by Sudhir H. Kalé , Ph.D


By Sudhir H. Kalé , Ph.D.

Over the past few months, casinos in most parts of the world are facing times of economic duress. The Urbino Casino Portal cites story after story of how various casinos are experiencing a dramatic downturn in their earnings and how they are all laying off employees. Most financial woes are a result of a decline of tourists to casino destinations. Response of casino executives to this adverse situation has been largely fatalistic. The situation has been caused by events beyond our control, there’s nothing we can do about it. Casino executives, like their counterparts in other businesses, are quick to take credit for the company’s successes and just as quick to blame broader environmental factors for downturns in revenues and profits.

Times of adversity are times for introspection and corrective action. When there was a significant decline in air-traffic during the Gulf War, Singapore Airlines decided to use the situation to their benefit. All employees were put through a rigorous and elaborate training program in customer service. The exercise cost millions of dollars at a time when the airline could least afford the investment. But, as a result, SIA emerged stronger than before.

During times of economic uncertainty and turbulence, every casino executive should take stock of the company’s internal situation. Some basic soul-searching questions should be asked during lean times so as to approach the future with reinvigorated verve and primed maturity: Is the right corporate culture in place? Are we providing the right customer value? Is the organization so driven by the primacy of customer experience so as to define its very psyche?

Of course, it is always less traumatic to ask such questions and make appropriate changes when the times are good. However, favorable times often jaundice the eyes of top management, resulting in an inability to see the cultural inadequacies that would haunt them in the long run. This is particularly true when top management bonuses are tied to market capitalization as defined by results of the last quarter. An example would probably drive home the point.

A Case Study

Let’s take the case of a large casino in Australia that I am intimately familiar with. The financial picture of the company, as evident from last year’s results, appears as solid as ever. But even a cursory examination of its operations on the floor--or better yet of the day’s roster—would unequivocally suggest difficult times ahead. The gaming division has gone through major upheavals at top management levels over the last six years. Three casino managers have walked through the revolving door, several shift managers have been made redundant, and a lot of good employees at the pit boss level and above have abandoned ship, leaving the customer to deal only with employees that are (i) too old to move up or out; or (ii) not competent enough to pose a threat to those above them.

Despite the casino’s recording unprecedented profits during the last fiscal year, dealers and floor managers complain that they have received no real pay rise since the casino opened over a decade and a half ago. The website hosting the employee bulletin board is full of slurs, cutting remarks, and angry irreverent comments directed at top management. The level of customer service is at an all-time low, leaving several good regular customers disenchanted and disillusioned. Top management, nattily attired in the fine tunic of financial ratios from last year’s crop, seems totally oblivious of the flaws within the cultural fabric of the company.

Just recently, the casino opened a new VIP room for its most “valued” customers at a tab exceeding 17 million dollars. On the surface, the company experiences unrivaled munificence, and yet this very illusion of success has caused it to ignore the underpinnings of its prosperity. The lure of quick profits has driven management to pursue overseas junkets, often at the expense of its loyal local customer base. Not many allowances are made for the risks faced by shareholders in such exploits (see my article, Lifetime Value of a Casino Customer, posted on 25 July, 2001). It is common knowledge that while the junket business does periodically provide large swings on the positive side, it can also sharply damage a company’s fiscal performance resulting in a drastic reduction in shareholder wealth overnight. In this regard, the junket business should be perceived as “slog overs” in a one-day cricket match. It makes sense to go for this “hit or miss” business only when the bread and butter operations are functioning harmoniously.

While gambling with shareholders’ money in pursuit of the junket market, it makes smart business sense for this casino and others like it to also focus on local customers. Servicing local customers should be viewed akin to the first twenty-five overs in one-day cricket. The local base allows for consolidation with minimal risk. What’s more, the interactions with locals truly reveal the character of the operations team.

Understandably, management is always less than totally willing to pay attention to ‘soft’ issues like character and culture when the going is good. And all too often, it operates in a ‘crisis-mode’ when the going is not so good. Top management may not feel manifestations of this lack of attention to the so-called ‘soft’ issues until it is too late. It is usually the local customer who first experiences them in the form of indifferent service and a “dilligad” (‘do I look like I give a damn?’) attitude.

We’ll now take a first-hand look at how employee morale and corporate culture—the soft issues--impact on customers, particularly the local ones.

Representative Vignettes of Customer Interactions:

Just in the last one week, I experienced two separate instances in the casino’s VIP room that illustrate how the current unhealthy corporate culture and low employee spirit adversely affect service delivery. I hasten to add that as a loyal regular I probably receive better service than most customers. After all, I have spent close to a million dollars in this establishment.

I am a passionate blackjack player. I like the game because it is one in which the house advantage varies depending on the skill of players. Also, it provides an ideal platform to observe the skill and aptitude levels of the casino staff.

The first incident took place around 2:00 a.m. I was playing BJ one-on-one with a dealer who has dealt to me several times before. On the third shoe, I got a blackjack and the dealer had a ten showing. Instead of pulling one card to check for blackjack, she pulled three. This error, unto itself, is quite understandable. What I’ll never understand is the way in which the casino staff chose to deal with it.

On the dealer’s pulling three cards instead of one, I requested a reshuffle. The dealer said she could not do it, unless authorized to do so. The floor manager called upon to address the situation said that a reshuffle would not accomplish anything as far as my luck was concerned. I immediately pointed out that my request had more to do with rectifying the casino’s mistake as opposed to changing my luck. At this time the dealer butted in: “Don’t you make mistakes in the middle of the night? It was just a mistake!” I pointed out to this otherwise attractive but pouting croupier that it wasn’t me that dragged her out of bed at this ungodly hour to come and deal at the casino. It was her need for money and the life choices she had made that determined her job situation. This annoyed the floor manager even more, and instead of attempting damage control, he got on the defensive and became very protective of the dealer. The issue finally had to be resolved at the pit boss’ level. I asked myself whether an airline stewardess or her purser would ever deal with a customer flying first-class in an analogous manner.

Date Posted: 29-Oct-2001

Sudhir Kalé is Associate Professor of Marketing and Departmental Head in the Bond University’s School of Business. He has served as management trainer and consultants for several industries including gaming. Profesor Kalé’s research on marketing and management has been published in top scholarly journals around the globe. A casino aficionado, Dr. Kalé has observed the casino industry for over two decades. His e-mail address is Sudhir_Kale@Bigfoot.com.

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