Caesars Palace is a casino-entertainment company that operates over 50 casino resorts around the world. Their properties include over 40,000 hotel rooms, and 300 restaurants, along with retail shopping centers and other entertainment venues. Caesars’ annual revenue totals over $9 Billion, making it one of the largest Casino’s in the business. Of the company’s profits, 30% is derived by millions of gamblers trying their luck on the casino floor. The profit from gambling comes from a small expected percentage of up to 10% (depending on the game) that the casino has as a “home advantage” over the players. Some people relate to gambling as a tax for people who don’t know math. But most gamblers are usually well aware of their disadvantaged position. The dream of getting rich is only a small part of Caesars value proposition. It is the thrill and the excitement a player gets that creates this fun and sometimes addictive experience.
Caesars knows that the worst thing for business is not a player that wins the jack pot, but rather a player that stops playing or decides Caesars brings him/her bad luck and goes to play at a competitor’s casino. That is why, in order to retain customers and continue to extract more money from them, Caesars’ launched its Intelligence Group with the goal of collecting data on their customers. The Intelligence Group later evolved to become Enterprise Analytics. This department made Caesars a pioneer in its industry when in 1999 it started using its Total Rewards loyalty program system to conduct customer data analytics. In order to attract customers to stay at Caesars properties, the Total Rewards program provides members with single-card access to all its casino locations and activities. In 2013, Total Rewards had 45 million members. Caesars tracks customers purchasing behavior when customers use their card every time the they shop or dine at one of Caesars’ properties. Caesars monitors customers gambling behavior every time customers gamble. The casino calculated what was the players expected loss (calculated by the amount of money that was gambled, times the percentage of “home advantage”). For instance, a player who exceeds over $400 of expected loss per day (not necessarily equal to actual money loss) was considered a “whale” (a player that gambles a lot) and was treated by a special casino host.
In exchange for that information, customers get credits, which can be redeemed quickly, and without the limitations or conditions that other industries impose. Members received invitations to special events, gift giveaway promotions, shopping trips, concerts, clubs and festivals. Members had multiple ways to redeem the Total Rewards credits they earned, including purchasing items at participating property outlets such as restaurants, and at the Total Rewards Marketplace, which features a range of retailers.
The casino-entertainment industry has become very competitive, and today every casino company offers its own loyalty card. In order to capture more value, casinos use analytics to improve their operations in order to increase the customer experience. Data Analytics is used for various goals including forecasting rooms’ occupancy, better utilizing the casino property, and making internal processes like the average check-in time at the hotel reception more efficient. Casinos battle for every customer, trying to keep them on their property and stimulating them to spend money in any way possible.
In the wake of the 2008 financial crisis, the casino industry has suffered from a clientele that is still a little bit traumatized. It seems like casinos’ abilities to extract more money from domestic customers is reaching its limits, and American casino companies’ main source of growth now comes from expending to foreign markets. Caesars future is not very bright on that end, since it did not get a gambling license in Macau, the “Las Vegas of the East”, while MGM, Wynn and Sands are taking over the South Asian market. Caesars will have to act quickly and reinvent itself if it wants to become the pioneer of the next technology breakthrough.
Student comments on Caesars Palace “Winner Winner Chicken Dinner”
Thanks for sharing Alon! In my supply chain class (not sure if you are also in it), there is also another case about Caesars and how they are collecting data and using analytics to predict check-in volume, and thereby making decisions on staff scheduling, training, and process improvement. My questions is that I’d imagine most hotel chains have started to do the same thing, so going forward, how should Caesars continue to use data as a source of competitive advantage?
Interesting post, Alon. Caesars has built one of the most valuable customer databases in the casino industry, but I agree that the competitive advantage of this database has started to diminish. Other casino players have been able to build their own databases and use data analytics, while also entering new and more attractive markets. Meanwhile Caesars has missed the boat on new markets because of a highly levered balance sheet. I think this is a good example of a company that has done a great job building a large customer database and figuring out how to serve the customers effectively, but at the end of the day data analytics cannot fix a poor operating and financial strategy.
Cool post – interesting that Caesars started its data analytics in 1999. I’m also surprised that 30% of revenues come from gambling – would have thought it was even less with the increased competition online and abroad.
It used to be 70% of profits before 2008. Is gambling legal in Norway?
How do you know I am from Norway? Are you leveraging data driven analysis to figure out my true identity?
And to your question – kind of. The state has a monopoly on gambling but during the last ten years people have started to gamble online through companies based in Malta.
Great post Alon. Interesting to know that they consider a customer a whale with only 400 dollars in losses a day. If they are using data analytics on the customers, wouldn’t it be fair if they allowed customers to use data analytics to gamble as well? Just doesn’t seem fair that they don’t allow card counting.
I would add that although data analytics have become a commodity in the casino industry, they do have one advantage in this area. Because they were the pioneers of using data, they have more historical data than others which implies that they can learn more from the richer data sets. It’s easier said than done and I don’t know how much incremental advantage they would be able to realize, but theoretically experience in data should give them more insight.
Really interesting post, Alon. I didn’t realize the extent to which they were utilizing the loyalty cards to extract additional data about members’ stays etc. Feels a little big brother to me. I’d wonder how successful this would be as a competitive differentiation given the high turnover of customers in this industry and the ability for other casinos to replicated.