Changes to the industry shifts the money around in the casino
April 18, 2017 3:11 AM
by The Analyst
Over the years how gaming resort properties have made money has evolved and will continue to evolve, sometimes leading to changes in customer behavior and sometimes reacting to changes in customer behavior.
It was not that many years ago that resorts could count on substantial revenues from in-room movies, pay phones, and charging for local and long distance calls from their hotel rooms. It was also not so long ago that free drinks, free lounge shows, inexpensive named entertainment, inexpensive hotel rooms, and reasonable/cheap food prices were all used as loss leaders or excuses to draw customers into the casino, which used to be the king of revenue centers in a gaming resort.
In-room first run movies and adult movies could account for as much as 10% of a hotel’s revenue; pay phones, particularly ones just outside the sportsbook, could make as much if not more than some slot machines; and guest using their hotel phone could rack up charges often exceeding what they paid for their room.
Technology unintentionally changed all that. Guest room phones, pay phones and in-room movies have all been basically displaced by guests using their smart phones, tablets or laptops. Do not start feeling too bad for the resorts though, they made up for this and then some by charging mandatory resort fees, which supposedly covered services such as Internet access, pool access, workout room access, etc. The fees can often reach as much as 50% of a resort’s room rate.
Are you wondering why the rates are charged as fees and not just included in the room rate? Well, with all the online hotel reservation booking services that exist today, if they put it on the room rate, the booking services would also get a piece of those revenues.
In the search for profits, MGM, among other areas, started the trend on the Strip to charge for parking. While casinos in downtown Las Vegas had been charging for parking for years, MGM was certainly more aggressive in their parking pricing.
Interestingly, as other Las Vegas resorts start implementing the practice of charging for parking MGM announced plans to increase their parking rates.
But, is turning parking into a profit center sustainable or merely a temporary action that will eventually lead to change in patron behavior?
Let’s say you fly into Las Vegas, rent a car ($75 a day), pay for overnight parking ($30), and visit two other destinations a day ($15 each visit for parking). Without much effort you are $135 a day into your driving and parking experience. All of a sudden Uber, Lyft or even an old school taxi are looking like great, convenient and cheaper alternatives for guest transportation needs.
Of course, and as noted by a number of recent Las Vegas press articles, paid parking and even higher priced paid valet parking, while improving the resort’s bottom line, is impacting the incomes of valet parkers.
While human compassion compels sympathy for those valet attendants who have taken substantial hits to their income, there are few jobs in the gaming resort industry that will not eventually be impacted by either change in technology or consumer behavior/preferences. Remember when casino floors were filled with roaming change persons, slot carousel attendants and keno runners, and showrooms had maître d’s, captains, servers and busboys, most all of which made reasonable if not great livings from guest gratuities.
Technology and consumer preferences have certainly decreased if not outright eliminated many positions, thereby relieving the payroll expense to the resorts and moving what used to be tip income to employees into the resort’s till.
Though evolution has negatively impacted several traditional positions, it has also created new positions or expanded the income opportunities of others. Nightclubs and dayclubs have created many highly tipped doorman and server positions that easily land in the six figures. The focus on hotel revenues has created commissionable up-sell opportunities for front desk agents. The position used to be a fairly routine hourly paid job with an occasional tip. Now, front desk agents often enjoy commission structures running between 7% and 10% of the up-sell to the guest, allowing the better up-sellers to add another $50,000 to $100,000 to their income.
In any event, it is simply the gaming resort’s job to make as much money for their owners as possible and the resorts need to constantly evolve their business processes and procedures to do so. Sometimes those changes have negative impacts on employee income, such as valet attendants, and sometimes they have positive impacts, such as front desk agents. Either way it is simply the dispassionate function of the resort to seek to optimize profits.