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Tangam article: Baccarat Revenue Management

May 14, 2013

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Yield-management strategies to drive Baccarat performance

Executive Summary

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

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President and General Manager at Mohegan Sun

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Sycuan Casino Resort

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The Star - Sydney

“Due to our ongoing success with Tangam at Sydney, we’re able to deliver the right product at the right time, leading to improvements in efficiency, transparency, decision-making and our bottom line.”

David Croft

,

General Manager Product & Strategy

View Press Release

Mohegan Sun

“We’d like to thank the exceptional team at Tangam Systems for what has been a very successful implementation that we undertook together. We immediately saw positive returns and an improved guest experience. Our team is very much looking forward to continue leveraging Tangam and all it has to offer from a floor optimization standpoint.”

Kevin Lowry

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Vice President and CFO

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What Clients Say About Us

Caesars Entertainment

“[Tangam’s] real-time data gives us a deeper insight that allows us to quickly adjust to customer needs, while also establishing new business goals and tracking the success of our strategy.”

Melissa Price

,

SVP of Corporate Gaming

View Press Release

Mohegan Sun

“Reporting alone doesn't provide answers. We chose SODA for its highly differentiated offering that provides a clear set of actionable recommendations, which maximize gaming performance and the guest experience.”

Jeff Hamilton

,

President and General Manager

View Press Release

Sycuan Casino Resort

“During our initial trial, it was amazing to see how quickly we were able to get to the answers in our data through the lens of SODA. This truly made analytics available to anyone - with intelligent recommendations, intuitive visualizations and seamless drill-downs. We are equally excited about the product roadmap over the coming months.”

Sierra Weyer

,

Director of Enterprise Analytics

View Press Release

Mohegan Sun

"Extending our partnership with Tangam to our full gaming operation, including tables and slots, was a no-brainer given Tangam's proven track record of business support."

Jeff Hamilton

,

President and General Manager at Mohegan Sun

View Press Release

Sycuan Casino Resort

"Sycuan is dedicated to providing an enhanced gaming experience for our patrons. By deploying powerful prescriptive analytics tools such as TYM and SODA, our operations and analytics teams are able to get data-driven insights at the right times to drive value to our business."

Douglas Vogelei

,

Senior Vice President of Casino Operations

View Press Release

The Star - Sydney

“Due to our ongoing success with Tangam at Sydney, we’re able to deliver the right product at the right time, leading to improvements in efficiency, transparency, decision-making and our bottom line.”

David Croft

,

General Manager Product & Strategy

View Press Release

Mohegan Sun

“We’d like to thank the exceptional team at Tangam Systems for what has been a very successful implementation that we undertook together. We immediately saw positive returns and an improved guest experience. Our team is very much looking forward to continue leveraging Tangam and all it has to offer from a floor optimization standpoint.”

Kevin Lowry

,

Vice President and CFO

View Press Release
Read All Testimonials