VIP programs: How much is a US bettor's allegiance worth?

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Gaming America speaks to casino operators about the importance of VIP programs in regards to customer retention.

Loyalty programs have been a staple of the US gaming industry since its inception, relying on a simple concept: for operators, investing money into customers through ‘freebies’ is worth it as it results in customer retention in the long term. They have proven to be a powerful marketing tool to incentivize gamblers to keep on coming back and spending more – eventually out of their own pocket rather than with free bonuses.

Following the subprime mortgage crisis of 2007, revenues at retail casinos dipped markedly, with a 9% decline in 2009 alone. This motivated casino operators to unleash a slew of loyalty programs with two primary purposes – to identify the ‘right’ kind of customer and to retain their loyalty in the long haul, thus ensuring an unwavering customer base; unsusceptible to any force majeures. Given the effects of the Covid-19 pandemic on land-based US gaming, the benefits of retaining a strong customer database can now be seen in hindsight – with key customers returning en masse when restrictions allowed (we’ll soon lose count of how many consecutive billion-dollar months Nevada will post).

NEVER LET ME GO

Nowadays, loyalty programs have evolved and we have ‘VIP programs’ – basically the same protagonist but in a fancier outfit. They still rely partly on free bonuses, promotions, casino-specific ‘currencies’ and other forms of customer-tailored incentives for a gambler to remain with a single casino operator.

VIP programs, as the name implies, put yet more emphasis on the personalization aspect of the loyalty program experience. For instance, Caesars offers its VIP customers private tours of luxury Ancient Roman-themed villas in Las Vegas. Meanwhile, Mohegan offers travel experiences from the likes of MSC Cruises, the New York Yankees, Mystic Seaport, Samuel Adams Boston Brewery and its own Momentum Travel agency.

"Motivated casino operators unleash(ed) a slew of loyalty programs with two primary purposes – to identify the ‘right’ kind of customer and to retain their loyalty in the long haul, thus ensuring an unwavering customer base; unsusceptible to any force majeures."

This new wave of more personalized loyalty programs comes in the wake of the overturning of PASPA in 2018, and the subsequent feeding frenzy of operators entering the US market. With all the opportunities available to the average bettor – at a simple touch of their smartphone – what could casinos do to ensure customer retention?

TO THE VICTOR GO THE SPOILS

An emphasis on casino-specific reward points has been the answer for many operators, as players are earning a currency that only has value within their premises. The modern bettor takes free bets almost as a given now – they can use it and then move on to the next operator; but they can’t do this with ‘in-house currency.’ It’s a closed-loop system – think Starbucks.

Each operator has its own version of in-house currency. At Mohegan, the ‘Momentum’ program offers ‘Momentum Dollars,’ which can only be spent at its hotels, restaurants, lounges and shops. Caesars has physical Gold, Platinum, Diamond, Diamond Plus, Diamond Elite and Seven Stars cards: earned through garnering a certain number of ‘tier credits.’ Likewise, Ocean Casino Resort’s loyalty program features four tiers – Signature, Preferred, Prime and Reserve.

These tiers can be thought of in terms of a sporting league, where if you spend a certain amount of reward points you get ‘promoted,’ and if you fail to raise the volume of your betting you may be ‘demoted.’ This system punishes the bettor for not ‘training’ regularly. Ironically, promotion and relegation aren’t concepts that are too familiar within US sport...

But if you do take part in the game, you will receive rewards aplenty – not trophies or medals – but special incentives, such as larger ‘reload bonuses.’ For instance, a normal reload bonus may be 100 times the amount first deposited, while a VIP reload bonus could potentially be 500 of that amount. These loyalty programs are costly for operators. Ask yourself why FanDuel and DraftKings, the two largest sportsbooks in the US, had been unprofitable since their respective launches? FanDuel turned in its first profitable quarter in Q2 of 2022 – having been launched in 2009.

 But the cost of free bonuses and the like are ultimately worth it to casino operators. For any casino, losing a client, especially a betting fanatic with deep pockets, is the worst conceivable outcome. These ‘gold mine’ clients are the prize and to the victor go the spoils.

The modern bettor takes free bets almost as a given now – they can use it and then move on to the next operator; but they can’t do this with ‘in-house currency.’ It’s a closed-loop system – think Starbucks.

 ADAPTATION

As the number of online operators has expanded, VIP programs have adapted to ensure the loyalty of their customers. Mohegan CMO Kim Noto says the company’s goal is to “sustain great relationships with the customers we already had.” She acknowledges that loyalty programs are now “universal across brick-and-mortar properties and online platforms,” and therefore Mohegan needs to differentiate itself.

Tailored experiences are key to this, with Noto telling Gaming America: “We give our guests the ability to personalize their visits across our resort and casino, as well as letting them enjoy their benefits at our sister properties and off-site partners play a major role in that. As competition continues to grow, we want our guests to value the uniqueness of their experience at Mohegan Sun.”

Many casinos now conduct separate programs for loyal clients’ birthdays, offering free spins, free credits, free entry into tournaments and more. Once again, the idea is to establish the feeling of a personal relationship between casino and customer. Much like Mohegan’s travel experience offerings, Caesars Tier Reward system offers holidays to its ‘VIPs’ when you get to the upper echelon of tiers. At Seven Stars level, customers can get discounts on select Norwegian Cruise Line vacations and at the Atlantis Paradise Island resort in The Bahamas.

Ocean Casino Resort SVP and CMO Kelly Burke tells Gaming America: “We believe one of our key competitive advantages is the property itself. Encompassing more than 20 beachfront acres towering high above the boardwalk with uninterrupted ocean views, it is the tallest building in Atlantic City, serving as a beacon of luxury lifestyle and a one-stop destination for state-of-the-art gaming, electrifying nightlife entertainment and endless culinary adventures.”

"These loyalty programs are costly for operators. Ask yourself why FanDuel and DraftKings, the two largest sportsbooks in the US, had been unprofitable since their respective launches? FanDuel turned in its first profitable quarter in Q2 of 2022 – having been launched in 2009."

In the past two years, Ocean has invested $100m in development, including two new guest lounges for Ocean Reward card members. Much like the ‘birthday treats’ that most VIP programs offer, the purpose of these holiday/beach-life experiences are to make the guest feel like they are receiving a gift from a friend.

VIP SAFETY

Burke says Ocean prides itself on high levels of transparency and communication with the NJDGE, while Noto commented: “Casino VIP programs and promotions are submitted to and reviewed by the Mohegan Tribal Gaming Commission and are subject to periodic audits to ensure the program guidelines are being adhered to. Generally, how much a casino decides to reinvest in its players to reward them for play and visitation is considered a business decision, subject to the discretion of casino management. Gaming commissions also monitor VIP programs and other marketing initiatives to make sure they are not susceptible to fraud and abuse.”

Gaming America understands from industry insiders that regulations are perceived to be far stricter in the US compared to other markets – even that of the Gambling Commission in the UK. So meeting the requirements might be the hard part, but the certification those requirements provide make the legwork worth the while.

THE BENEFITS OF OFFERING A VIP PROGRAM

Operators should ask themselves about their profitability models before offering VIP programs. There is a reason the higher echelon of casino operators, such as Caesars, offer the most highly rated ones: they can afford up-front losses. There are great benefits for operators knowing their customers' betting behaviours in intimate detail. Higher-end casinos can use more advanced technology to do this.

Digital operators should arguably be better at rewards tracking and using points-based systems that are simple for players to understand: the more they play certain games, the more they are rewarded. These operators have a significant advantage in regard to tracking, as they can use complex algorithms. Meanwhile, retail venues might be more susceptible to human error, allowing for third-party casino management systems to offer their services. 

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