The gaming industry is experiencing unprecedented upheaval. Few gaming executives have managed casinos in tougher economic times than these. The pressures of a faltering economy, concerns about job security, rising prices for gas and food, have all strangled the discretionary dollars that many people earmark for casino gaming.
In an industry rich with data, the question is: What leading economic indicators should we look to for guidance?
On the national front, the Conference Board’s Leading Economic Index consists of 10 indicators, including interest rate spread, average weekly claims for unemployment insurance, new orders and building permits. The best step for any casino in tough times is to look inside at the trends that are marked by our best customers; namely top-tier players. Data suggests that top-tier players may be one of the leading economic indicators of the casino industry. Just as affluent shoppers are the most important segment of consumer spending, top-tier players are most likely the most important in the gaming environment.
Government reports show that the top 20 percent of the nation’s households account for upwards of 40 percent of all spending. Commenting on the affluent consumer, Milton Pedraza, founder of the consulting firm Luxury Institute, said, “Unless these people turn up, a lot of companies won’t turn up.”
But unlike the affluent consumers in the Luxury Institute’s study, “top-tier” casino players are not necessarily what the industry classifies as “whales”. Rather, top-tier players are those who might hold a “gold”- or “diamond”-level card in a typical three-tier players club program that starts with “silver” members; or maybe they are “elite” players in a simple two-level tiered program.
The trickle of players back to the casinos may be slow and may be coming in baby steps. Many players simply feel less wealthy now as they watched their stock portfolios and 401(k)s plummet over the last 18 months, even if their daily budgets didn’t change Those who do have discretionary income have been hesitant to spend. Yet, according to surveys with more than 5,000 casino players in key non-Las Vegas “locals” markets, many top-tier-level players may be getting back in the game.
By and large, casino gamblers are a slightly more optimistic lot than the rest of the country. While top-tier players generally mirror those gamblers - and the nation in general in terms of their views on the economy - most have a more optimistic view of their own personal finances. Forty-one percent of casino players in general report being negative on their own personal finances, compared with only 25 percent of top-tier players who feel the same way.
While the numbers of top-tier players are far less than the numbers of casino-goers in general, they do seem to be returning to gaming in greater numbers. In the heat of the election campaign last year, and at the height of some of the more troubling economic news, better than half (54 percent) of top-tier players said that the economy was having a great impact on whether or not they were visiting their favorite locals (non-Las Vegas market) casino. Now, only about one in three says the economy is still having an impact on their visitation. This is a trend that has been moving in the right direction since earlier this year.
While the economic conditions are beginning to improve for the top-tier players, one of the fallouts of this economic crisis is the rise in competitive pressures. It used to be that a majority of top-tier players rated the players clubs at their favorite locals casinos fairly high in terms of the offerings they deliver and how they stack up against competing players clubs. Now, however, as more and more casinos have stepped up their marketing and direct-mail campaigns, top-tier players are in the enviable position of being able to compare competing offers. At the end of last year, just 44 percent of top-tier players rated the offers and program benefits of their “home” casino (the property where they have achieved top-tier status) at the highest levels. This was a dramatic drop from previous quarters.
Simply put, as offers from competing casinos poured in to players’ mail boxes and In-boxes, top-tier players were able to differentiate the degree to which their first-choice favorite casino valued them as compared to the competition. Equally important, as the economy forced may top-tier players to cut back on the number of trips they were making to their “home” property, many of these players found themselves being downgraded from top-tier club status.
Top-tier players are motivated by a slightly different set of players club benefits than other players. While practically every player wants cash back or free play, top-tier players cite a friendly staff, quality food offerings and being easy and convenient to get to as the key drivers for why they play where they play. (Other player segments also tend to cite location as the primary driver for why they play where they play.)
Nationwide, many market analysts have noted a shift in consumer shopping habits since the economic downturn. More consumers now are preparing shopping lists, clipping coupons, cutting back on impulse buys and doing more research on products and planned purchases. These habits are now finding traction in the casino environment as well as players are staying closer to home, comparing competitor offerings and deciding which players club offerings are more important to them.
Understanding consumer trends is vital to casino marketing. Consumers are choosing convenience over price. Consumers are placing more emphasis on being able to do all their shopping in a single trip. Casinos that stay top-of-mind with players, that highlight convenience, either by location or by having a host of amenities under one roof, will successfully navigate these tough times.