UNLV Theses, Dissertations, Professional Papers, and Capstones 12-2009 LLooyyaallttyy ttoo rreellaattiioonnsshhiippss:: EExxaammiinnaattiioonn ooff aafflffluueenntt ccaassiinnoo gguueesstt rreetteennttiioonn iinn LLaass VVeeggaass Adrian Y. Low University of Nevada, Las Vegas Follow this and additional works at: https://digitalscholarship.unlv.edu/thesesdissertations Part of the Gaming and Casino Operations Management Commons RReeppoossiittoorryy CCiittaattiioonn Low, Adrian Y., "Loyalty to relationships: Examination of affluent casino guest retention in Las Vegas" (2009). UNLV Theses, Dissertations, Professional Papers, and Capstones. 615. http://dx.doi.org/10.34917/1752258 This Professional Paper is protected by copyright and/or related rights. It has been brought to you by Digital Scholarship@UNLV with permission from the rights-holder(s). You are free to use this Professional Paper in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s) directly, unless additional rights are indicated by a Creative Commons license in the record and/or on the work itself. This Professional Paper has been accepted for inclusion in UNLV Theses, Dissertations, Professional Papers, and Capstones by an authorized administrator of Digital Scholarship@UNLV. For more information, please contact [email protected]. i LOYALTY TO RELATIONSHIPS: EXAMINATION OF AFFLUENT CASINO GUEST RETENTION IN LAS VEGAS By Adrian Y. Low Bachelor of Science in Business Administration Hawai'i Pacific University 2002 Master of Science of Hotel Administration William F. Harrah College of Hotel Administration Graduate College University of Nevada, Las Vegas December 2009 ii Contents Abstract .............................................................................................................................. iii Introduction ......................................................................................................................... 1 Purpose ............................................................................................................................ 1 Justification ..................................................................................................................... 1 Constraints ....................................................................................................................... 2 Limitations ...................................................................................................................... 3 Glossary .............................................................................................................................. 4 Literature Review................................................................................................................ 6 Affluent Guest Profile ..................................................................................................... 6 Luxury Items and Services .............................................................................................. 7 Luxury Hotels and Casinos ............................................................................................. 9 Impact of Affluent Guests on Casino Revenues ........................................................... 11 Casino Hosts .................................................................................................................. 12 Customer Relationship Management Systems in Casinos ............................................ 14 Hospitality Guest Retention .......................................................................................... 15 Retention Efforts........................................................................................................ 15 Retention Benefits ..................................................................................................... 18 Conclusion of Literature Review .................................................................................. 19 Personal Communications ................................................................................................ 21 Purpose .......................................................................................................................... 21 Personal Communications ............................................................................................. 22 Tony Alamo, Former Senior Vice-President, Mandalay Bay Resort Group ..... 22 Lori White, Assistant Vice-President of National Marketing, MGM Mirage ... 24 Bibliography ..................................................................................................................... 28 iii Abstract Loyalty to Relationships: Examination of Affluent Casino Guest Retention in Las Vegas, Nevada by Adrian Low Jeff Voyles, Committee Chair Academic Faculty of Hotel Management William F. Harrah College of Hotel Administration University of Nevada, Las Vegas This paper analyzes the challenges faced by Las Vegas, Nevada casinos when catering to their affluent guests. As part of the literature review, the paper will examine the various retention efforts taken by luxury products and service providers, along with luxury hotels and hotel casinos in Las Vegas. Personal communications with casino hotel executives provides a real- world comparison of the effectiveness and limitations of various techniques discussed in the literature review. 1 Introduction Purpose With the current global economic climate, there have been many changes in wealth distribution. The need to limit expenditures while working to retain high-limit guests has resulted in hotels and hotel/casinos needing to use innovative techniques. There has been limited research done with regards to marketing and catering to affluent guests. This paper will analyze the various sources of information through a literature review and insights of industry experts. The literature will define the target affluence levels, explore the retention techniques utilized by other luxury products and hospitality services, and highlight the Las Vegas loyalty programs, their benefits and the guest service role casino hosts play within Las Vegas hotel casinos. As part of this paper, a limited number of personal communications will be conducted with casino hotel executives in order to gain from their experience with high-rollers and managing properties that cater to such individuals. The information provided by these executives will be compared to the data gathered in the literature review so as to allow a comparison of theoretical and practical applications. Among the properties/companies identified are Las Vegas Sands, MGM Mirage Group and Wynn Resorts. The varied properties would allow for a comparison between higher-end properties. Justification Catering to the most financially lucrative guests is a very expensive endeavor which results in hotels being driven to provide better service and more amenities than the competing 2 hotel casinos. These perk offerings come at a great cost, both in terms of time and monetary value to the hotel casino. This paper will identify the various techniques used and highlight those that are most valued by the affluent guest, along with the role service standards contribute when providing guests and the hotel casino the opportunity to form an emotional relationship. This study will also identify the effect, both from the hotel and guest perspective, the economic crisis has on both parties. Constraints The information gathered via the personal communications will be limited by the need for the companies to retain some of their corporate proprietary strategic direction. Results mentioned in this paper are likely to be applicable exclusively to Las Vegas, Nevada as the personal communication sample is located exclusively within the Las Vegas Strip. Further research will have to be conducted to compare methods in casinos within other geographical regions. With the current economic crisis affecting the global economy, there will be significant changes in how the casinos and affluent guests conduct business that might not be reflected in this paper. The personal communications with casino executives will assist with identifying trends in previous years, along with the changes that have been observed in the recent months. However, the recent economic change is still in its infancy and the changes will likely continue into the future. 3 Limitations This paper will reflect a general snapshot of the current casino retention strategy on the Las Vegas Strip. Time constraints will limit the ability to discuss region specific details regarding various ethnic preferences that casinos cater to. 4 Glossary Casino Host: A casino marketing employee that performs a multitude of duties ranging from “guest communication, staff liaison, to managing the business”. However, their primary goal is to increase revenue for the casino (Booker, Attributes of a Successful Casino Host, 2008) Casino Rate: Discounted room rates available for casino players who do not qualify for a complimentary room. Comps: Short for complimentary, comps are products and/or services given to casino players as rewards for their business in order to promote good will and entice loyalty to the specific casino or company. Comps are usually calculated based on a player’s average bet and duration of play. Comps can range from room, food, beverage and transportation, to show tickets, access to exclusive golf courses and an array of other amenities. (About.com). See also RFB. Discount on Loss (DOL): An agreement between casino management and the player to decrease a player’s losses by a fixed percentage and can be negotiated before or after any wagering activity has taken place (Kilby, Fox, & Lucas, 2004). Harrah’s Entertainment: The world’s largest provider of branded casino entertainment and owner of the World Series of Poker. Harrah’s properties operate primarily under Harrah’s, Caesars and Horseshoe brand names (Harrah's Entertainment Inc.). Mass Market Luxury: Luxury that caters to a large number of people. They are mass produced and the product’s focus is in the brand name, not in the purchasing/ownership experience (Ibrahim, 2006). 5 MGM Mirage: A collection of resort-casinos, residential living and retail developments that own 16 properties in Nevada, Mississippi and Michigan, along with investments in properties in Nevada, New Jersey, Illinois and Macau (MGM Mirage). Player’s Club: A casino rewards program that is used to track a guest’s time spent playing at the slot or table games. The program provides casino hosts access to a guest’s value to the casino and helps with determining the amount of comps they are eligible to receive. Room, food and beverage (RFB): Types of comps that casinos generally issue to guests, consisting of free or discounted (casino rate) rooms, food and beverage. The monetary amount allowed is based on the player’s actual loss or casino’s theoretical win (Lucas, Kilby, & Santos, 2002). Switching Costs: Costs (in time, effort or money) or barriers businesses place upon customers to prevent them from changing from the current business to a competitor (Bowen & Shoemaker, A Strategic Commitment, 1998). 6 Literature Review Affluent Guest Profile The advertising publication Advertising Age comments on the difficulty in defining “wealth”, as there are the selectively affluent that may not have access to exclusive country clubs, but do indulge in luxuries such as expensive cars, jewelry or vacations, but not at the same time. This group also spends more than the average consumer on daily items (Cuneo, 1997). The World Wealth Report classifies affluence into three-tiers. Lowest-tier individuals have a net worth between US$1-5 million, mid-tier individuals range between US$5-30 million and the ultra-affluent have a net worth in excess of US$30 million (Merrill Lynch and Capgemini, 2005). A 1998 Discovery Channel documentary on affluent Las Vegas casino guests rated a premium player on a three-tier system, based on the credit limit provided to them by the casinos. Tier-1 players had a minimum credit line of $20,000, tier-2 players’-credit lines ranged from $100,000 to $500,000 and tier-3 players had credit lines ranging from $1 million to $5 million, with no additional classification for players that had credit lines beyond $5 million (High Roller's Vegas, 1998). A survey conducted by the hospitality industry publication Hotel & Motel Management shows that quality is still a factor when the affluent traveler makes lodging decisions, with 82- percent buying from brands with a reputation for quality, and 77-percent “buying for value, not price”, 68-percent also claim that they stick with a brand they like. These travelers are very demanding and express brand loyalty to their preferred brands. However, 68-percent also claim to look for the best prices when making a purchase. These travelers focus on quality, value and conservative view of their wealth (Yesawich, 2004).