Atlantic City Casinos Debate Wisdom of Comping Gamblers

Corporate thinking is to squeeze every penny, paying attention only to today's bottom line and ignoring the negative effect that impersonal and greedy service has on future revenues.

Once Benny Binion realized that all he had to do to make a fortune was keep people gambling at his casino, he did not take long to institute a series of methods designed to make customers feel special. Most important of these tactics was the concept of comping: giving away free drinks, free rooms, show tickets, limo rides and meals, all to keep Binion's Horseshoe at the forefront when people thought casinos.

Over the last twenty years, as Las Vegas and the casino industry worldwide have shifted to a corporate philosophy, comps have become harder to find, and harder to earn. Every time a free room is dished out, one can almost hear the grinding of a beancounter's teeth, furious that the income from a rental has been waived.

Now, as economic conditions demand bold thought, Atlantic City casinos are in disagreement about the comp system. Some have decided that, in light of declining revenues, free drinks and rooms are no longer affordable. Others realize that the strength of the industry lies on the casino floor; that the only way to make money is to spend it; and that patrons who no longer feel special will find other places to gamble.

Corporate thinking is to squeeze every penny, paying attention only to today's bottom line and ignoring the negative effect that impersonal and greedy service has on future revenues. But is this not the style of business that has forced the sale of the Tropicana and the virtual collapse of Columbia Sussex?

Last year, while overall comps in Atlantic City declined by 2.4%, the eleven casinos were heading in opposing directions as to comp spending. Six of the casinos increased comps, while the other five cut back. It is no coincidence that two of the most troubled casinos, the Tropicana and Trump Plaza, led the way in comp reduction. Both were significantly down in revenue.

As competition from Pennsylvania slot parlors and out-of-state casinos grows, businesses like Harrah's Atlantic City and Resorts understand that comps is a big part of making people travel to them. While equity analysts insist that cutting comps presents a healthier picture, how would they possibly find large defections among steady customers to be a sign of health?

Benny Binion knew not to let accountants run his casinos, and he left several fortunes for his children to squander. Perhaps the rest of the gaming industry needs to recall what made them what they are in the first place.