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In varying amounts, casinos dole out millions on 'free play'

Documents provide a glimpse of how much Maryland casinos dole out in free play

Maryland casinos have been collectively giving away tens of millions of dollars a year — as much as 20 percent of their revenue in one case — in free play on slot machines and table games designed to keep their big-spending customers gambling, according to state documents.

And that doesn't include the free hotel stays, dinners, gift cards, luxury car rides, flights and other "comps" that casino executives say are an essential part of doing business.

"It could be gift cards to Best Buy or Macy's or a kitchen item like a waffle maker," said Noah Hirsch, vice president of marketing at Horseshoe Casino Baltimore, a Caesars property. "It could be the casino's logo on a zip-up hoodie. Gifts can include cruises — Caesars has a partnership with Norwegian Cruise Lines. By and large, offers are based on past play."

Some state casinos go much further than others in trying to hook customers through "promotional" play, according to interviews and Maryland Lottery and Gaming Control Agency records obtained under a public records request.

Rocky Gap Casino and Resort has been among the most aggressive. Last year, it told regulators that its free play amounted to 21.3 percent of its 2013 revenue. It opened in May 2013 and reported revenue of about $23 million that year.

In the most recently available report, dated April 2014, the other Maryland casinos reported spending smaller percentages of their proceeds on such promotions — 2.8 percent at Hollywood Casino Perryville, 7.1 percent at Maryland Live and 11 percent at Ocean Downs.

Horseshoe wasn't included because it didn't open until August of last year and its free play spending may never be known because state gambling regulators decided to restrict the publicly available information about such promotions in Maryland.

The casinos' spending percentages for 2012 and 2013 appeared in the following years' staff reports of the gaming control agency. But free play figures for 2014 aren't included in this year's version.

Instead, "there was a private, confidential document on what was spent by each casino," said Charles LaBoy, the regulatory agency's assistant director for gaming. "It's due to the Maryland casino market becoming more competitive. This becomes an item that is extremely sensitive to the casinos and could be revealing to their marketing strategy."

Maryland also requires casinos to identify players who received $5,000 or more in comped services over five consecutive days. The agency said those reports, too, are exempt from disclosure under the public records law.

But even the older records offer a glimpse into the casinos' strategies.

Although Maryland Live expended a lower percentage of its revenue as free play than Rocky Gap, it spent more money on free play because it's the state's largest casino. According to the records, the Anne Arundel casino issued $17.4 million in such play in its first year alone, and that year was abbreviated because it opened in the middle of 2012.

In 2013, Maryland Live reported spending 7.1 percent of its $586 million in revenue — or $41.6 million — on promotional play.

Free play is part of what Maryland Live president and general manager Robert Norton calls "reinvestment."

The casino also offers comps including "trips to Atlantis, to Wynn resorts, to cruise lines, and we send people to the Super Bowl," Norton said. "Our complimentary goal is to help the overall property goal of making our players feel special. It's about creating experience and creating a relationship."

Norton declined to talk specifically about the percentages disclosed in the state documents.

The casinos "each have their own unique formulas to determine what is the appropriate level," LaBoy said. "They want to give enough away to get the person in the door. They don't want to give away too much."

At Rocky Gap, LaBoy said, "I think they felt they were competing with West Virginia, the Charles Town property. I had a conversation with them. They have their own unique challenges."

Rocky Gap also is more remote than the state's other casinos, at least two hours from Baltimore and Washington.

Rocky Gap general manager Scott Just declined a request to be interviewed for this article.

The casinos try to personalize their offerings.

Horseshoe threw a Valentine's Day surf-and-turf dinner for high rollers complete with roses for the women. Hirsch said guests from Caesars properties around the country are expected to come to Baltimore "and receive some sort of package" related to the Preakness Stakes on May 16.

"People like stuff, people like events," said Max Rubin, a casino consultant and author of the 1994 book "Comp City: A Guide to Free Las Vegas Vacations."

"Going to that Valentine's party, for example, is restricted. That's part of what they call aspiration marketing," Rubin said.

As a player, Rubin said, he received "front-row seats to The Rolling Stones, the entire backroom at The Palms for dinner, ringside seats for fights. This was kind of in the golden days — late '80s to mid-'90s."

Some casinos offer known inducements, such as hotel stays, for reaching certain membership rewards levels. But casinos' formulas for determining how many comps or how much free play to offer are often closely guarded secrets.

"That's the secret sauce," said Shonette Carew, vice president of marketing at Hollywood Perryville. "Most casinos give back to players both ways — in the form of device rewards or amenity rewards."

Mathematical formulas are sometimes used to help determine giveaways.

"At the very basic level, a computer may decide what you get," Rubin said. "The higher you get, the more people-centric it becomes. You may now have a player host, then you have a VIP host. Then you may get an executive host for an even higher level. And he is required to reach out and touch you. And then there is a player development host for the highest of high rollers."

Free play is often loaded into a player's rewards card. It can be inserted into a slot machine but not redeemed for cash. The loyalty cards enable casinos to track what customers are playing, and for how long.

Casinos also may supply "match play" coupons in which they share the cost of a bet with the player.

Under Maryland rules, casinos aren't taxed on free play amounts under 20 percent of their prior year's revenue. Rocky Gap was not subject to the cap in 2013 because it hadn't operated for a full year.

While giveaways cost casinos millions, they are what Rubin called "a variable expense" that can be adjusted.

"It's based on the amount of business you are doing," he said. "So that's a good expense. You can live with that."

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