Look, I know we’ve got to do the marketing and promotion work that everyone else does. No matter how good any product is you’ve got to sell it. I understand that, but I also know I never believed that stuff when I was on the other side of the desk and software vendors were trying to sell me something. Of course their marketing materials, case studies and pitches were going to include the most favorable numbers to make their products look like the greatest inventions in the world. Isn’t there some expressions about lies, damned lies and statistics?
I never put much weight into those case studies when someone left a copy on my desk. In the end, they’re just numbers, not realities.
I can be this blunt, because I’m not in marketing. I’m a product and analytics guy, and we’ve got this beautiful case study from El Cortez in Downtown Las Vegas. It looks a lot like the marketing collateral I used to see (and ignore) from vendors. Revenue increases, increased occupancy and a one month ROI. Oh great, a quote from the casino’s CEO on how wonderful we are.
Yeah right. I’ve seen it all before.
That said, I built this product, and I’m pretty good with numbers. I want—and need—to know how our revenue strategy system is really working. So let’s poke some holes in the case study.
The background: El Cortez Hotel & Casino is a classic. It’s the longest continuously running resort in Vegas and has been open since 1941. A year ago, it was placed on the National Register of Historic Places. We’ve been involved with the property since 2011, when prior to the launch of Duetto Research, Duetto Consulting worked there handling the property’s revenue management. It’s where we first tested my Excel spreadsheet that became Edge.
So we know the property and market quite well. Las Vegas, as you may have heard, has had its share of struggles since the downturn in 2008. The Downtown market has struggled even more. It’s not easy competing with massive new resorts like City Center and Cosmopolitan just miles away. And last November, the Downtown Grand added 634 rooms to the market.
Let’s take a look at our case studied titled, “Revitalizing Revenue,” and find some alternative explanations for those huge gains the hotel has seen. It can’t be all from adding our revenue strategy system, Edge, and now GameChanger, the latest version of our software created specifically for casino resorts.
In 2013, the resort increased cash room revenue, cash ADR was up and occupancy improved during that same time, in a very competitive environment. Duetto has been working with El Cortez since 2011, so the hotel had a lot more than nothing from the start. It’s where Edge came to life and where AJ Jenveja, now our vice president of customer success, consulted and actually worked on property as its revenue manager.
But let’s forget all that for now. What’s really interesting to me is what happened in January 2014, when cash revenues increased significantly over the previous January. Remember, Edge was already in place in January 2013 and the property was on its way to a sizable cash revenue increase for the entire year.
There’s no way that year-over-year increase came just from our system, right?
It had to be the market surging and a massive rebound in Vegas tourism. Well, according to the Las Vegas Convention and Visitors Authority, the market did improve some, but nowhere near what we experienced at El Cortez. Downtown occupancy was up 7.3% and Downtown ADR was up 2.7%, so roughly a 10% gain in RevPAR, but primarily through occupancy, which is not the ideal path to grow profits.
So let me guess, a bunch of properties closed in late 2013, right?
No, actually inventory grew with the November 2013 opening of Downtown Grand and its 634 high-end rooms. And backing up even further to those 2013 numbers, when the El Cortez saw the first big increase in cash revenue for the year, visitation was actually down for all of Vegas (0.1%), Downtown occupancy declined 1.3% and ADR was up 6%.
OK, back to January of this year, when El Cortez improved cash rooms revenue on top of what was gained in 2013 and well above the overall market. What else could have led to that?
A change in ownership, management or a new marketing push? Nope, the El Cortez has been owned and operated by Kenny Epstein since 2008, when he bought the property from his good friend and Vegas icon, Jackie Gaughan. There have been no significant changes to the property or management since the 2009 opening of the higher-end Cabana Suites. (Check TripAdvisor for further validation—I have. El Cortez has received consistent and mostly positive reviews the past three years.)
Could it be a more-skilled revenue manager worked on property to get the most out of Edge and now GameChanger? AJ acted as revenue manager for El Cortez up until November of 2013 when Nevin Reed, our Director of Customer Success, stepped in. Aha! There’s the difference. Nope, those two guys—honestly two of the top revenue strategists in the business—worked together for years at Caesars and have virtually the same experience and skillset.
OK, I’ve got it. Maybe January was a fluke, a statistical anomaly. Perhaps, but if so, February was an even more amazing fluke. Cash rooms revenue, occupancy and ADR was up again in February! And in March, total hotel revenue and total cash rooms revenue topped the numbers from March 2007—the absolute peak of the Las Vegas market.
I give up. If El Cortez’s gains are not because of a booming market, a significant drop in inventory, a change in ownership/management, a massive property improvement or a more skilled revenue manager, how did it increase rooms revenue in 2013 and again in 2014 by double digits? What led to those significant year-over-year improvements?
The only answer is Duetto. Edge is a more mature revenue strategy system and the implementation of GameChanger provided a direct interface into the PMS (Opera) to update rates dynamically and instantaneously across all channels. It allows the property to price each of its unique room types independently, a perfect tool for casino resorts with a broad range of rooms and rates.
Edge and now GameChanger have allowed El Cortez to take advantage of truly dynamic pricing. El Cortez has decreased rates during slower mid-week days to boost occupancy, while raising rates on weekends and busier times to really drive those revenue gains. It’s rolled back discounts during times when extra promotions weren’t necessary, it’s identified and drawn higher quality guests (and casino players, surely driving even more revenue, although you’ll never see the actual gaming results) and it’s expanded third-party distribution to include more OTAs and wholesalers. El Cortez is now tracking regrets and denials from their booking engine at the rate code level, which allows them to see how many people are shopping or responding to specific offers and dates. The revenue increase this January alone has more than paid for Duetto software for the entire year. In one month!
I’ve been waiting for an example like this, to really analyze how well our system is performing. Of course our marketing team is going to find the positive and the case study is going look like hyperbole, but that gave me the chance to really dig into their numbers. El Cortez was the perfect test case because we’ve worked with them for three years and can really understand all the variables that could affect performance.
This proves our system can help—dramatically—a property with a strong revenue strategy system already in place. The El Cortez got even better, by a lot, in its second year with our system.
That’s no marketing B.S.