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More Competition Coming to the Las Vegas Strip

July 11, 2017 | Duetto Content Team

The key for building a lasting business in the gaming industry — particularly with so many high-profile projects coming to the Las Vegas Strip — is the ability to adapt. Change is inevitable, but not everyone has the instinct to embrace it.

[Editor’s Note: This article has been updated to reflect even more development in the Las Vegas market announced in the past 12 months.]

Over the years, Las Vegas casinos have certainly proved their ability to evolve. The tourist destination built on gambling in the 1930s has reinvented itself multiple times, first by opening itself up to families by providing more age-appropriate activities, and later by introducing top-notch restaurants and nightclubs. Both helped Las Vegas pivot away from only gaming and more toward an entertainment destination.

Today, there’s another monumental shift underway in Las Vegas, as pro sports, e-sports and online gambling reshape the Vegas entertainment experience.

Las Vegas in Transition

 The Vegas Golden Knights’ inaugural NHL season success and current Stanley Cup playoff run is boosting the Las Vegas Convention and Visitors Authority’s mission to market the city as the sports capital of the world.

The Golden Knights have developed an early and loyal Las Vegas fan base that has electrified T-Mobile Arena, and the energy is expected to carry over to the NFL, when the Las Vegas Raiders open their season in 2020. In the WBNA, the Las Vegas Aces are scheduled to open their inaugural season this May.

E-sports, tournaments where gamers battle each other on video game platforms, are rapidly growing in popularity, and their draw could potentially rival that of slot machines.

Last month, Allied Esports opened the first dedicated e-sports venue on the Strip at the Luxor, where the opening tournament prize package was $25,000. Analysts are watching closely to see how the arena draws and whether its presence will attract a younger demographic.

A Changing Las Vegas Skyline

As a result of the increased tourism from sports and otherwise, net profits at Las Vegas casinos soared 191.4% to $814 million in the first half of 2017, the Nevada Gaming Control Board reported. Statewide, including 272 casinos, net income grew 59.1%.

Now that any impact on tourism from October’s tragic shooting seems limited mostly to MGM’s Mandalay Bay, developers can move forward with confidence.

The Las Vegas Review-Journal recently outlined six new mega projects that are expected to open in 2020, which would increase Strip room availability by nearly 9,000, or about 6%. Topping the list: Marriott’s opening of the building formerly known as the Fontainebleau, which will have nearly 4,000 rooms; the $3-billion Resorts World Las Vegas, an Asian-themed casino that will have 3,000 rooms; and Paradise Park, which will feature a 1,500-room hotel.

The 2020 openings would lead to the the largest year-on-year increase in rooms on the Strip since 1993, when the MGM Grand, Luxor and Treasure Island opened for business, boosting the number of Strip rooms by 10,000, according to the report.

Recent deals for Las Vegas casinos also include Virgin Hotels’ acquisition of the Hard Rock Hotel & Casino, which calls for complete renovations to be completed by late fall 2019. Also, following the departure of Steve Wynn from Wynn Resorts, the company has emerged as a rumored acquisition target of both MGM Resorts and Las Vegas Sands Corp.

How Casinos Manage Revenue Against New Supply

Duetto’s Associate Director of Casino Services Daniel Lofton remembers a similar situation when he managed revenue for both a casino and a hotel in the Houston area. In Houston, a new convention center brought more demand than hotels could handle, so more accommodations were built. Now the city is dealing with oversupply issues.

His advice for Las Vegas casino-hotels staring down new oncoming competition? Prepare to be more aggressive with your casino marketing plan without diluting rate.

“Get a little more active with promotions and offers,” Lofton said.

Examine the oncoming projects as close as possible to determine how opening their doors will affect you. Perform a SWOT analysis by identifying where they fit in the market and what business is potentially at risk, most importantly evaluating corporate and group contracts.

Are you the same level of product or can you begin skewing your offerings toward a different customer base? If you manage an off-Strip casino that caters to locals, chances are these new projects won’t be stealing much of your business.

If you’ll be going head-to-head with these new resorts, a more full-on analysis is required, including considering a deviated loyalty strategy to ensure keeping your best guests. Should a new hotel steal a piece of your business, you don’t want it to be your most profitable segment.

Protect your corporate accounts, recurring groups and loyalty members by building value into their rates, Lofton said. Instead of dropping rate consider including buffet tickets, parking or other amenities. Rely on the relationships you’ve built.

Casinos have a leg up over hotels, Lofton said, because they have more ways to offer value without completely erasing profit. The smartest Las Vegas casino-hotels will hold rate and closely monitor how demand responds to both the impact of the new property and their pricing.

Non-Gaming Revenue’s Implications for the Casino Industry

In the new Vegas, even people who don’t spend their time in front of a slot machine or at a card table will have plenty of options for entertainment. Instead of the whole share of wallet going to gaming, people are now more willing to spend on hotel rooms, food, shows, clubs and now professional sports.

Imagine a night out on the Las Vegas Strip that consists of dinner and drinks from a world-famous chef, a basketball game where you can wager live from your seat, and then a night of dancing at the hottest club in the U.S.

Just like Las Vegas, it’s time for casinos to reinvent themselves and end their over-reliance on gaming profits.

The obvious example is hotel rooms. Once considered simply dormitories for gamblers and given away to most everyone who dumped some money into a machine, hotel rooms are now valuable assets for casinos to attract guests.

This requires a culture change throughout your casino operations. No longer should you be designating “blocks” of rooms for your casino hosts to give away.

Hotel rooms are now part of your experience. Aim for fewer comps moving forward, and make reinvestment decisions based on guests’ total spend rather than how much they gambled.

Forward-thinking operators must diversify their non-gaming amenities and take a casino Revenue Strategy approach aimed at maximizing total-resort profitability.

Here are tips on how to get started:

  • Frequently engage with guests, asking them what amenities are important to them.
  • Ensure guests get a player’s club card, whether they gamble or not, and use that data to shape your reinvestment strategy and bring them back.
  • Collect data about your guests off-property as well, through social media or third-party analytics sources.
  • Wow guests with a higher level of quality in your amenities and service.
  • Once you know what is drawing guests to your property, you can aggregate that data and offer a custom, personalized offering.

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