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Rod Smith

In the Locals Market, Closeness Counts

16 November 2004

Closeness to home aces out other factors when Las Vegas locals are deciding where to gamble, a new survey by Goldman Sachs Global Investment Research found.

In the Goldman Sachs survey released Friday, 21 percent of respondents said they decided which casino to frequent based on its location, compared with 12 percent who decided based on the atmosphere and friendliness of the casino.

Goldman Sachs analyst Steve Kent noted the results differed from those reported in the last survey two years ago. That survey found locals rated a casino's environment about equally as important as its location.

Susquehanna Financial Group gaming analyst Eric Hausler said the survey results are consistent with long-term behavioral patterns and suggested that casino customers typically are looking for comfortable environments as close to home as possible.

However, Kent noted that while locals gaming companies in the past concentrated on building first-class casinos and setting up customer loyalty programs, once those twin challenges have been met, closeness to home becomes paramount for locals customers.

The power of location, Kent said, helps explain the importance locals companies have attached to snapping up as many licensed gaming sites in population centers around the valley and may affect advertising and promotion spending in the future, since it raises questions about whether this type of marketing has any impact on customer behavior.

However, Jim Medick, chief executive officer of the MRC Group, Nevada's largest market research and public polling firm, said the Goldman Sachs survey results rely on use of rewards programs to measure customer loyalty and may oversimplify market conditions.

While locals in some instances may not use player cards when they are gambling, they still sign up for them and decide where to play based on where the best bargains and promotions are, he said.

Second, location takes a back seat in areas where more than one casino compete head-to-head in a single neighborhood, Medick said.

He cited both Suncoast competing with the Rampart Casino and Fiesta Rancho competing with Texas Station.

"All things being equal, you'll go closest to home, which is why casinos are being located in population centers. But when you have more than one, proximity is not the answer. Service, amenities and loyalty programs come in to play then. That's why they are so important," Medick said.

The survey of 300 valley residents who play at casinos at least four times a year found Station Casinos continues to be the leading locals brand name although Boyd Gaming Corp. is gaining ground. Other locals operators trailed and slipped in population since 2002.

Medick said the survey findings underscored the importance of understanding the locals market. It found 73 percent of local consumers visit a casino at least once a month and 39 percent visit a casino weekly.

And while 66 percent of the local consumers spend less than $100 per visit at locals casinos, they make up for the lack in volume with frequency.

Bucking popular wisdom, the Goldman Sachs also found the preference for cashless slot machines is dropping, with 49 percent preferring cashless machines compared with 59 percent two years ago.

Also, customer loyalty cards are falling in favor, with only 4 percent of respondents saying they pick a casino based on its rewards programs.

The survey also found that brand loyalty is on the rise; Station Casinos is widely seen as the best product, with Boyd Gaming coming up fast; and slot machines made by International Game Technology are preferred over other manufacturers' devices.

Consistent with its 2002 survey, Goldman Sachs found some Las Vegas customers are still Strip-shy. One-third of the respondents say they never visit a Strip casino, up slightly from 31 percent two years ago.