Casino Differentiation
- Download Citation Product differentiation: Key to Macau's gaming revenue growth For a tourism destination, the purpose of revenue management is to maximise the amount and minimise the risk of.
- To gain specific insight into casino customers, MMHI data for all U.S. Hospitality brands was filtered to include only those responses for customers of casino brands. Utilizing two full years of MMHI data (over 280,000 responses), the analysis filtered 21,901 submissions by members of the panel who reported on a recent casino stay.
How do casinos in Vegas differentiate themselves from each other to compete for customers? A casino is a casino is a casino. You gamble, you drink. What sets one apart from another are the amenities. Offering a further examination of the launch, as well as how it will ensure added differentiation from competitors, Andrey Kuznetsov, KamaGames CEO, explained: “Online poker is a highly competitive market and we’re determined to make our product the best available. With that in mind, we’re constantly adding new features and updates to. When selling a non-differentiated product, such as a casino resort, developing a brand and identity for the property is at the core. During the early life of the Strip, the resorts all followed a similar theme.
All business owners need to run their business with keeping a profit margin in mind. Same goes true when you operate a casino business. Like every business, this business also needs to employ numerous strategies to make sure that it runs profitably.
There are two main strategies which can be effective for every business including casino in term of pricing, differentiation etc. For example, when it comes to pricing to run a business, a land casino should run at minimum cost. This helps avoid financial risks. This further indicates that the casino needs to be in place like a warehouse. It should have cheap fittings, average quality food and staff.
Since you are putting in low cost to operate a casino, minimum amount is needed to maintain the business. You go for a cheaper room to rent and average quality meal. This will encourage the player to put lower amount on the table for betting. Also, this way you can enable more of those players to play at your casino who are not interested in luxuries. These players don’t think of going to top clubs or large gambling places to have a good time with low amount.
Differentiation in a Casino Business
Differentiation is another strategy to run a casino business. This refers to tactics and strategies for how you can distinguish your casino and its atmosphere than similar places. Many casino owners spend lots of money to build resort-like casinos. They provide luxurious amenities like mini bars in different rooms, golf course, etc. Also, they offer clubs or pools in order to attract their clients to the brightness of their casino. They ensure making these services to be like 5-star hotels type and hence make sure to choose the décor tastefully.
However, the abovementioned casinos are not only very costly to setup, but also tend to be very expensive to visit and play. They require players to come in a selected dress code and put heavy amount of money to start betting. Also, prices are fixed for the meals and drinks. These places often need you to pay heavy tips to the staff just to show off. In short, a visit to such casinos usually ends up with emptying your pocket for temporary yet useless pleasure.
Casino Differentiation Games
In general, casinos that run on any of the aforementioned strategies do not find it easy to move to the other one. A casino established and run with small amount will need a large cash influx in order to build a better facility so it can work to differentiate their products. A luxurious casino, on the other hand, is usually not able to minimize the costs to offer their products at cheaper prices.
Revenue Management Strategy
A good casino-centered revenue management strategy helps casino managers promote their casino to the right audience and define right pricing to lift their bottom-line revenue.
A casino resort requires a strategy that will be different from traditional hotels and resorts. Listed below are some tips to build a strategy that will help you manage the revenue for your casino in a better and more effective way.
- Segmentation in casinos goes more complex than hotels. There should be different treatments for guests who play high-stake games and order high priced foods and drinks than those who gamble with fewer amount and drink water. This way you can make better offers for different types of guests and help increase the revenue.
- You can tap into your existing loyalty programs in order to track customers spending across the entire property. You can also begin creating dynamically-customized offers and prices based on the total value of each client.
- Lastly, reinvestment makes a crucial part when it comes to keep your customers loyal with your casino and remaining profitable. Think of the areas where reinvesting can be an incredible step to stay profitable and use a dynamic function of your pricing tools.
There is a steady growth rate in gaming revenues taking effect in the casino industy around the United States. A number of factors are tied into the increase including new entrants to the casino industry and rival casino expansions. Through aspects of Porter’s Five Forces Model of Industry Competion: Rivalry among existing firms, the threat of new entrants, and the threat of substitues, this case analysis addresses key problems the casio industry is facing and implements stratiges they may use to tackles thoses issues.
In addition, SWOT analysis (Strengths, Weaknesses, Opportunites, and Threats) will be used to facilitate the discussion.
Casino Differentiation Definition
Through the Porters Five Forces Model of Competition, were identified three main problems: the threat of new entrants, the threat of new substitutes, and intensity of rivalry among competitors in the casino industry. The threat of new entrants refers to barriers that the competitive enviornment is placing on the potential newcomers. There are six sources of entry barriers: economies of scale, product differention, capital requirements, switching costs, access to distribution channels, and cost disadvantages independent of scale.
The threat of substitutes refers to products and services that satisfy the customer in a manner that they provide a higher level of service and better economic competitiveness. Rivalry among existing firms refers to the fueds that takes place among competition in an industry which include the likes of price competition and advertising battles. The Strengths and Weaknesses of SWOT refer to the internal conditions of the firm-where your firm excels (strengths) and where it may be lacking relative to competitors (weaknesses).
Opportunities and Threats are enviornmental conditions external to the firm. These could be factors either in the general environment or in the competive enviornment. The product differentiation is forcing casino industries to expand on existing resorts or build new more expensive and extravagant resorts in order to compete with it rivals. MGM Mirage is building the “City Center”, a $7 billion resort in Las Vegas. It will feature over the top qualities that will top all previous privately financed projects in American history.
Byoyd Gaming is developing the “Echelon Place” which is the most expensive single casino at $4. 4 billion in Las Vegas. In addition, Las Vegas Sands and the Palazzo based in Las Vegas are making expensive additions to their properties. Along with the increasing revenues in Las Vegas, waterbourne casinos have produced the greatest growth producing casinos at various rivers and lakes. They have generated $11 billion in revenue in 2006. Furthermore, The Borgata Hotel Casino in Atlantic City is in the process of a $2 billion renovation trying to make it a better place to visit.
Additionally, casino hotels in Atlantic City are making rennovations to help bring in more customers such as Caesars, Trump Plaza, and Hilton. Finally, Native American casinos are increases across the U. S. and are becoming a powerful threat in the industry. Competition among existing firms is one of the key problems facing the casino industry. Based on 2006 revenue and income from Casino Journal’s National Gaming Summary, the top 5 leading casino industries in revenue were Native American casinos, Nevado casinos, Atlantic City casinos, riverboat casinos, and Western town casinos. See graph below for figures). There is a large number of competition making the rivalry more intense. The top two revenue leaders Native Amercian casinos and Nevada casino are leaders for a reason. The general enviornment has influenced Native America casinos to become number one in revenue. With the passing of the Indian Gaming and Recreation Act of 1988, Native Americans now have authourization to offer gaming on tribal lands as a way to encourage their self-sufficiency.
In addition, Native American casinos are exempt from federal regulations and are not required to pay any taxes on their revenues. They only have to pay a percentage of their winnings to the state in which they are located utilizing the political and legal segment of the general enviornment. Adding to Native American casino fortunes, their casinos are likely to increase over the next few years. It is noted that several states are reaching agreements to allow the introduction or expansion of Native American casinos because of the additional revenues they can provide.
This increases the Native American casinos opportunities and consitutes a high barrier for new entrants. The major source for this entry barrier is the cost disadvantage independent of scale regarding the favorable government polices vis -a -vis the Indian Gaming and Recration Act of 1988. Nevada casinos are the second leaders in revenue. The strengths that they have generated are the availablity of more hotel rooms, fine dinning, excellent entertainment, shopping, mergers and acquisitions, customer loyalty, and product differentiation among its rivals.
With its many strengths, Nevada casinos represent a high barrier for new entrants as well mainly due to product differentiation and economies of scale. Nevada casios use differentiation on the basis of special themes that characterizes their casinos, such as a medieval castle, a pirate ship, or a movie studio. Nevado casinos also rely on economies of scale as many of the larger casinos are expanding by buiding on additional rooms to bring in more customers. Eventhough Nevada casino has many strengths, it also has a weaknesses.
Two weaknesses they need to address are their distance away from gamblers and rising gas prices. In order to increase competition and revenues, the lagging revenue leaders Atlantic City casinos, riverboat casinos, and Western town casinos need to take advantage of Nevada casinos major weaknesses. Some gamblers do not want to travel as far as Las Vegas to get the casino experience. Along with this fact, gas prices are steadly rising limiting long travels for vacation. Both facts increase the likelyhood that gamblers will seek the casino experience closer to their residential areas.
Atlantic City casinos, riverboats, and Western town casinos can take advantage of this by utilizing its own strengths which for the Atlantic City casinos is its closeness to various northeastern cities. Substitues are the second major factor identified in the casino industry competitive environment analysis. Race track betting, gaming machines at race tracks, and internet gambling are the substitutes that are placing a threat to the casino industry. The emergence of internet technology is a factor of the general enviornment that has a direct effect on the competitive enviornment in particular the rise of internet gambling.
Hence, we conclude that this limits the returns from hotel accomodations, dining and enterntainment, which places a ceiling on the prices that the casinos can charge. Therefore, the differentiation of the product is high and presents a threat to the casino industry by making the revenues and profits tighter. Finally, with internet gambling, one doesn’t need to be in a specific location in order to participate in twenty – four hour gambling. This fact also limits the profits of the casino industry.
One last point to mention is the entry cost to making an internet site would be very cheap, however illegal in the U. S. Last but not least in importance, the intensity of rivarly among competittion is the third main factor that influences the competitive enviornment in the casino industry. The top five leading casinos in 2006 based on income were MGM Mirage, Wynn Resorts, Harrah’s Entertainment, Las Vegas Sands, Penn National Gaming. (See graph below for figures). The numerous and equally balanced competitors in the casino industry increase the rivalry among them and influence their income.
Also the rivalry is enhanced by the slow industry growth since the casinos are fighting for the same market share and seek to expand sales. Due to the above mentioned factors the customer`s choice is based on the price and service competition, that is a reason for the lack of differentiation in the offered prices and services. As a result, the incomes are relatively close. The number of casinos on riverboats is rising gradually which creates heavy competition among them. In regards to this, there is a lack of product differentiation and most of them are trying to increase their income by offering unique products and services.
However, due to their similar income/revenues most of them are able to retaliate with compairable products and services thus creating instability in the industry market share. Casinos are having slow industry growth by trying to maintain their business by providing complementary rooms, foods and beverages, shows, and other services in order to expand their sales. There is high competition in this market share since these rewards are tied to the product differentiation which forces the competitors to spend heavily in order to overcome the customer’s loyalties.
In conclusion, rivalry and substitutes are the main factors that are driving competition amongst firms in the casino industry. In order to compete with its rivals, casinos are forced to spend billions of dollars in order to survive and expand. It is concluded that there is a high barrier for entrants due to high cost in order to overcome customer loyalties. In additon, legal barriers connect to the status of the land which is favorable for the Native American casinos and create a barrier for the new entrants to compete.
Intense rivalry exists due to product differentiation and slow industry growth. Substitues are increasing throughtout the market as well. The technology factor is becoming a threat to the industy. It influences the competitive enviornment and lowers the income of casinos. In general, the casino industry is very competitive with high entry barriers. The exit barriers are also high. It will be difficult for a casino to exit the market because of this therefore we wouldn’t suggest investing in one.