The Australian casino-hotels sector is worth more than $6 billion a year and supports 25,000 staff nationally, yet it remains one of the most complex areas of revenue management in the hospitality industry.
The practice requires highly technical analysis of the spending patterns of existing clients and assessment of new clients, whose spending patterns are as yet unknown, in order to optimise the room rates being charged.
While the business of selling hotel rooms and casino tables is essentially the same – that is renting a bed or a chair for a set period of time – it is the pricing of the gaming tables that provides the biggest variable in the equation for revenue managers.
Casinos generally take a broad view of revenue, including how much guests spend on the gaming floor when setting hotel room rates.
To do this effectively they tap into guest profiles based on previous spending patterns generally acquired through loyalty-card schemes.
Australia’s major casino operators, Crown Resorts and Echo Entertainment Group, are reluctant to reveal their revenue management strategies in the highly competitive domestic market. They did not respond to requests for comment for this article.
However, US-based systems provider Rainmaker offers an insight into the industry which is increasingly being optimised through sophisticated software.
Angie Dobney, Rainmaker’s Vice-President of Pricing and Revenue Management Services, describes manual revenue management systems as hard work, particularly in Las Vegas where room rates can change 10 times a day.
“When you think about it, you’re not just changing one rate but the rate for every customer segment as well as managing all your distribution channels,” she says.
“That’s really where analytics come in. If a customer has been to the property before, you can track what they did and how they spent their time and their money.
“With a table player you calculate differently what their worth is to the casino compared to a slot player or a baccarat player.
“Based on that, people will come up with different ways to calculate it, but they come up with a total value of that customer.
“You need to understand what they are bringing to the table. If I’m worth $100 and you’re worth $500, our system sets the forecast based on the number of hotel rooms available 396 days out and it understands the total value you are bringing to the enterprise.”
Rainmaker is one of the world’s leading revenue management systems for the casino sector, although its customers are largely based in the US.
“We understand who your most profitable customers are and we make sure to save those last rooms for higher value players,” says Dobney.
“Maybe that means you price your rooms from $159, but you may have booked too much low-level business. The system recognises that, puts the rates up and automatically shuts out your low-level customers.”
Dobney has two basic tips for revenue managers in the hotel-casino industry.
“Understand the method of your players’ evaluation, because that helps you understand the value they are bringing to your organisation,” she says.
“Also, don’t just focus on room revenue. You need to focus on enterprise-wide revenue.”
Dobney says she still comes across casinos that manually undertake revenue management, but she says back-end support from software systems is essential if the revenue manager’s role is to become more strategic.
“It’s really what it should be. Revenue managers hold the forecasts, and that really drives everything your property is doing from entertainment, direct-mail strategies, marketing strategies and where you’re going to place events or concerts.
“They need to be much more strategic than taking orders and changing rates. They need to be driving the group’s sales process.”