Casinos Lose Estimated $37.2 Billion on Free Slot Play

Published: September 13, 2023, 11:05h. 

Last updated: September 13, 2023, 11:05h.

It’s widely believed that casino operators are highly profitable, but the industry is missing out on massive potential profits due to outdated customer loyalty systems, resulting in significant lost opportunity cost from free play on slot machines.

scientific games
Slot machines manufactured by Light & Wonder. A technology company estimates the casino industry endures massive losses due to free slot play. (Image: Twitter)

Acres Manufacturing Company, a leading provider of next-generation customer loyalty technology and services for casino operators, estimates that casinos are missing out on $37.2 billion in player loyalty reinvestment due to outdated casino management systems (CMS).

Despite the significant expansion in the number of casinos across the United States over the past 25 years, the U.S. casino industry produces lower inflation-adjusted revenues from slot operations today than it did in 2000,” stated Acres in a new report.  “With virtually no advancements in casino loyalty technology over the past 25 years, casino operators have become unable to adapt to the preferences of present-day consumers and cannot adequately create or maximize customer relationships.”

Putting $37.2 billion into context, that’s not far off the current market capitalization of $38.3 billion sported by Las Vegas Sands (NYSE: LVS) – the largest gaming company by that metric.

Loyalty Programs, Free Slot Play Risky for Casinos

Loyalty programs and free slot play are two essential strategies used by the gaming industry to attract customers. When a bettor signs up for a rewards program, the operator often offers free slot play as a perk, although usually in small amounts.

However, there are potential risks involved for operators. As Acres noted, casino loyalty programs can potentially reduce profits or even cause losses.

“While casinos advertise their rewards clubs as fixed rate reinvestment programs, in reality these are variable rate systems that expose casinos to lost profits (or even net losses) on existing players and lost opportunity to convert new and novice players into loyal, profitable customers,” added the technology company.

VIPs and savvy slots players can create challenges for casino operators using outdated CMS technology, hoping that less experienced clients do not redeem their free play.

“In our survey of nearly 200 U.S. casinos, we found that many loyalty programs provide players reinvestment rates approaching or even exceeding 100% when exploited optimally, and only maintain profitability through breakage caused by unredeemed rewards or players that do not take full advantage of the program,” noted Acres.

Why Updating Slot Free Play Is Important

There’s good reason for gaming operators to apply more scrutiny to CMS technology and the concept of free play: Money. Slot machines are highly profitable for operators because they require less labor expense compared to table games.

However, free play may not be beneficial in the long run. As Acres pointed out, $1 in free play actually costs operators more than $1 because players have limited time and if that time is spent wagering for “free,” casinos do not benefit. With just $10 in free play, players can significantly erode casinos’ already low yield on some slot machines.

“Simply put, free play is issued so liberally that it is no longer a valued gift or prize, removing its viability as a tool to attract, engage, and retain current and new players,” concludes Acres. “Any observer in a casino will note players happily celebrating even small slot machine wins by cheering, calling friends over, or taking photos of the winning screen. But nobody celebrates the issuance of free play because it is a boring and predictable entitlement documented in the casino’s official terms and conditions.”

Source link

Leave a Comment