Hotel revenue management practices were born out of the necessity of reconciling a limited supply of rooms with fluctuating demand and the need to maximize owner returns. Conversely, modern casino marketing efforts aim to maximize headcount and are often unconstrained by supply.
On the surface, there appears to be an inherent conflict between these two goals; however, I’ve will reconcile some of this tension and lead to the shared goal of both worlds: maximizing return on the hotel for the owners.
In traditional hotel yield, price is very straightforward: The amount of money a guest pays directly to the hotel for the room. With group rooms, this approach is slightly modified to include ancillary revenues, such as catering, meeting room rentals, etc.
In the context of casino resorts, we adopt an even more expansive definition of price: The total amount of money a guest contributes to the enterprise's bottom line through all associated activities during their visit. This understanding is the driver for why it can often make sense for casino resorts to offer casino comps and displace direct-paying customers.
On the surface, this is a simple change, but a more complex set of decisions emerges in practice. Do we consider the price to be a player's straight theoretical contribution based on play, or do we modify that figure to account for reinvestment? Once we’ve determined how to evaluate player worth for yield purposes, what systems and processes should we put in place to ensure alignment of player worth with room availability?
While the answers to these questions will differentiate one property program from another, at the end of the day, a universal practice for all well-constructed casino hotel yield programs is to redefine price.
Once a shared understanding is reached about how to determine the contribution of a player staying under a complimentary night, the implementation details are critical to a well-executed system. One area where I’ve often seen the most complexity is in how the approach is implemented in player development. The tension emerges because of player development goals that seem to be at odds with each other. One player development program goal is to increase guest loyalty among the highest-worth guests. In practice, properties often have hosts working off individual lists to maximize loyalty through a direct host-to-player relationship.
On peak nights, such as when concerts or other large demand drivers occur, the hotel yield system can often return “prices” that begin to exceed the floors of some player development programs. This can mean that, on the surface, tension can emerge between the host objectives and the goals of the hotel yield program.
To resolve this tension, host practices must be aligned with hotel yield goals and systems. For example, if hosts are just given blank checks to put players into rooms, the yield system often breaks down as lower-priced customers leverage their direct player development relationships to get in when their worth doesn’t justify it. Conversely, if hosts are constrained too much by price, it can harm the relational goals of the host program.
While there are best practices, there are no hard and fast rules in the alignment between the host process and the yield goals. One of the most important best practices is the alignment itself so hosts know what the hurdle is on any given night. A hurdle that is any hosted player isn’t enough. We must intentionally and systematically provide hosts dynamic hurdles so pricing alignment remains. Properties that take the time to align host goals with yield and set clear expectations will ultimately succeed, as this approach increases returns to owners and supports the goals of individual teams.
The final practice necessary for optimal yield is guaranteeing that all sources of business are in price parity with each other. Yield should be unbiased about where a guest comes from if they meet the price rendered by the yield ecosystem for that night. Worth and not source should steer availability for any given night.
While the right market mix will potentially feature guests from many different sources with varying levels of worth, casino resort yield works best when there is parity between these sources. This means, that if a night is yielding a $300 price, there is no more access for a $200 player than there is for a customer paying the front desk directly $200. This parity is critical for the whole ecosystem to operate effectively and reduce process friction.
Yielding a casino resort hotel is both straightforward and complex. The three practices we examined today are paramount to great casino resort yield management and will reduce the complexity of the process. First, redefine "price" to include the total contribution of a guest during their stay. Second, make sure that there is alignment between player development and yield management systems. Third, always ensure price parity between various sources of business at any given time.
I’ll close with a challenge to every casino resort revenue manager reading this: Which practice could you be more effective at? Do you have distinctly defined ways to determine when a player qualifies for a night? In other words, have you defined the price for players under comps? Have you outlined player development approaches to secure alignment? Do you hold to price parity in yield, regardless of source?