IS YOUR CASINO PREPARED FOR 5 DANGERS?

By Martin R. Baird

As I visit casinos around the country, I hear a common theme at every property – times are tough. I’ve heard this so often, I decided to have my company take an indepth look at the kinds of dangers casinos face. We succeeded in identifying specific challenges to gaming and unearthed facts and statistics to put these issues into perspective.
I am now going to share the highlights of what we learned. We identified five serious dangers that will affect casinos for the next 10 to 15 years. The dangers are – the economy, housing, competition, tax target and the S curve.
The economy. Across the country, we are hanging at just under 10 percent unemployment. It’s amazing that 1 out 10 people who once had jobs and came to your casino now are out of work.
The part of the employment picture that is really missed is underemployment. These are people who have jobs but are not making what they could or should. At this time, it’s estimated that underemployment is running at just under 20 percent. This means that 1 out of 5 employed people are earning less and have less to spend.
Some economists believe our economy has started a V-shaped recovery – a sharp economic decline followed by a sharp rebound. If this is true, it could be six to 12 months before the job market improves. Once people do get a job, I can’t guess how long it will take them to pay down the credit cards they’ve been living on or catch up on their car payments and start thinking about casinos again. First, they must fix the damage that has been done to their finances. Some economists don’t see a V unfolding. They see a long, painful economic recovery.
Regardless of how the recovery pans out, there will be the psychological effect of going for months or years without a job. Something like that changes the way people view the world. It can make them much less likely to jump on the spending wagon when they do land a job because they are always thinking that they could be laid off again at any moment.
Until your guests feel secure, good and confident about their jobs and the economy, they are less likely to spend freely at your casino.
Housing. Yes, Americans feel less wealthy because their homes are worth less, but just how bad is it? About a quarter of all mortgage borrowers owe more than their homes are worth and housing prices are not expected to appreciate much for the next five years, further dampening expenditures on entertainment. Imagine this – your house is worth less than you owe AND you are unemployed or underemployed. You probably feel like you are on the verge of poverty. Discretionary spending such as playing the slots at a casino is likely out of the question.
Competition and tax target. The weak economy continues to push competition for gaming revenue higher and higher. Non-hotel casino revenue is expected to decline for the third consecutive year in 2010, dropping by 1.6 percent.
This puts a squeeze on state governments as well as casinos. States take a cut of casino revenues and their share is declining. In fact, all sources of income for state governments are declining and, loath to implement new taxes on residents, many states are looking for ways to expand revenues from gambling. Delaware has added poker, blackjack, roulette and craps to generate more money for the state. Illinois is talking about adding slot machines in bars as a way to rake in a little more cash. That leaves states that have said they will “never” have gaming. How long will they continue to say that as they lose tax revenue to neighboring states?
Gaming is increasingly looked upon as a revenue source by cash-strapped state governments. State deficits could spell a new level of competition that would not have been imagined a few years ago.
S curve. Businesses and industries go through standard cycles and if you know where you are on the curve, you will easily know what is coming next. The S curve is a curved model that shows the pattern of market penetration. Most experts believe gaming in the United States is in one of two places – either late in the growth phase or in maturity.
In the latter stages of the growth phase comes consolidation. The strong players do what they can to take over the market. But as time passes, it becomes increasingly difficult to grow organically. This means that casinos are forced to take guests away from their direct competitors. Or they need to get their guests to come back and play more often with more money. During this phase, what’s required is differentiation created by offering a significantly better gaming experience, a branded experience.
If casinos are in the mature phase, this means that it will be harder than ever to generate trial. Potential guests know what your competitors have and they like it. Getting a guest to leave another casino for your casino will take an amazing improvement in their gaming experience at your property. I’m not talking about having employees smile when they didn’t do that before. This means that you need to have service standards that are higher than ever and are being executed 90 percent of the time.
These five dangers are quickly rolling out now. The longer it takes you and your team to make a decision and move forward, the further behind you will be. If the economy is recovering, you should have started improving your guests’ service and gaming experience 90 days ago. Improvement takes time and when guests start coming back, they need to have an amazing experience so they come back again and tell their friends all about your casino. If we’re in for even tougher economic times, you are six months behind because as people have less money and confidence, they will be increasingly critical of the experience they have at every entertainment venue they patronize. In fact, they are already more critical and forming long-term perspectives on your casino. They are taking a hard look at your ability to deliver a truly dazzling experience. That’s what it will take to get them to spend their precious dollars with you.
You must ramp up your service and gaming experience. The casinos that will make it through these challenges and grow are the ones that have the vision to ask for help and invest in improving themselves now.

Date Posted: 01-Nov-2010

Martin R. Baird is chief executive officer of Robinson & Associates, Inc., a Boise, Idaho-based consulting firm to the global gaming industry that is dedicated to helping casinos improve their guest service so they can compete and generate future growth and profitability. Robinson & Associates is the world leader in casino guest experience measurement and improvement. For more information, visit the company’s Web sites at www.casinocustomerservice.com and www.advocatedevelopmentsystem.com or contact the company at 208-991-2037. Robinson & Associates is an associate member of the National Indian Gaming Association.