There has been a lot of speculation about why Coast casinos have
changed their VP inventory strategy and whether it will succeed or
not. You may not care, or you may think that it is a waste of energy
to try to understand it, but I think that it is just as important for
the players to understand the casinos as it is for the casinos to
understand the players. Knowing what is motivating a casino to make
changes and how the casino expects their players to react to the
change may give players a reason or motivation to react to the change
in a way that will have an impact on future changes.
Why did they change their inventory?
The reason for these changes is that they wanted to make more money.
This is of course and over-simplification, they already had very good
cash flow numbers and it would seem foolish to mess with success and
take a risk of hurting their return in the long run. My guess as to
why they were willing to risk their long term revenue stream for a
short term jolt of higher revenue is that they need the cash to build
Southcoast. I think when the plan to do an IPO dissolved along with
the stock market, they had to find another way to get the capital to
continue their expansion plans. I would also venture to guess that
the VP machines are not the only machines that have been changed. The
slots were probably tightened up first because they knew they could
do that without any immediate negative feedback from their customers.
Will these inventory changes make them more money in the long run?
There are many variables which the executives at Coast had to
consider when they decided to make this change. The variables are
difficult to quantify and like many business decisions approximate
impacts based on the available data lead them to believe that this
change would be financially beneficial. I believe that they have
miscalculated and that they have underestimated the drop in volume
that will result and that they overestimated the negative impact of
the skilled VP player segment of their customers.
Let me expand a bit on these two key variables and explain why I
think they have quantified them incorrectly. I do not have any
specific data to cite, but I think that most of my points are self
evident. Coast executives knew that a drop off in business would
occur due to these changes but must have calculated that it would not
be significant and that it could be minimized by using counter
measures.
They knew they would lose the avid VP players who will only play full
pay, but I think they underestimate how many casual VP players who
play at lesser skill levels are pay table sensitive. Think about how
many poorly skilled players you see playing at the full pay banks
that you play. Although some of them may have stumbled upon this bank
randomly, or may have chosen their seat based on something other than
the pay table most of them know just enough to discern the difference
between full pay and short pay. Just like there are many blackjack
players who know what basic strategy is, and don't learn it or
use
it, there are many VP players who know the good machines from the bad
ones but that is where there knowledge or effort ended. These players
are the players Harry Porter referred to when he stated that the
lynchpin of the strategy is holding onto the profitable segment of
full pay players.
The counter measures they are employing are an ad campaign bragging
about how many 99%+ VP machines they have at Suncoast and the promise
of a much improved level of slot club benefits in the near future. I
would expect similar ads to be run for Orleans and Gold Coast and
although there are no details of the new slot club benefits to come
if any of them were good enough to offset the loss of the full pay
machines they would have leaked this information by now. But once the
new slot club is unveiled they will try to do a sales job on how the
new benefits and the 99%+ inventory of VP is better than the previous
inventory with the previous slot club.
I also stated that the new strategy being employed by Coast casinos
was implemented because they overestimated the negative impact of the
skilled VP player segment of their customers. Coast casinos has a
long standing reputation for being paranoid and over zealous in
protecting themselves against players who were good enough to beat
them consistently. Their treatment of blackjack players and certain
members of the VP community have given them a much deserved
reputation for over-reacting to players that they perceive to
threaten their bottom line. In my opinion this paranoia played a part
in their VP inventory decision.
The net win or loss of a skilled player on a VP machine is only one
of the economic transactions that that player conducts with a casino.
Many players do not play VP exclusively; they play other games as a
diversion. Most skilled players also do not travel alone, the bring
spouses, relatives or friends along with them to the casino. They
tell people where they play and why, many are seen by casual casino
visitors as THE person to ask about where to play and so the effect
those players have via word of mouth is stronger than the average
player. The subset of skilled players who can beat a given machine
and do not offset their win with other economic activity beneficial
to the casinos is much smaller than the percentage of VP players that
win consistently. To radically change your VP inventory because of
the impact of a very small number of players is a case of throwing
out the baby with the bath water.
Measuring the overall impact of the skilled players and estimating
the size of this group has been the subject of much debate on this
board. I find it quite amusing that another ongoing debate on this
board is whether or not VP can be beat over the long run by anyone.
Suffice it to say that of the skilled players who have the ability to
win money over the long run and who do not offset there winnings with
other economic activity, there are some who lose despite there skills
and the small theoretical advantage. I believe that the number of
people Coast would be happy to lose is small compared with the number
they will lose.
This change may have been more about increasing the hold from
marginal players than getting rid of the skilled players. We as
skilled players may be a little too confident in our skills and we
are probable overestimating our potential impact on the casinos.
Full pay VP is a low margin high volume product line for the casino.
Having an inventory which includes full pay VP games helps a casino
establish a reputation for having loose machines. Casinos with these
games like to put big 100%+ RETURN signs on top of the banks to
bolster this loose machine reputation. Having a reputation for loose
machines is one of the keys to the success of a casino, because it is
one of the factors slot players use to choose a casino, and slots
after all are a casinos bread and butter. Coast casino may suffer the
most from this VP inventory change over the long run on their slot
machines.
So what should players do about this? That answer may depend on who
you are, what you play and how much you care about these changes. I
intend to take my business to places that offer full pay VP. Even
though I expect a net win playing VP I also know that the casinos
that I visit end up with more of my money than I win from them. -JFR