Slots, Tables, and All That Jazz: Managing Customer

Profitability at MGM Grand Hotel (do all the questions)

1. Keeping in mind the description of MGM’s profitability measurement systems. Which of
the two customers described in Table 1 appears more attractive for MGM? Why?
Table 1
Customer A Customer B
Total theoretical win $2,000 Total Folio $1,500
Tables theo $1,300 Hotel $750
slots theo $700 Restaurant $250
Shows $500
Total Comps $800
Hotel $500
Restaurants $100
Tickets KA $200

Profitability $1,200 Profitability $1,500

Number of trips 2 Number of trips 1
I believe that Customer A is more attractive as they like to focus on the customers that
are both frequent and likely to use the facilities around them, which includes the tables,
slots, restaurants, and shows. So even though the bottom line says one Customer B was
more profitable, I believe in the long run the MGM should focus on customer A. Also in
these calculations, they say that Customer A only brings $1,200 to the hotel, but they
aren’t supposed to be calculating in any wins or comps that the hotel provides the guest
as those are provided free by the hotel’s choice. It’s not required.

2. Using the information in the MGM Players Club dataset, discuss the differences in the
various segments of players at the MGM Grand. Some hints for potential analyses:

a. Begin by classifying customers according to their attractiveness from a static

point of view (current profitably). Measure the concentration of profits.
There looks to be several different customer segments identified by the hotel – 14 to
be exact. However, there are broader categories that deal with profitability. These
are the ones that fall above the “comp line”- those that deserve “comps”, and then
the ones that fall below it. This is measured based on the amount of money that a
guest spends at the hotel (gambling) in and the frequency of their visits. Those above
the comp line in order of profitability are the whales, high rollers, and loyal lower-
level gamblers.

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 b. Look at some aspects of behavior of the different groups (Note: please use as cut-
off points total theoretical win of $500, $10,000 and $100,000).
i. Number of trips – this refers to the fact that someone that visits
frequently and is loyal (sometimes identified as the lower-level gamblers)
can be more beneficial to the hotel than one time large spending visitors.
ii. Trip length – Longer trips could be identified with any group, but
according to Exhibit 8 the longer you stay the more likely you are to
receive some short of comps.
iii. Whether they play in tables or slots – does not seem to be relevant to one
group, rather the amount they bid and their potential losses to the
company are more what is examined.
iv. Loyalty to a certain property – for whales this means that they could get
access to exclusive perks and luxuries that money cannot buy them, for
the high rollers an instant recognition and deference to their treatment is
provided by hosts, and loyal lower-level gamblers that frequent the MGM
can build a relationship that awards them comps as well. They can all
earn points that can be spent in the first week of December.

3. How does the MGM Grand derive value from its Players Club program and its player
information systems?

It uses them to identify who is spending the most, losing the most, frequents the
location most often, or controversy doesn’t visit for a long time, and who to target with
their deals and emails they send out. This also tells them who they should pay special
attention to with their casino host.

4. Do you think it is appropriate for hosts from any property to have access to the entire
profile of a specific customer, regardless or where that customer plays or stays? Why? If
you think that hosts form a certain property should have access only to the information
on customers’ play in their property, do you think there is anybody who should have a
comprehensive view of the customer?

I feel that the prohibiting the employee to see the complete guest’s information is going
to ruin the smooth transition that many guests experience with the complete
information in front of the hosts. In truth, the information benefits both the casino
segment and the guest, because the casino gets to identify its main spenders and the
guest gets the rewards (comps) that come with being one of the main spenders. Yes, this
does at certain points allow the casino to exploit the information to try to maximize their
profit. However, they are only offering the different deals, promotions, and service, the
customer does not have to participate or accept any of it.

5. Do you think treating each property (MGM Grand, Bellagio, Treasure Island, etc.) as an
independent profit center is the right approach to manage the MGM MIRAGE group?
Why?

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 If feel that each of the properties should be handled first individually because they are,
in fact, completely different operations. They may be owned by the same company but
they should determine the worth and success of each of the locations by themselves
before considering the whole. If they want to look at the big picture, then perhaps a
comprehensive view would be worthwhile. Like they mention in the text, they don’t
keep operating anything that isn’t profitable by itself, their example was a restaurant,
but a hotel is another good example.

6. How should MGM view the entertainment business? Is it simply a mechanism for ringing
gaming customers to the property? Is there a distinct entertainment segment of
customers? (Hint: look at the overlap between the Players Club and the Hotel Folio
database.)

Right now, it seems that they only capture the amount that is spent by the guests when
they gamble and what they charge to their room. Everything is else is not included in the
database, so they only realize where about 60% of that entertainment profit is coming
from. This is distressing, especially because 50% of the profit at MGM Grand actually
came from the entertainment section such as shows, hotels, restaurants, and spas. The
information they do have came from the Hotel Folio and that included the Players card,
however, it is not factoring in some of the major sources of revenue that it currently
possesses.
They need to figure a way to determine their profits from other sources than just
gambling and perhaps change their strategy on they give out comps and do business. I
feel that more and more people go to Las Vegas for the food, shows, and good
entertainment value that is provided in spades. This means that they are missing a lot of
repeat business that they could be taking advantage of. There is definitely a distinct
entertainment segment.

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