UNLV Study Finds Casino Free Play Promos Have Lost Effectiveness
A new study from UNLV suggests that free play incentives casinos have for many decades provided patrons aren’t quite as effective as the promotions once were.
In a new report titled, “The Diminishing Impact of Casino Free-Play Promotions,” researchers at the school’s Harrah College of Hospitality found that reducing the amount of free play a casino incentivizes a player has limited impact on the patron’s visitation and spending habits.
“We wanted to understand how the spend per trip and number of visits changed,” explained Anthony Lucas, the study author and lead researcher. “What we found out was that there was no decline in spend per trip after reducing the awards. I don’t think there is anyone in the industry who would have predicted that.”
Free play, or comp money, is afforded to loyalty reward members by most casinos. Free slot money is a common promotion for new players who register for the casino’s loyalty program, too.
Lucas says the comps’ effectiveness might need some rethinking by casino operators.
Free Play Goals
Lucas explains that the primary objective of providing repeat visitors with comp dollars is to retain the customer and ideally increase their spend per trip levels. In major gaming markets where saturation is robust, Las Vegas for instance, Lucas says the comp bucks have historically helped casinos return players.
“ou don’t always go on vacation to the same place or out to eat at the same restaurant – it’s the same with gambling,” Lucas said. “You’re probably not going to the same casino every time, but if they can get you to visit more frequently, that’s great. And that’s what they use free-play loyalty programs to do.”
Lucas’ team worked with a tribal casino operating in the western part of the U.S. to determine whether promotional play is continuing to achieve its goals.
In the first year of the study, 400 players were given $15 a week in free play. In the second year, the 400 people were split into four groups, with the groups’ weekly free play allotment ranging from $0 to $15.
Lucas said there was no noticeable decline in the frequency of visits or spending habits among the groups that saw their promo play reduced to $5 or $10 a week. However, visitation declined by about 20% for the group whose free play benefits were entirely rescinded.
Lucas concluded that casinos might be smart to reduce, but not eliminate, comp money.
“It’s difficult for casino ownership to make changes because corporations are naturally risk-averse,” Lucas stated. “The data shows that you could do so many other things with that money with minimal to no consequence. You could improve customer service and the physical environment — these are things that affect patronage and spend, as well.”
Promo Taxes
Of the 27 states with commercial casinos, riverboats, or racinos, only seven allow free play money to go untaxed. In other jurisdictions, casinos must pay gross gaming taxes on the promotional play despite it being given out for free.
The states where gaming venues don’t pay tax on promo play are Florida, Kansas, Massachusetts, Nebraska, Nevada, Ohio, and Pennsylvania.
The study also revealed that the reduction of free play incentives in some groups resulted in a minimal impact on their frequency of visits and spending habits, contradicting the initial presumptions in the casino industry. The findings suggest that casinos might consider reducing, but not eliminating, their use of comp money to retain customers and potentially enhance their visitation and spending patterns.
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