Oliver Lovat explains why Las Vegas casinos need to adopt a new marketing approach if they want to attract younger customers
In an environment where there is little to choose between products, an effective marketing strategy has always been vital. Las Vegas casinos are no exception – from the earliest days of this town the marketing of its resorts has always been highly competitive.
The challenge that resort operators have faced in recent years is how to attract both the established, traditional gaming customer whilst nurturing the next generation that is vital to sustaining their businesses in the future. Vegas is currently a real-time marketing laboratory with some interesting experiments taking place.
Bastos and Levy, in their paper A History in the Concept of Branding, state: “At the root of all branding activity is the human desire to be someone of consequence, to create a personal and social identity, to present oneself as both like other people (e.g. to belong) and unlike other people (e.g. to stand out), and to have a good reputation.”
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. The Dunes, The Sands, El Rancho, The Hacienda, The Desert Inn, Sahara and Aladdin all played on the fact that they were located in the desert. The resorts thrived thanks to an excess demand for Las Vegas in general, as Nevada was the only state which had legalised gaming.
The early anomaly in this group was Flamingo Resort, which for a variety of idiosyncratic reasons relating to its inception took a different brand position. But it took Sarno and Mallin’s Caesars Palace in 1966 to take this total branding concept to the next level.
With glass blue fountains, emerald green landscaping and shining marble statues adorning the entrance, Caesars was significantly differentiated to its competitors set, defining itself top to bottom by its brand.
Caesars Palace has no apostrophe in the name. When asked why, Sarno famously declared: “The hotel was not named after one Caesar, rather than at Caesars Palace every guest would be treated like an emperor.”
Guests came to Caesars Palace to experience opulence of Biblical proportions that was unavailable in any other hotel in any other market. Customers would indulge in opulent, glamourous feasts and to mingle with the finest, most elegant and beautiful people whilt being entertained by the greatest talent on the globe. It was not uncommon for guests to sit in the lounge dressed in full tuxedos, listening to lounge jazz legend Louis Prima and his band, sipping on Old Fashioneds or imported French Champagne. The employee dress matched the theme, as did the parchment style room notepaper and the retro-designer architecture. The customers loved it, and from opening onwards, Caesars Palace has remained one of the leading properties in town.
Early branding strategies existed to distinguish products from one another, but Caesars took idea this to the next level. When it opened in 1966, Caesars did not just create the themed hotel, but invoked the concept of a distinctive brand that defined the property and attracted the customers most aligned to it, which was the origination of the brand strategy that exists across Las Vegas today. Whatever problems Caesars has had throughout the years, the brand proposition actually did deliver on its promise: luxury escapism for adults. Caesars Palace became more than a hotel resort – it became a symbol and an aspiration for a whole industry.
This philosophy was advanced 30 years later by Steve Wynn’s Bellagio, the first high-end segmented mega-resort, where the architecture is of Italian influence and features a lake, retail and restaurants that complement the brand experience. The facilities were great, but more importantly, it became an aspiration to stay at Steve Wynn’s properties.
Every Strip property, from Delano and Mandalay Bay on the southern end, to SLS and Stratosphere at the north, has a brand and a brand promise, aiming to differentiate it from the competition and encourage brand alignment. For many, the brands in Las Vegas act as differentiators, however a brand alone will not necessarily translate to a competitive advantage.
Even in the early days, casinos employed hosts who liaised directly with the most valuable customers, managing their needs and ensuring they were treated in a manner that befitted their value. Traditional gifts held by the hosts included the comping of rooms, arranging logistics and benefits, and creating events that would encourage customers to increase visitation or revenue for the property. The host-customer relationship remains strong today, but with 42 million visitors to Las Vegas in 2015 this hand-to-hand method of marketing is no longer possible as a strategy to entice the masses.
In 1997, a Harvard economist and MBA lecturer approached Harrah’s, the operator of regional casinos, with an idea. Dr Gary Loveman was the co-author of the seminal paper Putting The Service Profit Chain to Work in 1994, which focused on the enhancing of the customer experience to create loyalty.
Loveman’s hypothesis was this: customers are naturally disloyal, but by creating a way to incentivise customer behaviour we can increase spend and visitation, and therefore increasing revenues. The method that Loveman advocated was incremental rewards collected on a central database, initially called Total Gold, but now known as Total Rewards.
Such was the success of the project, Loveman was appointed COO of Harrah’s, served 12 years as CEO and is now president of the company, named Caesars Entertainment after their acquisition of Caesars. More importantly, his legacy was the implementation of casino player’s clubs, which have become a key tool in every casino globally. With over 40 million members, Total Rewards is one of the largest loyalty programmes anywhere in the world.
Player’s clubs became very popular in creating loyalty with traditional gaming customers who felt that they were being rewarded. As noted in the table overleap, during 2012 in the 46-59 year-old market segment over 70% of Las Vegas visitors held MGM and Caesars cards, but looking at younger customers, holders of this once effective tool diminishes rapidly.
Yet, the 21-28 year olds are visiting Vegas in numbers that could not have been forecast a decade ago. This has posed a challenge to Las Vegas marketers, who have had to adopt a new range of strategies to attract this segment.
The new generation
Like Gary Loveman, Sean Christie is a Bostonian. After 15 years in Vegas nightlife, Christie is heading up Wynn Resorts’ move to attract the younger market that seems impervious to the strategies that proved so successful with the previous generation.
In January 2016, Encore Player’s Club formally opened, a segregated gaming floor with traditional gaming tables, but also much more.
“We have 26 65-inch TVs, two shuffleboards, an amazing pool table and a DJ. We have interactive tables that have four screens on them that can be TV screens. They can be games. They can be your Facebook. They can be whatever you want them to be, they’re very user-friendly. We needed a better place for people to come hang out, gamble and have more of an interactive experience in terms of gambling. It doesn’t feel like a club, it feels more like a cool lounge that has gaming.”
This follows in the footsteps pf Lavo in the Palazzo, which adopted gaming in the former nightclub spot, and the successful nongaming elements that have appeared on the third floor of the Cosmopolitan and to the side of the centre bar at the SLS, resorts that have actively branded to appeal to younger customers.
At G2E last year Mark Frissora, Loveman’s successor as CEO at Caesars Entertainment, noted that O’Sheas, the Irish-themed, college-style bar, with beer pong alongside traditional gaming tables aimed squarely at college and post-college visitors, was the highest revenue producing space inside the new Linq complex.
These segmented spaces appeal to younger customers, who don’t want to spend hours staring at a slot machine or be part of the mass of the casino floor, but would rather spend time on mobile devices, talking to friends and having fun, including gambling.
The challenge for casino operators is how to construct this space to attract the customer.
The loyalty gap
Experts and analysts keep repeating the same mantra that younger Las Vegas visitors have no loyalty. However this accepted logic is questionable, as recent evidence shows.
Younger visitors are loyal to specific bars, resorts and nightclubs, visiting the same places on repeat occasions.
Loyalty experts confuse transactional loyalty, that is the small incremental benefit obtained by using a particular product repeatedly, and functional loyalty, where the customer uses a product or service as it is preferred by that customer. It is true that younger customers eschew the behaviour of their elders, but this is natural: how many of us demonstrate the same behaviours as our parents?
Creating a specific experience-driven space, like O’Sheas and Encore Players Club, geared for this generation of customers, which services their needs in a comfortable environment, could be a method of marketing effectively for the next generation.
I sat at the bar at the Linq last week and spoke to several of the patrons drinking there – all were under 25. Some were gambling, others were just talking. They liked the bar – they said it felt more natural. This ‘fauxthenticity’ creates comfort and security, which leads to an emotional loyalty. These customers were not staying at the Linq hotel, but said they certainly would do next time.
The world has changed since Caesars Palace opened. However, just like 50 years ago, everyone still likes to be treated like a Caesar, or indeed, a Player.
Oliver Lovat leads the Denstone Group, which offers strategic advice and consultancy on customer-facing, asset-backed investment, with a focus on casino resorts. He is a Fellow of the Royal Institution of Chartered Surveyors and visiting faculty at Cass Business School in London. He is based in Las Vegas and can be contacted at [email protected]