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July 28, 2014

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Las Vegas Sands cuts bait: Comps

Off the hook: Company shifts focus on booking rooms to paying customers, drawing ire of some guests, insiders

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Kin Cheung / AP

Sheldon Adelson, chairman and CEO of Las Vegas Sands Corp., speaks during the news conference of the opening ceremony of the Venetian Macao Resort Hotel in Macau Tuesday, Aug. 28, 2007.

Casino comps

Would removing comps for the vast majority of gamblers be positive or negative for a company's bottom line?
Removing comps would hurt casino earnings. — 88.3%
Removing comps would help casino earnings. — 11.7%

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Note: This is not a scientific poll. The results reflect only the opinions of those who chose to participate.

Attracted to the resort’s elegant surroundings, hushed atmosphere and perks such as free hotel rooms and entertainment discounts, California resident Joy Kane was a regular at the Palazzo, gambling thousands of dollars per trip as frequently as once a month.

That three-year relationship ended two days before her scheduled arrival for a birthday getaway when her casino host called and said the resort wouldn’t honor the comped three-night stay she had reserved two months earlier. Instead, she could pay the regular hotel rate of $750 for those nights, the host said.

“That’s fine if they want to stop comping rooms, but to cancel 48 hours before our arrival is shocking,” said Kane, who owns a renewable energy company in Palm Springs, Calif. “I’ll never stay there again even if they start comping me a room.”

Late last year, parent company Las Vegas Sands boldly scrapped the promotional offers casinos typically mail to gamblers year-round to entice them to stay at their properties. The loyalty club still entitles players to free or reduced prices for amenities based on the number of points they accumulate gambling. But add-on promotions such as free hotel stays, gambling tournaments for prizes and discounts at restaurants and shows — key parts of the industry’s marketing machine — were gutted.

Las Vegas Sands CEO Sheldon Adelson told Wall Street analysts about his strategy this month: Fill more rooms with cash-paying tourists and conventiongoers rather than comped gamblers. Although the casinos’ biggest gamblers will still receive comps as enticements, everyone else — the vast majority of any casino’s customers — will have to earn their discounts by spending money at the resorts.

“No more comped rooms. No food and beverage. No showroom credits. We’re selling rooms,” Adelson said.

Industry experts say the move may make business sense for Sands, which isn’t as dependent on business from gamblers as other casinos. It was handled about as delicately as a ton of bricks, though.

It “could have done this quietly, without discussing it publicly,” said Randy Fine of casino consultants Fine Point Group in Las Vegas. “They basically gave the middle finger to their (customer) database.”

Sands also could get in hot water with casino regulators if it has revoked advertised promotions that have been redeemed with a reservation — a violation in many casino states, he added.

“Once an offer has been extended and redeemed, I don’t think you can welsh on it,” Fine said.

Behind the scenes, casinos frequently tighten and loosen comps based on business conditions. Competitors Wynn Resorts and MGM Resorts International say they have no plans to slash promotional offers across the board.

But some companies are starting to tighten up on comps after having loosened them to attract business in the recession, said Bill Lerner, an analyst and principal with Union Gaming Group in Las Vegas.

“The casino industry moves through these cycles of generosity on comps,” he said.

Sands isn’t your average casino company. It generates more than 80 percent of its earnings in Asia, where the gaming business is booming. Sands and Wynn Resorts, neighbors on the Strip and in China, are expected to hit new business records in Macau this year for Chinese New Year even as business lags in Las Vegas.

With only one U.S. casino outside of Nevada, Sands doesn’t need to use its Las Vegas hotel rooms to attract gamblers like some of its competitors, casino industry consultant Jeffrey Compton said.

“They don’t need a rewards system the same way that (Caesars Entertainment) needs a reward system,” said Compton, referring to a national casino chain that comps many of its rooms in Las Vegas for gamblers who frequent its regional casinos across the country.

Sands also books more rooms for convention groups than its Strip competitors because of the attached Sands Expo & Convention Center and extensive casino ballroom space. Adelson, who built his Las Vegas casino empire on the success of his once-dominant Comdex trade show, sold high-priced rooms to conventioneers before the concept became popular here. But conventiongoers don’t gamble, some casino bosses griped.

Although that may be true, conventiongoers pay significantly higher rates than tourists who typically reserve rooms through Internet discounters that might charge 40 percent less than advertised rates for rooms, said Patrick Bosworth of Duetto Consulting in Las Vegas. Catering banquets and other events for convention groups is a highly profitable side business for casinos, he added. Although some gamblers are quite profitable despite comped rooms, others were no doubt taking up the casino on a free room offer but not gambling much in return, Bosworth said.

“They saw their convention business (recovering) in October, sooner than others did, so they no longer needed that marginal casino customer,” he said.

Sands spokesman Ron Reese called the reduced comps a work in progress.

“In tough economic times we were comping rooms to people who wouldn’t necessarily have qualified. Looking back, we were probably too generous with our comps at certain levels. I think you can make the case, up and down the Strip, that operators have their hands on the dials to try and make sure their businesses are operated more efficiently and effectively in a challenging environment.”

Reese declined to discuss how the company implemented the cuts. “Valued” customers are receiving new offers, he said.

It’s a calculated risk, Fine said.

“At some point over the next 12 months, they’re going to need incremental sources of demand, whether in the depths of summer or Thanksgiving weekend,” he said. “Gamblers are proud of their loyalty and feel they’ve invested in the company. ... But they’re going to remember the company giving them the finger.”

Sands is likely the only exception to a casino culture of promotional comps that’s too ingrained to go away, Compton said.

He said an instructor told him in 1994 that all comps would vanish within three years because casinos can’t afford them. “But they’re too much a part of the picture,” Compton said

On paper, comp reductions appear to be working. Cutting expenses including comp offers contributed to a 42 percent earnings increase at Venetian and Palazzo in the fourth quarter of last year.

The savings will come at the expense of some repeat business, said Anthony Curtis, publisher of the Las Vegas Advisor newsletter.

“Gaming customers won’t stand for it — they’ll go elsewhere,” he said.

Kane and others have gone one further, flooding the Internet with complaints in gambling chat rooms and on the Venetian’s Facebook page, a “Boycott Palazzo and Venetian” Facebook page and Tripadvisor, a travel reservations website with a public comment section that’s become required reading for hotel operators nationwide.

Rather than pay for a room at Palazzo, Kane and her friends stayed at Aria, where she quickly signed up for MGM Resorts International’s loyalty program. Competitor Caesars Entertainment has also offered to comp her stay in Las Vegas.

“Casinos tighten up all the time ... and then give comps to people who complain,” Compton said. “At least (Las Vegas Sands) is being honest with people.”

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  1. What's the problem? Join a company's players club and you'll get "comped" according to your play. What's fairer than that? The old way, you'd have to go, hat-in-hand, and beg for a comp. On the other hand, you don't like a hotel/casino's policies? Do as Joy did and go someplace else. That's what the free enterprise system is all about: Choices. The business makes theirs, and you make yours. Vote with your feet; vote with your dollars; but, for God's sake, quit whining!

  2. The thing is this: Once every other company on the Strip will follow the same policy the customer has no more choice. Actually, he has...

    To me, this action is short-term oriented, without further inside-looking. Sure, there may have been customers taking advantage of the comped room without actually "honoring" this guesture by actually gambling at the property and instead go elsewhere or not gamble at all. could have been the reason for this new strategy. On the other hand, I believe that people being comped usually do business at the hotel they're staying. Some do more, some to a lesser extent.

    In summary, this is a clear message to the customer that says: The casino is not willing to give you back as much as it used to. But at the same time it expects the customer to return to the property, anyways. I think it will backfire heavily.

    Traveling to Vegas is not a cat-hop to many people. Especially in today's times with the hassle at the airports and high energy costs. Therefore, people that have options will now again think 2x again before booking their trip to Vegas if all casinos follow this "new policy". Don't forget, there is a lot of gambling available all across the world now. And a lot of places where you don't get a comp. So what's the point then in visiting Vegas if there are no benefits to the visitor? Just because of the sun or the chlorid water? I think not, so.

    I am curious to see how the story continues. If it will spread just like the resort free thing, then I can only say this: Good night, Las Vegas.

    From Switzerland

  3. In order to get a "750 dollar room comp" you need to wager more or less the following amount:

    1 per cent house cut game (Baccarat):
    750 dollars are about 20 per cent of the theoretical hold (1.20 per cent). So then it would reqire a game of the volume of approx 750x100x5= 375,000 usd. This of course does not mean somebody will have to lose 375,000 usd, but to wager 375,000 dollars. This isn't an easy task for someone betting 25 dollar black jack or 100 dollar baccarat. It would require 15,000 hands of 25 dollar black jack (which is about 150 hours or play) or 3750 hands of 100 dollars-per-hand on baccarat, which would take about 100 to 125 hands of play in the baccarat pit. Not very likely to happen that often.

    I also believe that The Venetian still keeps comping the really big players without asking, although the official statement now says "No more room comps". This will eliminate all free room hustlers and indeed will result in higher revenues if there are still enough gamblers flocking in.

    From Switzerland

  4. The casinos in California might be able to get some more business.

    Since China is the Sands main moneymaker, maybe he can take a hit on Vegas? Do they still offer free drinks for players.

    I was at the Cannery once, $500. ahead and ask for a small B&B on the rocks. The cocktail waitress came back and said they don't comp that according to the bartender. "That's OK, I said, I got some at home." ...and then I cashed out and left.

  5. Adelson is the same guy who owed so much to contractors and sub-contractors and left them high and dry. Greed is not a good trait and customers will file out of your business in droves.

  6. Ludicrous ?
    Foolish ?
    Self Destructive ?
    Short-Sighted ?

    All Of The Above !

  7. Sounds to me like they think they'll make just as much or even more money than they do on the marginal gaming customer who may be affected by this policy. Give them credit for trying, at least!

  8. Homer

    Thanks for your critis. However, would you be so kind and be a bit more specific? Define please if you know everything so much better than I do.
    I have serious doubt that the casinos give you back more than 20 per cent of your theoretical loss, and from this point of view my calculations are probably not 100 per cent correct, but giving an idea how much game is needed before you can ask for your deluxe room being comped.
    A 25 dollar BJ player usually is not playing big enough to get a room comp, with or without the new Adelson-rule. Even if he's rated as "weak player" (giving up about 1 to 2 extra per cent to the house).
    A player wagering 100 to 300 dollars per hand , betting 2 hands , stands a pretty good chance of being comped after playing 2-3 hours. And then my calculation is pretty much correct. Average bet 150 dollars x 2 hands x 60 rounds per hour= 18,000 Dollars play through in 2 hours. Make it 4 hours, and you have 36,000 dollars wagered. 1 per cent of that is about 360 dollars theoretical loss, and from that the casino has to pay taxes and everything else and if they give you 20 per cent of that (80-100), then you may get lucky and get your room.

    And if you do not agree with this calculation please give me yours. I will gladly look into that. Stop talking about Europe or America or whatever, give me cold facts that are useful, or go back to your in-debt-credit-card lifestyle and be happy with that.

    From Switzerland

  9. This decision to stop or reduce certain comp items and at different comp levels by Sheldon is because the Asia casino market is now the main revenue generator for his company...Period! Frankly this move helps the other casino properties with similar offerings, which will divert customers from Palazzo and Venetian to the Wynn and MGM properties.

    Thanks Sheldon for helping redistribute your customer base on the Las Vegas strip. Good stuff.

  10. Boris knows more about Vegas casinos than 90% OF VEGAS PEOPLE DO (MYSLEF INCLUDED). Adelson said under oath tat he was on prescription drugs and couldn't remember anything around 2001 and 2002.

    While Adelson does philanthropic things for the troops and others, it seems he digs in on somethings that make him look bad. Like suing a reporter who had a kid with cancer. Obviously, he does not deserve to be ripped off because he is rich, but some of the litigation with the Macao business person seamed counter productive. Then he's concern about human rights in Israel but not so much China.

    http://www.a2zmacau.com/398/las-vegas-sa...

  11. Boris, respectly, your calculations on the theo requirements are not accurate. Good try, your way off.

    No, you figure the numbers. Nothing is free in this world of comps :)

  12. Thank you Homer!
    I agree, Boris always knows better! I really wonder where he gets all his info! There is never and was never a Casino in the US which comps at 20%. Average margin is 35-40% on international clients! However, following the comments on here I am amazed that only the experts cry out loud. Assuming, because they can not get their free-bees anymore and take away the real customers air to breathe! I would not give or comp a dime to players like Boris, weather they come from Switzerland or elsewhere! Comps to the customers who deserve comps! They get and always will get their comps and being invited back for more! Get rid of the crap who is asking how much and how long they have to play to get a free buffet or room!
    Following the rest of the story, there is no room at the Venetian worth like 750$. That is a soft cost for the company, practically just moving numbers from one pocket to the other. The rooms are there,...and certainly not filled with paying tourists or conventioneers!
    But Adelson thinks he is at the high of his game and with booming markets in Asia, he does not need Las Vegas anymore! ....good luck!
    Las Vegas is and always will be the Mecca of gaming,...in good and in bad times!...and one word of advise to Adelson,...never forget where all started for him. It was Las Vegas!

  13. I still can't understand why folks stay on the strip and pay high prices when there are many great places on Boulder Hwy and downtown? My wife and I have always had a good time and the folks working at those places seem friendlier...

  14. I used to stay and play there all the time, since the Venetian opened a little over ten years ago. I was loyal to them. Ate in their restaurants, tipped their people well, and more than paid for my rooms at the tables. Last fall they sent me many free room offers. The offers were good any time. I called and decided to go during a slow mid-week. They told me that all of my offers were cancelled but that I could pay for a room at a casino rate which was twice as high as I could get the room for on Expedia. I now stay at the Wynn and the Cosmopolitan and refuse to spend a penny at the Palazzo, including at my favorite restaurant, Carnavino. They are the only place in Vegas that has truly left a sour taste in my mouth where I refuse to give them a penny of business. Funny thing is, I decide where we take our small convention and we took that elsewhere, too. In the end it worked out fine. I'm happy to be appreciated at my new places. And they are happy to take my money (which is a lot more than a room from expedia)and they comp me just fine.

  15. BorisR assumes that a comp'ed room means a loss of revenue which needs to be made up by the theoretical amount of wagers that has to be made so that the casino's winnings turns that loss from the comped room into a profit. But what he does not consider is could possible be a number of rooms that are vacant on a given day. Comp'ed rooms during that time represents no loss of revenue so all losses by the gambler is all gain for the casino. His calculation is relevant only if there is a loss of a paying customer because the room was given as a comp'ed room.

  16. At least boris has numbers, what are yours Long time??

  17. Regardless who is or is not correct concerning the correct formula used to calculate entitlement to comps, obviously Mr. Adelson's accountants and financial analysts have established to his satisfaction that the new comp policy will save money. Time will tell. Given the nature of the company-----most revenues and earnings coming from Macau, his Las Vegas properties getting a larger share of non-gambling conventioneers, etc., this may be a beneficial move. Can't say I approve of him reneging on Ms. Kane's comped room after it apparently had already been promised to her, if that is what happened.

  18. Hello all, I am sorry for your recent dissapointment. Customer Loyalty is crucial to any business, however, The loyalty should go both ways!!
    As Regional Director for Caesars Entertainment, I feel it is my responsibility to create loyal long term relationships with my valued Casinos players. I am here to take care of your needs. What ...would this consist of? rooms, Suites, casino credit, dinner reservations, transportation, shows, spa appointments, and anything else that will make them comfortable. I am the contact person to know.
    One call and you are on your way to a wonderful gaming expereince. I can't promise that you will be a winner but I promise you I will deliver!! I am looking forward to hearing from you. reach out anytime via e mail [email protected]
    reach out on FB, Lets be friends and if you are a slot player please inquire about an amazing forum for Slot lovers.
    Be safe and be well and always remember "it's not the weight of the load, it's how you carry it." Myra [email protected]

  19. Ok, let's make peace, not war :) Whoever has the right figures isn't really relevant. Some casinos give maybe 20 per cent of your theoretical expected losses, while some other casinos perhaps can risk to give you more. If you're a known guest to gamble at times extremely heavy but then at times when you don't feel like it is also possible that you get your room comped even then.
    But the point is this: No matter how much they give you, isn't it worth speculating of "going for" the comped room by wagering for hours at fairly high amounts that you don't really want to lose?
    Getting the room tab being taken up by the house is nice, but there's a bad smell in your mouth if at the same time you get your 150 dollar room comped you realize that you actually not lost the theoretical expected amount but perhaps 50x that much. And from this point of view I can live with the fact that I am not a comped guest at Venetian or the Wynn. Like probably many other writers in here, too.
    After all, the comp system is an effective marketing tool to draw the customer into a casino and have him stay and play there. It would absolutely make no sense to comp rooms to people that only come for sight-seing and sitting at the poolside. And the days when you had to know the right person and palm-grease this guy in order to get your free rooms for the weekend when you had plans to go party in town are (fortunately) over. With today's electronic player rating tools it has become a much better way of comping the right people and not wasting money for non playing customers. Not comping at all, even if somebody wagers heavily,will definetely hurt the business and looks bad for the system. That's how I see it.

    From Switzerland

  20. Thanks Mred, you are right Boris has numbers, but his numbers are missing the mark, big time. I would think Boris would know the correct numbers being he is in the casinos many hours of the day. Nothing is free my friend, let him learn on his own. We will let him know when he is correct.

  21. Longtimevegan, again thanks for reminding me how stupid I am. However, I am not stupid enough to change a "free room" with thousands of dollars playthrough needed. I hope this is clear enough. And to repeat myself, I have serious reason to doubt that the casinos can give you a kick-back of 40 per cent or higher on theoretical expected losses. If you only check how much you get in return for playing the slots , that point value is worth something like 0.015 or 0.20 per cent of your coin-in, sometimes higher when you are being offered point-multipliers, but this number is only an indicator that the casinos are not stupid enough to give way 40 or more per cent of their profits for the gamblers' pleasure.

    You remind me of one of the other guys above just criticizing my comment without giving any information that shows you understand the business policies any better than I do. Whatever, say what you want, it's irrelevant for me. I get my comps anyways.

    From Switzerland

  22. ...the comps I get, for your info is usually limited to some dining invitations and such, but I gladly pay for my room. It's not a shame being a small player I would think. Would you?