The pandemic has shifted a lot—what about gaming and casinos?
We dig in to this industry in the first episode of Vertical Reality: Travel, a new podcast series from Epsilon that explores the world of travel through the eyes of industry experts. Our first episode features Ben Koff, a hospitality and gaming marketing executive and founding principal of Hidden Upside, who shares insider perspectives with Epsilon's Jason Simon and Brown Analytics Group's Bob Brown.
Learn about the broad long-term industry effects, who will gain market share in the post-COVID world and that time Homer Simpson got kicked out of an all-you-can-eat buffet.
JASON SIMON: Hello, my name is Jason Simon. I'm a leader for the travel and hospitality practice here at Epsilon. Today I am joined by Bob Brown of Brown Analytics Advisory Group. Hello, Bob.
BOB BROWN: Hey, Jason. Good to be here.
SIMON: Bob, why don't you tell us a little bit about your background and what you're doing?
BROWN: Yeah, it's a pleasure to be here with you, Jason. I founded Brown Analytics Advisory Group a little over two years ago, and we've focused primarily in the travel and hospitality industry at the intersection of analytics, CRM strategy and marketing technology. And I've been working in the travel space for about 15 years now. Previous to founding my own company I was with Vail Resorts, and about six years prior to that with Caesars Entertainment.
SIMON: Glad to have you on board. Clearly, we are facing unprecedented times that are impacting travel hospitality and all of the associated components of the space. Our guest is Ben Koff of Hidden Upside. Ben, welcome to the podcast.
BEN KOFF: Thanks, Jason. I'm glad to be here. And hey Bob, good to hear your voice, too.
BROWN: Hey, Ben. Yeah, likewise.
SIMON: Ben, I think a good place to start today would be if you could tell us a little bit about your background.
KOFF: I was lucky enough to start my career at Caesars Entertainment—at the time, it was Harrah's. Started off in the Midwest at Harrah's Joliet, worked my way through Tunica, and then to Las Vegas doing a variety of different positions. Started off as a slot analyst doing slot performance management. Worked my way into planning and analysis at the director level. That segued into marketing and database analytics, and then a marketing position over the Southern region.
I was able to take that to go to a company called SBE Entertainment Group based out of nightlife and hotels and restaurants, and they were dabbling in casinos. So I was able to work with them from a database side, really got into martech at that point. And I was able to go to Golden Nugget next, putting together their loyalty program across the casinos, working on creating that integration between the Landry's restaurants and the Golden Nugget casinos. And then I went off on my own. And now I work for companies like Carnival Corporation with their cruise lines. I work for some provinces in Quebec. I work for some local properties across North America.
SIMON: Well, at least you don't have a wide variety in your background, right?
KOFF: Yeah, I will tell you one thing about the casino industry: It is never boring.
SIMON: And it's always changing, right? Which is probably a great kickoff topic for our conversation today. So, guys, clearly we're in the throes of a pandemic. I think the reality of it is that we've probably had, as in all industries, a significant impact from COVID on customer engagement and sort of the gaming industry itself. Ben, what did you see at the beginning? And how have things sort of evolved and been impacted by COVID?
KOFF: I think the biggest challenge that faced everybody is that their world and how they operate effectively started carte blanche. And what I mean by that is that all of a sudden you had all these new regulations regarding COVID: everything from masks to how many people could sit at a table, how far apart customers needed to be, what you could do, what you couldn't do in terms of marketing events, in terms of dining options, in terms of smoking. And the entire experience changed from top to bottom.
And that experience also was a direct impact of where you were in the country. There are some states that didn't have a lot of effect. And other places, like New York and the East Coast, are very stringent guidelines. And in some other places there weren't any guidelines really at all. They just tried to keep business open as usual. Maybe there was a mask mandate, maybe not. But with that, where you were in the country affected your database. So you look at somewhere like Las Vegas that brought in a lot of convention business midweek, and was not just a national, but an international travel destination. Well, their database was affected in a much different way than your typical local casino, even just in like Las Vegas. We had to change the way things were being done.
BROWN: Obviously casinos have a ton of data about their customers and who's visiting. How much has that played a part in being able to understand these shifting dynamics through COVID? Have folks really been able to dive into and get in depth with what's happening from a customer standpoint?
KOFF: That's a great question, Bob. And customer communication, and understanding the customer was always important, but I think everybody kind of just looked at people through that RFM lens, and it was good to know who the best players were. Now, there are so many different characteristics about everything from where a player lives and how that can infect their travel, to their age and how they might view COVID and the risks associated with travel or just going into a casino environment. And then it's even just having the customer information in hand to reach out to them. One of the best practices that I saw during the time that all the casinos were closed is that there were some executive teams that were still intact, that weren't furloughed. And they were reaching out to the highest-level guests just to say hello. Creating a point of contact. Because even though they didn't have the business, they were trying to establish that loyalty and maintain the relationship, even though they were closed and it was a different time.
BROWN: Have you seen a consistent shift in demographics and patterns of visitation?
KOFF: Oh, absolutely. And it's interesting because you see fluctuations in a couple different directions. In terms of age, there has been a definitive shift everywhere, I think, where, just because of the risk factor, the average age of the customer has gone down. I'm seeing with the properties that I work with five to seven years in your average age going down. What was really interesting with the reopening is sometimes depending on where you were, there was no impact in terms of financials. When you look at a state like Mississippi, for instance, and you look at the year-over-year for months following, there was growth in some areas of Mississippi.
Whereas you look at other parts of the country, because of the restrictions, and there was a decrease in spend. So, there were maybe less customers, but they had more wallet. And I think that's something that not only the casino industry, but hospitality in general is going to see that shift to people wanting to get out, people wanting to spend. I think that you're going to see it not just on the travel segment, but luxury goods and some of the higher-ticket items.
SIMON: I think it comes back down to audience identification, knowing who the customers are, and then making sure that the messaging and getting in front of them is appropriate, which I think would apply heavily to the gaming industry. Particularly as we talk about the difference between localization, versus sort of this destination-driven engagement. I mean, that's going to have an impact, as well, on those audiences.
KOFF: Yeah. It's been interesting to see how the spend, even with the more local properties, has changed. I'll just use movie theaters as an example. Because movie theaters have effectively closed, and very much limited their occupancy where you don't see that with casinos. So if you look at casinos as an entertainment factor, just for your share of entertainment wallet, it really has kind of shifted the balance to those who can stay open and those who can deliver an experience. You see your customers shifting and different audiences coming in and different groups coming in because what you're offering. So the fact that you can have a brighter casino, that's more smoke-free, all of the sudden is this giant attribute that you might've leveraged before, but it wasn't so much of an issue. Conversely, as you look at the needs and wants of your customers, it used to be the belief that you couldn't exist without a buffet on your property, for instance.
SIMON: Bob knows all about that, by the way.
BROWN: I love the buffet.
KOFF: Yes. I heard he's called the houser. He walks in–how many plates can he finish?
SIMON: I got to tell you, it's a great Homer Simpson bit where he's at an all-you-can-eat buffet. And the manager comes up to him and says, "Hey, you got to go." And Homer's like, "But it's says all you can eat?" And the manager's like, "That's all you can eat." But Bob, you've had that happen, right?
BROWN: Yeah. I can relate.
KOFF: Bob is the only person on the Nevada blacklist for buffet usage. In casinos, you comp a lot, but we don't really look at their spend everywhere else in their cash spend. And it was interesting that when you had this option to give things for free, people just preferred free play, and cash expenses and cash equivalents like free play or promo chips. And now, they're like, "Oh, I don't need the buffet." They complain actually when you give them food credits instead of the free play in the perks that they were used to. So, it really has shifted what they want.
BROWN: Are Vegas casinos having to shift to a local focus, and kind of drive a local and a drive audience that they didn't have to get to before? And same thing for other destinations like Biloxi, or Tunica, Mississippi, Atlantic City?
KOFF: Yeah. You are seeing that shift. I think the biggest indicator of that—and I'll use Wynn and Sands as an example—is that they're promoting probably what you would consider a more traditional view of the loyalty program, where it's a lot more front and center. Where there's many more tiers than they previously had to kind of equate themselves with the local audience and even the regional audience. I think that the drive time is definitely a bigger factor now than it ever was. There's a lot of casinos around the country, and Atlantic City is a good example, Gulf Coast is a good example that were reliant on a lot of charter business. And you see even the advertising spend of some of the bigger players. I remember hearing a MGM commercial promoting a tier match in the market I was in. And it was really interesting to hear them kind of say, "Hey, take your player's card from another property and join our loyalty program." And there's been a lot of that focus on building up your tier, building up your level to drive that local and regional customer into the doors.
SIMON: That's a really interesting point. Because tier matching, as you guys know, has been going on in the core hospitality business for a while, and the airline and big hotel chains with big loyalty programs. So it's not surprising to me that they're kind of glomming on. Because I think for a long time, the industry was successful enough without having to, I think, employ things like loyalty strategies and audience engagement. But that's clearly not the case now. And I think one of the drivers that's interesting to me is the shift in who the audiences were or are, right? Because they can't just be reliant that even when travel opens up, that everybody's going to jump on planes and fly back out to Vegas—or that everyone who used to do that will do it.
KOFF: Yes. And there's no silver bullet to all of this. It's looking at things. And to your point about in the past, you're right: Revenue hid all sins. It also hid all incompetence, as well, sometimes. Or not knowing what you were doing and you got your bonus check as a casino executive because the numbers were great, but you might not have known where they were coming from. So people are fighting and re-looking at their entire marketing mix, and looking at all those customer contacts and points of contact in their journey. And I think that that's really interesting from the loyalty perspective; when I started in the business, I joined Harrah's right when Gary Loveman was there. And he always had this phrase that the customer's promiscuous—that the customer will go out, and they're game to go everywhere.
And in our casino business, you're going to game where you feel lucky, you're going to game where you feel liked, like all hospitality. You go to the bars and the restaurants and the hotels where you like it where they know your name. And it's always been about customer service, and to some degree, the loyalty program. What's interesting right now is I think there was a lot of sampling and a lot of switching that occurred during the pandemic, making things even worse for some of these other companies.
One of the interesting thing that's happened with loyalty programs as we were in the middle of the pandemic, where things haven't opened, was that you started seeing these companies open up their loyalty programs. So someone might say, "Hey, we're extending your tier to the next year. So don't worry about it." And what they were doing is they were really just inviting switching. I mean, I'm kicking myself right now. I'm with American Airlines, I'm an executive platinum. And they basically said, "Oh, your tier is good through at the end of 2021." And I'm just like kicking myself that I didn't switch to the United to try them out during that time. And I think that it's very important for everybody kind of to know who their customers are right now. I mean, not just to give them freebies because there is a lot of behavioral shift going on that needs to be tracked, and why. And that's only going to happen if you're looking at your data, if you're appending new data, if you're looking at the data in brand new ways to get those insights.
BROWN: Yeah, I wanted to ask you about that, Ben, because I think it's interesting. The historical casino focus tended to be on internal data and behavioral data. And there's nothing that predicts gaming behavior like past gaming behavior. Are you seeing that this dynamic that's happening now is shifting to more of a need for external and third-party data, or are casinos still very internally focused?
KOFF: I think that there'll always be that internal focus because I think it's so ingrained in the culture. But I think where you see is this acquisition going on, especially in the casino industry where everybody's trying to expand their verticals, you see this expansion in the sports gaming. It's still surprising to me when, I thought with the repeal of PASPA and sports betting become more prominent, that draft leagues would go away. Yet here we are, still watching people acquire—like, Caesars just acquired a fantasy league platform. And with that part of it might be, hey, we're trying to expand our offerings, but hey here, it's also this vibrant database that's third party that we can utilize. But I think there are challenges, because you just can't incorporate a database easily. Or actually you guys, Jason, you would know better because that's actually what your company does.
SIMON: The biggest challenge that you have when that occurs is being able to sort of ensure that you've got an identity that's persistent, that you can match up, right? So somebody coming from database A or database B to become part of a master database, you have to know who that person is, but you also have to be able to identify that it's the same person that may be sitting already on the database, but has a different set of attributes assigned to them, to be able to kind of communicate appropriately with them. Because then what you want to be able to do is start communicating with that person appropriately.
KOFF: I think that you tapped on something that's really pertinent. For a long time, there've been these bits and almost crumbs of information that you have about a customer. I remember one time with a client—this is several years ago—they were talking about how they had this wonderful database. And what I saw in there was just basically a list of phone numbers not attributed to anybody, but they knew who the guest was. They said these are our guests because we've called the people at these numbers. And they've called us. And didn't know what to do with it. And when you look at email lists and utilizing these, people are like, "Oh, I'll buy a list because I'll just hit this shotgun approach to everybody," which is sometimes too often used in the casino industry. Instead of taking a look at the data, looking and saying, “What can I get out there, append to it, and to your point, message the right message to the right person, knowing as much as I can about them?”
BROWN: When something like a pandemic happens and you get this massive shift, that understanding becomes that much more critical. That stitching customer identity together, pulling in different pieces of data that you haven't looked at before to understand who's willing and able to travel, understanding these shifting loyalty patterns, and how you might not have the same level of loyalty from people that you had before a reset. The companies and the casinos that are able to get on that quickly are going to be the ones that win market share during this time, I would think.
SIMON: Yeah. And I will add that that I think loyalty, as we know it, is shifting for every vertical for the exact same reasons. Ben, you were talking earlier about American, or United, or your travel patterns. But I think the challenge is going to be that most people who travel frequently, like I do, haven't been on an airplane in 18, 19 months. So the experiential component of that loyalty connection has been severed. And it's going to create opportunity. And I would even suggest to you that the ability to play casino games online is also acting as an experiential differentiator that has also been severed. So instead of walking into the lobby of a Vegas casino with all of its grandeur, you're logging onto an app playing blackjack. And that's very different. And connecting those two things is going to be a challenge, I think.
BROWN: It's hard to predict what's going to happen and what's going to be different. But what do you think the advice is for casino companies in order to take advantage of that? Who's going to win coming out of all these shifts?
KOFF: Wow. That's the money question, isn't it, Bob?
BROWN: And you don't want to share it.
KOFF: I believe the casinos that are going to be at the forefront, and who are going to increase their market share and share of wallet, are going to be those that rise to the occasion, that aren't quiet, that do take risks. Because a lot of the playing field has been leveled. When all is said and done, a casino is there for the gamers—the actual casino. It's a big box full of slot machines and tables games. But where you can differentiate is how well your service is, how well people know people, how clean it is. And I think that there's a more pronounced effort on that with the experience. It's not just the capital that you pump in. Don't get me wrong, I love that we have beautiful casinos that are still being built and opened on the Strip and downtown, and across the country. But it's not just about who can build. Just because you build it, they won't necessarily come anymore.
BROWN: Yeah. It's all about the people, but people are really just collection of data. Right, Jason?
SIMON: Yeah. I mean, I think ultimately all of that is true. But I think those that are able to centralize their data, meaning that they have that view of who the customer is, and—I know we talk about this phrase a lot— who knows their customer the best will be able to leverage all of those other components. So to me, it's about data and the knowledge of data. And as we've talked about, not only what you know about people through their own interactions with you, but knowing where are they eating, where are they shopping, how are they spending their money when they're not spending it with you, will help the casinos, I think, orchestrate the right types of communications and messaging to drive outcomes and interactions that they're looking for. I think that's going to be critical, guys.
KOFF: It's definitely showing itself. I mean, I think of one example that speaks to everything you just said: There's a property I work with on the Gulf Coast that took the learnings of the pandemic. They realized how good it was when they reached out to customers. We got hit by hurricanes all across the Gulf Coast this summer and into fall. And they took the learnings that they had and they applied them to when the hurricane hit these markets that were adjacent to theirs that were feeder markets. And they started looking at, okay, who are the guests who are in these affected things? So let's look at the geographic data. Let's look at their play data. Let's call our best customers who’re going to be affected by this, and ask them what they need. In one instance, a generator was sent to one of their top guests because the person couldn't get a generator. Well, the casino was able to provide one. And those create lasting relationships.
But when you imagine, if you have all that data that's available, and you can start creating models of people who are affected by certain things, when you can look at all the data points and say, hey, God forbid we have another pandemic, but here's the at-risk group that will be affected by it. And you're able to score customers by their prevalence to be impacted by things like economic changes, pandemic changes, social changes, and contact them at the right time, knowing that they have a need to escape, or it's a good time because they came into a ton of money. That's gold right there.
SIMON: But you also have to think about all the new audiences, I guess, that might be playing online now, too, right? Are they reaching new customers? I know where I live there's a blitz of television advertising to drive online gaming. And so I have to believe that that's having an impact on the audiences that are engaging in that activity. And then using those folks from online gaming to move them through the channels available by whichever brand happens to own that particular customer's business.
BROWN: As you think about this, the growth of online gaming, what do you think is important in terms of the connection between these bricks-and-mortar casinos and online, as you're seeing a lot of partnerships and acquisitions that are happening?
KOFF: That's a great question. The company alignment's probably the biggest thing, the cultural alignment when you're looking at it internally. But then I would say a very close second is realizing the revenues of that acquisition as quickly as you can and building upon it. And it's meshing that data together and creating a cohesive... I mean, you use the word “identity.” That's probably the best thing is that it's a singular thing, where you're looking at a customer from all sides. And those acquisitions that are going around gaming, I mean, I wouldn't be surprised if you start seeing, and it's already happened with, I think the Reverb Hotels by Hard Rock is a good example, is it's an adjacent space that people are branching out to. I mean, Hard Rock probably got into the casinos after the restaurants, but now it's kind of going the diverse way where the casino industry is spawning the brand further, and it got its foothold.
And I think you're going to see a lot of that from the different big players. I know Caesars has made some forays into that. MGM is making some forays into that. Building off of those ancillary adjacent markets. And some of that's going to come from acquisition. And if you can build upon that, use the brand, leverage the brand at the same time as you're leveraging your customer database, there's only more money to be made.
What's great—and I think sports betting has done this specifically—is that it's broken down the barriers that Las Vegas was this giant hub of gaming in the country. And I'll use sports betting as a great example because I got to participate in the launch of it in Mississippi. The universal idea from a lot of the people who grew up in Vegas and had built their careers in Vegas, well, “This online thing is just a fad.” And as you see, it's where the bulk of the revenue is coming from. And Nevada never saw that.
And I think it's interesting is that where I think online has not only allowed that access, but it's allowed that kind of free use and better use of the data to look at players, to target them, to kind of use your internal resources, but even then in terms of acquisition and the tools that they're using just by being virtue of online, they're able to take this whole next-generation way of thinking about what we've done with the Googles of the world and the Amazons, and kind of taking that electronic… you're not just what's on your license. You're actually the sum of your actions that happen online, and create these personas that they can leverage across the business.
I think what's really exciting about this time in the casino industry is that it's pretty much blue sky. When you look at the acquisitions that are going on, when you look at the expansions, when you look at how everybody is rethinking their business, people had a break to really think about strategy for the first time instead of doing things. You're seeing all these new things coming about. And I think that those are here to stay. That kind of mindset of growth and revenue driving as opposed to expense cutting, because expense cutting is easy, but looking at all these new ways to leverage your database, connect with other industries, is going to be at the forefront of what we're going to see in the coming years.
SIMON: And I'll add that I'm probably a good example of somebody who has for years played fantasy football with a bunch of college buddies. Our season ended, our regular season. We ended up switching over for the playoffs, and used one of the daily lineup setting apps, which is also a gaming casino app. I had extra money in my account. I bet on the Super Bowl, right? I've never bet on the Super Bowl before. I took a risk. But what's interesting is, again, because I keep coming back to data, the amount of information, Ben, that I had to enter into the app to be able to kind of move the money around—and I'm talking like 50 bucks—but it was pretty significant, including a credit card. So I think the amount of data that is being collected for the online gaming and for people to actually be able to interact with the apps is more than it would require for me to go into a casino and cash a $100 bill to play blackjack.
KOFF: Yeah, you're going to see a big push to knowing your customer better from the gaming side. And that's going to come, to your point of, you have all these new points of contact with the customer. We call it rated business, for instance. Knowing who your customer is just having that card. What's neat about online is that everything is there for you. And you can only add upon it because you have the base metrics. You know name, address and contact information. And from there, I mean, I think the world's kind of your oyster if you know how to stitch it all together.
SIMON: It comes back to knowing your customer, right, guys? And clearly we're starting to see in this industry, the gaming industry, the ability to collect more data, the ability to sort of acquire the types of businesses that can add to your knowledge of, we'll call them the gamer, the consumer, the guest, is really changing the way that the industry has to interact. So I'll ask both of you, and I'll start Bob with you as somebody who spent a lot of time in hospitality and gaming, if you put your forecasting eyeglasses on, what do you see over the next 12 months for the casino industry? What's going to look different a year from now when we all get together and see how things went?
BROWN: Yeah, there's an operational shift that we're going to see that’s significant in terms of cost cuts that have happened as a result of the pandemic that are not going to come back, and margins going up. But I think the key thing from a marketing perspective is that needing to understand quickly who your customers are, visitation, and what patterns have shifted. Because we're going to see that reset of loyalty that we talked about, and that's going to change the dynamics of actually who's gaming at what casinos.
SIMON: Thanks, Bob. And Ben, same question: How do you see things over the next 12 months?
KOFF: Yeah, I think that right now it's an interesting time in terms of casino marketing, because we're at somewhat of a, I guess, détente would be the appropriate word, where due to a combination of regulatory issues and no one wanting to rock the boat because they're making possibly better EBITDA in bottom line revenue because of some of these cuts as well—like, the buffet is a good example—and marketing kind of decreases that no one's doing anything. No one wants to rock the boat because everybody's making money and doing well.
And I think what's going to happen in 12 months is you're going to see someone say, you know what, we're going to go out there guns blazing. And I think that you're going to see a resurgence of the marketing. You're going to see a lot more advertising on air as people are pushing for it and people are fighting for guests. And then it's going to probably settle down to its norms. But I think the pendulum has swung very far back in terms of outward spend and investment into the customers, at least externally. I think there's a big push right now internally to put that reinvestment there. And I think you're going to see a lot more external push leveraging that internal data to get more bang for the buck. And I think that's going to be coming hopefully in the next 12 months.
SIMON: So, I guess the idea is that change is coming either way, right, guys? Or it's here to stay. But in some variable, the industry is not going to go back to what we knew pre-pandemic.
KOFF: Yeah. Operationally, it's going to be very few changes. I mean, I think you'll see the resurgence of shows. But I think there's a lot of benefits that people have seen from this that they're not going to want to move away from, unless the bulk of all their competitors start moving away from them.
SIMON: Bob and Ben, thanks for a great conversation today on the casino industry, all things COVID, pandemic, reemergence, identity, data and experience.
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