March 4, 2009
This is Part II of a two-part series on perspectives of the economic crisis and its possible impacts on the gambling and poker industries. . .
Dr. David Croson holds a PhD in Business Economics from Harvard University and has published dozens of scholarly articles on strategy in uncertain environments, managing risk, and the value of information. He is presently an Associate Professor of Strategy and Entrepreneurship at Southern Methodist University’s Cox School of Business in Dallas. Dr. Croson has been an avid poker player for 15 years and regularly uses poker as a teaching tool inside the classroom. He says:
The key to handling a slowdown in spending is to realize that consumers don’t cut back on everything equally. In fact, they actually consume more of some items. Consider gasoline, for example. On one hand, people may try to drive less to save money. But on the other hand, they’ll still drive across town to save money at stores where there are sales, drive to places they otherwise would have flown, and choose recreational spots that are drivable.
People also tend to spend money on small splurges in a downturn. High-end lipstick, for example, does well in economic contractions; it lasts a long time, is a visible indulgence, and yet costs only a few dollars more than the basic kind of lipstick. The same is true for premium ice cream in the supermarket (at the expense of Baskin-Robbins and other full-service ice cream parlors).
If casinos could convert just a few table game players into a weekly poker tournament, the poker rooms would boom at only a slight cost to the pit. The key for Las Vegas in the current recession is to appeal to people’s instincts to go to Las Vegas rather than, say, Virginia Beach, to show them what Las Vegas can offer them that no other destination can. Poker is a perfect combination of “driving rather than flying” and an affordable splurge for players who would otherwise do nothing. It’s much cheaper than many other things to do inside a casino. In Las Vegas in particular, a stellar vacation can center on poker games, the pool, and a few good value restaurants.
Casinos need to recognize that some of their clients are a little stretched right now, but still in need of relaxation and recreation; making investments in keeping these players coming back once things turn around will pay off and need not be expensive for the hosts. Certainly, most of my poker friends make a point of being loyal to a place that’s treated them well, particularly when other things aren’t going so well.
If I were running a casino, I would be sending out room comps to everyone I’ve ever interacted with (and some that I hadn’t). I’d be throwing in some luxury splurges that most people don’t normally order when they have to pay for it (e.g., a fabulous molten chocolate cake). Toss in a poolside cabana during the week (which will generate some tips for servers as well) with a complimentary bucket of ice and a hotel branded bottle of mineral water. None of these things costs the casino anywhere near as much as they’re worth to the customer. Let the customers pay for their own hamburgers if they’re trading down from filet mignon, but make them feel that this was the best value vacation they’ve ever experienced.
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