by Steve Karoul
A simple tool for cost effective complimentary / junket decisions.
I receive numerous calls and faxes from fellow casino executives around
the world asking the same questions over and over. Therefore I know
that there seems to be a great deal of confusion when it comes to making
good, rational, cost effective decisions relating to both casino complimentary
guidelines and / or junkets. If you note, I inserted the word 'rational'
in the previous sentence. This is because every experienced casino executive
fully understands that many of the numerous daily decisions that we
make are not based upon rationality but rather upon human emotion. The
key issue is what degree of flexibility do you have in your decision
making. If you own the casino you can probably do whatever you want.
However, most of us do not own the casino and therefore we must be accountable
for all of our decisions. However, if we can better demonstrate that
we have carefully reviewed and analyzed as many variable factors as
possible that can enable us to more accurately evaluate our decisions
in advance, then we have done our jobs properly. These factors should
be based upon each individual casinos cost factors, theoretical win
or theoretical earning potential, total customer estimated costs including
commissions and discounts, casino profit based upon theoretical win
or EP and finally the profit percentage per individual player or junket
compared to theoretical win or EP.
I know that this all sounds very complicated and time consuming. However,
it is not. It is actually so simple now using my Casino Executive Helper
that you will not believe that it actually works. But I can assure you,
it does work, and it works very effectively. Many of the larger casinos
in Las Vegas, Atlantic City, Australia, etc. have all spent millions
of dollars having very highly sophisticated and complex computer software
programs developed to help control their complimentary and or junket
expenses. The only problem that I see is that most casino executives
today are given a set of complimentary guidelines as part of their casinos
Comp Policy or Junket Program but they are not given an explanation
of how or why the guidelines work. This lack of knowledge or lack of
understanding therefore make it very difficult for the casino executive
to make good accurate decisions on situations, questions or problems
that can and do fall outside of the normal policy.
For example, what would you say to a new customer who is on the telephone
and asks you the following: I heard a lot of nice things about your
casino from my cousin, Joe Smith. He suggested that I give you a try.
My children are home from university this weekend. There will be six
of us. I need a one-bedroom suite plus two additional rooms, RFB for
the six of us and transportation from the airport. How much money do
I need to deposit and how much do I have to play in BJ to qualify for
everything? Can you give him a quick accurate response? If not, he will
probably call your competition if he hasn't already. Whether your response
is immediate or delayed is not critical. What is important is the response
information that you give him. It must be cost effective and it must
be accurate otherwise how will you know if your company stands a reasonable
chance (theoretical chance) of making a profit. I say theoretical chance
of profit because we all know that in games of chance we can not control
the luck factor.
What we can control is relating everything to common theoretical or
EP values. For example, it is possible to analyze everything in reverse
order. We can establish what target profit margin is reasonable for
our casino. It is possible to do this in both real costs, our individual
casinos actual hard dollar expenses, as well as in theoretical terms.
The ideal situation is to create tables that relate everything to common
or similar theoretical or EP values. This means that depending upon
the actual casino game you can now tell a player how much money he must
have available in credit or cash, how many hours he must play and how
much his average bet must be in order to qualify for a certain dollar
value of complimentaries. This can now be directly tied into your companies
comp guidelines but also allow you the flexibility to make quick accurate
decisions for the unusual cases.
This can all be done quite easily using the Casino Executive Helper
program. Anyone that can use a computer can now have access to this
very simple program that basically links three spread sheets together.
The first sheet is the control sheet where you actually enter all of
your own casinos actual costs such as room costs, average per person
food costs, airfare allowance, junket commissions, and any other variable
expenses. There is also a provision for you to enter your casinos actual
game speed or number of decisions per hour per game as well as the house
advantage percentage per game that your casino wants to use. Everything
is then compared against a common value that I have selected. The value
that I picked is for a baccarat player's average bet as a percentage
of his credit line or cash deposit. I selected 1.5% but it could just
as easily have been 1% or 2%. This will relate more to what your casinos
overall betting limits are.
This all links to the next set of spread sheets, which actually show
you on a per game basis the average bet and time required to generate
a pre-set target theoretical win or EP. It further shows you a breakdown
of your estimated expenses and your estimated gross profit margin per
player or per group. And on the bottom of the page it will also show
you your estimated dollar profit on theoretical win and theoretical
or EP based profit margin. By quickly comparing the estimated dollar
profit margin percentage to the theoretical profit margin percentage
you will be able to quickly see which variable such as average bet or
number of hours played must be adjusted either up or down. Since you
normally know in advance the number of days the player or the junket
will be staying at your casino you can usually guess 4 to 6 hours of
play per day or 15 to 18 hours of play for the trip. Therefore, if the
number of hours of play required exceeds this figure you know that you
must adjust the players average bet required upwards to reduce the number
of hours play required. For theoretical win or EP analysis, a $200 average
bet for four hours is equal to a $100 bet for eight hours or a $400
average bet for two hours of play.
The next spreadsheet shows you your casinos actual theoretical win or
earning potential (EP) tables. Therefore, even if you don't have a computer
or your PC cr
Date Posted: 30-Apr-1999
STEVE KAROUL is a recognized authority and consultant in the area of international casino marketing as well as an Associate Editor for CASINO WORLD MAGAZINE. Steve covers the Asian markets for CASINO WORLD MAGAZINE in the areas of Travel, Leisure and Gaming.
Steve Karoul may now be contacted in the Philippines at Tel. (63-47) 252-1342, Fax 252-1343 or E-mail: firstname.lastname@example.org.