REDUCING THE COMP

11 April 2008

US land casinos feeling the pinch of a tighter economy are taking another look at comps


The economic slowdown in the United States could be responsible for eroding one of the land casino industry's biggest advantages over online casinos - freebies for regular players in the shape of accommodation, drinks, entertainment, meals and even money.

So while there may have been no such thing as a free lunch in the rest of the world, you could get one pretty easily in Vegas and Atlantic City for the past three decades, reports Associated Press in an article that achieved wide US mainstream coverage over the weekend.

Focusing on Atlantic City in New Jersey, the author of the report claims that the city's 11 gambling venues are split on how desirable it is to continue to hand out free meals, hotel rooms or show tickets to gamblers. That's because for the first time, Atlantic City casino revenues declined last year, the report reveals, and out-of-state slots parlours continue to steal the resort's most reliable customers.

Operators are divided on whether this calls for a reduction in comps, or is even more reason to maintain the status quo.

The AP report goes on to detail the coach traffic to Atlantic City and the desire of operators to diplomatically ease away from that image as it seeks more affluent bettors.

And it gives some numbers to illustrate the point: the amount of comps handed out in Atlantic City declined last year by 2.4 percent, but six casinos actually spent more on giveaways last year, while five spent less. Two of those, Trump Plaza Hotel and Casino, and the Tropicana Casino and Resort, were significantly down.

Handing out free meals, drinks, hotel rooms, show tickets and cash is expensive for the land casinos. Atlantic City's 11 casinos collectively spent $1.63 billion on comps last year. One of the problems is that customers have grown accustomed to the comp culture, making it a difficult element to abandon or reduce.

Nick Danna, a senior equity analyst at Sterne Agee & Leach, says that the real opportunity for Atlantic City is in customers who currently look down on the resort, viewing it as the domain of elderly people who clamber off buses with buffet coupons in hand. The former tend to favour Las Vegas as a consequence.

To attract the more upmarket and presumably more profitable visitor, Atlantic City casinos are spending billions on non-gambling attractions like gourmet restaurants, spas and shopping outlets, and the addition of thousands of new rooms. And reducing comps to some visitors - the Trump Taj Mahal Casino Resort, for example, reduced entertainment perks like free show tickets by about two-thirds last year.

Trump Plaza Hotel and Casino handed out slightly more free drinks last year but actually spent less on them. And it significantly reduced the amount of cash it handed out to bus-trip customers.

Taking an opposing view was the Tropicana, which was hurt by a severe cost-cutting drive last year that led to its owners being banished from Atlantic City and their license revoked. Management drastically increased its cash handouts to bus-riding players.

Bally's Atlantic City gave out more free rooms and spent more on them last year but saved on food and drink comps, which were reduced, and the Borgata Hotel Casino & Spa gave out over 200 000 more free rooms last year but actually spent almost exactly the same amount on the perk, giving out no bus cash at all.

Over at Resorts Atlantic City last year, more cash comps went to a greater number of customers. And Harrah's Atlantic City more than doubled its spending on entertainment comps.

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