Modernizing Casino Loyalty Systems: A New Approach to Curtail $37 Billion Annual Losses
Digitalization in Addressing Unfair Gambling Advantages on Online Slots at the Global Security Summit
In an eye-opening revelation at the World Gaming Protection Conference, Noah Acres, co-owner of Acres Manufacturing, pointed out that U.S. casinos are losing a staggering $37 billion per year by showering players with free play. Acres, a developer of casino-loyalty and technology, argued that this practice not only doesn't attract new players but also exploits existing vestiges of legacy systems.
Acres presented findings from the company's 2023 position paper containing 200 U.S. casinosโ responses regarding the impact of player-loyalty reinvestment on their profitability. The study uncovered that many loyalty programs provide player-reinvestment rates approaching or even exceeding 100%, becoming profitable only through breakage caused by unredeemed rewards or underutilized programs.
Casinos are unintentionally hemorrhaging money, with net reinvestment in player loyalty consistently hovering above 35%, equivalent to approximately $25 billion. Free play represents the most substantial single cost contributor to this figure. Free play not only devours significant playtime but also diminishes profitability on novice or time-limited players.
"The primary concern with free play is that it doesn't generate new play," Acres asserted. "It doesn't bring in new players." Over the past 15 to 20 years, gambling revenue has dropped as free play became more prevalent, despite a growth in GDP and overall income.
Acres based his findings on public data from various states and maintained that not every property issues free play at the same rate. Of those that report, free play amounts to around 20% of a casinoโs gross gaming wins. Yet, the time value of players consuming free play remains unrecalculated, which could significantly widen the damage.
In contrast to traditional businesses, where free items are procured after money has changed hands, casinos offer free play before players have wagered their funds. Calculating the true value of the time spent on free play reveals that players lose potential revenue by consuming free play, which could have been spent on paid games, thus generating more income for the casino.
Willy Allison, the conference host, addressed the matter, expressing concern over the misuse of free play. The question remains: can casinos find a way to quarantine this practice while catering to addicted players? According to Acres, the solution lies in new technology.
Acres proposed that future loyalty systems abandon free play as the primary incentive, instead introducing tools inspired by the excitement found in video games and slot machines. By enhancing gaming experiences and rewarding loyalty with personalized content, casinos can encourage more sustainable play and discourage manipulation.
Casinos also need to reconsider their outdated sign-up process for loyalty programs. Current registration procedures can deter potential customers with lengthy, complicated processes, fostering a more appealing experience akin to popular social media platforms or content streaming services.
Advantage play is another area where casinos lose money, with organized groups taking advantage of promotional offers and free play. Crystallizing the control over these accounts and turning to digital solutions like mobile apps can offer a more secure and efficient alternative, reducing the exploitation of free play.
Ultimately, investing in digitalization can empower casinos to truly personalize their customers' experiences and protect their revenue. By adopting AI-driven insights, real-time tracking, flexible membership programs, and building trust through transparency, casinos can better manage free play offers, minimize the potential for exploitation, and nurture long-term player loyalty.
The co-owner of Acres Manufacturing, Noah Acres, suggested that casinos could reduce their $37 billion annual losses by modernizing loyalty systems and reforming casino-games practices, particularly with slots, as the use of free play as a primary loyalty incentive might not attract new players. Acres implied that technology could be instrumental in implementing new casino-and-gambling strategies, such as personalized content and digital solutions to curb advantage play.
