Royal Poker Blog

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Originally posted by: mindbender
First of all, Mindbender has enjoyed nearly everyone of your posts and hope you will jump in more often.....

How would you gage the mood of casino management? Are they taking the downturn in stride or sort of running around acting a bit crazy?

Does it feel slower this month compared to May?

How much of the downturn is a result of the new casinos in Asia?

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1. Thank you. Like I said, I like talking shop so I'm happy to be here.

2. Everyone is running around crazy. Very stressful times. Gotta figure out how to make your numbers in a declining economy. Lots of people getting laid off, including management. Very few people feel safe.

3. We don't really look at things month to month because of seasonality but rather year over year. That having been said, it's been a VERY slow six months.

4. Not a lot, and not at all in the non-Vegas markets. In fact, many casinos are targeting foreign play very heavily because of their increased buying power given a weak dollar and this has been an effective strategy for those with those capabilities.

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Originally posted by: JFReller
casionboss,

So my question is, why don't all casinos offer what players refer to as "full pay" video poker?

-JFR

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Basically, as I alluded to before, because video poker in general is not nearly as profitable as slots. In a market where you can have only a finite amount of machines, it's pretty much a no brainer to not offer a machine where you potentially could get your brains beaten out when you could put the newest slot there and make more money. In a place like Vegas where there are no such regulatory constraints, there is a similar cost benefit analysis that is done.

There is another school of thought that is in the minority, though, that says that offering these games could actually increase win. Say you advertise full pay machines but only put a bank or two of them out there. You have non-skill players who will play these games because of the big "100% Payback" signs but because they don't know the strategy will lose. And because you don't have a lot of these machines, if you do get an advantage player in house and the banks are full then they will still play an unprofitable game rather than leave. However, not a lot of people subscribe to this as just not having them at all is an easier decision to make for a slot director.

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Originally posted by: JFReller
Casinoboss,

Thanks for the link; I've read several things by and about Mr. Loveman. I printed out the article and will read it with great interest. Mention of Mr. Loveman leads me to another question.

From what I've read and seen, Mr. Loveman seems to have bucked the traditional thinking on price elasticity in the industry. Do you think that there is a higher level of price elasticity than was previously thought or do you think that any negative reaction to price increases is just a delayed reaction that may be difficult to reverse?

The later sentiment is popular with players, possibly because they hope it to be the case. The level of vitriol among some players towards price increases at Harrah's is bound to negatively impact at some point because word of mouth is very effective marketing.

-JFR

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Tough one! Let me dust off my economics book!

I guess it depends on what we are calling the "price".

Overall, like I mentioned in a early post it's my opinion that most marketing programs are unprofitable and only serve to lower the reservation price and make customers loyal to the best offer they get, not to any particular brand (the latter is the preference). Basically casinos are largely buying their business. This "price", IMO, is all-inclusive to include the offer cost, hotel rate, table game minimums, etc. So if you consider this reservation price as the "higher level of price elasticity", then yes I'd agree. However, I don't know that you will see a ton of elasticity in the retail price (i.e., the prices you see for rooms, buffets, etc.) if for nothing else that given the mergers there are not a lot of alternatives. So, do I see casinos adding more $5 tables and lowering the prices of the buffets, yes. Maybe 10-20% or so. But do I see the days of $2 BJ everywhere and $1.99 loss leader buffets returning, no.