Split-level in Vegas Seven

It’s Thursday, which means another Green Felt Journal column in Vegas Seven. Here’s the crux of what I call the “split-level strategy”:

So casinos are pursuing a “split-level” strategy that harks back to the 1970s and earlier—keeping prices low for bargain hunters while pursuing high-end play at the baccarat tables. It’s not the mid-1980s approach of making a profit on the sheer margin of visitors, since it’s much more expensive to borrow, build and maintain casinos today. And it’s not the early-2000s pursuit of free-spending travelers willing to pay a premium for rooms, food and entertainment. It’s looking like a little bit of both, taken to extremes.

via Adopting the old ‘split-level’ strategy | Vegas Seven.

I talked about this strategy last week, in some detail, but I wrote this article first, so you actually read my response to what I wrote before I wrote it, if that makes sense. Not quite the grandfather paradox, but it does muddle the timeline a bit.

This is also, by the way, what I was referencing when I talked to the LVRJ about the Hard Rock’s plans to chase the Asian-American middle-upper-level roller. It is a huge potential market, but basing your strategy on targeting local players of any ethnicity is risky right now, because of obvious reverses in both employment and housing.

Having looked over the numbers even more closely over the past week, I’m even more convinced that without the high rollers spiking the baccarat numbers, we’d be telling a very different story about 2009. Hopefully I’ll get to that later today.

I went with “split-level strategy” because it sounds retro and the strategy is very, very retro. As I said, it’s totally different from what worked in the 1980s and the early 2000s, and it is risky, but given the economic climate right now, there are few other options.

Tiered pricing thoughts

A few weeks ago, I started talking about a tiered pricing model for Strip hotels on the Vegas Gang. I took some time to

On one side, pro-fee advocates argue that they offer convenience. On the other, resort fee opponents maintain that fees are poorly advertised and shock the customer. There may be a way to please both groups of visitors, those who want convenience and those who want low prices. A tiered pricing model, in which customers get to pick one of several levels of service for the same room, might help generate additional revenues and give guests a greater feeling of control over their experiences, which may translate into greater customer satisfaction and stronger bottom lines.

For example, imagine a three-tiered pricing structure for a guest room, with “standard,” “gold,” and “platinum” levels.A guest booking a room at the “standard” rate would receive a room key and not much more. He or she would have to pay extra for virtually every other hotel service; for example, to visit the health club, use the Internet, or make phone calls.

At the “gold” rate, customers would receive everything that came with the standard, plus free wireless Internet, phone calls, bottled water, copies of the local paper, etc.

For guests looking for more, a “platinum” rate could deliver all the benefits of the gold rate, plus several extras — dining credits, a selection of prix fixe menus at select hotel restaurants, tickets to the hotels big show, complimentary spa services, and nightclub admissions.

Guests opting to “go platinum” will value cost-certainty and convenience over spontaneous choice.

Some resorts are already offering something close to platinum-tier pricing. Wynn Las Vegas, for one, offers several packages, including a golf getaway, jetsetter package, romantic retreat, and the Ultimate Wynn Package, that offer guests varying levels of amenities.

We’ve seen the trend towards cost certainty become popular over the past year in Strip restaurants. From all-day, single-price buffet offers to prix fixe gourmet dining, visitors have responded positively to the chance to pay one price for an expected level of service. It stands to reason that an operator to apply this model more broadly to the total guest experience could become a trend-setter.
Companies owning several properties along the Strip are particularly well-poised to offer a variety of dining and entertainment options that will generate true economies of scale and diversity.

Whether it’s called tiered pricing, a vacation package, or something else, this may be an idea that needs to be explored more aggressively as resorts seek to defend their market share in what promises to be a challenging year.

via Las Vegas Business Press :: David G. Schwartz : Tiered room pricing: A modest proposal.

I came in about 250 words over for the article which was shortened for publication, and I included some of the cut material in the quote above where I lay out the proposal.

The industry’s moving in a few different directions right now, and this is one of them. I’m sure that there are a million back-of-the-house reasons not to do this, but coming at this from the consumer’s perspective, it deserves consideration.