Does your gaming floor match up?
Have you ever wondered whether you’ve got the right mix of gaming machines or are investing enough in gaming staff to deliver a quality service? While the winning formula in each club is likely to be unique, it is beneficial to understand how you measure up to industry benchmarks – especially if you’re in New South Wales, writes Daniel Mitchell.
Chances are you’ve heard the terms ‘business intelligence’ and ‘big data’ being bandied about, and for good reason – there is a wealth of research that shows that data-driven decision-making improves business outcomes.
All the buzzwords and jargon thrown around by consultants may be intimidating, but there are simple approaches to data analysis that can often yield important insights.
The Astute Quarterly Industry Benchmarks report – based on the New South Wales (NSW) market – is a classic example of a simple but effective approach. It’s a relatively easy process to compare a venue’s performance with industry benchmarks to determine how it is tracking relative to its peers.
The APDM indicator
By far and away the most common benchmark used in gaming machine performance monitoring is average daily profit per machine (ADPM). The overall ADPM figure across all clubs was $155 for the last gaming machine tax year (the year ended 31 August 2017). A more in-depth dive shows significant variances across venues, with more than two-thirds making an average profit per machine of less than $100 per day.
Astute provides the ADPM figures on an aggregated basis across a range of categories including venue size and gaming machine manufacturer and denomination – allowing the venue to zero in on and identify specific areas of under or over performance on the gaming revenue front.
It’s important to remember that, despite the terminology, ADPM is really a revenue rather than a profit figure and therefore represents the contribution to the club’s bottom line. That’s why it is necessary to take benchmarking a step further and compare performance not just for revenue but also for the cost and profit domains.
Some costs need to be accounted for, not the least of which is gaming machine tax. Approximately, 20 percent of the ADPM goes straight into NSW Treasury’s coffers.
Why benchmarking matters
Clubs should also be benchmarking wages, promotional and other direct costs associated with generating gaming machine revenue. This is an area where the Astute Quarterly Industry Benchmarks report becomes an indispensable tool; it facilitates simple comparison across these metrics, which typically aren’t available elsewhere.
By subscribing to the Astute report, venues can determine not only how their gaming machines are performing in terms of the revenue they generate relative to their peers, but also how efficient the club is in converting that top line revenue into bottom line profit. An interesting fact is that within the Astute Benchmarking group the bottom 25 percent of clubs are marginally more efficient at doing this. This may strike as odd. It’s not that there aren’t economies of scale at the top end of town, but rather higher marginal tax rates quickly erode these advantages.
Regardless of size, venues can benefit from using benchmarks to ensure that they are running an efficient gaming operation that brings in more money to support the club’s core purpose: to invest in better community facilities or make donations to local charities and sporting groups.
Benchmarking can also assist in answering more detailed questions venue managers or directors may have about their gaming machine operations. The Astute report shows the distribution of gaming machines according to denomination. It may surprise some clubs to know that multi-denomination gaming machines are second only to the 1c gaming machine when it comes to their proliferation on gaming machine floors.
Benchmarking can also be used to work with gaming machine manufacturers to optimise performance. For example, the club may identify that a particular gaming machine manufacturer’s cabinets are performing below the industry average for that supplier, but that all other manufacturers are performing above average. The supplier can then determine a plan, such as game or denomination conversions, for boosting performance. This way the venue can ensure it is getting the most out of the floor space it dedicates to a particular brand.
Typically, once club boards and management get a taste for using data to drive their decision-making processes, they inevitably continue down that path and begin employing more sophisticated business intelligence practices. To avoid frustration down the track, it pays to invest in a product suite that can evolve with the club’s increasing demands.
There is nothing more aggravating than discovering a convoluted process to generate gaming statistics to compare them with the industry benchmark. To avoid that, look for alignment between the club’s benchmarking service and its gaming system.
It’s hard to overemphasise the importance of benchmarking. Having the appropriate tools and resources to know how your gaming measures up is not a luxury; it’s a necessity.
Daniel Mitchell is ClubsNSW Manager – Gaming Policy.
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