No gambling required: Harrah’s widens rewards program

By Liz Benston

Tuesday, April 27, 2010 | 2 a.m.

When Laura Sides and her husband visit Las Vegas, he gambles while she spends money on pedicures, massages and shopping.

“My husband doesn’t do any of that stuff,” says Sides as she strolls out of Caesars Palace’s Qua spa with freshly painted toenails. She’s on her way to meet her husband at a craps table downstairs.

Sides is among each day’s tens of thousands of people who spend more money on other activities than they do on gambling while they’re here.

Las Vegas has grown increasingly dependent on business from people such as Sides, whose money is just as crucial to the resort industry as her husband’s wagers are. And yet, in the traditional hierarchy of loyalty programs, casinos placed more value on her husband.

That changed in a big way when Harrah’s Entertainment last year expanded its Total Rewards program — a membership group that allows gamblers to earn points that can be redeemed for gaming rewards and nongambling products and services.

It’s a sea change in how the world’s largest casino company, which generates about 80 percent of its revenue from gambling, views its customers.

In years past, the company’s CEO proudly explained that his company discriminated against people who don’t gamble. The company’s Total Rewards gamblers have always gotten special treatment — seated quickly from a fast lane at any of the casinos’ buffets while everyone else waits in long, slow lines, for example.

Total Rewards uses real-time data to track what gamblers spend and offers them enticements to stay and spend at Harrah’s properties. The company has poured millions of dollars and years of research into the customer loyalty program, which customizes discounts and other perks based on how gamblers prefer to redeem points.

With Total Rewards, Harrah’s pioneered what has become a cornerstone of the gambling business for casinos of all sizes. Much like gambling itself, the programs play on people’s desires and aspirations with multiple levels, or tiers, based on how much people spend. The more they gamble and lose, the more points and other benefits they receive.

In recent years, Harrah’s realized that it needed to expand the program to nongamblers. The company discussed the idea years ago, but only started work on an expanded Total Rewards program after acquiring Caesars Entertainment in 2005, says Matt Bowers, vice president of Total Rewards and Promotions.

“We saw some dramatic nongaming spending going on away from a slot or table game. We realized there were a lot of really good customers out there who we didn’t know much about.”

And in the casino industry, the greater the knowledge about a customer, the greater the competitive edge.

Although Harrah’s casinos were focused on gambling as the main attraction, resorts acquired from Caesars, including Caesars Palace and Paris Las Vegas, had less-advanced gambler loyalty programs with customers who didn’t gamble much. In fact, some customers didn’t gamble at all.

“The (Caesars acquisition) reinforced what we already knew,” Bowers says. “There are people who love the entertainment and fun of Las Vegas, but they don’t like to gamble.”

That’s painfully obvious in today’s Las Vegas. The largest chunk of Strip revenue still comes from gambling, but that amount, which was 39 percent last year, is falling while other segments, such as rooms and drinks, grow. The latest annual survey from the Las Vegas Convention and Visitors Authority found that 17 percent of visitors don’t gamble — a record high in the three decades the agency has conducted surveys.

Moreover, 49 percent of gamblers, up from 47 percent the prior year, said they gambled for the least amount of time possible during their trip, or two hours or less. The primary reason for not gambling wasn’t lack of time or money — 39 percent of nongamblers surveyed called gambling “boring.”

Still, elevating noncasino purchases to the level of gambling dollars is a cultural shift in Las Vegas, where gamblers have always been the most important customers.

Some customers say that view has been held for too long, and it’s not only antiquated but annoying given the multitude of loyalty programs that reward travelers with free stays at hotel chains worldwide. Until Harrah’s initiated reward points for hotel stays, people who didn’t gamble couldn’t get credit for staying in a Harrah’s room.

Harrah’s customers can now earn one reward point for every dollar spent on a nongambling purchase at stores and restaurants in its casinos. (Retailers and other attractions in attached venues not owned by the company, such as the Forum Shops at Caesars, don’t accept Total Rewards cards.)

Customers earn more credits by gambling, although Harrah’s keeps such conversion rates, which are different across the country, confidential.

Harrah’s executives knew expanding Total Rewards wouldn’t be simple or cheap.

Before the recession, the company began spending millions to update its software at hotel registration desks, restaurants, bars, gift shops and showrooms. The investment has continued, hurting finances at a time when it is offering giveaways to more of its customers.

But Total Rewards is credited with improving profits at casinos purchased from competitors.

Harrah’s isn’t the only casino giant upgrading its loyalty program, however.

About a year ago, Las Vegas Sands updated its Grazie program to allow members to earn points by charging purchases at stores as well as meals, drinks and entertainment to their rooms. Customers can use points to advance through tiers and access bigger discounts, comps and upgrades. Customers can’t use these points to buy meals or make other nongambling purchases, however.

The update has proved popular with customers, spokesman Ron Reese says.

MGM Mirage, which owns the largest share of resorts on the Strip, is revamping its rewards program to better track gamblers and reward them based on preferences.

Recognizing that its loyalty program isn’t as advanced or well-used as it could be, MGM Mirage recently hired two consulting firms to help upgrade it. The company intends to eventually reward nongamblers for purchases, representatives say.

Anthony Curtis, publisher of the Las Vegas Advisor newsletter, says expanded benefits make sense given the increased importance of food, drink and entertainment revenue.

But in Harrah’s case, he doubts it will get much boost from the nongambling program given that it’s much easier to amass points needed to earn perks by gambling.

“The overall effect is probably minor. Nobody that I know of has asked about this program or discussed it, and I don’t see Harrah’s trumpeting this,” Curtis says.

Total Rewards’ expansion is months old, but it has been low key. At Caesars, for example, a Total Rewards counter features new brochures tucked behind the usual ones for gamblers. The new brochures feature slot machines and spinning roulette wheels on top, with a woman in a lounge chair and a couple enjoying dinner shown below. A small video screen behind the counter also advertises the expanded program, but the text is hard to read.

Bowers says, however, that Harrah’s is tracking millions of dollars’ worth of noncasino purchases not previously registered through cards. The company says it can’t say how many new members were the result of the expanded program. All told, membership includes about 8 million people who have gambled at Harrah’s properties over the past year, it says.

Last year, Harrah’s began training front-desk employees at its U.S. casinos to discuss the program expansion.

In the past, many customers wouldn’t sign up for Total Rewards because they said they didn’t intend to gamble or wouldn’t gamble enough to make the membership worthwhile, says Kaitlin Riggio, a hotel manager at Caesars.

Now, however, most guests are signing up because they will be “getting credit for something they’d already be spending money on anyway,” Riggio says.

Upstairs at Qua Baths & Spa, Director Chrystal King says business is up from last year and many customers are using their Total Rewards cards.

The spa’s hushed lobby has no marketing brochures about the program, though. Until a spa employee told Sides about it, she didn’t know she could earn reward points for purchases outside the casino.

“It’s a great idea and a nice perk,” she says as she hands over her Total Rewards card to redeem points earned at the craps table.

“I think I’ll come back for a massage.”