Inside Asian Gaming

INSIDE ASIAN GAMING | November 2011 38 Feature elements such as show tickets, credits and breakfasts save customers even more. A scan of Macau casino resort websites indicates that promotions and ‘packages’ are featured far more prominently than room- only booking options. It can actually be a challenge to find out how to book a room- only hotel stay, while packages are always at your fingertips. In one example, a package containing two premium show tickets, breakfast, retail credit and a ferry ticket cost consumers an additional MOP300 as compared to the room-only rate. When considering the individual components but omitting breakfast—the price of which is harder for the consumer to estimate accurately—this package represented a saving of MOP700 to the customer. Operators may look at this example and think there is no harm done. Such packages can be used to generate incremental consumer demand. Although the saving is MOP700 to the customer, the actual cost to the resort is far less, and “breakage” as marketing experts call it—where components of the package never get redeemed—make this cost even lower.These are fair points; however, the real-life example above was found on a Saturday night during a major holiday. Surely, if the strong gaming demand on this date could not fill the hotel alone, full-price paying retail guests could. Once packages have been established, operators can easily slip into a ‘set it and forget it’ attitude. Package bookings are often considered the same as regular free independent traveller (FIT)—or retail— demand and remain open and available throughout the future booking horizon. However, the profitability of some packages is far less than a room-only booking. During high-demand periods, more revenue could be generated by restricting package availability while allowing room-only bookings to continue. The ultimate result of this strategy is displacement. Packages are currently very appealing to retail guests based on price. Therefore, a guest who may initially only want a room will likely instead book a package for a few hundred additional MOP. That same guest may have instead booked their room and then decided upon arrival to book a show ticket or ordered room service. However, since they have booked the package, these higher-profit ancillary transactions will not happen. This quickly turns into a chicken-and-egg problem. Because casino resorts see these guests redeeming packages instead of making individual purchases, operators can fall into the trap of thinking that all guests want a ferry ticket with their room, that no one will pay full price for show tickets, and that room service is not popular for breakfast. Discounts and package rates available to FIT guests can greatly dilute their potential revenue generation. Packages booked through wholesale agents reduce this even further due to negotiated rates and commissions. As a result, the perceived value of FIT guests to Macau’s resorts is very low, when in fact the profitability of high- paying retail guests can be stronger than low-value casino guests once reinvestment and gaming taxes are considered. When packages benefit both guests and operators Macau resorts should not do away with packages, but rather, they should refine the process of how packages are planned and executed. Packages do work—but they work best when they are a win-win for both guests and resorts. Packages can be extremely beneficial when accomplishing the following objectives: • Generate incremental demand on ‘need’ dates for hotel rooms or attractions. • Strategically encourage guests to extend their length of stay—potentially generating additional revenue on the gaming floor. Hotels can also capture a greater share of wallet for F&B and ancillary services, which increase the total customer value of each guest. • Attract families and companions of gamers, again increasing share of wallet and potentially extending the length of stay. • Encourage gamers to stay within one property or complex. • Introduce a new product or service, such as a pool party, spa service, loyalty programme, or generate buzz for a new entertainment option. • Encourage retail guests to book directly with the resort instead of through a wholesale partner or online travel agency. This assumes that the package is exclusively available to direct bookers. Recommended next steps To maximise profitability, operators must assess which of their packages deliver incremental demand to the property and which are simply diluting the profitability Rock the boat—Macau hotels should consider alternatives to the one-size-fits-all, ferry-plus-room package deals