Not-so-smart decisions at the Trop

As some of you know, I participated in the Las Vegas Rock and Roll Marathon this year, and I had a ball. But I’d like to share something that happened before the race that, hopefully, can make a point about what not to do with a Strip casino.

Parking at the race is always an issue. Even if you can get into Mandalay Bay (the host hotel), it’s not always easy to get out with all of the lane closures. So I usually park somewhere else. This year, a big chunk of the race was down Hacienda, and I didn’t want to chance circling around the west side of the Strip trying to find a place to park that wasn’t too far away. Last year I parked at the Tropicana and it worked out pretty well, so I figured I’d try it again. I suggested the same to my running group, adding that the casino had recently changed hands and might be a fun place to stop after the race. I haven’t been inside the hotel since the new regime took over, but I’ve read about the money and effort they’ve been sinking into it, and I think they deserve the benefit of the doubt.

Around 4:30 AM, I pulled up and parked, and was stopped by a bike security officer who said that I’d have to move, that parking was for “Tropicana guests only.” The officer was completely reasonable and polite, and said exactly what I’d say if I was in his situation. He said that it wasn’t his idea, that the management had insisted that no one going to the race be allowed to park on the lot. I told him that whoever drafted that policy was an idiot, since the property could use all of the exposure and foot traffic it could get.

(The officer actually used one of my favorite lines–“It’s really not up to me, but they’ve got me on camera and I’ve got to do this.” It worked for me and, this time, it worked on me. It’s nice to see that it’s still effective.)

I made it over to MGM Grand where I parked, passed a bunch of runners in the lobby, and headed over the Mandalay Bay. I got there about ten minutes later than I would have liked and wasn’t shy about letting people know what the Tropicana thought of us runners.

This isn’t just about sour grapes or personal inconvenience. Booting the runners from the parking lot was actually bad business, in my opinion. Here’s why:

The parking lot is already built. It represents a sunk cost. Whether someone parks on it or not, it’s going to cost the same to pay off the construction and maintain it.

That being said, having a full parking lot is a more effective use of the asset than an empty one.

At most, a few dozen runners would have parked in the lot. With acres of open spaces, that wouldn’t have prevented any guests from accessing the hotel. Most of them would be gone by noon. It’s extremely unlikely that hundreds of new guests would be arriving between 5 AM and noon on Sunday morning.

Even if only a few of the runners who parked patronized the restaurants at the Tropicana, isn’t that better than none? Particularly at a property that’s trying desperately to rebuild its image?

This is the kind of thing that irks me because it doesn’t seem to make sense. If I was running the Trop I’d not only encourage runners to park on my lot, I’d offer them a 10% discount on their buffet if they showed their finisher’s medal. The marathon’s already happening; why not capitalize on the fact that it’s happening on your doorstep? The property doesn’t boast the best rooms in Las Vegas or, from what reviews on TripAdvisor say, the best service. It’s best asset is its geography. If you’re not going to use that to your advantage, you’re not thinking about your property strategically.

Maybe the hotel had 100% occupancy that weekend and all of the restaurants were slammed and they didn’t need the business, maybe not. But this is a case study, I think, of management not seeing the forest for the trees.

This policy might have effectively ensured that the Tropicana had a few dozen more empty spaces than they usually do. Unfortunately, it might convince some people to let them stay empty.

Can anyone think of any other policies that, in the end, do more harm than good?

The 2009 Recession Impact Study is underway

Earlier this week over at gaming.unlv.edu we rolled out our latest project: the 2009 Las Vegas Casino/Hotel Impact Survey. It’s a new start for the center but also a return to the past. Let me explain…

In 1980, accounting firm Laventhal and Horwath conducted a “Recession Impact Study” that polled executives at Las Vegas casinos about the nature of the ongoing economic decline. I happened across this study while I was doing research for the paper about how Las Vegas reacted to the early 1980s recession that I gave at the 14th International Conference on Gambling and Risk-Taking. I found it very useful, and wondered, “Hmmm. Someday historians might be curious about how Las Vegas casinos reacted to the 2008-? recession.”

That was the genesis of the idea. Borrowing a few questions from the 1980 survey, I quickly had a list of 20 questions that, with some help from people in the industry and at UNLV, I later boiled down to ten.

The 1980 survey’s methodology is a bit mysterious–the study only says that a large sample of casino executives were polled. I decided to be a bit more methodical in my approach, so I developed a distribution system that, given the limitations of resources, seemed feasible to me: I decided to find a contact person in each of the 70 or so Las Vegas hotel casinos and convince this contact to forward an email with information about the survey (including how to access it) to 5-10 fellow executives. That should theoretically generate about 500 respondents, which is a big enough pool to get a sense for how the industry feels.

I decided to define “executive” as anyone working at a Las Vegas casino/hotel at the director level or above. I also decided to confine this study to Las Vegas because the logistics of getting in touch with 70 people seem much less daunting than getting in touch with 500, which I’d have to do if I expected to have any kind of national sample. Also, as a resort destination Las Vegas is facing issues in the recession that are markedly different from those facing regional markets.

So far, I’ve gotten in touch with a few contacts and gotten several responses. I’m cautiously optimistic about the prospects of getting support from the various properties across town, though this isn’t an easy job. Everyone is busy, of course, and many don’t see the value in taking the time to answer a few questions with no immediate payoff.

There is, however, a payoff. Right now, I think that many executives are flying blind–they don’t have much of a feel for what lies ahead, and their only impression of what others are doing is based on rumor and hearsay. What we’re doing at UNLV is conducting a systematic study of what executives think is exacerbating the recession’s impact, and what can ameliorate it.

The simple answer is, “It’s the economy, stupid.” Obviously, the overall downturn has lowered visitation and gambling spend. When the national economy picks up, the gaming/tourist economy will as well. Maybe. Or maybe not. What impressed me about the industry’s reaction to the early 1980s recession was that there was an understanding that something wasn’t working, and a well-conceived plan to change course. Because of new competition, a weakened global economy, and rising energy prices, the high roller market diminished. Casinos responded by pursuing the middle-market gambler and families. This worked–Las Vegas was in the doldrums from 1979 to 1982, but with new attractions and new strategies rebounded in the later part of the decade, far more so than if casino operators had simply dug in and waited for the storm to pass. You didn’t see a return to 1977. You saw an expansion of the market.

The survey is an attempt to learn how executives are planning to weather this recession, and come out improved. Will they ditch amenities and focus on no-frills gambling, or add amenities and again court the non-gambling luxury market? Will they focus on improving the quality of food and beverage, or increasing the perception of value?

My sales pitch to the executives who I’m asking to take the survey is: you’ve got some difficult choices ahead of you. Every department is going to be arguing for scarce resources in the coming months. If we can get a large group of executives to answer the survey, you’ll have something to take in front of your executive committee when you’ve got to make those decisions. For example, you want money to open a new restaurant. If the survey shows that most executives think they should spruce up their f&b options, that’s some good support. Or maybe you’ll be able to see something that no one else does, and find a niche that’s going to be underserved.

Ultimately, it comes down to the idea that knowledge is power. With the city’s casino industry facing its deepest and possibly longest economic downturn yet, it only makes sense that those who will make the decisions that will shape the industry for years to come would want access to as much information as possible.

And, from my perspective, historians will be able to write a much truer interpretation of what’s happened, when the dust has settled.

If the survey is a success, I hope to run a few of these a year, on various issues facing operators.

If you are a director-and-above executive at a Las Vegas casino and want to participate, or if you want to volunteer as a contact person (or can recommend one), please email me.

To visit the survey page, go here, but you’ll need to contact me and get a password before you can take the survey.