LAS VEGAS -- Running a casino presents a big stats problem -- and a correspondingly large opportunity. Casino managers might know the probability of gamblers winning different games, but laying out a casino floor to optimize the amount of money that's taken in is no sure bet. All those games generate plenty of data, though. That combination makes the casino industry a prime candidate for analytical technologies and applications.
Rom Hendler, chief administrative officer at Las Vegas Sands Corp., which owns nine casinos and resort facilities in Las Vegas, Pennsylvania, Singapore and Macao, China, is a firm believer in the idea that data analytics gives casino operators an edge in a very crowded industry. "Analytics technology is essential to be competitive," he said in an interview at SAS Institute Inc.'s 2014 Premier Business Leadership Series conference in Las Vegas.
But even though the potential benefits of analytics in managing casino operations may seem obvious now, it wasn't always that way, Hendler said. He has been with Sands for 14 years and has held several numbers-driven positions, such as revenue manager and vice president of strategic marketing. In those jobs, he saw analytics applied to general business issues, mainly in marketing. He said it's a relatively recent development that casinos, including the ones his company owns, are using analytics to drive higher profits on the gaming floor.
Hendler said the traditional approach to maximizing gambling profits was driven by intuition. Pit managers would position slot machines, card tables and other games around the casino floor based on their experience and understanding of how people played them. Little was measured and reviewed afterward.
"Traditionally, it was very uneducated," he said. "You know the games very well, and you know how people behave. [Casino managers] had a lot of knowledge, but they weren't able to apply analytics at that level."
Ante up on analytics
During his time at Sands, Hendler has helped change that. Today, modeling teams at Sands use SAS-based analytical technologies to predict the impact of moving games from one area of a casino floor to another. To set a baseline, they collect data on how much money each game, whether table games or slots, currently brings in. They also collect information on how people move about the casino. When the gathered data is combined with the odds of a particular game paying out, the analytics team can model what its performance would look like in different locations to help determine where the game should be placed in order to achieve the optimal performance level.
Rom Hendlerchief administrative officer, Las Vegas Sands Corp.
Hendler said the analytical techniques that Sands is using to position casino games are similar to ones that have long been employed in other industries -- for example, by supermarket companies. "If you think about the casino floor like a grocery store, what should be where to get the best yield?"
Sands hasn't tried to formally measure the ROI of the predictive modeling approach. Instead, Hendler said, his team tracks the winnings generated by each game after it's moved and compares the results to the baseline measure. If a game underperforms compared to baseline, they'll consider making another change in location.
Data drives casino decisions
The process of positioning games ties into a broader data-driven approach to optimizing revenues at Sands. According to Hendler, gaming revenue is a relatively small part of what casinos bring in. They derive much of their revenue from their resort operations, and he said Sands also analyzes every decision related to that area of the business.
For example, Hendler said a good way to encourage gambling is to give customers free nights or discounted dinners in the hotel that houses a casino. But the casino would lose money if it did so for everyone, because some people don't gamble much. To help pinpoint such offers, Sands runs customer analytics applications on data it has collected showing how often individual guests gamble, how much money they tend to spend in the casino and what kinds of games they like.
This is all part of a significant shift in how casinos do business. Hendler said it's getting to the point where casinos are being run like financial services firms and analytics professionals are moving from banking to the gaming industry. That makes some sense, since companies in both industries need to balance financial risks and returns in making decisions and placing their business bets.
And Hendler thinks that relying so heavily on analytical technologies is making casino companies smarter. In the past, "it was not a very educated industry," he said. "Over the last 10 years, you see a lot more knowledge."
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