UNLV Study Challenges Casino’s Dependence on Free Play Promotions

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A recent study being conducted by the University of Nevada, Las Vegas (UNLV) suggests a surprising possibility: the long-standing tradition of casinos providing free play incentives to entice customers may not hold as much sway as previously believed. It appears these promotions have lost their luster and may not hold the popular appeal they once boasted.

This unexpected revelation is spelled out in their new report titled, “The Diminishing Impact of Casino Free-Play Promotions.” Here, researchers from the school’s venerated Harrah College of Hospitality concluded that reducing the amount of free play offered by casinos has a surprisingly minor impact on the subsequent behavior of patrons, whether in the arena of their visiting frequency or their spending habits.

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“When we set out on this project, our goal was to analyze how both the spend per trip and the number of visits by a patron were affected,” expounded Anthony Lucas, the lead researcher behind the study. “Much to our surprise, and quite counter to most industry projections, the results showed no significant decline in per trip spending, despite cutting back on the free play incentives.”

While free play, often called comp money, is a major promotional tool used by most casinos to reward their loyalty program members and to coax new patrons into their doors, Lucas indicates that his research nudges towards a re-evaluation of this practice by casino operators.

The tried and tested strategy of enticing repeat visitors with comp money, Lucas explains, has conventionally aimed at retaining customers and coaxing a stretch in their individual spending. In highly competitive gaming spaces like Las Vegas, where there’s an embarrassment of choice, the power of comp money has historically played a crucial role in luring the gamblers back.

Lucas and his team partnered with a tribal casino based in the western U.S. to investigate whether the bait of promotional play is still successful in meeting its objectives. Over two years, they studied the spending and visiting habits of 400 patrons. In the first year, each participant was given a weekly free play incentive of $15. In the second year, the group was divided into four, each with varying weekly allowances, ranging from no comps to the original $15.

Notably, Lucas found that those who had their promotional play incentives reduced to $5 or $10 a week showed no significant change in either the frequency of their visits or their spending habits. However, when the comps were removed completely, there was a decrease in visitation by about 20%. The implication is clear – scaling back on comps may be survivable, yet eliminating them could be detrimental.

Lucas further argued that the study indicates potential in redistributing some of the money allocated for comps to other aspects of casino operation. “There’s a level of hesitation in making such a move since businesses naturally lean towards avoiding risks,” Lucas admitted, adding, “but the data shows that you could divert funds towards improving customer service or the physical environment of the casino. And these are factors that undeniably impact patronage and spend.”

It’s worth mentioning that promotion-related taxes also might play a significant role in the restructuring of comp programs. Currently, of the 27 states with commercial casinos, riverboats, or racinos, only seven – Florida, Kansas, Massachusetts, Nebraska, Nevada, Ohio, and Pennsylvania – exempt free play money from being taxed. In other states, casinos must pay gross gaming taxes on promotional play, even when it is distributed as a free perk.

This revealing study from UNLV certainly offers food for thought in an industry where seemingly every square inch has been strategized and monetized, indicating that there might be room for beneficial changes in the traditional approach to harnessing customer loyalty.