Determining the Appropriate Level of Player Reinvestment

Six factors to consider

Everyone wants to know “the number.” Or the “secret formula” when we talk about player reinvestment at casinos. And, to the dismay of many, the answer is a big ol’ “it depends.”

In a recent Host Player Development Conference roundtable, several factors were discussed which could steer you in the right direction:

  1. Optimal Level of Reinvestment: The ideal level of reinvestment is often likened to the story of Goldilocks and the three bears. It should not be too small as that might not retain high-value guests, nor should it be too high as it will erode profitability and might not be sustainable in your marketplace.
  2. Reinvestment Percentage: For high-value players, reinvestment is typically higher, but it can and should fluctuate, and with lower value guests it should be a smaller percentage. The key is maintaining a profitable position while holding on to a competitive edge.
  3. Quality of Player Matters: The overall worth or value of a guest affects how much reinvestment should be given. When sending offers to a tier group or ADT band, consideration for the competitors in the marketplace is paramount. And, if a player group, segment, or individual guest is already receiving a significant amount of offers, rewards, and benefits, additional reinvestment might not generate incremental revenues. Additionally, more reinvestments will likely not influence additional visitation, and thus limits the profit margin for each grouping.
  4. Competitive Analysis: Determining the appropriate level of reinvestment requires a thorough understanding of the competitive set and overall competitive landscape. Knowing what other casinos are offering in terms of offer, rewards, and incentives on a percentage basis is crucial for setting tier, segment, and ADT band reinvestment strategies. Understanding your database from a geospatial perspective will also guide your reinvestment strategies knowing where to reinvest more and where to potentially pull back investment.
  5. Total Marketing Spend to GGR: Most executive leadership teams from most casinos use a percentage of total marketing spend to gross gaming revenue (“GGR”) as a metric to gauge their reinvestment efforts. This marketing margin to GGR fluctuates depending upon your property’s market position in your market, the individual core competitor’s posture, and the determination of whether your property is in a monopoly, quasi-monopolistic, destination, or regional market. And finally, your market’s gaming property count will assist you in determining if your market is latent, competitive, or highly competitive. All of these factors will assist you in determining your best reinvestment percentage.
  6. No One-Size-Fits-All Approach: There is no universal formula for determining reinvestment, as it depends on various factors unique to each property, market, and competitive landscape.

Of course, if you do want to know the “secret sauce” for your particular property, whether you’re at a destination resort, a local’s resort, commercial or Tribal gaming, it is critical that someone in your organizations knows how to answer these questions before you overinvest millions or lose players to your competition. And if you don’t have that expert on-site, that’s okay as well – that’s where you get the best outside resource you can.

For more information about Raving’s outsourced analytics services, please reach out today!