Why Most Casinos Should Implement a Grandfathering Policy
As I was driving down the Las Vegas Strip on the day that Caesars announced the pending name change of Ballys to The Horseshoe, I was recalling an unforgettable cab ride I took on the same stretch of road in the summer of 1990.
The Excalibur Hotel had just opened, and the cabbie was ranting in a thick Northeastern accent about how “Carpet America” was destroying the city with its focus exclusively on profitability. He said that the only places left in town to make a real bet were Caesars Palace and The Horseshoe downtown. Though I didn’t understand until his third mention that he was saying “corporate”, I took his point that those two casinos did take great pride in being true gambling houses, but even as a teenager I realized that every business’s goal is to make as much money as possible. Maximizing return on every investment is the whole point.
Our table games products help align player demand to table game-mix, open hours and pricing both for future planning and in real-time as demand ebbs and flows throughout the gaming day. The other day our team was engaged in a healthy discussion with a casino executive about dynamic pricing and the policy of grandfathering players in while raising table minimums.
In a previous blog, we discussed the various market factors involved that decide when a casino should consider grandfathering. Taking those factors into account most North American casinos probably should implement the policy, but most don’t. In fact, many casinos are taking away grandfathering when they shouldn’t be.
As discussed in that blog, from a strictly mathematical perspective, grandfathering is less profitable. In practice though, assuming the casino is not monopolizing a market, data shows that this is often not the case.
In our quest for increased profitability, we need to understand that there are many factors involved in the decisions we make including the guest experience, the psychology of the gambler, and importantly resistance of staff to price games up due to the difficult conversations that take place daily when raising table minimums. Our true north is a healthier bottom-line and we need to navigate our own swamps to reach our destination.
Much has been written in casino management texts about the great lengths that operators go to in designing a casino floor to influence player behavior including carpet styles, traffic patterns, lack of clocks, etc. Once the wise decision to dynamically yield in table games has been made, the most important question we need to ask ourselves is this: How can we continue to influence player behavior to maximize profits?
We have conducted impact analysis studies for some partners in the past who had removed and implemented grandfathering to see what effect the change had on their business and the results were enlightening. We will highlight some of those results later in the post, but first let’s focus on the player experience.
Guest Experience and Psychology of a Gambler
Consumers in general are accustomed to prices fluctuating to meet demand in almost every business sector and gaming is no different. Players expect sky high limits during New Year's Eve, major sporting events, or big concerts at a property. It is the everyday changes in table minimums throughout the peaks and valleys of a gaming day, however, that can really affect profitability. How those changes are carried out is as much an art as a science.
Does a swing floor manager reflexively raise prices at the beginning of a shift regardless of the action taking place at the time? How much time is given to players when raising a minimum: next hand, next shoe, 30 minutes? Without a grandfathering policy how does the player feel when prices are raised? From the player’s perspective, operators are sending the message that they don’t care about their business. Bet more or move on, we don’t have time for you.
What if the player is losing, which happens more often than not? Most gamblers are swayed by a wide range of emotions from ecstasy to agony with many stops in between. It is the roller coaster mix of those emotions, not math or logic, that drives them to gaming as entertainment in the first place. Where they are emotionally at the time they are pressed to decide to stay at a higher price or leave that table will dictate how they feel about the situation and your casino.
Dynamic Yielding in Practice
Operators spend a great deal of time and effort developing a pricing strategy for their table games, but I wonder if any time is spent contemplating whether their grand plans will actually be executed? Implementation is only as good as the department’s weakest manager. How confident can a leader be that their plans will be carried out effectively by the staff?
Our goal is to influence behavior by directing players toward tables where we want them to land; sometimes to increase game speed by spreading players over many tables, sometimes to not disrupt a large bettor by slowing them down. Both situations lead us to higher profits.
In reviewing our software’s recommendations at locations without grandfathering, we find that specific members of the staff dismiss strong opportunities to increase prices over time. Continually delivering bad news to a table full of people can be difficult for some. Or staff members will raise table limits on games where all the players are already meeting the new minimum. This can be less effective influencing behavior and often doesn’t help our cause.
A grandfathering policy allows all staff to execute the operator’s strategy more easily. Any manager can confidently survey their floor using basic casino math to determine which table they should raise without having to account for any additional psychological factors either for themselves or their patrons. No gambler has ever celebrated immediately after hearing that they have to bet more money.
With grandfathering in place, their minds think differently. Players generally understand the situation. It is getting busier and prices are being raised. “I better stay at this table longer to get more bang for my buck.”
Operators should generally not concern themselves with those patrons taking up that space. Casinos are in the business of taking bets, not turning them away. We want as much action as we can get for as long as we can get it, hopefully while using the tools at our disposal to manipulate circumstances to our advantage as painlessly as possible. With that in mind, operators should frame their thinking differently. The questions that should be asked are these:
- Where do I want my next player to sit that will offer the most profitable situation?
- Am I willing to sacrifice some profitability in the first 30 minutes of a busy segment of the gaming day to achieve much higher gains over the remaining two or three hours of that segment?
Which game would you raise?
All of this leads to the impact both removing and instituting grandfathering can have on an operation. Data has shown that casinos that removed grandfathering saw average play time for those affected by a raise in table minimum decrease by an average of 30%. Additionally, staff response to exploit high demand pricing opportunities decreases by 25% after grandfathering is removed.
Finally, the average rated wager for a table, which we would expect to be higher given the raise in minimum, tends to remain relatively flat. This last data point is likely the result of managers either not raising games that they should or raising limits on games where patrons are already meeting the higher minimum.
After a casino implements grandfathering, we have found that on average play time for all players experiencing a rise in table price increased by approximately 25 minutes per session and staff was 2.5 times more likely to capitalize on opportunities to increase table minimums when demand was high. Generally speaking, grandfathering is a policy that offers a rare win/win for operators and patrons alike while leading us to our ultimate destination of higher profits. A detail that operators and that old cabbie from long ago would celebrate.
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As the Director of Operations & Casino Strategy, Lee Vinocur has 20 years of experience in casino management with an in-depth knowledge of all table games, including poker. At Tangam, he helps clients all over the world implement data-driven management of table games spreads and pricing on the gaming floor to achieve their revenue management objectives.