Gaming

Harrah's reaping Rewards of slot club

By Liz Benston / Staff Writer

Harrah's Entertainment is fond of touting its Total Rewards slot club as the most effective and most technologically advanced reward program among the biggest casino operators.

The company is in the thick of rolling Caesars Entertainment loyalty club members into Total Rewards -- a process the company expects will be complete by April. The acquisition of Caesars and its customer lists this year brings the number of Total Rewards members to nearly 40 million. That's impressive compared with estimates that some 53 million people visit casinos each year, Harrah's bosses say.

But that's all fluff if Harrah's can't prove that people are gambling more with Total Rewards rather than playing at other casinos. For the past few years, Harrah's has shown convincing evidence of that phenomenon at work.

In the third quarter, for example, Harrah's said gambling activity using the Total Rewards card grew by 12 percent from a year ago. Unrated play was down one percent. The number of trips by Total Rewards customers to Harrah's properties rose 4 percent -- or 250,000 more trips -- while spending per trip grew 3 percent.

What's more convincing is a report released last week by financial analyst Matthew Jacob. Jacob's firm, Majestic Research, creates data purchased by investors and is independent because it doesn't do business with any gaming companies.

Lots of Wall Street firms have hired people to count gamblers in casinos. But Majestic takes that one step further by plugging hard count information into a complex mathematical model that aims to predict company revenue even before the companies release the information. Over the last several quarters, Jacob claims to have predicted net revenue within a couple of percentage points of actual numbers.

According to his report, Jacob estimates that Harrah's share of Las Vegas Strip "game usage" is about 23 percent this quarter, up from 22 percent a year ago. That includes the Caesars properties and assumes Harrah's bought them a year ago. Game usage, which correlates to revenue, is a measure of how often and heavily its casino games are played, like an occupancy rate for casinos, Jacob said.

Another ratio that is up for Harrah's is its "fair share" of game play. If Harrah's casinos control 50 percent of the Strip's games and is generating 50 percent of the Strip's gambling revenue, the company has a "fair share" of 100 percent. By Jacob's estimate, Harrah's is getting well over its fair share of gambling activity. Fair share is tracking toward 126 percent in the fourth quarter versus 116 percent a year ago, including the Caesars properties.

"If you're above 100 percent, you're doing something right to draw more than your fair share," Jacob said. "If you're below that, there are probably some opportunities to operate your property more efficiently."

At the former Caesars properties, which haven't had the full benefit of the Total Rewards club, fair share is tracking toward 107 percent this quarter, up from 99 percent a year ago.

Excluding the former Caesars properties, Harrah's appears to have the highest fair share of any public company operating on the Strip, Jacob said.

By Jacob's estimate, the Harrah's casino has the third-highest share of game usage on the Strip of any major property, behind Wynn Las Vegas and MGM Grand. But unlike their counterparts, which have casinos of 110,000 square feet and more than 170,000 square feet, respectively, Harrah's operates a casino floor that's around 88,000 square feet. Harrah's Rio casino was No. 5, behind Bellagio. Rio's casino floor is just over 111,000 square feet to Bellagio's just over 156,000 square feet.

Harrah's performance in Las Vegas won't be enough to offset the declines the company has experienced from the devastating hurri-canes in the Gulf, which shuttered multiple casinos. Jacob says the company's revenue is tracking toward a 3 percent decline this quarter from a year ago and an increase of about 7 to 8 percent excluding the shuttered properties. These figures exclude the proper-ties purchased from Caesars.

According to a separate report Jacob issued Monday, 33 percent of Las Vegas visitors surveyed had a Total Rewards card, followed by 27 percent who had an MGM Mirage player card and 20 percent who still had a Caesars Entertainment card. About 43 percent had no player card. The survey was conducted recently of 400 adults who visited Las Vegas in the past year.

Liz Benston covers gaming for In Business Las Vegas and its sister publication, the Las Vegas Sun. She can be reached at (702) 259-4077 or by e-mail at benston@lasvegassun.com.

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