FEATURE ARTICLE side of the equation . This includes expenses connected with a casino ’ s reinvestment strategy . Reinvestment refers to special benefits and offerings that casinos give to different segments of their databases . In essence , the more people spend gambling , the more perks they receive from the casino . Casinos regularly use reinvestment to enhance customer engagement , loyalty , and earn repeat business . They reinvest a percentage of a customer ’ s theo toward offerings such as complimentary hotel rooms , meals , entertainment tickets , and airfare reimbursement .
Many casinos reinvest 35 to 40 percent of theo from the customer . However , this figure should not be a “ one size fits all .” Rather than using a blanket percentage across the board , it ’ s more effective for each property to run its own simulations , and do a valuation analysis , to determine what coefficient provides the best result for a particular casino .
For business success , casinos require a revenue management system that accurately and efficiently calculates a player ’ s theo . Without such a system in place , theo calculations can be impacted by subjective elements and measurement errors , downgrading its effectiveness . If a player ’ s theo is overestimated , then a casino over invests in a player and in some cases may even become upside down on a player . In addition , trying to correct a marketing plan of over investment can lead to customer dissatisfaction , with loyal players wondering why they ’ re no longer receiving the perks they used to . Conversely , underestimating a player ’ s theo may lead to him or her feeling undervalued , and they may go in search of another casino they feel treats them better .
Challenges in Determining Total Guest Value
In addition to ensuring accurate theo numbers , when it comes to calculating total guest value it ’ s important to remember that today ’ s casinos have grown into resorts that offer more than just gambling . In order to determine a patron ’ s true worth , revenue managers must also incorporate analytics for guest spend on amenities such as hotel rooms , restaurants , spa visits , golf courses , and night clubs .
In addition , certain challenges in determining total guest value are unique to the casino industry . One such challenge is the aspect of randomness . Players decide the amount of money they wager and on which games , but randomness is often the primary driver in determining how much a player wins . In addition , profit margins among players with identical wagering patterns can vary widely due to variations in player reinvestment costs .
Casinos that don ’ t effectively manage and use customer data to develop accurate total guest valuations , will experience negative effects that ripple throughout their entire organizations . Total guest value impacts marketing efforts , financial decisions , and profitability . Savvy casino operators are not gamblers . They base their businesses decisions on accurate customer information and solid mathematical principles . And they understand that total guest value is a critical tool for making informed decisions that will increase the bottom line over the long term .
SOURCES :
• American Gaming Association , The . “ 2017 State of States : The AGA Survey of the Casino Industry .” American Gaming Association , 2017 , www . americangaming . org .
• The Rainmaker Group Continues to Make a Mark in the APAC Region as It Partners with SKYCITY Entertainment Group . Rainmaker Group , May 2018 , newsmakeralert . com / RainmakerGroup-052418-2 . html .
• MacDonald , Andrew . “ Dealing with High Rollers .” World Casino Directory , 21 Feb . 2006 , www . worldcasinodirectory . com / articles / item / Dealing _ with _ High _ Rollers _ 36 .
• “ Casino Revenue Management .” Cornell University Blog : Revenue Management in Action , Cornell University , 28 May 2012 , blogs . cornell . edu / advancedrevenuemanagement12 / 2012 / 03 / 28 / casino-revenuemanagement /.
• Geoghegan , Bill . “ Gaming : The Lifetime Value of a Player .” HospitalityUpgrade , 1 Oct . 2012 , www . hospitalityupgrade . com /_ magazine / magazine _ Detail . asp ? ID = 755 .
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