In Part 1, we saw visual proof of the massive influence that your top 10% of players have on overall casino revenue. At most casinos, the top 10% of players represent around 82 to 88% of total slot and table theo. It also appeared that the VIP group remains mostly stable over time, but we finished that essay by stating that individually, players are highly volatile. We'll look into that in more depth here.
Centerfield Nine reviewed changes in VIP player spend over multiple casinos and multiple years. Our study revealed that among players who qualified for the top decile, 38% dropped out of that group the next year. More than half of the top decile reduced their spend by 25% or more in the next year, and 40% of the top decile cut spend by half or more the next year.
To put that in dollar terms... if the annual spend among your top decile of players averages $2400 ($200 per month), these results imply that more than half will spend at least $600 less the next year, and 40% of them will cut spending by $1200+ the next year. That's a lot of people and a lot of dollars that won't be coming back to your casino next year.
In an example casino with $100 million of annual revenue, about 85%, or $85 million, is generated by the top decile. 40% of those players will spend at least 40% less the following year. $85M x 40% x 40% is a minimum of of revenue declines (in practice, because many individuals decline much more than 40%, it's about in total declines from the top decile)
We can build a curve demonstrating player volatility. The graph below is filtered on elite players among VIPs, where each dot represents a single person (it requires nearly $10,000 to qualify – for example, $200 average for 50 days, $100 average for 100 visits, etc.)
The next year, the dots aren't lined up in a curve, they are scattered all over the place. The green dots represent players whose spend increased the next year (great!) and the yellow dots represent players who spend about the same (within 20%) the next year. But the huge number of red dots, skewed heavily to the left (fewer visits), represent all the players whose spend collapsed the following year.
Because it originally required almost $10,000 in annual spend, many of the red dots are people whose spend fell by $3,000, $5,000, sometimes $10,000 or $20,000 from one year to the next. In this case, the dollars add up very quickly, easily reaching into the millions. Hopefully you are starting to see the opportunity here – if you can prevent some of these red dots from falling off in the next year, that's a ton of recaptured revenue that goes straight to your bottom line.
Certainly, not every player can be revived. However, if you can reverse the decline from just a few percent of the group, you can re-add millions of dollars. And although it's challenging, these are players who you know, who have been very loyal and very high spenders in the past. It's a lot harder to find future VIP players out in the wild!Continue to Part 3