Casino revenue tanks after Las Vegas Sands cuts comps
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Sun file photos
The Venetian, left, and Palazzo hotel-casinos on the Las Vegas Strip.
Wednesday
11 May 2011
6:53 p.m.
Updated
11 May 2011 9:58 p.m.
Sun archives
- Atlantic City casinos cut back on freebies amid revenue slump (4-23-2011)
- Las Vegas Sands cuts bait: Comps (2-28-2011)
- Las Vegas Sands swings to profit in 4Q on cost-cutting (2-3-2011)
- Air carrier to partner with casinos on New York flights (2-21-2011)
- MGM loyalty program will reward customers with perks not imagined previously (1-6-2011)
After scrapping promotional offers such as free rooms to entice gamblers, the owner of the Venetian and Palazzo in Las Vegas reported a 47 percent decline in casino revenue in the first quarter and a 6 percent drop in room revenue as occupancy slipped to 83.9 percent.
Still, some experts say it’s too soon to call Las Vegas Sands’ strategy a flop.
The resorts have yet to cycle through multiple seasons that attract different types of customers, from tourists to conventiongoers, said Bill Lerner, a principal with investment analyst Union Gaming Group.
“I’d want to see the impact over a full year to understand what the impact is to volume at the property,” Lerner said. “It’s early in the initiative.”
At the Las Vegas properties, slot machine wagering fell 36 percent and table games wagering fell by 13 percent in the first quarter compared with the same period a year ago.
Players were especially lucky at the tables during the quarter, which depressed results, the company said.
Promotional spending fell 64 percent in the first quarter, including fewer comps and lower business volume. Although occupancy fell, average daily room rates rose 2 percent to $212. Food and beverage revenue rose 12 percent as convention business improved, and retail, royalty fee and other revenue rose 28 percent.
While still comping its biggest high rollers and honoring points customers earn by gambling, the company decided to cut year-round enticements for ordinary gamblers with the goal of filling more rooms with cash customers.
The shift was dramatic, as the company said 97 percent of occupied rooms in the first quarter were rented for cash compared with 68 percent a year ago.
To bolster the effort, Las Vegas Sands signed a marketing deal last year with Intercontinental Hotels Group, a hotel giant with 180 million annual guests.
CORRECTION: Some of the percentage changes noted in this story have been updated. | (May 11, 2011)
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Discussion 8 comments
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Sounds like it's on track to be a winning strategy. They need to purge themselves of these marginal players that only take, take, take and don't give anything, but the casino and its employees a hard time. I'm sure the deal with IHG will surely bring more deep-pocketed players with spending money to this casino. The marginal players will just trade down to properties that they should have been at in the first place. Other companies are going to have to do this exact same thing once we come out of this recession. No business can subsist or even expand on the meager margins they suffered during this recession which means prices will rise and hopefully employment and wages.
When I gamble, I enjoy it when my money last longer at the machines. I know when the machines are tight and when I last only 30 minutes with a thousand dollars verses a couple of hours. When I go to the Venetian or the Palazzo, I am luck to last ten minutes. You never find a video poker machine with the return of 6/9 at these locations. More often you find the ratio of 5/6. That is the return you are looking for when you win a flush or full house.
Zackie Nice try .People are not stupid. They will go and get their moneys worth whether being at a high end resort WYNN/ Encore or a lesser Casino Harrah's. Everyone is not on an expense account where u can charge . Be real the economy is still bad. With your plan we wouldn't have any comps. Go back to your frankfurter stand.
Serves him right. Let him lose it all!
There nothing like shooing away ordinary people, seeing how they make up a majority of the population.
Clearly, this is Obama's fault. Sheldon is a lawyered-up genius billionaire capitalist. It couldn't possibly be Sheldon's fault.
@Zackie: You may very well be right. Just down the street at City Cemetery they don't want no stinkin' looky-loos neither.
Being a local I've decided to spend my money elsewhere. My family, who lives in California, would visit at least 3 times a year and stay, eat, and gamble at Venetian/Palazzo. Cutting all promotional offers they've decided to spend their money and stay at other properties like Wynn.
This business strategy will completely fail short term and long term the effects will still be felt. Cash customers are going to spend less because they've now paid for and in some cases paid higher rates than previous stays for their rooms. Gambling is psychological in nature and it's easier to get people to spend more money gambling when they feel like they may get something larger in return. What do they get for spending $250+/night on a room? No real return.
If Adelson wants to be a cash customer and convention only hotel/casino I wish him much luck. You'll continue to see Las Vegas Sands numbers lower than expectations. Convention attendees do not typically gamble as much as guests who are comped.
I'm also an LVS investor and if this continues you're going to see investors like me go elsewhere for a better return on investment. My guess is Macau and Singapore will fund operations in Las Vegas to just to stay afloat for the foreseeable future.
A-hoo,
a-ha,
a-hoo-hoo-hoo-hoo-ha-ha-ha-ha........
cccraaaaaazy baaaby.
Check me into that laughing academy with Sheldon.(ooo-eeeeeee!!)
There are a lot of people with money who are real cheap skates. So cutting their comps will drive them away. Let's see how long this program lasts before the comps kick back in. I wonder how many have gone across the street to the Wynn?
They have some of the more popular watering holes, restaurants and shows...but that is not enough to attract people. People want to think the came out ahead.
@zackisbinkes,
Good comments, good insight.
I also stopped playing $1 slots there. Wynn or Caesars now! Its nice having choices. I do feel sorry for their nice cocktail servers. Wynn gets my $5 tips now.
As a person who has lived in Las Vegas my entire life, I hope all industries succeed. I wonder if the Sands can only go after whales in a market where even sharks and sardines help the bottom line...
Next we should take out the lighting and the sound systems in all the casinos because all those are just distractions from the real money maker, the gaming. Why doesn't Vegas just build a giant warehouse with rows of machines and credit card slots where nothing happens and no ones focus is pulled away from pouring cash into a bottomless pit. Build it near where a lot of tourists will be able to be duped into dropping their life savings so they can see clips of the Munsters, Gilligans Island or Sex and the City every time they get a full house. Oh wait they already have this...it's called the airport. Vegas has lost touch with 'Why' people came here in the first place...free drinks, escape from reality and to just get away. Doesn't sound like they are getting away from anything. Vegas has become horribly overpriced and you can barely get a free drink in this town anymore. Even when you are gambling casinos are charging for drinks, full price. Lets face it Big Corporate Business has "Lost Vegas".
Only one person at the Las Vegas Sands responsible for the flop...Sheldon Adelson. It was totally his idea and he made sure it got pushed through. No one to blame but himself, but no doubt someone else's head within his regime will be on the chopping block.
His focus is where the real money's being made...Singapore.
It's up to the gaming public to ensure this to be a failure. Tell are your family and friends they are not welcome at the Venetian or Palazzo. Vote with your feet and force that greedy jew to either sell his Vegas properties and move to Asia or change his policies.
The V was always way too generous for their own good with regards to room offers and way too tight with regards to comping players based on their actual play. It should have been the other way around. No way a high end casino like Venetian should be using the Harrah's Total Rewards business model of giving away the rooms for free and rely on the good will of the players to gamble. Harrah's players can gamble and redeem their comps back home at their local Harrah's casino. Venetian players comps are worthless once the players leave Vegas.
The Connecticut business model would be the one that fits best. X play gets Y comps...send bonus event and coupon mailers only to the top 10% of customers or based on tier level tailored to whether they are local or non-local. Charge off the cost of all redeemed comps against accrued comp balances and in exchange have much more generous comp rates. That way even a mid-level player or conventioneer who plays 4 hours a day would probably accrue enough comps for a meal or two or cover the costs of maybe one room night over a several day trip creating a win-win for the resort and the player.
Now, if the V could talk all their competitors into getting rid of comps then they might have success at it...but then the FTC would have some real problems.
Las Vegas Sands should be congratulated for their gamble to eliminate marginal players, who have been getting room and meal comps, that may not be justified by their casino play. With the Sands Expo Center, supporting convention and trade show business, the Venetian and Palazzo, have much greater mid week room demand, than the typical strip casino resort. I worked with Sheldon Adelson, as President/ COO of the Sands, at the time on the Expo Center opening. Sheldon and his partners also owned the Comdex Trade Show, and most casino operators wanted nothing to do with the computer geek attendees. We offered to triple the mid week room rates, and everyone, but Bill Bennett at Circus Circus, booked the Comdex rooms, discovering that their gourmet restaurants customers were cash (not comps) and that their meeting rooms were full of high profit Comdex exhibitor functions. Atlantic City is facing the same problem with comps, cash give away, and other promotional costs reaching a third of casino win at many properties. And 5 of the 11 casinos are just emerging from bankruptcy.
The secret for LV Sands and others is a careful balancing act, determining the true value of each customer, and when their play may justify a comp room. For marginal customers it will certainly be mid week, and at times when their are few convention rooms on the books. LV Sands is a publicly traded company and their management must be more comcerned with the bottom line, than the casino win.
Steve Norton
Las Vegas Sands should be congratulated for their gamble to eliminate marginal players, who have been getting room and meal comps, that may not be justified by their casino play. With the Sands Expo Center, supporting convention and trade show business, the Venetian and Palazzo, have much greater mid week room demand, than the typical strip casino resort. I worked with Sheldon Adelson, as President/ COO of the Sands, at the time on the Expo Center opening. Sheldon and his partners also owned the Comdex Trade Show, and most casino operators wanted nothing to do with the computer geek attendees. We offered to triple the mid week room rates, and everyone, but Bill Bennett at Circus Circus, booked the Comdex rooms, discovering that their gourmet restaurants customers were cash (not comps) and that their meeting rooms were full of high profit Comdex exhibitor functions. Atlantic City is facing the same problem with comps, cash give away, and other promotional costs reaching a third of casino win at many properties. And 5 of the 11 casinos are just emerging from bankruptcy.
The secret for LV Sands and others is a careful balancing act, determining the true value of each customer, and when their play may justify a comp room. For marginal customers it will certainly be mid week, and at times when their are few convention rooms on the books. Las Vegas Sands Inc., as a publicly traded company has to put the companies bottom line profits above the casino win, which is so publicly followed. Let's concentrate on the important numbers.
Steve Norton
I spent 4 days playing at the Venetian last month. The Slots were so tight they were like expensive parking meters and not fun at all. I have no intention of ever entering the place again. Next month Caesars will get my business. At least there they throw you a few bucks now and then..
Comps are only good if the recipient is a steady gambler, enough of the freeloaders not playing the tables when they get a nice room to stay in, not to mention free meals. Good move Sands, I'm sure it'll save ya money in the long run.
Thanks Martin9! You know how to run a joint like the old days!
Last time I played at Palazzo it did seem tight but I had a wonderful time anyway. I bet they change back to free mid week rooms for mid rollers like me in 6 months. Sheldon hates seeing money clips walk past to Wynn. :)
We haven't been to Venetian/Palazzo since last fall, precisely because they have become so tight with their comps policy.
Are we marginal gamblers? Considering we easily leave behind three thousand dollars at their tight machines over a three day stay, that's possible. But really, if a thousand dollars a day doesn't cover the cost of a "comped room," then how much more would they like to have?
By contrast, Aria and Cosmopolitan have given us free upgraded rooms this year (plus free slot play). Guess where we stayed on our last two trips to LV?
Sands went way too far in retracting comps. I don't want to get into my personal numbers but I get comped at Caesars, Wynn and Cosmo. I always used to play at Sands but then they told me that they were rescinding all the offers they gave me. I took my business elsewhere. I walk thru and the casino is dead compared to what it used to be. Many of the workers know my name and ask me to play but I tell them I have to play where I'm being comp'd. I miss taking care of my table friends, cocktail waitresses, etc. For those who think that they only eliminated comps for marginal players I'd have to tell you that you don't know what you are talking about. I paid for my free room many times over each and every stay. Now I pay for my free room many times over where somebody at least says "Thanks for your business. Here's a free room any time you want to come back."