A twist on ‘baby needs a new pair of shoes’

By Liz Benston (contact)

Monday, Oct. 2, 2006 | 7:35 a.m.

Drop $5,000 at blackjack and you might get a free dinner and discounted room at Caesars Palace. Drop $5,000 at the Gucci and Versace boutiques at the Forum Shops and you'll get a few pairs of fancy shoes and not much else.

Caesars owner Harrah's Entertainment is now looking to change that by rewarding a growing number of customers who prefer to spend their money away from the casino floor. The logic is simple enough: If gamblers are loyal to a casino because they are rewarded with perks, why not keep shoppers loyal by rewarding their spending as well?

"The whole Vegas model has changed," said David Norton, senior vice president of relationship marketing at Harrah's. "We think it's a big opportunity."

While the strategy of rewarding top-drawer shoppers makes sense, executing it is a different matter because of the difficulty and expense of installing software or other tracking systems at stores not owned by the casino.

Technical challenges aside, tracking systems also raise delicate privacy issues. While gamblers are used to having their play monitored, nongamblers might not be comfortable with Big Brother keeping tabs on what they spend on jewelry and couture.

"Gamers are used to having their cards tracked. We have to see whether (retail) consumers take to it," Norton said.

There's a lot at stake, since more than half of the spending at some Strip resorts is done outside the casino. Harrah's has made a fine art of tracking gamblers' activity. Harrah's tracks 80 percent of its gamblers' spending, a staggering amount compared to airlines and retailers that have reward cards, Norton said.

It now wants to take the lead in monitoring retail spending by guests as well, since Las Vegas is learning that a couple bent on Vegas shopping can be more valuable to a resort than a run-of-the-mill gambler, said Tony Lucas, a statistician and hotel management professor at UNLV's William F. Harrah College of Hotel Administration. The problem is that, consumers don't necessarily want to use cards that monitor what they spend, Lucas said.

One option to track people who don't want to use loyalty cards would be to install surveillance cameras at cash registers that would match images with the casino's digital photo database, similar to the way casinos catch gambling cheats. That way, casinos would know at least how often customers are spending money at retail stores, if not what they are buying.

Casinos already can estimate noncasino spending based on statistical modeling. Tourists who drive into town for a whirlwind weekend tend to have bigger travel budgets than, say, travelers who purchase a discount vacation package, including hotel and airfare. Convention-goers tend to be among the biggest spenders because they are charging entertainment and dining on company credit cards.

Estimating what customers spend "isn't invasive but isn't precise either," said Lucas, who builds statistical models for casinos.

Norton won't reveal how the company's system could ultimately work, saying it's still under development. Harrah's has examined several systems such as the key fobs some grocery stores use to track purchases and offer discounts as well as retailer credit cards and gift cards.

"We're looking at what's really easy for the consumer and doesn't take up time in the transaction."

Before it was acquired by Harrah's, Caesars Entertainment introduced a system that rewarded customers based on retail purchases, meals and other items charged to their hotel rooms. But that system wasn't able to capture spending not charged to the room.

MGM Mirage, the company with the largest presence on the Strip, keeps tabs on the dining and shopping preferences of high-end customers on an ad hoc basis but doesn't have a formal rewards program for those consumers.