The casino industry was forever changed in November 1989 when the MIRAGE opened its doors in Las Vegas. At a time when the Las Vegas Hilton was the world’s largest hotel with 2,000 rooms, the MIRAGE checked in with almost 3,000—more than half again as large as anything on the planet. Why build such a large hotel? In my opinion, Steve Wynn was reinventing the casino hotel, a move that made the MIRAGE a destination in itself.
At a time when the industry was maturing and luring walk-in traffic from neighboring properties was getting ever more difficult, Wynn undoubtedly noted that with occupancy rates at 95 percent-plus, a casino could rely almost solely on its in-house population to ensure profitability—just build it big enough. In a final step, the MIRAGE was also the first to mandate that each department make money, which was a huge change from when the casino drove all the revenue and food, rooms, beverages and entertainment were given away to lure high rollers and gamblers.
For the first time, high-end restaurants were touted, not buffets; nightclubs actually sold drinks in an environment where almost every drink was given away; entertainment was no longer Tom Jones and boxing (two proven draws for gamblers), it was hip-hop artists, rock bands and any act that could actually sell out a venue. And then came the arenas, as properties added 3,500–7,000 seat entertainment palaces to capitalize on this new trend.
The end result? The MIRAGE was the template for a mega-resort as a destination and Las Vegas itself was soon marketed as one big mega-mega-resort. The fact is, Las Vegas is the only United States gaming venue that is a destination in and of itself, and consequently, it is immune to the ravages of competition—at least as long as tradeshows do not move to a virtual world or another terrorist attack ravages the airline industry.
But what about Atlantic City, Tunica, Gulfport, Laughlin, Reno and other cities that have created hubs of 7–12 casino hotels? As Native American casino operations continue to expand, and as states look to generate revenue with racinos and slot parlors, the coming era of hyper-competition in the casino industry will create for operators (just as it has for gamblers) winners and losers. These specific cities will be hurt, no doubt about it. Atlantic City is already feeling the heat from Empire City (a racino at Yonkers Raceway in New York) and Pennsylvania slot parlors. Early in 2007, gaming revenue was off 2–4 percent over 2006, and that figure jumped to more than 7 percent in October. When any major storm hits on a Friday and effectively wipes a weekend off the calendar, 15–20 percent year-over-year declines are commonplace.
The industry is already gearing up to answer the problem in its usual way: waiting. In December 2007, one casino executive was quoted in the Press of Atlantic City as saying, “Until we get to the point in the beginning of next year (2008) where we’re comparing ourselves to the period of time where Philadelphia racinos came online, we’re just going to continue to see these declines.” True genius—the year-over-year comparisons won’t be as bad. The numbers will still be lower, but they just won’t seem as bad.
What can these properties do? The answer is easy, but difficult to achieve. They must reinvent themselves as a destination. There are ways to re-create an entire resort city as a destination, but it hasn’t been done to date. Back in the mid-1990s, I was part of the team that created the Laughlin Tourism Committee to explore ways to market the city as one entity. The good news is that we did bring about numerous positive changes for Laughlin, perhaps the most important being an ability to advertise in our largest feeder market, Las Vegas. We also developed and expanded many of the citywide events Laughlin is still known for today, including the River Stampede Rodeo, SCORE off-road racing and numerous others.
The bad news is marketing the city as a whole made it very difficult to distinguish one property from another—a nightmare for the more upscale properties that found themselves in a situation where each property competed for the same customer, more or less. Since it helped stabilize the market to some degree, however, it did stem the decline. I would have preferred to see these events held Sunday through Thursday—days when we could barely give rooms away—and free up the weekends (which always held their own), but it was difficult to get all the properties to agree to unconventional ideas and suggestions.
There were a number of other ideas that were bandied about, and perhaps any number of them might have worked. Again, the challenge was getting every property to agree to implement these ideas, and then agree on how the benefits would be shared. That was the tough part.
At that time we looked at developing an infomercial for Laughlin. It was basically taking Bob Stupak’s concept for Vegas World (his property before the Stratosphere, for those not old enough to remember) to the extreme. Stupak packaged airfare, rooms, food, drinks, limos and match play coupons to entice individuals to forsake the Strip for his less-than-stellar property. This concept might still work for Laughlin, Tunica or Gulfport, where better weather and a lack of clearly defined properties could open up the venue to an audience that might otherwise look elsewhere (translation: closer to home).
We also looked at partnering with an airline (back then it was Sun Country) to bring more people to Laughlin, and this might work for Atlantic City. The problem with the “resort” city is the same as it was when I worked at Bally’s Park Place in 1984: an inability to fully utilize Atlantic City International Airport. (Much like Laughlin International Airport, we had one flight a week that went to Canada.) Spirit Airlines and Delta Connection service the city today, but it’s still not enough. This idea might require subsidizing the airfare to ensure profitability for the airline, but anything that can be done to extend Atlantic City’s reach beyond its current 250-mile radius must be attempted. It may also help to increase convention business, reducing the need to lower room rates, especially in the off-season.
These destination resorts could also explore developing “must-see” attractions. In Laughlin, I explored the possibility of creating a “water screen” show on the Colorado River, complete with nightly fireworks. I had hoped to lure a corporate sponsor through advertising embedded in the multi-media presentation, but this was one concept that wound up sinking along with the gaming revenue at the time. Today, a resort city like Laughlin or Gulfport might consider building a Dubai-inspired ski world, an indoor skiing facility that would not only provide a refreshing coolness, but help expand the demographic base from snowbird to snowboarder.
The reality is that I do not believe any of these cities can or will reinvent itself as a destination. Rather, it will be done on a property-by-property basis, and the winners will be those who can think outside the box to offer exclusive amenities and experiences that cannot be delivered anywhere else or by anyone else.
But innovation in the casino industry comes very slowly. Most operators still do not allow players to use their slot card at every property in the chain. The traditional solution to competition has been to lower room rates. Again, Laughlin in the mid-1990s provides a textbook example of what not to do: We dropped room rates in December to $5 per night midweek, and it was $15 at the “high-end” Flamingo Hilton. That case study proves there needs to be another way out.
What can a property do? Technological innovation offers a number of viable possibilities. I wonder how long it will be before anyone tries one of the following proposals, let alone everyone in the industry adopts one.
• To promote player loyalty (and stave off having your best players go to another property), I propose that a property create an online casino and allow its players to use the points on their player reward cards to play reel slots and Video Poker. Since no money changes hands, I believe a test case could be made that this is a legal venture. It might require redefining the value of reward points, but giving players the chance to win points that can be converted to comps and other rewards is a heck of a lot easier and more convenient than driving to the nearest racino.
• New electronic Poker tables are in use at Mohegun Sun, the Seminole Hard Rock properties in Florida, and others. Since no cards or chips are used, it would be incredibly easy for a casino to set up outdoor Poker parlors to take advantage of nice weather and create a new playing environment.
• Slot machines are moving to server-based technology. With the “guts” of slot machines on a hard drive rather than inside the machine, the games can be changed at will. But I believe the real benefit is that it will allow a forward-thinking casino the opportunity to go wireless and provide players with hand-held slot machines and devices that can be played anywhere—on the beach, at restaurants or even in their rooms.
Any of these ideas would provide a unique selling position for a casino anywhere. Add exclusive dining, entertainment and decor options, and many more properties can become destinations. The MIRAGE set the bar extremely high, but solutions don’t have to cost hundreds of millions of dollars. Just offer something that no one else has. Numerous options fit that bill.
Wayne Schaffel is President of Public Relations Network. He is a 25-year marketing and public relations veteran with wide-ranging casino experience. He can be reached at (917) 903-0309 or waynehschaffel@aol.com.
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