Determining ROI Is Worth Effort
Casinos that implement internal improvement programs to boost performance and then actually realize an increase in revenue can determine how much the program contributed to the gain and then calculate the program’s return on investment.
As casinos compete for market share, they pursue various strategies to accomplish their purpose and vision. One strategy is to roll out an internal improvement program that enhances overall performance. From there, the casino should want to know what it got in return for its investment in the program. The ROI can be determined and is well worth the effort.
Here are some tips on ROI and improvement programs.
Break It Down. Assuming the casino has an increase in revenue from one year to the next after implementing an improvement program, the property should break that revenue gain down to get at the program’s actual contribution to the numbers.
Take A Look At the Hold. Calculate the percent increase in hold from gaming machines and table games. Once you have that number, subtract it from the overall percent increase in revenue.
Talley Up Marketing and Promotions. Next, determine the percent increase in spending for marketing and promotions and subtract that from the new, lower number calculated in the first step.
Normalized Growth. After subtracting the increase in marketing and promotions expenditures, you have the casino’s normalized growth.
Now Determine the Program’s Contribution. Subtract the normalized growth from the initial percent increase in revenue and the end result is the improvement program’s contribution to revenue growth.
Apply the ROI Formula. Knowing how much an improvement program contributed to revenue growth is important information. The final step is to calculate the program’s ROI. To do that, calculate the program’s contribution in dollars. That’s the benefit. Subtract the cost of the improvement program from the benefit, divide that number by the total cost of the program and multiply that number by 100. There’s your ROI.
To help casinos understand and deal with return on investment, we have published an ROI white paper. Those interested in obtaining a copy of the white paper should e-mail Lydia Baird, Robinson & Associates’ director of business development, at email@example.com or call her at 206-774-8856.