Do you know what your player reinvestment percentage is? Yes, I know you think you know, but do you really know? Odds are, the answer is no. I have been to multiple properties and conducted close examinations only to discover that what they thought they were investing in their players didn’t match what they were really investing. Shocking, I know. The crazy thing is that many of these properties are in prime locations in premium gaming markets. Concerning, right? Seth Schorr has an impressive, intense and highly thoughtful approach to reinvestment analysis; he has worked in multiple, vastly different gaming jurisdictions and currently operates Fifth Street Gaming, which operates the Downtown Grand. He spoke to the complexities of reinvestment evaluation and the challenges casinos have in hitting the sweet spot of reinvesting enough to yield a high response rate—but not so much that there are diminishing returns. "If you don't formally include operational expenses in your reinvestment analysis, that's okay. Just make sure to be consistent and take a step back for a holistic view of your property. If you are charging for drinks and parking, that may provide an opportunity to beef up the investment in players via more free play, or . . . maybe not. Just make sure to be thoughtful and intentional with the investments you make, and see the benefits and drawbacks of visiting your property from the player's perspective."
Needless to say, I invite you to do a player reinvestment percentage audit immediately. Meaning, act like it is an emergency, because it is highly likely that there are major revenue and profit opportunities to be had. If you are a president or an executive of a casino, and you switch properties, put this at the top of your “to do” list when you make your move. It will allow you to hit the ground running and show success quickly. My MBA professor said, “As leaders, it is our job to find the points of friction and eliminate them. The points of friction (internally or externally) represent revenue opportunities.” These words of wisdom haven proven true in my career, and the player reinvestment audit is the best pathway to identifying these friction points. Here are some common mistakes made when choosing a player reinvestment strategy—and how to avoid them.
Forgetting Different Markets Are Different: Sounds simple, right? Many leaders frequently make the mistake of arriving in a new gaming market and drafting plans to change the property player reinvestment percentage without conducting a deep competitive analysis. Make sure this is never you.
Stopping Short of Measuring Opportunity Costs: Because the revenue mix at some properties is higher in retail than in gaming, it is now more important than ever to consider how much retail revenue you could be losing by comping rooms. Once this analysis has been made, you can structure your player offer models accordingly.
Lacking The Patience To Look At The Detail: There is a ton of revenue and profit opportunity that can be apprehended at a granular level if you take the time to look closely. There is an equal amount of opportunity in evaluating offer types and the true costs associated with each. These opportunities are often missed, because most teams won’t slow down and take the time to spot them.
Depriving The Property Of Consistency: What exactly should you include in your player reinvestment formula? Promotional expenses? Operational expenses? The approach—and the philosophy behind a given approach—varies drastically by casino, but one thing is certain: it is crucial to pick an approach and stick to it so you can make solid business decisions that pay off.
There are many common mistakes when it comes to deciding on a player reinvestment strategy, including failing to understand the importance of Average Daily Win (ADW), Average Daily Theo (ADT), and the trip versions of each in the player reinvestment calculation—but I will save that for another article. In general, don’t get so caught up in improving your property’s profit margin that you lose sight of generating revenue volume. And do your best to avoid tightening the player reinvestment percentage so much that you lose sight of the totality of what your players are experiencing when they arrive on property, as compared to your competitors.
But what if you don’t know with certainty what your player reinvestment percentage is now? You can’t formulate a quality strategy and measure the success of implementing it if you don’t know what your starting point is, so it is time to get down to business. You are now ready to conduct a percentage audit! If that doesn’t sound exciting yet, it will soon—once you see the revenue and profit it drives. Following are some tips and tricks I have learned along the way to execute a highly productive player reinvestment percentage audit that yields maximum returns.