Atlantic City’s casinos should spend less money on room, food and drink giveaways and more on travel and parking reimbursement if they want to draw more people to the resort, a recently published study suggests.
“They may have a need to try creative marketing tactics if they want to gain a competitive market advantage,” Temple University professor Seul Ki Lee said of the casinos. “This paper suggests a possibility.”
In a study published in the Journal of Hospitality & Tourism Research, Lee and Purdue University professor SooCheong Jang found that Atlantic City casinos, on average, spent nearly half of the money they allocate on promotions toward rooms, food and beverages and about 8 percent on travel, bus and parking. The complimentary items increased casino demand and spilled over onto on neighboring casinos.
However, room, food and beverage giveaways worked to draw customers away from nearby casinos rather than attracting new visitors to Atlantic City, the study says.
“They initiate a cutthroat competition in which casinos bear burdensome losses to attract players away from other casinos,” the researchers said of room comps. “Most of the increase in demand through compliments is produced by taking away players from neighboring casinos, while little new demand is brought into the market.”
Researchers based their study on two years’ worth of data the casinos filed with the state Division of Gaming Enforcement between 2008 and 2010. Revel was not included in the study’s data, as it opened this year. Casinos also may have altered their promotion strategy since the data were collected.
Lee said that if the casinos want to draw more and newer visitors, they should consider pooling part of the money they spend on comps into a shared program that offers travel reimbursement, free parking or other options that bring in new visitors to Atlantic City. He said the statistical evidence shows the casinos would benefit.
“I can safely assume that by increasing travel-related comps, they would benefit as a market,” Lee said.
The new CEO of Resorts Casino Hotel also has said he believes Atlantic City’s casinos are giving away too many promotional freebies and fighting one another for the same customers. In remarks to the Atlantic City Hotel & Lodging Association last month, Gary Van Hettinga questioned the practice of giving away and deeply discounting rooms during the winter.
Tony Rodio, president of the Casino Association of New Jersey and of Tropicana Casino and Resort, said he agreed that Atlantic City casino hotels shouldn’t undersell their hotel rooms but that it was “easier said than done.”
“I agree philosophically as a market we need to go in that direction,” he said.
But when a casino has many rooms sitting empty and others are discounting rooms, sometimes offering a free or deeply discounted room to a customer who is spending money at the property is a better alternative than having an empty room and one less customer, Rodio said.
As far as the study, Rodio said he was unsure whether researchers had captured information on sweepstakes, tournaments and other promotions that draw new visitors but may not be captured in the complimentary data on which the study was based.
He also said room giveaways were an essential promotion for a casino’s customer base that he couldn’t see changing.
“One of the biggest, best things customers can get is a free room,” he said.
Frequent Atlantic City visitors Lou and Arlene Zaren, both 62, of Philadelphia, said the room promotion they receive as part of Trump Taj Mahal Casino Resort’s Chairman’s Club is the single giveaway that keeps them coming back.
“The rooms are definitely a draw,” said Arlene Zaren, who was with her husband in Atlantic City on Sunday to mark their anniversary.
The couple, who have visited Atlantic City at least once a month for the past 10 years, said the casinos have scaled back their complimentary promotions in recent years. Without free rooms, the couple likely wouldn’t make the trip to Atlantic City.
“We would go to Parx (casino in Pennsylvania) because I’m only 10 minutes from it,” Arlene Zaren said.
Jeff Guaracino, chief strategy officer for the Atlantic City Alliance, the marketing arm of the casino industry, said he was unaware of the study but open to ideas. At the same time, the group is focused on Atlantic City’s image and offering activities that give people a reason to visit the destination rather than a program to offer visitors complimentary travel.
“At this point, we’re focused on the brand campaign,” he said.
Atlantic City must focus on ways to attract people and convince them to spend money rather than giving them something free, Guaracino said.
“I don’t think Atlantic City is interested in comping much more,” he said.
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