Against the Odds
Gambling has become America's hot pastime. But today's casinos have more of an upper hand
Gold rush. Your lost dollars, of course, have been a bonanza for casino operators, game manufacturers, and Internet bookies. International Game Technology, the world's biggest slot machine manufacturer, pockets about 30 cents of every dollar of revenue, which gives it one of the healthiest profit margins in business today. Swedish-owned Pokerroom.com, the fifth-largest online poker site, reported making $20 million on revenues of $60 million last year. Investors, sensing a gold rush, have swooped in. The stock of industry giant Harrah's Entertainment climbed more than 25 percent in the past year. The December initial public offering of casino operator Las Vegas Sands was the country's most successful IPO in the past two years; its price jumped 61 percent on the first day of trading.
One of the most effective revenue boosters is standard business procedure: the casino's equivalent of a frequent-flier card. As soon as a gambler applies for a reward card, computers start compiling a personal dossier. When the gambler plugs the card into a slot machine, computers calculate the value of each bet, the number of seconds it takes the gambler to pull the lever or push the button, and the amount of the win or loss. When the gambler quits for dinner, the computers note the time, and, if the card is swiped at the casino restaurant, what the diner ate.
That information is monitored to the second at Harrah's, the industry leader in customer data mining. Research shows that a gambler's first experience at a casino is key to a return visit: Winners come back, while losers usually don't. So at a few Harrah's casinos, a manager will send a "Luck Ambassador" over to a first-time loser to offer a consolation of a free meal or show ticket.
That's just the beginning. Casinos also use the loyalty-card data to tailor offers and freebies to lure the player back. A gambler who, say, spends an hour playing The Price Is Right slot machine might get a letter dangling free credits to play a new version of the game. Or a meat-and-potatoes diner might get a coupon for a complimentary, or "comp," steak dinner. Since Harrah's turns away two callers for every one it offers a room, a quick glance at a player's profile tells the reservation agent whether the gambler deserves a room and at what price. "It isn't putting people in rooms; it is putting the right people in the room," says Gary Loveman, CEO of Harrah's.
All sorts of data are being exploited. Caesars in Las Vegas discovered, for example, that the demand for shrimp cocktails spikes between 10 p.m. and 3 a.m., so it upped the price then by 50 cents, says Carol Pride, chief information officer. The nearby Hard Rock casino is trying out radio-frequency-identification-embedded poker chips to monitor card players.
Snack prices aside, casino executives say the data mining is good for players, since it enables casinos, which typically return from 10 to 30 percent of a gambler's losses in comps, to make sure every gambler gets the discounts and freebies that he or she earned and truly likes.
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