculated as game type multiplied by time played multiplied by decisions per hour multiplied by win percentage. 38 Global Gaming Business MAY 2013

3 EXPERTS SPEAK Gaming executives from the operator and technology sides contributed to this article by detailing the latest developments in how casinos are tracking and understanding the blast of revenue coming from beyond the betting floor. CONTRIBUTORS INCLUDED: Nick Abruzere, director, casinos and resorts MICROS Systems, Inc. With more than 15 years experience in the software solutions industry and more than a decade in the casino and hospitality market, Abruzere is responsible for the company s business relations and development into the gaming sector. A global leader in providing hospitality software solutions, MICROS and its solutions, with their scalable and flexible architecture as well as easy deployment, are employed by casinos worldwide. Its host of property management and casino point-of-sale solutions include a complete range of full-featured property management and central hotel solutions as well as integrated restaurant management. Mark Birtha, corporate vice president and general manager Station Casinos, LLC Birtha has more than 20 years of experience in both operations and development at leading casino and hotel companies including Mirage Resorts, Las Vegas Sands, Marriott and Starwood. He has worked domestically and internationally as well as in commercial and Native American gaming. Station Casinos is a leading provider of gaming and entertainment in the greater Las Vegas area, where it owns and operate nine major hotel/casino properties. These are regional entertainment destinations and include various amenities beyond casinos, including numerous restaurants, entertainment venues, movie theaters, bowling and convention/banquet space. Tom Doyle, vice president, systems product management Bally Technologies, Inc. For Bally, a leader in casino systems utilized globally by many of the biggest names in the industry, Doyle directs various aspects of systems software product development. He has been general manager of the Spa Resort Casino, vice president of the Peppermill Casino group and with the Nevada Gaming Control Board in his 30 years-plus in gaming. Bally systems now are being utilized for tracking non-gaming aspects of modern casino properties. Natalie Osborn, senior industry consultant SAS Institute s Hospitality and Travel practice Osborn is an 18-year veteran of hospitality and hospitality technology solutions development, specializing in revenue management. SAS brings more than 30-years experience in analytics, and now works with multiple gaming companies, including helping the Venetian Resort keep occupancy and revenue high, Foxwoods Resort Casino gain a fuller picture of their customer relationships, and Harrah s/caesars Entertainment identify those customers with the highest potential to return. Thomas Soukup, vice president of research and development, systems Konami Gaming, Inc. Soukup leads the team whose goal is to integrate new and existing technology into the company s casino management system. Now evolved into its Synkros version, the system provides accurate, real-time, game-level accounting and patron tracking information to property operators. A 20- year technology veteran and engineer, he is also the author of the book Visual Data Mining: Tools and Techniques for Data Visualization and Mining. The company, long known for its slot games, now provides one of the industry s fastest-growing systems, which includes its Konami Enterprise Intelligence (patron worth, segmentation, campaign management, dashboards, visualizations and reporting). The company has also recently been granted a patent on its methodology for tracking and rating nongaming activities. Josh Swissman, vice president of corporate marketing MGM Resorts International In his role, Swissman is responsible for M life development, the company s rewards program that is described as providing the power to earn benefits for virtually every dollar spent. In addition, his responsibilities include strategic oversight and execution for cross-regional marketing and trigger-based marketing as well as being involved in the development of the corporate social media strategy. Swissman began his career with the company in 1999 as a front desk clerk at the company s Monte Carlo property, and since has been promoted into executive positions including marketing, analytics and, most recently, as the vice president of slot operations at the Mirage. John Wallace, managing director, gaming/hospitality The Rainmaker Group A recognized expert in the practical application of pricing and revenue management, Wallace has more than 20 years of experience delivering consulting as well as packaged and custom software to U.S.-based and international clients in the travel and hospitality industry. A world leader in automated forecasting, pricing and profit optimization solutions, the Atlanta-based firm manages more than 125,000 rooms for casino-hotel properties ranging in size from 128 rooms to 5,000 rooms, with datastorage and processing needs that cover the spectrum of complexity and sophistication. Its solutions support the operations of world-renowned casino operators including Caesars Entertainment, Melco Crown, MGM Resorts International and Wynn Las Vegas, as well as leading Native American gaming clients such as Mohegan Sun, Foxwoods Resort Casino, Seneca Gaming Corporation, Agua Caliente and Grand Casino. MAY

4 With non-gaming, explains Soukup, the theoretical value can be calculated as the total spend (less any discount) multiplied by the profit margin of the item, meal or non-gaming service. Casino marketers can use the theoretical win value as one of a number of key statistics to determine the level of rewards, offers, cash back, promotions and complimentaries to make available to the customer, to garner a larger share of wallet while the customer is on property and to encourage additional future trips. The theoretical win can be a good estimate of the customer s worth. A percentage of this number is often established to gauge customer rewards and is used for marketing reinvestment through enticements. Many casinos have a theoretical reward for players, and it depends often on location, adds Tom Doyle, vice president of systems product management for Bally Technologies. It will be as much as 25 percent in some places. Others may be only 5 percent. It depends on the property and the customer and the competition in the market. Typically, casinos do not reward as much for non-gaming purchases as they do for traditional casino gaming. Today s systems are flexible, and allow for variable reward rates and criteria depending on the source of the spending. The different rates often depend on the profit margin. While the components for calculating guest value are different from one operator to the next, they all include common factors, such as total spend, recency, length of stay, proximity to the property, and frequency, says John Wallace, managing director, gaming/hospitality for The Rainmaker Group. Ideally, you want to treat casino and non-casino customers the same, and group them into segments based on the value they bring to the property, he says. His view is that gaming customers still bring more value with more frequency, and so in order to reward non-gaming customers in a manner which encourages them to increase their spend during a current visit or to increase the likelihood they ll return, different methodologies are used to value and/or reward non-gaming customers. According to Nick Abruzere, director of casinos and resorts for MICROS Systems, a key casino marketing goal is to reward spend and redeem rewards seamlessly at every transactional touch point, both gaming and non-gaming, across properties and throughout their enterprise. Casino resorts are utilizing a centralized, single-card approach for gaming and non-gaming rewards, barcode scanners capable of reading sophisticated codes delivered by smart phone at the point of sale, and social media marketing which often touches non-gaming resort guests. All of our source systems at the front desk, restaurants and box offices are integrated utilizing TIBCO technology and a custom-developed Loyalty Marketing Engine to track and reward our members non-gaming spend in real time, explains Swissman at MGM. We track all spend charged to a hotel folio or associated with an M life card back to the customer s account. We have already moved beyond the traditional notion of theoretical win to value our customers. We use advanced analytical models to predict our customer s future value and offer appropriate promotions and incentives. We incorporate both gaming and non-gaming activity as well as other variables into these models. At SAS, we are seeing casinos moving towards master data management initiatives to deliver accurate information into the hands of line-level employees based on a patron profile, adds Osborn. This information enables employees to deliver mass personalized service, encouraging patron loyalty and spend. Technology To The Rescue It s all about having one view of a customer, explains Bally s Doyle. For years, Bally enabled casinos to track players at gaming machines, table games, race and sports books, poker rooms and elsewhere. Now, the company is enabling casinos to 40 Global Gaming Business MAY 2013

5 Due to the competitive nature of our marketplace, as well as the ever-changing needs, wants and expectations of guests, casinos are constantly re-evaluating the way they manage their gaming and non-gaming revenue centers. track players spending at hotels, restaurants, nightclubs, swimming pools, theaters and everywhere in a modern casino property, he says. Casino operators not only want this single view of the customer, they want to be able to see everything a customer is doing at the property to reward them and to use that information to help bring them back to the property. An example Doyle cites is Bally s BOSS Systems (Online at the Slot Machine Beverage Ordering Service System), which allows players to order their favorite drink easily and remembers the customers preferences. The system also allows players make restaurant reservations or key in the valet ticket number for the valet to get their car. Numerous options allow customers to have a better experience, while giving the casino operators more data to successfully reward the customers. Another example is the Bally iview Display Manager interaction, which enables casinos to reward players right at the game or at a kiosk by giving free play or a buffet, or anything else the property wants. Konami s Synkros enterprise management system is designed to facilitate the tracking and analysis of both gaming and non-gaming spend, says Soukup. Through a robust and extensible web-services layer, hotel, food & beverage, retail point-of-sale, and other revenue sources can be interfaced to Synkros to track nongaming spend. Similar to player ratings for table and slot play, Synkros assigns a profit margin to a non-gaming revenue source, so a comparable non-gaming player rating is recorded which includes the customer s theoretical win. Not only does Synkros use these non-gaming ratings to generate a non-gaming profile, but it also scores and ranks the customer s non-gaming data. According to Soukup, casino marketers, hosts and players club who use Synkros can view the customer by their gaming rank, their non-gaming rank, or their blended rank to design customized offers and accurately comp or reinvest in the customer. Furthermore, the Synkros Konami Enterprise Intelligence engine (KEITM) can be customized to calculate the customer s true worth to the casino based on the customer s behavior that is, their recency and frequency as well as the monetary value of both their gaming and non-gaming activity. Konami s Synkros system is unique in that the tracking and integration of gaming and non-gaming can be accomplished without investing in an expensive, large and complicated data warehouse infrastructure. Abruzere says MICROS works with gaming systems companies and other systems companies within the resort to interface and share data. More and more data is being gathered and shared with the advanced gaming interfaces in the company s Simphony Point of Service and Opera Property Management Systems. Managing all of the data coming from these disparate systems becomes challenging, so casino resorts, from the largest multi-property enterprises to local-market, single-property operations, are creating enterprise data warehouses in an effort to centralize data and streamline business intelligence. Rainmaker s GuestREV revenue management solution and best practices are focused on measuring and tracking both room and non-room revenue, explains Wallace. Our system has the ability, for example, to classify guests non-room spend into nine separate non-room revenue buckets, Wallace says. These buckets include everything from gaming (with slots and table games either combined or separated), dining and spa to golf, events/shows, retail shopping and more. The casino resort ultimately defines the buckets that fit their property and align with their needs. Each non-room revenue bucket can be marginalized separately to measure and track profitability by revenue stream. All information is then used to assign each guest a value, which determines whether or not they will get a room at the hotel and, if so, at what rate. Typically, casino resorts do not want to comp noncasino guests or even give them a reduced room rate, says Wallace. Instead, they would use their TGV to give them preference on rooms and/or perhaps offer them other incentives, such as free play or food and beverage credits. In addition to assigning different margins to different revenue streams, other costs such as gaming reinvestment (e.g., free play and gaming taxes) are explicitly being factored into customer profitability. Osborn at SAS appreciates that many casino companies collect information about patron visits through the use of loyalty or reward cards. According to Osborn, this gives a historical view, but lacks analytical insights into the patron life cycle to predict future behavior. Information about when and how often patrons stay, which outlets they frequent, which offers they respond to and how much they spend can lead to predictions about what offers they are likely to respond to, what services they would desire in the future and their lifetime value. Tracking the patron life cycle allows gaming companies to nurture behavior they desire, and discourage behaviors that are detrimental to patron value. The SAS for Patron Value Optimization helps casino companies gain a 360- degree view of the patron by capturing all of a patron s activities across the resort from rooms and restaurants to the casino, spa retail and entertainment. Using advanced segmentation strategies and predictive analytics, microgroups of patrons with similar preferences and purchase behaviors are identified. Using the advanced analytics in SAS Patron Value Optimization, casinos can identify the elements of service that drive patron value and track these over time. Once the most valuable patrons are identified, casino management can then understand their activities and behaviors and identify the drivers of value. SAS for Patron Value Optimization takes that information and helps create targeted promotions designed with the specific patron in mind. No Longer Gaming vs. Non-Gaming Due to the competitive nature of our marketplace, as well as the ever-changing needs, wants and expectations of guests, casinos are constantly re-evaluating the way they manage their gaming and non-gaming revenue centers, explains Station s Birtha. The sophisticated operator today is not only developing properties that have the most unique combination of bells and whistles; they are co-mingling these amenities so they maximize a value offering to the guest while at the same time strengthening the critical mass of the whole enterprise. The traditional approach of building retail, dining and entertainment venues as loss leaders to drive pure gaming play is no longer a consistent way to manage a profitable business entity. Instead, savvy operators are looking at maximizing the ROI on every square inch of their property, in every revenue center, says Birtha. There is no longer gaming vs. non-gaming: success relies on managing revenues in all areas. Over many years and from key corporate positions, Carolan Pepin and Roy Student of Applied Management Strategies have introduced new technology, tools and games into the worldwide gaming market. Using well-developed relationships and contacts, key marketing initiatives and road-tested strategies, they now help companies enter the gaming sector, move into new jurisdictions or move to the next level. They can be reached through the company s website, appplied-management-strategies.com. 42 Global Gaming Business MAY 2013