AGS GameON: Tweaks to slot lineup yields big revenue gains, ReelMetrics study shows

June 20, 2023 6:47 PM

AGS GameON: Tweaks to slot lineup yields big revenue gains, ReelMetrics study shows

Photo: CDC Gaming Reports
  • Mark Gruetze, CDC Gaming Reports
June 20, 2023 6:47 PM
  • Mark Gruetze, CDC Gaming Reports
  • United States
  • From the Floor

Casinos can increase slot revenue substantially with relatively minor changes in their slot lineup, new research shows.

“Mix matters and mix matters in a big way,” said Nicholas Hogan, co-founder & CEO of ReelMetrics. “Through pretty modest manipulation of inventory, we can make huge changes, desired changes to consumer behavior.”

Hogan, appearing June 14 at the AGS GameON conference in Reno, outlined new findings from ReelMetrics’ Cupid initiative, about which he also spoke at last year’s GameON. Cupid began in 2014 and has accumulated data from more than a quarter-million slot machines, tens of millions of anonymized player profiles, and more than 2.5 billion playing sessions.

In recapping last year’s presentation, Hogan said more than half the slots on North American casino floors meet the definition of “dogs.” For example, 25% of the inventory have less than two minutes of play per hour.

“These imbalances are getting worse and they’re affecting our host-level VIPs disproportionately,” Hogan said.

However, the cost of new machines, now around $30,000 each, compared with $10,000 about 15 years ago, is greeted with skepticism among executives who see additional costs without proof that the purchase will raise additional revenue, rather than cannibalize revenue from existing machines. Because of the limited number of the top machines, high-value players often turn to their second- or third-choice slots. While reasonable, the cannibalization question doesn’t account for the depth of customer data available in the industry, Hogan said.

To test the cannibalization effect, ReelMetrics performed a double-blind experiment in multiple U.S. markets, with each venue involved having at least 1,000 slots on the floor. The test involved “monkeying with” about 3% of a casino’s slot offerings, replacing some low-performing machines, the Z cluster of the Cupid study, with popular and high-yielding X cluster machines. Operators didn’t market the changes, not even with in-house promotions or hosts telling their players.

“As soon as we created that incremental capacity, what we saw as the engagement of the right players with the wrong product fell straight off the cliff,” Hogan said. The rate of players served per month quadrupled, from a mean of 1,000 to 4,000.

Hogan said the “really critical” question was the effect on slot players’ trip wallet. Before the test, researchers thought a 15%-20% increase in trip wallet would show their theory about better inventory management was on the right track. In the test, trip wallet more than doubled, going up by 106%, Hogan said.

That finding raises the question: How high can slot revenue go in a market? He said many operators assume they’ve already hit their ceiling and their monthly revenue simply varies up or down by about 5%.

“Is there a ceiling? Absolutely. Do we know what it is? No, we do not,” Hogan said. “That’s a huge point in this. We’re creating incremental revenue when we make these moves.”

Other study findings included:

  • 2% of the play sessions by A-segment members, the highest-value players, lasted more than hour, compared with a global mean of about eight minutes. The average bet per spin increased by $1.
  • A sizable portion of B-segment customers, the middle classification of player value, increased their play enough to move to the A category and the B segment trip wallet increased 20%. The segment showed big upticks in average bet and session length.
  • Men under 45 spend 60% of their trip wallet on slots; for women, it’s 80%. Only 7% of the trip wallet for players under 45 goes to electronic table games and video poker.
  • Among players 21 to 44 years old, 33% of the trip wallet is spent on high-octane leased slots. That’s the highest rate of any age group.

“This is just good news,” Hogan said. “What we’ve seen is that we can take a big bite out of this apple just by monkeying with our premium portfolios alone and you can get a long way forward with very small portions of your overall inventory.”

Hogan said an occupancy rate of about 60% on a high-octane premium game is the sweet spot, but 85% or more is too high. “That’s where you really need to expand it, because your best players are typically not getting on it.”

His assessment of casinos’ inventory problems has changed over the years. “I used to say that it’s probable that your floors are plagued with this. I no longer say that. Basically, we’ve seen this enough times to know that these imbalances are dramatically restricting revenue growth, player growth, and profit growth and they’re disproportionately affecting your highest-value players.”

Mark Gruetze is a veteran journalist from suburban Pittsburgh who covers casino gaming issues and personalities.