The Future of Revenue Optimisation for Gaming Hotels and Integrated Resorts

Written by Jurgen Ortelee, Managing Director, APAC for IDeaS

The path to sustained profitability is challenging for gaming hotels and integrated resorts. The industry is experiencing a decrease in gaming participation, a slow recovery of occupancy levels following the pandemic, changing consumer preferences and an increase in online and interactive gaming sites.

Property owners can no longer rely solely on gaming activity or hotel room rates to attain profitability. And although gambling still brings in the largest portion of revenue for gaming hotels and integrated resorts - rooms, retail, food and beverage, spas and entertainment are also critical in the overall revenue equation.

Understanding all the revenue generating areas of your business and which guests and segments are the most valuable impacts not only gaming revenue but also property-wide profitability.

How will your competition impact your ability to drive demand?

In a competitive operating environment, gaming hotels and integrated resorts want to increase their market share. This means constantly trying to attract new guests through refurbished rooms, generating new events and tournaments, developing VIP packages and developing new promotions to attract families. However, running a promotion and waiting for the guests to arrive is not enough. You need to re-look at your competition and how their actions impact your ability to generate demand.

Gaming hotels and integrated resorts must have an accurate picture of their operating environment and the competitive factors that could impact their ability to attract guests and maximise revenue.

To gain a complete understanding of the competitive landscape, gaming hotels and integrated resorts must ask the following questions:

1. What does the regional development pipeline look like? Are new hotel brands coming in? Are certain hotels closing for renovation?
2. Have there been new changes in room type?
3. Regarding distribution channels, are guests still booking rooms through wholesalers and travel agents?  What distribution channels are you now looking at to increase market share?
4. How do your loyalty programs compare to the competition? What entices your guests to come back?
5. Do you understand the behaviours of your guests that are booking your hotel?
6. What about the reputation of your hotel?  Is there anything that the reviews are highlighting?  F&B? Rooms? Service?

To understand where their properties sit in the competitive environment, gaming hoteliers and owners of integrated resorts need to understand who their guest is. Where are they coming from? How long are they staying? What attracts them to a property? After all, the travel market looks completely different compared to pre-2020.

Hotels have generally determined their competitors in proximity to their property. However, as international travel has reopened and guests consider leisure options based more on the style of travel (beach resort or urban experience) across a whole region rather than a single destination, the property next to you is not necessarily your direct competitor.

In the case of a market like Asia properties in Macau, the Philippines or Singapore might all compete for the same guests. A true competitor is a property that competes with you in most segments generating demand for your property. And this might have changed drastically after 2020. For instance, your superior room offering could now be a deluxe room offering for a competing resort brand, and their price point might be a lot more attractive to a potential guest.

Defining a proper competitor set has always been vital to determining price positioning. Keep an eye on your competitors’ pricing. Look out for hotels making pricing actions, such as increasing their corporate rate during the week or leisure rate on the weekends. It’s essential to know how your pricing compares and which hotels near you are also forced to respond when you modify a price.

Understand your most valuable guests

Ancillary spending across a gaming hotel or resort can be challenging to optimise but can also be a significant contributing factor to overall net operating profit. Having a true and accurate picture of overall guest spending can also help total property operations in general decision-making, amenities determination, floor design and licensing agreements.

The simplest way to understand your most profitable guests is to gather data across the “ecosystem” of how guests spend time on your property. You can gather this data by encouraging a guest to assign any spending to their guest loyalty card or room account. This not only helps you gather spending patterns but can also help you reduce credit card processing costs associated with retail, food service, spa services, guest rooms, gift shops and more. By consolidating this data, you can set ancillary revenue hurdle rates to ensure you take the most profitable business and manage revenue across discrete revenue sources.

Guest segmentation for a gaming hotel or resort also needs to be approached differently from traditional hotels and can only be effective when the true value of each guest is understood. Hotels may segment individuals and groups separately where business travellers are treated differently than leisure travellers. But in a gaming hotel, a different approach is required.

For example, a guest who outlays large amounts on gaming tables or is a big food and beverage spender should be segmented differently compared to a guest who drinks water and plays only at the cheap tables at the casino. However, segmenting effectively is nearly impossible without understanding what a guest’s value is beyond the room rate they paid.

Improve your forecasts and improve your profits

An accurate demand forecast assists gaming hotels and integrated resorts with pricing decisions, inventory management, staff allocation, property maintenance and general operations. Before the disruption caused by the pandemic, accurately forecasting demand was critical to a hotel predicting the time frames throughout the year that would bring them higher or lower than average occupancy, demand and revenue. These forecasts would, in turn, inform future marketing and revenue strategies. Forecasting also was (and remains) critical for owners and investors as they assess a property's financial potential or performance.

Accurate forecasts have a direct bottom-line impact. For example, suppose you have a better forecast performance instead of fixing a static promotion at a flat 15% discount. In that case, you can now flex these promotions dynamically based on demand and inventory. Today, a new strategy might involve flexing and making your promotions agile according to your forecast. 

You do not need to give a 15% discount for the entire year or month. By making your promotions dynamic based on demand and inventory, you avoid unnecessary discounts, retain more control and can lift overall property profitability. This is supported by a recent study from AMR Research, which projected that with a 3% improvement in your forecast performance, properties could receive a 2% profit increase.

The need for automation

In a competitive and increasingly fragmented operating market, manually collecting, evaluating and calculating data to develop forecasts and understand who your most valuable guests are is not only a tedious process but also slow and highly susceptible to mistakes and missed opportunities. This is where an automated revenue management system (RMS) makes a huge difference to both the top and bottom lines. An advanced RMS generates prices that adapt to market changes and considers the competitive landscape and a guest’s willingness to pay.

To succeed today, a gaming hotel or integrated resort needs to attract the right guest through the right channel at the right price, which automated revenue management can help streamline and facilitate. An advanced RMS that can make effective pricing decisions to maximise business and revenue even in a disrupted market is no longer a “nice to have” tool. It is a business necessity.

For more information on how an advanced RMS can support your organisation, please visit www.ideas.com.