What can Hotels learn from Casinos? Focus on knowing your guests
By Natalie Osborn, Senior industry consultant for SAS Institute’s Hospitality and Travel practice
Did you know that total consumer spending on gambling at commercial casinos in the US was calculated at $37.34 billion in 2012? $8.6 billion of this revenue was returned to states and local communities in the form of taxes and other levies. The US casino entertainment industry also provides jobs to 332,000 people who earned $13.2 billion in wages, benefits and tips during 2012. It's hard to deny that gaming is serious business. And like all serious businesses, the casino entertainment industry is leveraging predictive analytics to ensure that they stay on a winning streak.
But first let's address one of the biggest myths about the casino business right up front. The casino business is not about "winning" or "losing" money. Casinos are in the business of providing entertainment. When a customer comes to a casino, they are not buying a chance to win (or lose) big, they are buying entertainment. The fun of playing at a table or at a slot machine, the pleasure of dining in a restaurant, seeing a show, playing golf or enjoying the hotel, spa and pool amenities are all of the reasons that patrons visit casinos.
Any business that is focused on providing entertainment must center on its customers, and it would be difficult to find an industry that is more focused on its customers, or patrons. But the casino industry has a challenge. Patrons can be very fickle. There are a variety of entertainment options available and only limited entertainment dollars in every patron's wallet. What's more, the casino entertainment experience has been built on recognition. Valuable patrons are rewarded with offers such as free meals, free or discounted play and free rooms in exchange for their patronage. Over time these offers and rewards have become expected. If a patron of a casino doesn't feel that they are getting the offers and recognition they deserve, they can easily chose to find their entertainment elsewhere. One of the most important things for a casino is to know their patrons' preferences well so they can provide the entertainment experience to keep them coming back, while at the same time understand the patron's value so that offers and rewards remain profitable.
So how do casinos know their patrons so well? They know them from the data they collect. And the data we are talking about is data on the customer experience. Casinos do have some challenges when it comes to data. Think for a moment about all the experiences you can have in a casino. Gaming – whether it is table games, slot machines, even betting on horse racing. Eating and drinking in restaurants, bars, cafes, even your hotel room. You can see a show, play golf or relax in the spa or by the pool. That's a lot of points of experience which results in a lot of transactions that are each managed by individual systems.
Pulling all that data together is a challenge. First casinos need to bring together all of the customer transaction data from all of the disparate systems that manage it. Then they need make sure that the data is of good quality and that there are no duplicates or bad data. Once the data is clean and ready, casinos build a 360 degree view of their customers and start to apply predictive analytics. This gives the casinos a unique understanding of their patron, including current and predicted customer lifetime value, the theoretical win they expect to gain from the patron whether it is daily or by trip for out of town patrons. They also build segmentation and response models to help them understand how to market to the patron and how they are likely to respond to offers.
Companies with a game-changing analytics set their business strategies based on what the analytics tell them. In their book, "Competing on Analytics - The new science of winning," authors Thomas H. Davenport and Jeanne G. Harris highlight Caesars Entertainment as a great example of this. By gathering and analyzing patron data through their Total Rewards program, Caesars found out something very important. They realized that their core, profitable patron was not who they thought it was. It was not the high-roller who dropped thousands of dollars per trip, but it was the high-frequency, lower spend per visit slot player. They designed their entire brand position, rewards program, service offering and business strategy around this player, and went on to become a market leader in the US casino industry.
Foxwoods Casinos is another great example. Foxwoods segmented their customer database to such an extent that they were able to understand their guest preferences very well and get extremely granular with their campaigns. In some cases, for example, they can send 400 variations of a single mailer out to their customer base. Let's think about that for a moment. Can you imagine sending FOUR HUNDRED different versions of the same mailing to your customer base? When you know your customers well you can give them exactly what they want, and keep them coming back.
The same challenges with disparate systems that exist in casinos exist for hotels. The hotel front office system may capture all of the transactions if a guest charges to their room, but what about those guests who do not room charge, but use a credit card when dining, or those guests who do not stay in the hotel but still use the hotel restaurants, spa, and meeting rooms? Are they identifiable as a unique customer, or are they a nameless transaction in a point of sale system? Building a comprehensive view of all of your guests can be a challenge if you have disparate systems. A data management strategy can assist you with bringing together data from different systems and consolidating it into unique customer records.
Once you have a 360 degree view of your guests, the options for analytics are vast. Perhaps you want to look across all of your customer records and understand what relationships exist between those that use the restaurants at your properties and those that use other facilities, for example, your spa. This can certainly help with understanding how changes to the restaurant operations such as opening hours or even a renovation will impact the revenue of the spa. When it comes to marketing, a better understanding of guest preferences and spending patterns can help drive segmentation, which in turn drives better tuned offers.
While hotel companies are unlike casinos in many ways, one of the fundamental similarities between the two is the need to focus on knowing the guest. Casinos have implemented loyalty card programs that capture data and reward their patrons no matter which area of the business they are patronizing. And data collection doesn't stop at only those patrons who show their loyalty card. Through data matching it is possible to identify those customers that do not use loyalty cards, but can be identified using their name, address or other identifier. How much do you know about guests who do not use your rooms? Do you know enough to tailor a promotion for them that will encourage spending in other outlets, or even other properties?
When you know your guests well you can give them exactly what they want, and keep them coming back. Casinos use solid data management and predictive analytics to help understand their guest's preferences, and predict what guests want. In my next post I will explore some of the ways that casinos optimize their physical environment and operations – stay tuned!