Study: Free Play Less Effective in Attracting Casino VisitorsStudy: Free Play Less Effective in Attracting Casino Visitors A recent study from the University of Nevada, Las Vegas (UNLV) has found that the effectiveness of free play promotions at casinos is diminishing. Researchers from UNLV’s Harrah College of Hospitality discovered that reducing the amount of free play a casino offers to players has a limited impact on their visiting and spending habits. This finding contradicts the industry’s long-held belief that free play is an essential marketing tool for attracting and retaining customers. According to Anthony Lucas, lead researcher and author of the study, there was no significant drop in spending per trip or number of visits after reducing free play rewards. This suggests that casinos may need to reconsider the effectiveness of their comp programs. Lucas explains that free play, often known as comp money, is offered to members of loyalty rewards programs to retain customers and increase their spending. In saturated gaming markets like Las Vegas, comp dollars have been a key strategy for casinos to differentiate themselves and encourage return visits. The study analyzed data from a tribal casino in the western United States. In the first year of the study, 400 players received $15 per week of free play. In the second year, these players were divided into four groups, each with varying levels of free play allocation, ranging from $0 to $15. The results showed that there was no noticeable decrease in frequency of visits or spending patterns among the groups that had their free play reduced to $5 or $10 per week. However, visits dropped by approximately 20% for the group whose free play benefits were completely eliminated. Lucas concluded that casinos would be wise to reduce fees but not eliminate them entirely. He noted that the data indicates that other strategies, such as improving customer service or enhancing the casino’s physical environment, can have a more significant impact on customer loyalty and spending. The study also highlighted the issue of promotional taxes. Of the 27 states with commercial casinos, only seven allow free play money to go untaxed. In other jurisdictions, casinos must pay gross gaming tax on promotional games, even though they are provided for free. The states where gambling establishments do not pay taxes on promotional games are Florida, Kansas, Massachusetts, Nebraska, Nevada, Ohio, and Pennsylvania. Overall, the study suggests that casinos may need to rethink their reliance on free play promotions and explore alternative strategies to attract and retain customers.
Posted on: June 27, 2024, 12:33 pm.
Last updated: June 27, 2024, 12:33 PM.
A new study from UNLV shows that casinos that have offered free play for decades are not as effective as the promotions once were.
A billboard outside the Chumash Casino Resort in California advertises $100 in free play. A new study from UNLV questions the effectiveness of free play promotions. (Image: Casino.org)
In a new report titled “The Diminishing Impact of Free Play Promotions at Casinos,” researchers from the school’s Harrah College of Hospitality found that reducing the amount of free play a casino encourages a player to have has a limited impact on the customer’s visiting and spending pattern.
“We wanted to understand how spending per trip and number of visits changed,” explains Anthony Lucas, the study’s author and lead researcher. “What we found was that there was no drop in spend per trip after reducing rewards. I don’t think there’s anyone in the industry who could have predicted that.”
Free play, or comp money, is offered by most casinos to loyalty rewards members. Free slot money is a common promotion for new players who also register for the casino’s loyalty program.
Lucas says the effectiveness of the Comps may need to be reexamined by casino operators.
Free play goals
Lucas explains that the primary goal of providing repeat visitors with comp dollars is to retain the customer and ideally increase their spend per trip. In major gaming markets where saturation is robust, for example in Las Vegas, Lucas says comp dollars have historically helped casinos bring back players.
‘You don’t always go on holiday to the same place or eat out in the same restaurant. The same goes for gambling,” Lucas said. “You probably won’t go to the same casino every time, but if they can get you to visit more often, that’s great. And that’s what they use free-play loyalty programs for.”
Lucas’ team worked with a tribal casino operating in the western part of the US to determine whether promotional gaming continues to achieve its goals.
In the first year of the study, 400 players were given $15 per week of free play. In the second year, the 400 people were split into four groups, with the groups’ weekly free play allocations ranging from $0 to $15.
Lucas said there was no noticeable drop in frequency of visits or spending habits among the groups that saw their promo play drop to $5 or $10 per week. However, visits dropped by around 20% for the group whose free play benefits were completely withdrawn.
Lucas concluded that casinos would be wise to reduce fees, but not eliminate them.
“It’s difficult for casino owners to make changes because businesses are inherently risk averse,” Lucas said. “The data shows that you can do so many other things with that money with minimal to no impact. You can improve customer service and the physical environment — these are things that also impact customer numbers and spending.”
Promotional 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 tax on the promotional game, even though it is provided for free.
The states where gambling establishments do not pay taxes on promotional games are Florida, Kansas, Massachusetts, Nebraska, Nevada, Ohio and Pennsylvania.
