Management practices in casino operations

Management of Casinos

The history of gambling in the United States consists of three periods, called waves. During these periods, laws and social standards vacillated from prohibition to regulation and vice-versa (Dunstan 1997).

The first wave was during the colonial era from the 1600s to the middle of the 1800s when early colonists had a vastly different attitude towards gambling. These colonists were the Puritans and the English who established their individual communities, where their distinct values were observed and lived. The Puritans, prominently in the Massachusetts Bay Colony, prohibited gambling, the possession of gambling items (cards, dice, gaming tables) and even dancing and singing. This rigid behavior, however, relaxed the following year to allow innocent gaming as recreation, but not as a trade or profession. The English, in contrast, not only allowed it but indulged in gambling as a harmless and popular diversion (Dunstan). Gambling was further enhanced by the then prevailing frontier spirit in that New World, which induced high expectations, risk-taking, opportunism and movement. But ensuing problems in the colonies were attributed to gambling, which financiers believed was the root cause of the colonists' inability to support themselves.

Lotteries, however, were resorted to as a source of funds for business ventures. All of the 13 original colonies put up lotteries to raise money, so that playing lotteries even became a civic responsibility (Dunstan). They built universities, churches and libraries. Benjamin Franklin, John Hancock and George Washington were among prominent sponsors of the use of lotteries to finance public projects. Congress passed a bill in 1823, providing for the use of a private lottery.

Casino gaming slowly began as taverns and roadhouses, which allowed the use of dice and cards. With an increase of population in the early 1800s, more lavish casinos were established. In the lower Mississippi Valley, it was recognized as a legitimate and an organized trade or business (Dunstan). Farmers and merchants with money rode river boats to gamble there. New Orleans became the gambling central then, and it also attracted professional gamblers, also called sharps or sharpers, and were generally considered dishonest and cheated. Professional gamblers faced bad breaks, as they were blamed for the slow economic growth, for interfering with business, numerous crimes and social demoralization. Vigilant citizens threw professional gamblers out of Mississippi or threatened them with lynching. These professional gamblers moved to California. The first wave of (legal) gambling thus drew to a close in the 1800s due to attacks spurned by offended religious beliefs, which clamored for reforms in the form of temperance, women's rights, abolition of slavery and reforms in education and imprisonment. Lotteries were the chief focus of objection, because of the scandals they bred. By 1840, most states had banned lotteries and 20 years later, only Delaware, Missouri and Kentucky allowed authorized lotteries.

The second wave was between the mid-1800s and the early 1900s, occurring with the expansion of the western frontier. It was the period of the Gold Rush and mining was a gamble and a risk-taking venture itself. California was the setting for both the mining boom and the spread of gambling, which peaked between 1849 and 1855, particularly in San Francisco - in Mexican towns like Monterey, mountain towns like Mariposa and growing cities like Sacramento (Dunstan). Gambling became integrated and patrons included women, blacks and Chinese. By 1850, gambling establishments were licensed to raise money. But soon, sensitive sectors urged for the control of gambling and laws were enforced in California, as well as in the rest of the United States, out of a generalized desire for respectability and its connection to social ills. Most types of gambling where then outlawed, gamblers were associated with corruption in public office and gambling itself, an object of blame in the Great Depression that took place at this period.

Despite the illegality of gambling, the first slot machine was invented and operated in San Francisco in 1895 and outlawed only in 1911. Between 1869 and 1910, gambling was banned and legalized alternately until it was pushed to Virginia City. There were gaming houses that catered only to Chinese and smaller gaming houses for Hispanic minorities in Los Angeles.

Lotteries staged a comeback in the South, mainly to raise revenues in rebuilding the war-damaged region. The Louisiana Lottery Company was a most famous provider of lottery for 25 years in 1868, made possible by a bribe made by a criminal syndicate from New York of the Legislature. More scandals and anti-gaming moves came about, mostly from religious groups. In 1895, the Louisiana Lottery was abolished. The discovery of large-scale ill-gotten profits and bribery led to the inclusion of prohibitions of lotteries in the 35 states, including California, at the end of the century. This second wave was short-lived, owing also to the rise of Victorian morality. Gambling was virtually effaced in the United States by the first decades of the 20th century. The rage against gambling was so intense that Arizona and Mexico were forced to outlaw casinos as conditions to gaining statehood. But gambling never really die out completely.

The third wave of gambling was from the 1930s to the present. This was the unforgettable time called the Great Depression, when the anti-gambling sentiment disappeared because of huge financial distress, beginning from the stock market crash of 1929. Legalizing gambling was viewed as a way of stimulating the economy and surviving the Depression. Bingo was decriminalized and legalized in 1931 and was used to raise money for churches and charitable groups.

New York mobsters, including the infamous Benjamin "Bugsy" Siegel were forced out of California into the West Coast. His intent was to expand gaming and bookmaking operations for organized crime (Dunstan). Floating casinos were also closed down, the most famous of these being the Rex. In the meantime, there was growing tourism activity and the completion of Boulder (now Hoover) Dam in Nevada, which motivated its Legislature to legalize gambling in 1931. This grew from the realization that illegal gambling was corrupting law enforcers and prohibiting it was not effective or realistic. The then legalized gambling industry first struggled until after the Second World War when the prosperity that boomed during post-war America conduced to the peaking of the industry. The shutting down of California ports, the expulsion of illegal but thriving gambling businesses, run chiefly by organized crime moved to Nevada and helped make it the industry's vast center today.

Organized crime syndicates were among the early supporters and heaviest investors of gambling in Nevada casinos. Most notable was Las Vegas' Flamingo, opened in 1947 by Bugsy Siegel, who managed to get a license despite his criminal record. His success was due to his underworld connections. His extravagant casino attracted celebrities like Jimmy Durante, Xavier Cougat and George Raft. The Flamingo helped establish Las Vegas as the destination point for high-stake gamblers. Mob influence in casinos became the focus of interest by the Senate Committee on Organized Crime, which later discovered widespread evidence of skimming, which screened gambling profits from taxes. The discovery once more brought the industry to the brink of near-prohibition, but first, the casino industry was subjected to a cleansing, and which led to the mob's selling their interests in the casinos to lawful individuals and publicly-traded companies.

From 1894 to 1964, lotteries were widely played but always illegal. So was the so-called illegal numbers game. The outcome was the establishment of state-run lotteries in the 20th century, started by New Hampshire in 1964, then New York in 1967. New Jersey launched the first successful modern lottery in 1971 and also became the second state to legalize casino gambling in 1978, restricted only in Atlanta City.

Comparing the three waves, it can be gleaned that the first and the second were partly ended by marked public concern about moral degradation and scandals in gaming. This event showed that most people could live with financial woes better than cheating. But what type of scandal can end the third wave of gambling is not that clear.

How does one manage his money in a casino? There are rules to observe, as set by the masters.

1) Never bring your entire resource to the gambling session. You must budget your gambling money too. Then divide your daily bankroll into the number of sessions to be played each day (Pilarski 2003). Stick to your single-session bankroll, that is, do not use tomorrow's budget or money today.

2) Set a goal of winning between 50 and 100% of a single-session bankroll. Then separate your original bankroll and half of your winnings. Play only with what remains and continue to set aside additional winnings (Pilarski).

3) Use a progressive method of betting by setting a predetermined percentage increase for each winning bet. Then stick to that. The casino aims at creating a fantasyland experience for patrons, and what the player can do in response is to devalue his or her money by using betting chips instead of legal tender. Continue't bet with your own greenback so you will always know its real value. Treat the chips as hard-earned cash you save for your child's tuition, mortgage payment and other regular bills.

4) Never increase your bet when you lose. If you do, you become like a lamb led to slaughter. Discipline is the virtue to use in gambling sessions as well as at home and in the larger community. It is the most important element of money management. You must set your losing limit as well as your win goals.

5) Choose the most profitable opportunities by shopping for the best odds, rules and playing conditions. Do not play games in which the casino has more than a 2% house advantage.

6) Never gamble with the money you cannot afford to lose (Pilarski)

7) Using credit cards to gamble is a show of desperation, just to stay in session. Do not bring your credit cards and bank teller cards to the casino so you will not be tempted to draw cash from them.

8) Do not quit a hand when you are winning. You may be lucky without knowing it. It is possible to have 15, 18 or even 20 hands in a row. But when it ends in a loss, rush to the cashier's cage.

9) Managing your money will not affect the house advantage or guarantee that you will win more. If that house advantage exits, it will still be there even after you apply money management techniques. Effective money management principally means limiting or minimizing losses and, in most cases, protecting winnings (Pilarski).

Casinos that flourish or thrive develop comprehensive systems that emphasize the management of guest behavior in order to gain a competitive edge (KPMG 1998). Industry leaders know that they must attract guests to their properties and ambience and strive to make their guests' entire experience special, if not magical. That magical experience begins at the front door of the casino, the guests' arrival, services during their stay, checkout and through follow-ups. The KPMG, for example, helps casino owners develop state-of-the-art systems to capture, analyze and use data in managing their customers' behavior I creating value to their business. KPMG says that, while these systems are in place in most casino establishments, some of these have remained inadequate in meeting sophisticated needs or contain excess or unmanageable information. The solution is to have just the right systems in place that will capture and analyze the needed information and then show casino companies how to best utilize their resources. If a casino establishment has the proper data, it can develop and implement the right marketing strategy and make the correct sales decisions required in gaining or maintaining that competitive advantage in realizing superior shareholder value (KPMG). Today's guests or players demand greater value for their money. But when the establishment has the precise information, accurate analyses pus the right products, it can manage these money value-conscious guests, at the same time realize the greatest value to the business and its shareholders.

The bottom line is that each guest experience is critical and entire. A successful casino business must know how to effectively read through and translate volumes of individual guest experience data into specific operational changes that it must undertake in order to improve customer service and increase customer value. This is why, through the years, successful casino establishments have kept focused on the maintenance of their operation systems. This focus is shared by the front desk, the catering section and the sales systems. What is more is that these establishments are concentrating on seeking out and providing customer preferences and trends. This means putting technology to optimum use in making each guest feel really special and enhancing that total guest experience. KPMG stresses the customer-centric approach, which means that the business must re-think its strategy in customer relations and product development. It suggests an approach that will develop a new point-of-sale system and then provide tools to capture information on guest behavior and preferences. Utilizing this feedback, the casino cn better serve its guests during their stay and thus maximize its growth chances.

In the past, casinos gave away rooms and served foods just to attract new guests, especially the high rollers, and in order to motivate them to come back. But today, non-gaming areas are increasingly a focus of potential profit opportunities and these include rooms, food, shows, retail space and other aspects or features of their property. It boils down to the same thing about understanding guest preferences and behavioral patters. Guests must be more than satisfied, they must be delighted. If the casino business is customer-centric, it puts its technology, marketing and personnel in the right places in order to capitalize on this important opportunity called guest experience.