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Casinos consider ending meal, room comps

Many customers can feel the change
April 6, 2008 12:00:00 AM PDT
While there may have been no such thing as a free lunch in the rest of the world, you could get one pretty easily here for three decades, along with a roll of quarters, as long as you rode the bus to a casino. But now that the economic slowdown has hit casinos as well, the city's 11 gambling halls are split on how desirable it is to continue to hand out free meals, hotel rooms or show tickets to gamblers.

That's because for the first time, Atlantic City casino revenues declined last year, and out-of-state slots parlors continue to steal the resort's most reliable customers. Some casinos feel that the slowdown justifies cutting back on giveaways to help the bottom line; others feel that a slow period is when freebies are needed most.

Since the first casino opened here 30 years ago, tour buses depositing herds of senior citizens out for the afternoon at the gambling house doorstep has been a big part of Atlantic City casino culture. It's now one the industry is trying to move away from - gently - so as not to antagonize loyal patrons as it seeks more affluent bettors.

The amount of comps handed out in Atlantic City declined last year by 2.4 percent. Six casinos actually spent more on giveaways last year, while five spent less. Two of those, Trump Plaza Hotel and Casino, and the Tropicana Casino and Resort, were significantly down.

Charles Lafferty, a retiree from Prospect Park, Pa., says he can feel it.

"You can definitely tell it's slowing down," he said as he spoke with friends in the lobby of the Atlantic City Hilton Casino Resort. "One woman we come down with used to get hundreds of dollars at a time. Now she says it's a lot less."

It's important to keep people like Lafferty happy: He lives eight minutes from a racetrack slots parlor in Pennsylvania but comes to Atlantic City because they make him feel like a big deal.

"They give you free drinks here, and we get to stay overnight for free sometimes," he said. "We like that."

But handing out free meals, drinks, hotel rooms, show tickets and cash is expensive. The city's 11 casinos collectively spent $1.63 billion on it last year. In an environment when casinos are being forced to tighten their belts to deal with an economic slowdown and intense competition from out-of-state gambling halls, comps can be the first place companies look to cut.

But Nick Danna, a senior equity analyst at Sterne Agee & Leach, said turning off the freebie spigot will be hard to do.

"It's a difficult culture to break," he said. "The expectation is still there; the customers are used to it.

"There are certain customers that Atlantic City really shouldn't attract anymore because they're just not profitable," he said. "Then there are other customers they'd like to comp less, but it's very difficult because they (the customers) are used to it."

Danna said the real opportunity for Atlantic City is in customers who currently look down on the resort, still viewing it as the domain of elderly people who clamber off buses with buffet coupons in hand. These folks tend to favor Las Vegas.

So to attract them, Atlantic City casinos are spending billions on non-gambling attractions like gourmet restaurants, spas and shopping outlets. A frenzy of hotel construction is nearing completion, which will add thousands of new rooms.

When day-trippers become less important, their perks tend to dry up. The Trump Taj Mahal Casino Resort, for example, reduced entertainment perks like free show tickets by about two-thirds last year.

Trump Plaza Hotel and Casino handed out slightly more free drinks last year but actually spent less on them. And it significantly reduced the amount of cash it handed out to bus-trip customers.

Yet the Tropicana, which was hurt by a severe cost-cutting drive last year that led to its owners being banished from Atlantic City, their license revoked, drastically increased its cash handouts to bus-riding players.

Bally's Atlantic City gave out more free rooms and spent more on them last year but made up for it on food and drink comps, which were down.

The Borgata Hotel Casino & Spa gave out more than 200,000 more free rooms last year but managed to spend almost exactly the same amount on it. It gave out no bus cash at all.

Bus riders fared better at Resorts Atlantic City last year, with more cash going to a greater number of customers. And Harrah's Atlantic City more than doubled its spending on entertainment comps.

Things like this are what keep Al Kramer, another Pennsylvania senior, coming back to Atlantic City. Clutching a coupon good for two free Hilton buffet meals or $10 in cash (he went for the cash), Kramer said he comes to Atlantic City at least 15 times a year. He does so even though Pennsylvania racetrack slots are much closer to his home.

"They put us up in a room for free," he said. "You can't get that at the track."

 

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