Recently, we realized that in past articles we have written, we have described on an individual basis many facets of a well-rounded analysis process and were marketing centric. However, while the topics are very meaningful, a critical piece of what we see in today’s executive suite is that the analytics from all facets of the operations, not just marketing, should be incorporated into senior management’s overall organizational process. According to Capgemini Consulting in their e-book Going Big: Why Companies Need to Focus on Operational Analytics, “making analytics an essential part of the decision-making process in operations enables companies to make a more informed choice – increasing the chances of their success.”

To be able to increase the chances for your property’s success, we feel there are certain key areas and facts that all gaming senior management should not only have knowledge of, but also a deep understanding. Collectively, the more people on the senior management staff who are utilizing the same metrics, the more likely changes to data will find a more unified approach to making decisions. The thought process is that senior management should not just look at their individual operating department, but look at how the entire operation needs to be interacting.

With all the above in mind, some of the operational areas we include in this article are:

  1. Database marketing/analytics: supporting the best spending on patrons to deliver the most cost-effective service.
  2. Slot operations/optimizing: which machines are best and most profitable.
  3. Feasibility/market studies: identify the revenue that your local market should produce, and if competition opens in a nearby market, identify current “at risk” revenue.

Database Analytics

The database supports a majority of most casino’s revenue stream. We see the rated database accounting for more than 70% of a property’s overall revenue. As we have highlighted numerous times, the database needs to be evaluated on an individual patron comparative basis. The production from your rated patrons very likely includes revenue metrics, but in today’s world also needs to make sure you are incorporating profitability. The patron profitability is especially important given the large dollars spent and reliance on promotional credits (also known as free-play) for marketing spending. Some of what you should know about the database– other than is the database more productive (profitable) than before – should include:

  1. How do we measure our “best” players?
  2. How do we determine if our loyalty program is driving loyalty?
  3. Is the amount of promotional credit spend delivering to our bottom line or is it being wasted?

Ideally your current database analysis process includes constant updating and evolving of these areas so you are able to answer the questions. The basics need to include segmentation of accounts, trips, revenue and profitability. As you advance, utilizing “Net” win (gross win less promotional credit spending) pinpoints over (or under) spending. Also, you should always be challenging where you are reinvesting because smarter reinvestment earns you more.

This section has briefly dealt with database marketing, the next area we will discuss is how slot floor optimizing actually feeds the database for the majority of player-based marketing decisions.

Slot Floor Optimizing

Based on a game-by-game analysis, slot floor optimizing constructs a comprehensive analysis and performance improvement plan with the objective to produce an easily-digested story for each game on every gaming floor. Put more simply, each asset must continually be evaluated against other assets (just as you should do with players) to earn its position on the slot floor. Information you need to have about significant analytical areas of the slot floor should include:

  1. What games generate your best Net-Profit?
  2. Where should your games be located?
  3. Is your Theo-Actual variance within reason?
  4. What games should you buy, keep or sell?

In addition to quantitative data analysis, the optimization includes CAD floor layouts/changes and recommendations on equipment standardization. Having access to manufacturer game performance trending offers performance recommendations based on industry data, not only data from your property. The analysis interprets machine data and applies analysis on numerous key metrics including: gross Win Per Unit (the top-line revenue each game earns every day); Utilization (how often is the game player versus other games); and a triple Net Win component which deducts promotional credits and, where applicable, leasing costs culminating with a ranking of each game. By reducing every game to these ranked values, a performance matrix can simply document which games are your best games. The reports also should forecast the dollar value of the revenue enhancement opportunities by the recommended product mix and game placement. Lastly, the process should build capital budget models for games by predicting replacement timing of games on floor as well.

Feasibility / Market Studies

An area that is often left to the pre-opening or development group is feasibility and/or market studies. We think this is an area that needs to be re-evaluated frequently. You certainly do not need a full feasibility study each year, but when a new competitor comes online or even to re-target your direct marketing efforts, components of a feasibility study are appropriate.

Feasibility studies incorporate many facets of the economic environment. Gravity models are generally used for building a model that shows the potential revenue capture based on distance to the population and the tendency of that population to, in this case, casino gamble. We augment our gravity modeling with our tested and proprietary methods to produce local market breaking point models. The market break point defines the distance in time traveled from the “target” property at which:

  1. The 50/50 distance split is reached and the property’s capacity to gain market stops as another similar property’s boundary is overlapped; or
  2. The property’s capacity to gain market customers slows because a competitor has “more gravity” despite being further away.

Some of the data senior management should always have a good and current understanding on from this aspect include:

  1. Does your location, demographics, amenities or capital structure provide an advantage?
  2. Where does existing competition or future new competition begin to steal your current market?

The culmination of the modeling for breaking points is to calculate the potential revenue that is at-risk to you from new entrants to market. At-risk refers to the quantity of revenue that is currently associated with your property by the individual zip codes in the areas that, due to competition, will be potentially lost to your property. Once you have determined the at-risk locations you can determine if additional marketing efforts will be worth the cost or if you should concentrate on areas that you know you can keep.

To wrap-up, to increase the chances for your property’s success, certain key areas – database, slot operations and the outside environment through market studies – need to be a constant for senior management. The more senior management knows these areas, the more unified the approach to making decisions will become.

Pop-quiz: Ask yourself, are you able to answer the questions we presented? Does your senior management just look at their individual operating department or are they taking a group approach at how the entire operation needs to be interacting?

Jay Sarno has 20+ years of experience in the Hospitality and Gaming Industry. Jay consults on casino marketing segmentation programs, software product development and technology solutions evaluations, selections and implementations. Jay has implemented over 20 data warehouse systems and currently also teaches courses in Hospitality Management for Richard Stockton College of NJ. Jay can be reached and welcomes your comments and questions.


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