Two Way Hard Three | Las Vegas Casino & Design Blog

May 11, 2011

SIMPSON ON VEGAS #021: When The Fun Stops

Posted by Hunter

Yeah, so this isn't about gambling addiction but I couldn't resist the use of the headline on everyone's favorite in-casino pamphlet.

Jeff's back with the latest installment of his column and this time around, it's looking at a common thread in recent casino corp conference calls: a reduction in comps to rated players.

The article is after the jump.


Sheldon Adelson was more clear last week during his company's quarterly conference call describing how his Las Vegas properties had reduced comps. His previous description of the new policy made it sound like he had eliminated comps except for all but the biggest players ("We know that the subject of comps has been played out all across Las Vegas, but we've taken a different position. We've essentially cut out all our accounts except the most highly rated players," he said in February). I then wrote a column that said the decision was a mistake, if in fact that was what Las Vegas Sands was doing.

"I'm not going to say that Las Vegas Sands is crazy to say the company is going to stop giving complimentary rooms, meals and other perks to all but the biggest gamblers at its Venetian and Palazzo casinos, but I will say that, if they follow through, I think it is a short-sighted, stupid move," is what I wrote.

I also said that I questioned whether Sands bosses would really do what they said they said they were doing.

"Now, I should note right here that I'm skeptical about Sands' follow-through on its announced move," I wrote. "Will its hosts really tell a customer who just dropped $5,000 over a weekend, playing 12 hours of blackjack at more than $100 per hand, that they won't pick up the tab for his room or at least a couple of meals? That's where the rubber meets the road on the new policy: When gamblers' expectations (for reasonable comps) aren't met and those folks never return -- and when they spread the word. And will Sands really stop giving players comps for their accumulated slot points? I am dubious."

As it turns out I was right to be skeptical. Sands executives said last week that the company had significantly reduced the number of comped rooms Venetian and Palazzo had given out during the quarter, but Adelson said during the call that the reduction in comps mainly affected slot players at the lowest levels of play.

That's significantly different from what he said three months earlier. Sands may be stingier with comps than its biggest Strip competitors, but I believe what's really going on is a sensible industry trend. Sands is not eliminating comps given for folks who have significant play. Instead, I believe the real change is that operators are backing away from the incredibly generous levels of comped offers made to players in their databases in 2009 and 2010 when they were doing whatever they could to keep rooms full.

MGM Resorts CEO Jim Murren said as much during his company's call, noting that MGM was also benefiting from reduced promotional spend on the bottom levels of Mlife customers. I'm not a shareholder in any casino companies, but as a beneficiary of some of the wild promotional spending the major operators threw out during the bottom of the market, I think the operators are finally restoring sanity to their comp offers.

Ask any rated gambler what kind of offers they received from MGM, Sands and Caesars during those years, and almost everyone will say they received far more and better offers than their past play seemed to justify. I know I did. I spent so many weekends on the Strip, all at great properties, and all free. I haven't gambled much on the Strip since 2008 (and even before then, I was a green chip dice player unless I was really into the house's money) yet I received and used dozens of comped-stay offers for Venetian, Palazzo, Aria, Bellagio, MGM Grand, Caesars Palace and Mandalay Bay. Sometimes the offers included promotional chips, food and beverage credits and invitations to special events. I never thought that I would grow jaded by the resort experience, but during those years, I did. I did spend a few free weekends at some mid-level properties (Rio, Monte Carlo, Paris, Luxor and The Mirage) but, after a while, stopped accepting most of them, unless they had generous gambling or dining components. I almost never played during those visits (unless it was free chips or slot play or a tournament) and I expected the offers to quickly dry up, but they didn't, for two years. Only at the end of last year did they finally slow down. MGM Resorts made the most offers, but Caesars and Sands weren't far behind. (I've never stayed at Wynn or Encore and my limited play there has resulted in a couple of meal comps but never a room offer.) I'm sure many of the people who accepted the deluge of free room (and more) offers during the past two years proved to be valuable customers who spent enough money on the floor and elsewhere to justify the promotional spend that brought them in, but I know there were also plenty of folks whose spending was anemic (like mine was).

I've heard so many similar anecdotal reports from other players that they, too, were getting ridiculous numbers and levels of offers. Those kind of offers obviously weren't sustainable and it clearly is a smart move for operators to reduce free room and other offers as the market's strength returns. So while Sands may want to frame its reduced promotional spend as a sea change, maybe its reduced offers (and MGM's reduced promotional spending) are really more of a return to sanity, making offers and giving comps only to those whose play justifies them. I can't blame them if that's the case. It was fun (for me) while it lasted.

-- Jeff Simpson, May 2011

Categories: Business of Gaming, Las Vegas Strip, Simpson on Vegas, Venetian/LV Sands


Comments

Read archived comments (15 so far)
May 11, 2011 10:25 AM Posted by Misnomer

Great column, Jeff, though it sadly confirms my suspicions. As a $1 VP player with a modest budget, I was routinely enjoying comped 3 and 4 day stays at Wynncore, with a generous Freeplay allowance, and no weekend restrictions. Though my play has remained constant, I've recently been busted down to 2 days, Sun. through Thurs. only, and my Freeplay is now a pittance. I expect these comps to eventually dry up altogether, as occupancy rates improve.

May 11, 2011 10:36 AM Posted by jinx

I've seen my offers suffer at least at MGM over the past 6 months or so. I barely showed up on LVS' radar. My play at MGM has always been a bit hit and miss, it is a bit surprising though that I'm qualified as Gold in their system.

In my opinion this is a harder move for MGM to make then LVS. Palazzo was still fairly new at the time of the recession and with conventions down, I can see why they were passing out rooms like candy.

MGM has far more properties to fill and when I'm still receiving occupancy offers 3 nights free at Aria vs only 1 or 2 offers for 2 weekdays at Monte Carlo, then I have to wonder if MGM really has a grasp on what they want to do. I still think they could benefit from putting their resorts on a tier and allowing them to co market from that tier towards their base. That is assuming they aren't going to consolidate operations for the resorts and markteting any time soon.

May 11, 2011 10:40 AM Posted by detroit1051

Yes, it probably is a return to sanity, but casino operators have to strike the right balance. They can't offer comps to those who don't play or play very little, but they need to entice visitors with something to make the price of gas or airfare to come to the Strip worthwhile.
A quote in a Vegas Inc story caught my attention: "Casinos no longer make the little guy feel like the big guy, he said. "
Problem is, the little guy can often feel like a big guy in his own locals casinos. If I can get a comped dinner or concert tickets once in a while here at Seminole Hard Rock, it makes me think twice about considering a trip to Las Vegas.
Here's the link to the story: http://www.vegasinc.com/news/2011/may/10/are-wealthy-fleeing-it-all-collapsed-says-business/

May 11, 2011 4:41 PM Posted by Michael James

Ditto, Jeff. Just spent six nights in Nevada (April 30-May 5) all as guests of CET (split between Rio, Harrahs Reno and Flamingo). In no way did my play justify all the hotel comps.

My poker buddies are looking to go out with me in October, and as of now, I have no CET comps at all. Did they wise up? Did my recent trip not yet tickle the comps in CET's computers? Won't know for awhile.

But I will miss them if they're gone, and I will begin shopping price and probably take more business to downtown properties (The Gold Spike is offering about $29 a night on the weekend we are looking at in October).

May 11, 2011 5:40 PM Posted by Jeff in OKC

Detroit, the person who made the statement you quote lived in a $25 million estate, claims a fortune in the "low nine figures" and, I think, is referring to himself as the "little guy". I am not attacking the accuracy of your sentiment, just that your source is, uh, questionable.

May 11, 2011 6:06 PM Posted by mike_ch

We would throw $100 on slots around here and there sometimes, with a splurgy weekend once a year, and almost never got anything like this. I can think of basically one exception. Otherwise, we reserved several rooms on "Locals Discounts" offered via the internet.

Kind of a shame, because we play much more heavily on a night with a free room than we do otherwise. I keep hearing about all these locals getting room offers and wonder how much they're playing

May 11, 2011 7:57 PM Posted by Hunter

Speaking as a Southern Californian, I've noticed a significant drop-off in the past six months.

That said, for whatever reason, Cosmo is marketing heavily to my wife. I find it funny because I'm still trying to get them to credit all of my December spend to my Identity account - she's never done much of anything there.

May 11, 2011 9:46 PM Posted by romaman

Just out of curiosity, does MGM Resorts rate the MGM Grand higher (and better) than the Mirage?

May 12, 2011 1:16 AM Posted by Mark

I think it's a sign of economic times, only going to get worse IMHO. I still get the marketing but the offers are not worth taking up.

May 12, 2011 2:43 AM Posted by detroit1051

Vegas inc follows up on Jeff's theme. I'm surprised that analyst Bill Lerner wants to see the impact over a full year. A year could fundamentally change LVS forever. There are different vibes in properties when the balance between conventioneers and gamblers/fun seekers gets out of whack. That's what I fear could happen at Venetian/Palazzo. It was OK when LVS focused on business travel mid-week but reverted to players on weekends. If the reduced comp program affects the weekend vibe, there could be permanent damage. I disagree with Lerner. This policy needs to be reevaluted before a year is up.
http://www.vegasinc.com/news/2011/may/11/revenue-tanks-after/

May 12, 2011 7:23 AM Posted by Hunter

I believe they still do, yes. Here's the hierarchy I believe they're still using:

Bellagio
Aria
MGM Grand
Mandalay Bay
The Mirage
Monte Carlo
NYNY
Luxor
Excalibur
Circus Circus

May 12, 2011 9:13 AM Posted by Jeff Simpson

Some very interesting and astute comments.

Romaman touched on an interesting subject, its internal hierarchy of properties. Because MGM Grand was Kerkorian's, Lanni's and then Murren's original flagship (in the current company) I have always paid close attention to this issue. Murren, in particular ( I have long felt) has a strong preference for the original MGM Grand Inc. properties over the Mirage Resorts acquisitions. (Company sold Golden Nuggets, Treasure Island and trying to sell the half-share of Borgata, which originally was planned as a Mirage JV with Boyd.) Murren loves to say how Bellagio really wasn't running well until MGM Grand bought it. And, of course, the touted joining of the MGM and Mirage names didn't last a decade before Murren excised the offending half. After the Mirage Resorts purchase The Mirage resort occasionally generated more cash flow than did the much larger MGM Grand and always had higher average room rates and (I will confess) I used to enjoy asking Murren whether Mirage was the company's second most luxurious property after Bellagio. Murren started off saying Bellagio and MGM Grand were equal at the top as co-flagships (!) and ahead of Mirage, despite Bellagio's obvious superiority in numbers and luxury.
Anyway, MGM Grand does have The Mansion, an arena and a bigger convention center along with 2k more rooms compared with The Mirage.
Interestingly, the company originally released property-by-property numbers after it bought Mirage Resorts then stopped releasing property-by-property numbers (it released "Las Vegas Strip" composite numbers) after the Mandalay Resort Group purchase. It then resumed releasing property numbers a few years later. Looking at the company's press releases that accompanied quarterly earnings, the first few earnings press releases after MGM Grand Inc. bought Mirage Resorts, the releases (in the second half of 2000) listed MGM Grand first, then Bellagio, then Mirage, then NYNY, then Treasure Island. By the next year Bellagio was listed ahead of MGM Grand.

As for Detroit's second comment, I read the VegasInc piece on LVS comp policy and drop in LV casino revenue. I have no comment on the short piece.

I will, however, note a Twitter exchange I had with @Brian_Fey and @EastCoastGambler during the LVS conference call:

@simpsonlasvegas: Sands 1Q casino revs in LV dropped to $83.1m from $155.3m, 47% drop. Blamed low hold for $45m of drop. Did stingy comp policy have effect?
@EastCoastGambler: stingy comps didn't help.
@Brian_Fey: Something sure did. Their Vegas numbers were just horrible.
And a tweet I did the next day, during MGM's call:
@simpsonlasvegas: Jim Murren, on MGM Resorts 1Q conference call: cutting promotional spend (comps/offers) at bottom tiers paying off (sounds like Adelson)

As I see it the issue is whether the one-quarter trend on the LVS Vegas casino floors will continue and whether the increased revenue on the room side that comes with far fewer comped rooms (that Sheldon and Michael Leven spoke about during the call) will offset or mostly offset the gaming decline.
I doubt the room rev. increase will make up for the gaming rev. decline but LVS in Las Vegas has always been much more room-oriented (and convention-focused) than Wynn or even the high-end properties of MGM.

May 12, 2011 10:26 AM Posted by Adam

Great article. As a player who just entered "comp land" (couple of free nights at the Wynn) I find this whole discussion fascinating. I just wish I could find out what my actual rating was.

May 12, 2011 10:49 PM Posted by marc

Hunter, judging from the offers I receive I think Mirage and MGM Grand might be inverted on that list, but the rest seem right.

May 17, 2011 7:46 AM Posted by mike_ch

I'm still amused that Bellagio is listed ahead of Aria in ranking. I always kind of figured MGM would claim semi-ownership of Mandarin Oriental in so far as listing it in the company's array of properties, simply to knock Bellagio out of the top spot.

Whether or not you think it's lost soul, the truth can't be denied that Bellagio is a champ, and nobody on the Strip has still managed to land a decisive punch on it in 12 years of building and an almost completely changed skyline.

People often ask what killed "themed" resorts, and while I've talked a lot about it in the past I really think Bellagio is probably as responsible as any kind of consumer trend swap. It's managed to blend an international, un-Vegasy flair perfectly with the casino luxury resort concept. Nobody could build anything but a luxury resort, and building that ornate themed luxury resort puts you in a direct apples-for-apples comparison with Bellagio, and who wants to be there?

Steve Wynn dodged the issue by deciding he wanted to do a 180, and CityCenter eschewed the ornate flair to take almost sole ownership of modern.