The Dollars and Sense Of Great Casino Service
Gaming was once run by visionaries. People who could look at the desert in Nevada and see opportunities. People who could look at a location and see the need for entertainment and risk it all to make it a reality. People who put other people first. They treated their employees like guests and the guests even better.
Now much of gaming is dictated by pencil-pushing, number-crunching, myopic executives who can tell you their hold percentage to the third decimal place. But they don’t know the names of anyone other than the executive team or, worse yet, only their boss.
Don’t get me wrong. It’s critical for a business to make money. But in today’s gaming environment and weak economy, more time is spent looking at the bottom line than at how to make the casino better for the guest.
I admit I have a bias. Look through my eyes and you’ll see guest service as a way to make casinos more profitable. When you spend hundreds of thousands of dollars to build a new parking garage for your guests, does that have a good ROI? What would the ROI be if you invested a small percentage of that money to train valet employees and people around the garage to smile and greet guests?
I was having coffee with a casino COO one day and we talked about guest service. He told me a little story. He asked a man in his maintenance department how often he rode the elevator at the casino’s resort. The fellow replied, “All day long.” The COO asked how often he encountered guests on his rides and the maintenance worker replied, “Almost all the trips.” The COO asked if he talked with the guests. The answer was no.
This maintenance employee had opportunities all day to make positive impressions and increase the level of guest satisfaction but didn’t do it. Management teams spend money so he has the latest mechanical tools but won’t invest one cent on the guest-service skills he needs.
I’m asked all the time to show how guest service is an investment that pays. “Show me the ROI!” OK, I’m going to share some formulas and research and you decide if guest-service improvement makes sense.
It’s well documented that highly satisfied customers buy more often, buy additional services, spend a larger portion of their income, exclaim a company’s positive reputation and are less concerned about price. I sit in meetings and hear marketing tell an executive team that the casino must lower buffet prices so it can compete. Think this through! Does this mean that if the casino provided a better guest experience, it could hold its prices and make more money or at least reduce the bleeding that many casinos have in their F&B areas?
Here’s a math teaser. It’s often said it costs five times as much to bring in a new guest as it does to keep an existing one. I agree. Yet, I have worked with casinos that spend $1 million a month to attract guests. Would it make sense to invest $100,000 on guest-service improvement and reduce your monthly marketing expense by 10 percent?
Look at it this way. Let’s say your casino has 250 visitors per day and that 1 percent of them decide not to come back because they received poor service.. This could happen. Let’s say the casino’s average win per guest is $100. On an annual basis, that translates into $91,250 your casino let slip away.
The flip side of the coin is that improved service would have a positive affect on all your guests every day of the year. I believe that if 1 percent of your happy guests spent just $50 one more day out of each year, you would reap more than $45,000 in extra profit.
These numbers are understated for most casinos but they show how expensive poor service can be.
Service Management Interest Group at Harvard Business School did some research and found that by retaining 5 percent of their customers, software companies could generate an additional 35 percent in profit. The same study found insurance companies could generate an additional 50 in profit and that credit card companies could add 125 percent. Gaming was not in the study but my guess is it would be in the +35 percent range.
I don’t know about your casino, but most I work with would be delighted to increase profits by 20 percent or more. That can be done by retaining guests.
Finally, Prof. James L. Heskett of Harvard Business School did research on loyalty and it’s amazing. He found that if a business’s customer ranks their satisfaction at less than 4 on a scale of 1 to 5 (5 being very satisfied), the company has about a 30 chance of retaining them. Looking at the level of guest service at casinos I have worked with, I would say very few average a 3. There are individuals and departments that might be in the 4 and 5 range but that’s unusual.
What is your casino’s current level of guest service? Are you a 4? Do you even know, based on timely, quantitative research? What would you need to invest to get from your current level to a 4? What could that investment generate for you this year and in the future?
Again, I admit I have a guest-service bias. But why are so many casinos wasting money on marketing that brings people to their property, only to disappoint them and drive them away? This is like a leaking boat. Plug the holes and you won’t have to bail as much or as often. If you improve your guest service, your marketing won’t need to work as hard.
I know the challenge with investing in service is that you can’t touch it or show it off when you walk through with a guest. I know it’s not a small investment. But I also know that when done properly, an investment in guest service pays for itself. It creates an asset.
Businesses that provide great service are worth so much more than the bricks and mortar of their facilities.