New Database Helps Las Vegas Sands Focus on Profitability

The Las Vegas Sands Corp.'s new data system places a stronger focus on the full spectrum of visitors' activity, and therefore their total profitability.

Traditionally, casino patrons are ranked and marketed to based on what they spend, either during a single trip or in aggregate. But this doesn't allow for subtleties such as their rate of play, how the value of comped rooms mitigates their worth to the property, or other activities which might change how they are valued.

"A casino system [usually] shows when a trip starts and ends," says Rom Hendler, senior VP and CMO at the Las Vegas Sands Corp., which within the U.S., operates the Venetian, The Palazzo, the Sands Expo Center and the Sands Bethlehem in Pennsylvania. "But what happened during the trip, and how it breaks down by day, is not that obvious."

The drive for analyzing profitability is spurred in part by casinos having a finite number of rooms in their affiliated hotels. If promotions management inappropriately distributes free or lower-rate rooms based on customers' spend, as opposed to their total profitability, the property may leave profits on the table by giving the room to a higher-revenue, yet lower profitability, customer.

Even worse, it may set up false expectations in a visitor.

"A gamer above a certain value is used to not paying for the room," says Hendler. But there are many ways a customer can be profitable to a given property. Yes, casino play offers some of the best returns for the Sands Corp. properties. But also there's value in entertainment, dining and shops. Understanding how a guest takes advantage of these helps allocate rooms during high-traffic times and guides the types of offers Hendler might make.

Give The Room, Get The Dollars
"We know that when someone stays with us, they spend approximately 60% more than when they are just visiting the property without taking a hotel room," Hendler says.

Consider a customer who spends $200 a day at a one of the company's casinos over three days without staying at a Sands hotel. Under a traditional revenue-based system, that customer would receive offers appropriate for a $600 customer. But if the hotel has an open room during a relatively quiet time, and can use that room as an incentive, Hendler may be able to boost that patron's worth to nearly $1,000 for the three-day stay—and will make offers based on that level of value, as opposed to the $600 level.

Analysis works in the other direction as well. Sometimes the best room promotion is the one not given away at all. Hendler gives the example of a customer who pays $300 for a room and gambles, but not much. But that customer does eat at the better restaurants and sees featured entertainment.

Imagine that a revenue-based system recognizes an upcoming low-occupancy period, and based on the second patron's total spending level recommends giving that guest a free room, along with $100 in free plays in the slot machines. So the guest takes the deal, plays in the casino and ends up spending $200 on gambling.

"Most of our profit comes from the room or the casino. I've just given a room with an average base value of $300 away for free, and that customer never wants to pay $300 again," says Hendler. "I took the highest margin I can get, but I diluted my revenue, and that is because I looked at only one dimension."

The Las Vegas Sands uses the Patron Value Optimization software from SAS to provide its customer valuation calculations. These figures are then fed both to the promotions and revenue management departments. When coupled with reservation software, the system gives guidance regarding the types of offers casinos can make available.

For example, promotions can be focused on higher-level players when additional rooms are scarce. Similarly, if an associated retailer is offering a special event such as a trunk sale, the hotel won't be as quick to discount a room rate. The Sands uses e-mail, direct mail and phone calls to make offers, based on the value of each guest.

The system, which allows a deeper dive into behavior, can also prevent the LV Sands from overestimating the value of a customer to its various properties. Let's say a patron charges $200 worth of restaurant expenses one evening to either his room or his loyalty card. The system might peg this guest as a foodie, and start churning out fine dining offers for him.

Not so fast, says Hendler. That customer may have taken out nine friends to one of the quick-service restaurants. But looking at a food bill in the aggregate won't reveal this.

"If we identify the restaurant as a budget restaurant, then we continue to market to the person as a gamer," says Hendler. "If we identify the restaurant as a fine dining restaurant, we will market to the customer as someone interested in fine dining."

From Points To (Profitable) Experiences
Ultimately, the goal is to provide information that moves casino loyalty programs from the traditional retail and airline models which rely on point collection and redemption to ones that reflects the gaming industry.

"These customers are having an experience," says Kelly McGuire, executive director of SAS's hospitality and travel global practice. The focus of a loyalty program at a casino isn't on upselling to the next purchase. "You can still do segmentation and modeling, but you are working on a different set of modeling criteria."

For instance, a few years ago the Venetian offered a dinner with celebrity chef Mario Batali, who operates restaurants at the resort. "The casino customers didn't care. I offered it to people who ate [at one of Batali's restaurants] at least twice, and it filled up within a day," says Hendler. "I should have marked it up more."