By Taylor from New Mexico
“We will look back in 20 years and laugh at how casino executives thought it was a good idea to market heavily to Millenials, similar to how it seems bizarre now that Las Vegas tried to cater to families.” –Taylor from New Mexico
When asked about marketing to millennials recently by Vegas Fanboy, the Plaza CEO answered that he is not convinced that he should. I am one of those people who are not convinced by the Strip casinos marketing heavily to the millennials. As a person at the older end of the definition of Millennials, whose girlfriend is right in the middle of the millennial demographics, I believe that the strip casinos are misinterpreting the social media and marketing embellishments by nightclub partners.
Misinterpreting the nightclub phenomenon
The first time I ever heard about Las Vegas nightclubs was about 5 years ago. The particular article talked about how famous Las Vegas DJs were making hundreds of thousands of dollars per night. A quick Google search today reveals that Calvin Harris makes $400,000 a night at Hakkasan and Omnia. A quick search also reveals that Omnia’s capacity is 4,400. General admission to Omnia costs about $40 and up depending on your gender. We hear about cabanas at pool clubs and bottle services starting at a couple of thousands of dollars. These are all great numbers if you’re making a presentation to the casino executives.
However, it seems that Las Vegas is the only city in the U.S. that thinks the Millennials have tens of thousands of dollars of disposable income. Everywhere else, it’s a reality and a running joke that college graduates move back in with their parents after graduation. Millenials are underemployed and underpaid compared to other generations, who reached adulthood in booming economies. So where is the disconnect between the Millennials of Las Vegas and Millennials of everywhere else?
Here are a few observations I made last year on the Millenials’ spending habits in Las Vegas:
(1) While Cosmopolitan is filled with hot sexy young people, staying at the Cosmo was different. Hotel guests seemed to be older business travelers, who typically stay at Marriott Rewards hotels, with which Cosmopolitan is associated. A business traveler paying $400 a night alone at Cosmopolitan is different from 6 dudes from Southern California paying $400 for one night (“We’re not going to sleep much anyway”), but it’s an easy mistake to make when seeing those 6 hanging out at Bond Bar and think ‘That’s $400 x 6.’
(2) Speaking of hanging out, the Millennials are really good at hanging out. They don’t gamble at video poker bars, but just pay for their drinks. In most cases, this would actually be cheaper than playing. We’ve all had those $100 cocktails when the four of a kind God ignores you, and getting a couple of Bud Lights at $8 each would have been cheaper.
(3) A $2,000 bottle service is for 10 people. So that’s $200 per evening whether it’s for 3 or 5 hours, but that’s still much cheaper than gambling. However, this is where the executives make a mistake. Those 10 bachelorette party girls will each post a photo of the $2,000 Belvedere (#woooo! #highroller @Omnia ) and make it appear like they each paid $2,000.
(4) It’s easy to get into a club for free. If you’re an attractive female and want to get in, you’re in. So the Omnia example of 4,400 people x $40 each cover charge minus $400,000 to Calvin Harris will not look as good in reality. And here’s the kicker. A high rolling gambler will sit down at an empty baccarat table in a high limit room and bet $1,000 a hand. The $2,000 bottle service people (again, split among 10 people) will not get a bottle service at an empty club. In other words, on top of all the overheads (DJ, technicians, waitresses, bouncers, bartenders, etc.), the business model of bottle service only works when you fill your club with normal people to create an “exciting environment.”
Long term marketing to Millenials
Are Millenials a good group to market long term? Here are some simple calculations. Again, the key is to target your marketing to the person who has the most disposable income. There are three college graduates starting their jobs (Assume 3% inflation and pay increase every year).
(1) Benchmark person graduating at 22, who gets a job in a career of her choice starting at an annual salary of $50,000. Assuming 3% inflation and pay increase, this person will earn $133K a year when she’s 55 ($50,000 x (1+3%)^33).
(2) Millenial #1, who couldn’t get a job out of school, so he goes to a grad school, and starts his career at 25. By the time, Millenial #1 is 55, he’s making $121K, and that’s not even considering additional student loans taken out for the said grad school ($50,000 x (1+3%)^30).
(3) Millenial #2 starts his career at 22, but because of the recession, his starting salary is $40,000. Millenial #2 will make $106K when he is 55($40,000 x (1+3%)^33).
Suggestions for the Casinos
(1) I generally think that diversifying your marketing to Millenials in addition to other age groups is okay. The value destroying of Millennials marketing comes in when casinos alienate other demographics. This happens at casinos that try to be new and posh, Cosmopolitan, SLS, Encore, etc.
(2) Why no casino has done this is a mystery, but here it is. Similar to giving x5 points multipliers to seniors, why not give a x5 multiplier to ages 21 to 35 on Fridays and Saturdays? I would bet a large amount of money that this would work better than having skilled based slot machines.
(3) As Vegas Fanboy said in the parking fee post, Las Vegas needs to emphasize where Las Vegas has advantages over other cities. That means gambling and alcohol regulations. Nowhere else in the U.S. allows gambling and 24/7 no-last-calls alcohol serving like Las Vegas does. Play that up to the max, not drink tickets.
VFB editor’s note: Thanks to Taylor for sharing these thoughts. I tend to agree. Spending large sums of money on a “what if” market may not be the best long-term strategy. Successfully serving the market you have currently seems to make the most sense. Then again, making sense isn’t exactly why C-suiters get paid the big bucks, is it?
feature photo: TipKilby