From: breid@pyrhard2.eng.pyramid.com (Bill Reid)
Newsgroups: rec.gambling
Subject: Re: Betting both sides to get Comps
Date: 18 Aug 92 15:47:34 GMT
Organization: Pyramid Technology Corporation, Mountain View

In article <1992Aug14.164936.9248@ichips.intel.com> bhoughto@sedona.intel.com (Blair P. Houghton) writes:
>In article <183065@pyramid.pyramid.com> breid@pyrhard2.eng.pyramid.com (Bill Reid) writes:
>>Except that the $50 the casino won cost them considerably more than 
>>the $25 they used as a "promotional giveaway".  They also had to pay 
>>the dealer, keep the lights on, feed the tigers, etc.  This casino just 
>>paid roughly $300 to take in $25 in revenues.  As a budding capitalist, 
>>you should not confuse the "hold" with profit (or earnings) - it is 
>>the gross sales (or revenues) from which costs have to be deducted to 
>>compute profit or loss. 
>
>As a decrepit old wastrel, you shouldn't be expected
>to understand the nuances of marginal economic
>activity.

As a shopworn and disillusioned consumer of business and economic 
theories, I would never consider confusing a general economic theory 
with an accounting principle.  When the time comes to tote up 
P or L, the casino loses in the example given, period (notwithstanding 
my lack of knowledge of how much it costs per player to run a 
BJ table for four hours, which may be $300, or only $30, but it ain't 
nothing!).  

>Casinos don't offer free rooms to every patron, only to the
>marginal patrons.  The bulk of their guaranteed gross
>income comes from people who pay full-rate.  Mikey's RFB is
>an investment in the interest of liquidating his bankroll,
>which would otherwise not be removed from his mattress
>(or at least wouldn't be spent preferentially at the
>comping hotel).
>
If you want to invoke "marginal activity" as a marketing strategy, 
you must first understand 
that it only applies to non-maximal profit scenarios, because there is 
the implicit assumption that capacity utilization is below 
100% (you have to have empty rooms and empty spaces at the table). 
The strategy you propose 
implies advertisement of the promotion (remember, to bring in   
that "marginal" business, you must let people know about it).   
So you tell the world about it, get a few low-profit  
comp hustlers in there, piss off your loyal customers, who then 
either take their business elsewhere, or line up for THEIR free rooms, 
rendering your brilliant marketing strategy a sure-fire way to 
increase costs while at the same time reducing revenue.  This 
looks bad on the annual report. (It is also a well-known economic 
phenomenom, which could be called "The Cancerous Inevitability of 
Discounting", examples of which abound in the airline business, 
consumer electronic retailing, computer hardware, and on and on...). 
 
>As economic cost, its value is actually positive to the
>casino, not even the negative $25 you assume they spend on
>the room and Amstel Light, and certainly not the negative
>$300 in fixed costs you invoke, which were already covered
>by Joe Football and his screaming brat kids.  Otherwise,
>there is no valid business reason to make the decision to
>offer the discount.
>
You're right, there IS no reason to offer discount to Michael 
Hall, unless you couple the promotion with a policy of "looking" 
at him, causing him to make one of his notorious "cover" plays!

Now, the well-run casinos in Nevada 
recognize a basic business principle, which 
is you give discounts to your GOOD customers when you can't fill the 
rooms or the tables, to get more of THEM in the door, rather than some 
skinflint card-counter.  The well-run casinos also target certain types 
of customers, and set up their comps and other marketing ploys to bring 
them in.  Circus Circus has done very well over the last decade by 
concentrating on the family business 
(the "screaming brats"), and Harrah's has a particular 
segment of the population they cater to.  Other casinos, with the 
type of confused management you propose, have bankrupted themselves.