Engineering Luck

Author’s Note: This is the first in a series of six articles, each penned by an elite executive at Barona Resort & Casino, which delve into selected cutting-edge business principals that have propelled Barona into being the dominant player in the San Diego gaming market. Each article will be comprised of a general treatise followed by an in-depth interview conducted by Max Rubin, detailing specific examples of how putting those principals into action results in reproducible, measurable and memorable positive guest experiences.

Early in my career, someone told me that every gambler walking through the door of a casino expects to lose. My own father used to tell me, “Casinos weren’t built to lose money.” So why is it that 30 million Americans choose gambling as their “sport” of choice? Is it the challenge? Do they like being the underdog and beating the odds? Do they think, “Today is my day? Today will be different. Today I might be lucky?”

Researchers, scientists, psychologists and psychiatrists have been asking this question for centuries, and they have found that people who gamble are motivated by various reasons and exercise different avenues to express their preferences.

Often, players may feel they have a secret knowledge or a level of control over some aspect of a game, such as sports betting, poker, horse racing, blackjack or shooting the dice. Still others enjoy the purely random redistribution of wealth associated with games such as the lottery or slot machines. Others yet may feel that they have an unbeatable “system” that they use to “beat” roulette or baccarat.

It’s often said that gambling is consistent with everyday life—that life itself is a gamble. Of course the cliché holds true, but when we look at the 10 percent of the American public who chose to visit a casino in 2009, we have to recognize the great common denominator—they all believe in luck.

What does an inherent belief in luck have to do with it? Almost everything. Because if players weren’t superstitious and didn’t believe that luck was on their side, they wouldn’t play. Our guests’ ingrained belief in their ability to be lucky is one of the cornerstones upon which our industry survives. Virtually all of our customers believe in the adage “I would rather be lucky than good”—and correctly so, I might add. So, it becomes obvious that we should do everything we can to positively engineer our games to make our players more lucky.

As smart operators, we can parlay our player’s luck to our advantage, yet I’ve found that most casino managers pay little heed to the notion that most players know when they are in a casino that cares about their luck. Building a comprehensive “lucky players” program is certainly within the grasp of the savvy operator, but instituting this sort of program requires a disciplined strategy and buy-in from the highest levels in the organization.

To fully understand the implications of such a program, we need to understand our players’ limitations first. We know the first major guest constraint is money. Most customers have a certain bankroll they are willing to risk, and they will play until it’s either gone or they have hit the second constraint, which is time. As we all know, there’s usually more time than money; however, that may not be true for everyone.

Next, we need to determine what our customers really want from their gaming experience. If you ask them, they’ll tell you the answer’s simple: they want to win and they’re going to play where they win. But we know it’s not that simple—and we know that we wouldn’t stay in business if they all got that need met every time. But make no mistake about it, they will play were they got to be the lucky underdog who somehow overcame adversity and achieved at least a degree of victory.

Of course there are other social and customer service factors that should be taken into consideration, but let’s just stick with that first assumption: primarily, gaming customers want to win, and they’re going to play where they have the most luck.

We see marketing campaigns designed around this concept all the time. “Loosest Casino,” “Certified Slots,” “More Winners,” “X percent Payback” and so forth, but what does it mean to players?

Most of these campaigns in other casinos are designed to attract customers (and win their money quickly), but few are supported by a strategic plan geared toward the customer experience. And this lack of support creates a great opportunity for you to set your casino apart from the competition.

Some would argue that this sort of strategic thinking only pertains to “local properties,” but I disagree. On a recent trip to Las Vegas, I was staying at a property with a nice double deck game (my game of choice). While playing, I was informed by another player that there was a better game with better rules at a similar property nearby. After further inquiry, I also found that it was priced competitively (with reasonable table minimums) as well. My thought was that this was done strategically to compete for my business, so I took my business across the street. Please remember property loyalty programs still have significant impact on a customer choice and experience, but a simple change in rules on a blackjack game can cause someone to “vote with their wallet.”

When we think of designing or engineering “luck” for the player, I am referring to our ability to mathematically engineer the games we offer—whether slots or table games—to enhance the enjoyment of our customers. These value propositions are particularly important in our current down economy. While employee-guest relations, as well as property amenities, location and clientele, are certainly to be considered, all things being equal, the “lucky” casino is the casino your guests are going to choose.

First, let’s discuss bankroll. This is the amount of money a customer is willing to risk for his experience in our casino. Although not truly fixed, it is usually a fairly concrete number in the guest’s mind. For these purposes, we will be using a $500 bankroll. It helps to remember that initial individual bankrolls are volatile, but when cobbled together over time, they trend toward statistical norms.

Second, house advantage is the edge that the house has over the customer on any particular game. The important part to remember is that this can be adjusted depending on the type of experience you want to give the customer.

Finally, we need to examine hit frequency (how many losing hands a player sits through before getting paid), which is a vital part of the customer experience.

Chart 1 shows a comparison between two typical Three Card Poker games. The only difference is that Casino A pays 4-to-1 on a flush while Casino B pays out 3-to-1. As a reminder, the primary constraints a customer usually faces are time and money. As money is the more common constraint, it’s obvious that the casino offering 4-to-1 will give the guest more value.

The question you have to ask yourself is whether you want to win the player’s money as soon as possible or do you want to give the guest a “lucky” game so that she has a better chance of winning, a better chance to play longer, and will return (see Chart 1)?

The customer may not understand the exact dynamics or mathematical implications of Chart 1, but she will feel them—especially with return visits. Over time she will feel luckier at your casino due to the simple fact that she will have the opportunity for more winning sessions and significantly more time played.

Now let’s look at how hit frequency can be manipulated. A member of my team recently wrote a great article explaining house advantage and hit frequency between single-zero (which is the only game we offer at Barona) and double-zero roulette. Basically, by adding the double zero, the house advantage is increased 100 percent, except on the outside numbers, in which case it’s increased by 200 percent! In addition, playing a single number straight up with single zero increases the player’s chance of hitting from 1/37 to 1/38 (see Chart 2).

Based on this example, guests will have the opportunity to hit “their” number(s) more often, not only by an increase in hit frequency, but by time on the game as well. And once those guests come to understand that our odds are better (because they lose less and consequently win more or get more playing time), they become more loyal to Barona.

As we face progressively more difficult operating conditions, whether from the pressure of declining revenues in a free-fall economy, competitive saturation or simply a mature market, it is increasingly important to understand our guests’ needs and be able to fulfill them.

Today, more than ever, our guests are looking for value propositions. Just because we can implement short-term solutions to shore up declining revenues (like adding 6/5 blackjack), it doesn’t mean we should, or ever would at Barona. While our customers may not fully understand the mathematical implications behind some of the decisions we make, they will surely feel them. And the feelings they have, which are measurable in the business you have, will be clearly illustrated by your players’ repeat visits to their favorite lucky casino.

Max Rubin: Pretty heady stuff, Michael. Let’s get right to it. How do you know that making people luckier is better for Barona?
Michael Patterson: Because they visit us more often, and they have a better experience when they’re here. You go to where you’ve been lucky.

MR: Sounds like you’re talking from experience.
MP: Kind of. We have high trip frequency, and I think it’s highly attributable to the low game edges we offer. And I like to play a little blackjack myself and I always go where I think I’ll find the best game.

MR: How hard was it to get your top management to buy in to this sort of program?
MP: I wasn’t hard at all. Actually, it’s a strategic objective with a value-based proposition that our very top management put into place at Barona in the very beginning. And we’ve stuck with it.

MR: How has the guest response been?
MP: If you look at the head counts at our property compared to the head counts at our competitors, I think that answers the question.

MR: I’ll take that to mean you’re busier than they are. Do you guys shop your competition frequently?
MP: Yes, monthly.

MR: Is that just for head counts …
MP: We look at the whole competitive environment.

MR: What’s that mean?
MP: Head counts, game edge, minimums, maximums, penny slots, loyalty rewards, food quality, price points, hotel rooms, valet, security, cleanliness, uniforms, facilities, entertainment, staffing, you name it.

MR: Sounds like fun.
MP: (Laughs) At Barona it is.

MR: Do your competitors shop you?
MP: If they’re smart …

MR: Ouch! Do your players even notice the difference between a single- and double-zero wheel?
MP: Yes.

MR: How do you know?
MP: By the amount of time they spend at the table and by how often they visit me.

MR: How do you measure up against your closest competitor?
MP: From a table games perspective?

MR: On roulette.
MP: On any game, we normally have three times as many tables open and three times as many players as anyone in our market, and that includes roulette.
MR: That’s gotta translate into a lot of dollars …
MP: We probably do about three times as much business. … But it’s actually more, because our minimum bets are significantly higher than anyone else’s.

MR: How hard was it to teach your dealers to handle the En Prison feature?
MP: Not hard at all. It’s automatic with the Rapid Roulette feature. There’s nothing to it.

MR: So you have Rapid games, too?
MP: Uh-huh. We have a lot of chipless games.

MR: We’ll have to get to that in another article. Are you the only one in your market that pays 4-1 on the three Card Poker flush?
MP: Yes. As far as I know, everyone else pays 3-1. And that includes Vegas.

MR: Do you have more three-card games in San Diego than anyone else?
MP: Yes.

MR: Do you think you make more money on yours?
MP: We make more than anyone in southern California.

MR: Does that include Pechanga?
MP: Yep. We make more money in table games than anyone.

MR: How are your head counts compared to, say, 2007?
MP: From a property perspective, they’re flat compared to 2007, but we’re way above our competitors in both head counts and tables open per hour.

MR: Do the principals of “Engineering Players’ Luck” pertain to slot machines, too?
MP: Yes. Things like hit frequency, average bet, payback scales all pertain to slots, too. However you want to design it, engineering luck is critical. No matter what you do, it’s all about giving your guests the best games that you can

MR: And the theory works?
MP: Exactly.

MR: It seems to me that your entire concept of the “lucky casino” is based on the players’ feelings. How do you measure feelings?
MP: That’s easy. I just look around Barona and see that we’re busier than any other casino I know of and that tells me that we’re right.

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