Las Vegas Sun

March 28, 2024

Critics: Casinos’ cash-back programs of little benefit

Giving cash back to a casino's gamblers has become one of the most popular enticements used to draw players into Las Vegas casinos.

Many gamblers, particularly along the Las Vegas Strip, have become accustomed to receiving a certain portion of their gambling money back from slot clubs. It's a perk that goes all the way up to the highest of the high-rollers -- and it's been said that the cutthroat cash-back competition for high-end players is starting to show on casinos' bottom lines.

"Kerry Packer (a famed Australian high-roller) is just an average player ... but he works the casinos brutally," said Anthony Curtis, publisher of the Las Vegas Advisor newsletter. "These guys are too savvy and too tough."

And that has some in the casino business turning against the cash back frenzy.

"The idea of the slot club is to take care of our customers appropriately, not to give them the world," said Las Vegas casino consultant Andrew Klebanow, former vice president of marketing at Sam's Town and Santa Fe Gaming Corp.

That issue was debated Wednesday evening at a meeting of the Casino Management Association.

"Cash back," in the casino industry, is defined as credits that can be immediately redeemed for cash by the player. It differs from "bounce back" comps, which are checks mailed at a later date to the player that can be cashed at the casino. Typically, the cash given back to a player is about 0.5 percent to 2 percent of the amount wagered.

Klebanow believes the current trend toward cash back is going too far.

"Cash back is perceived by a majority of players as a joke," Klebanow said. "It benefits only those players with extremely high coin handle (the amount wagered in a machine)."

That's typically the professional video poker players -- the "wise guys," as Klebanow calls them -- and the players who jump from casino to casino looking for the best comps.

Neither player is very profitable for a casino, Klebanow said, and casinos can lose money to pros by giving cash back, he said.

"If you think you can make money off those (customer) segments, look at the former owners of the Reserve and Santa Fe," Klebanow said. Those locals' casinos, located in northern Las Vegas and Henderson, were sold separately to Station Casinos Inc. in recent months after years of financial difficulties.

After taking over, Station eliminated cash back programs at both, though it still gives "bounce back" rewards through its Boarding Pass program. Klebanow noted that Station has hardly been hurt by its refusal to offer immediate cash back to its players.

"Station has the fewest number of full-pay (high-payback machines), and it has no cash back," Klebanow said. "They also have the highest hold percentage gaming floor (among locals casinos in Las Vegas) ... and yet they're the dominant player in this market. Players go there because it's a great gaming experience, and that's what it's all about."

Klebanow argued that more traditional comps, such as giving away jackets, movie tickets and meals, can be far more attractive than cash to more loyal, profitable customer segments.

"Las Vegas locals have no problem shoving $200 in a video poker bill validator, but when it comes to spending $5 on a meal they view it as repugnant," Klebanow said.

And things like jackets and hats are almost viewed as trophies for player loyalty, he said.

"You can't put a jacket, hat, shirt or mug back into a machine, but that's a true reward for customer loyalty," Klebanow said.

But not everyone agrees with Klebanow's hard line against cash back.

Bob Dancer, a Las Vegas casino consultant and gaming columnist, is also a professional video poker player. He countered that casinos can't go without cash back if their competitors are offering it, particularly if they want to market to video poker players. Doing otherwise is "suicidal," Dancer said.

Cash back is more attractive than other comps, Dancer said, because it's easier for a player to grasp what they're getting for their play, and there's always an incentive to keep playing more.

"If someone has a million Station bucks in their account, they can take all their friends to dinner, and go see a lot of movies, but there's not much incentive to get that second million Station bucks," Dancer said.

And Dancer said the cash will make it back to the casino, even if the player simply walks out the door with their cash immediately.

"For the most part, it's a closed system," Dancer said. "When they cash out, they may take it with them, but they'll bring it back next time."

Though the pros are looking for high payback machines over high cash back programs, Dancer said most video poker players can't tell what the theoretical hold is on any given machine. Therefore, he said, a high cash-back program can be used to entice less educated players, even if a casino tightens up its gaming machines.

Curtis noted that many of his subscribers, when asked, said they wouldn't stand for the elimination of cash-back programs, and that new casinos simply can't be players if they don't offer such programs. Cash back is simply more effective in attracting many players, he said.

"I believe the locals want cash back and the tourists want comps," Curtis said. "The locals are just over-comped. They get too many things in the mail (from casinos) already."

But he also believes casinos may be going too far for their financial well-being with their cash back programs.

"I think the casinos have put themselves in a position where they have to do it, whether they like it or not," Curtis said. "But I think you've got to wean yourselves off this slowly."

Curtis said a compromise that would be acceptable to many players is offering them a choice between cash back and non-cash comps, particularly if players are given a premium for taking rewards other than cash.

"They don't want to feel dumb for not getting the cash," Curtis said.

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