Slot Club Competition Heats Up

by David Strow

LAS VEGAS—Feb. 2, 2001 --Station Casinos Inc. has been viewed as a leader in the casino industry with its "Boarding Pass," a slot players card that allows players to build credits toward comps at any Station-branded property.

Now, Station is refining that program in an effort to target its comps more effectively at its most lucrative customers.

Starting March 14, the amount of points built up in the previous three months determines the level of comps a player receives over the next three months. The tiered system starts at "preferred" -- reserved for players wagering $4,500 or more in a month -- and works its way through bronze, silver, gold and platinum levels, each carrying a higher level of comps and offers. The elite level is platinum, achieved by wagering $90,000 or more a quarter.

Frequent Station players will be the biggest beneficiaries, as Station promises to step up the level and quality of comps made to qualifying players. But more casual, less frequent players could notice a decline in such benefits as coupon books, as Station devotes its promotional budget to higher volume players.

"It's a way for us to get rid of a lot of the periphery, the stuff that wasn't benefiting our loyal customers, and transfer it to this program," said Brad Goldberg, Station's vice president of marketing. "The customers who are loyal to us, we'll be loyal to them."

Harrah's Entertainment Inc. has been demonstrating why it makes business sense to do that. Under "Total Rewards," players move through three levels -- gold, platinum and diamond -- each carrying more lucrative comps than the levels below.

The result for the casino is higher play, as customers play more often at a Harrah's property in an effort to move to a higher level. It also means players tend to stick with Harrah's properties in an effort to maximize their comps.

That means greater returns for each casino, at a far lower cost than expanding or renovating a property.

"I'm sure the consumer will find that the accelerating status suits his ego," said Jeffrey Logsdon, gaming analyst with Gerard Klauer Mattison. "To the extent that this has been a proven success for Harrah's on a national basis, clearly there's no downside for Station in the locals market." Logsdon noted that Harrah's has been recording same-store sales growth numbers in the 10 percent range for the last six quarters, "unheard of" in the gaming industry.

"There's a significant decline in throwing new capital or designing new projects to enhance existing facilities," Logsdon said. "The returns are getting harder to achieve. That's when you can turn to something like a rewards loyalty program. In tough times, the guys who execute well take market share from those who can't or won't."

Station, however, says the idea for tiers didn't come from Harrah's.

"We knew they (Harrah's) had a tiered program, but in all honesty, we've always had tiered programs," Goldberg said. "We've just extended that. This is more of a full disclosure, so customers understand why they get a level of offers from us. We're giving them the knowledge of how to achieve the most rewards from our company."

At this point, Harrah's doesn't appear to view the move as stepping on its toes.

"We find it complimentary that our competitor recognizes the success and value that Total Rewards has brought to Harrah's," said Harrah's spokesman Phil Levine. "We have proprietary software and information, and you can have a system like Total Rewards, but I can assure you it won't be Total Rewards."

Though Station is viewed as the dominant force in the Las Vegas locals casino market with its seven properties, company officials have said growth in 2001 could be slower than seen in recent years. One big factor in that is growing competition on the Boulder Strip from Arizona Charlie's East and the renovated Sam's Town, as well as the Suncoast near Summerlin.

"It's an opportunity for Station to increase its competitive position in the marketplace," said Bear Stearns gaming analyst Marc Falcone. "My guess is given the loyalty the original Boarding Pass is creating, a tiered system won't have as significant an effect ... but I believe you could have some impact on same-store sales growth.

"By leveraging (the Boarding Pass program), they might help offset or mitigate potential impacts (from competition). (But) I don't think it'll be a big contributor until it's been out in the system for a little bit."

Goldberg agreed that the goals of the program aren't immediate.

"This will translate well into the bottom line, but we see this as a much longer term prospect with our customers," Goldberg said. "We're trying to evaluate the lifetime value of our customers. It will will help us financially over the long-term, as opposed to simply the short-term."

And that's apparently the philosophy Las Vegas' other large gaming companies have in mind, as Park Place Entertainment Corp., MGM MIRAGE and Mandalay Resort Group all work on player cards that cover all of their Strip properties.

MGM MIRAGE hopes to introduce a card that will unify its properties nationwide by year's end, while Park Place is hoping by mid-2001 to introduce a series of regionally-based cards, particularly one linking its "Four Corners" Strip properties of Caesars Palace, the Flamingo Las Vegas, Bally's Las Vegas and Paris Las Vegas.

Mandalay has also said it is working on card that will unify play at its five Strip properties, though the company has not said when it plans to introduce it.