Region's casinos gamble as they fight for customers in a down economy
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From cash to cars to flat screen TVs, the two casinos in southwestern Pennsylvania have been going all in with prizes and promotions as they battle to lure and keep customers in a down-and-out economy.
This month alone, the Rivers Casino on the North Shore gave away $130,000 in Saturday promotions, including a $70,000 cash prize yesterday. The Meadows Racetrack and Casino carved up $50,000 the day before Thanksgiving, with one lucky winner walking away with a $25,000 grand prize.
That's in addition to the $25,000, including a top prize of $15,000, it awarded in each of the first three Saturdays in November. It also is giving away $5,000 each Monday through Jan. 11 in a KDKA-TV drawing.
To experts, the giveaways are a sign of the growing competition between the two casinos, located about 30 minutes apart, for regional gambling dollars.
"This doesn't surprise me. It's two competitive properties going at it. We've seen it before in competitive properties, and we'll see it again," said Joseph Weinert, senior vice president of Spectrum Gaming Group, an industry consultant.
Frank Legato, editor of Global Gaming Business, a trade journal for the gambling industry, described the cash giveaways as Atlantic City-style marketing, where the competition between casinos is keen.
"It's interesting that they're going after each other like this," he said, adding, "They can only sustain a war like this for so long before it starts hurting both of them."
The Rivers and The Meadows are not battling only each other for customers. Nearby West Virginia casinos -- Mountaineer Casino, Racetrack and Resort and Wheeling Island Hotel, Casino and Racetrack -- each are offering its own set of promotions. In fact, Mountaineer is running a billboard advertisement next to the Rivers Casino promoting "More value! More action! More fun! Less traffic!"
This month, Mountaineer gave away a Cadillac CTS and other prizes, including cash. Next month, Wheeling will award a 2010 Camaro among its promotions. At some point in the near future, the West Virginia casinos likely will lose their biggest advantage -- table games, which are being added in Pennsylvania.
David La Torre, a spokesman for The Meadows, acknowledged that competition is the chief factor in the bevy of giveaways, free play and other promotions.
"We are in an incredibly competitive marketplace. That's why we work as hard as we possibly can on customer service and making sure our guests know how much we appreciate their business," he said.
Anybody who thinks the promotions don't have an impact probably wasn't caught in the massive Interstate 79 traffic jam that occurred when the casino gave away $80,000, including a $50,000 grand prize, July 31.
"The busiest nights are the ones with the big giveaways," Mr. La Torre said.
The Meadows, he added, has been focusing its promotions on free play and cash giveaways for the last six months. The KDKA promotion began July 27, two weeks before the Rivers casino opened its doors.
Nonetheless, Mr. La Torre insisted the Pittsburgh competition wasn't the main factor in the TV promotion.
"Anytime a casino opens within a 30-minute drive you always make adjustments to your marketing, but free play and cash giveaways always played a big part [in promotions]," he said.
The Meadows has seen a big drop-off in wagering and gross terminal revenue, or gambler losses, since the Rivers opened Aug. 9. According to the state gaming control board, gross terminal revenue fell from $29.9 million in July to $22.4 million in September before rebounding slightly to $22.6 million in October.
At the same time, Rivers revenues, while well below projections, have seesawed, going from $16.2 million in August to $15.6 million in September before jumping back to $16 million in October.
Mr. La Torre attributed the revenue declines at The Meadows to several factors, including competition from the Rivers.
"From Day One, The Meadows has operated under the assumption that there would be an effect once the Rivers opened. That certainly hasn't been a surprise," he said.
But he added that the sluggish economy, with high unemployment, also has been a factor, along with the "normal ebb and flow of the calendar year." He said the casino typically sees a drop off in business in the fall.
"That's just par for the course," he said.
Next month, The Meadows will keep the cash flowing, giving away a total of $70,000 on both Dec. 12 and Dec. 19, with a top prize of $50,000 on each date.
The Rivers, meanwhile, has not shied away from offering its own glitzy promotions. In October, it handed out four cars and 25 flat-screen televisions, in addition to cash promotions and free play.
This month, besides the Saturday drawings, the casino gave away 25 gift bags each Friday containing goodies such as electronics, gift cards and free slots play. Last Friday, it raffled off two home entertainments units, each consisting of a TV, DVD player and surround sound system.
In December, the casino is dishing out $600,000 in cash promotions, including a $25,000 grand prize to be awarded between Christmas and New Year's Day.
Albert Liu, who oversees the Rivers' marketing, said the "go big" promotions are not so much a reaction to the competition as a means of increasing awareness of the casino, drawing people through the doors, and trying to dispel misconceptions about traffic congestion and parking.
"I kind of feel like we're Pittsburgh's best kept secret," he said.
After a couple of big opening weeks, the casino saw gross terminal revenues falter, dropping to a low of $2.76 million during the week of the G-20 economic summit in Pittsburgh.
The early results were far off the casino's own estimates for $427.8 million in gross terminal revenue in its first year of operation, prompting Standard & Poor's to downgrade the Rivers' credit rating from B to B minus and put it on its CreditWatch with negative implications.
But since the week of Sept. 21, the numbers have been rebounding. The last week of October, wagering climbed to more than $50 million and revenues hit almost $4 million for the first time since the second week of September. They have stayed in that general vicinity since then, although they still remain lower than projections.
Mr. Liu attributes the reversal at least in part to the various promotions.
"You can't separate the two," he said. "I think there's definitely a direct correlation around the marketing efforts."
While competition plays a role in the giveaways, Mr. Liu said the larger goal is to raise the Rivers' profile in a region where it is still new, get players in the door and keep them coming back.
"It's still a relatively new market. We all compete for the same customers. I want to make sure we're highlighting the advantages and benefits we have," he said.
At the same time, Mr. Liu would not characterize the promotions and giveaways as a "war" between the casinos. He said most of them are fairly routine for casinos the size of those in the region.
"These numbers are not huge. These numbers are appropriate for the market. I've given away a million dollars before in other markets. I don't believe these are anything out of the norm," he said.
Richard McGarvey, a spokesman for the state gaming control board, said cash giveaways and other promotions are "not unique" to the Pittsburgh market. Other casinos in Pennsylvania have been offering them as well, although maybe not on as grand of a scale.
Mr. Legato said he doubts the Rivers and The Meadows can sustain the large cash giveaways indefinitely, given the state's 55 percent tax rate.
"I don't think you'll see a lot more of this because they don't have a large profit margin in Pennsylvania. They can't afford too much marketing," he said. "They're not going to be able to sustain it if they want to remain profitable."
Nonetheless, neither the Rivers nor The Meadows shows any sign of letting up at the moment.
"From a sustainability standpoint, I'm going to continue to do what I can to come up with great promotions, great things, within what the budget allows," Mr. Liu said.
"I like big numbers," he added. "I don't want to shy away from the fact that I am here to create memorable experiences."
As for The Meadows, "We're not slowing down," Mr. La Torre said. "Our plans have been consistent. We've had a vision from Day One in making our case in southwestern Pennsylvania and the outlying region as to why we're the best casino. We've stayed consistent to that vision, and we will continue to do so."
First Published November 29, 2009 12:00 am