Tangam article: Baccarat Revenue Management
Yield-management strategies to drive Baccarat performance
Baccarat is a popular family of games worldwide, and maximizing its performance through yield management is a top priority for table game executives. However, the concept of "optimum table games utilization" can be complicated and often misunderstood, leading to negative effects on profitability. Tangam Systems analyzed data from 19 casinos across four markets to understand the impact of utilization on player seating distribution, unoccupied tables, play-time, game speed, and ultimately, profit. The analysis focused on a specific casino, using head-count and player ratings data representing over 75,000 player visits in a $1000 (HKD) minimum bet mass-market Baccarat segment.
The study found that a minor utilization level correction from 4 to 3 players resulted in an additional $4 million HKD in profit for every 100,000 patron visits, a 6% improvement in profits. On the other hand, a departure from the optimal utilization from 3 to 2 leads to a $2.5 million HKD reduction in profit, an opportunity loss of 4%. The distribution of patron seating also plays a unique role in the determination of optimal utilization. When the average utilization for the patron segment is 4 patrons per table, the actual seating distribution of players shows that 22% of players are playing at tables with occupancies 9 or higher, and only 19% of players experience a table occupancy of 3-4 patrons per table, while 9% of tables are unoccupied. The study also demonstrates that increases in table occupancy beyond a certain point result in measurable reductions in patron play-time of up to 20%.
In terms of financial impact, the combined variables translated to per-patron net contribution (profit) peaking at $693 (HKD) per visit at an optimal target average utilization of 3, inclusive of labor rates and tax reductions. There is a 16% decline in net contribution going from an average utilization level of 3 to 5 and an 18% decline in net contribution going from a utilization level of 3 to 1.
In summary, an effective yield management strategy for Baccarat should include segmenting the patron base and measuring/analyzing the impact of utilization on play time, actual distribution of player occupancy, unoccupied tables, and game speed. Net contribution models incorporating the multiple dimensions subject to utilization should be built for each patron segment, and these models should be used to manage the game mix, table spread, and table limits to maximize overall net contribution. When player supply exceeds table or labor availability, these net contribution models can be used to quantify opportunity costs with respect to each patron segment and to adjust spreads/pricing to cater to the most valuable patron segments at the appropriate utilization levels. For further insights into the data and strategy see the complete publication by Tangam Systems below. Full Publication