PMI’s International Experience
The management of Profit Maximization Inc. (PMI), the operator of the Planet Hollywood (PH),
has been very aggressive in their pricing strategies. We believe these tactics have been the primary
factors that have led to the increase in business levels PH has enjoyed over the last year.
Hotel Rooms – As outlined in our Phase 1 management report to British American Casinos (BAC),
we negotiated a new hotel management contract with Starwood Hotels. Our new hotel contract
allowed us to use a yield management system that has better served the casino. Our goal was to
obtain a 90% occupancy at the highest rate possible. We are pleased to report that we have not only
achieved this occupancy rate, but have also been able to increase our average daily rate (ADR). So
far in 2012, our ADR is $118.45. The 7% increase in occupancy resulted in 58,000 additional room
nights and an assumed $14.5 million in increased casino revenue (based on commonly accepted
Las Vegas Strip averages of $250 gaming win per occupied room).
Food Product – Of the 19 restaurants at PH, only three are operated directly by PMI and PH. The
rest are leased out to various restaurant operators. The PMI operated restaurants include the Spice
Market Buffet, a twenty-four hour coffee shop, and a steakhouse. When PMI took over the
property, they repositioned the pricing of the buffet to a lower dollar amount. At $11.95 for dinner,
the pricing of this buffet is now the lowest on the center strip by almost 20%. Covers, however,
have soared from 1,500 a day to over 3,000. While food costs increased over the previous year, the
fixed costs remain stable and have been more than offset by the increased volume. The buffet went
from losing $10 per cover previously to now breaking even. Of the 16 leased restaurants, we
replaced two overly high-end restaurants with two other leased offerings that better appeal to our
mid-level target casino players.
Entertainment Product - Prior to taking over PH, PMI determined that it was in the best interest of
the property to not directly operate the entertainment venues but instead to “four-wall” them with
outside promoters taking the financial risk. We signed a contract with BGP (the former Bill
Graham Presents) to supply both the showroom and the Center for the Performing Arts with
popular entertainment attractions targeting our guest base. We are pleased to report the arrangement
has been an outstanding success. Using its connections with the most popular entertainers of the
day, BGP has filled our stages to capacity every Thursday through Sunday. Covers are up by 10%.
While PH does not share in the ticket revenue, we have seen liquor sales also increase by 10%.
Gaming Device House Advantage (Win Percentage) - Management intends to develop an
aggressive product for the electronic games (slot machines) based, largely, on the replacement of a
substantial number of slot machines (170) with server based games and the renewal of 250 "stand
The new slot machines, all of the latest generation Advanced Video Platform (AVP), are equipped
with the modern "server based” system which will allow targeted marketing to guests. The players
in fact, can interact with this type of slot machine and get all the information they require. The
marketing department can monitor guest preferences and reward the player’s loyalty by sending
benefits via a message that will appear on the screen of the slot machine where the guest is playing.
The player can also change the game, denomination, line per game and bets per line, directly on the
slot, without ever moving from one slot to another. This will increase the time spent on the slot
with the simultaneous increase in earnings.
The replacement of the above games will allow the complete renovation of another 250 slot
machines and PH will therefore have an overall renewal of the floor equal to 25%. All of these
games will be among the most modern that the gaming industry has produced in recent years. This
is in line with the marketing strategy, to offer fun and excitement to a younger audience (25 - 40
years of age), who play at our slot machine floors in search of the fantastic world of stars and film.
Many of these games will be chosen on the basis of the most famous movies, television shows and
personalities known in current and past films, such as Indiana Jones (The Last Crusade), Star Trek
(Trek through Time), and Star Wars (Dark Side). This approach will lead to a renewed interest in
our slot machines and will increase profits.
PMI has repositioned the casino target market and no longer feels that the high end product is
necessary. As a result of this, PMI will be closing the separate high limit casino and eliminating
the high stake games. By eliminating the high end table games, PMI anticipates that the hold
percentage will increase because we no longer have the volatile high end player.
Complimentary Expense Overview - Using our proprietary software that analyzes our key gaming
metrics, we are able to reward our guests based on their worth. Our percentages of complimentaries
for both food and beverage and the hotel have been running at our expected 13% of revenue.
Because we know we are properly and competitively rewarding our guests, any growth in
complimentaries will be justified.
NEW MARKETING NICHE
The present population of guests does in fact cover a wide range of people, attracted by a wide
range of products and entertainment. Former management tried to do everything for everyone with
little focus. At this point there might be a basis for “conflict”. Since new management is aiming at
new target groups, the range in products and level of performance in PH changes with it. This
means that there will be a better focus on what we offer, to whom and as a consequence of that,
what services, products and entertainment we will no longer offer.
The mission of the PH Resort is to provide our guests with a safe, clean, fun and glamorous
celebrity infused experience. Our strategy is to draw players whose level of wagering may be
ignored at the larger resorts but in volume can be highly profitable. With this strategy we will
attract, recognize and reward these “medium level players” in the Las Vegas market and in the
international market (spending $1000 - $2000 per visit).
Our players’ club is the focus of our marketing strategy and is the key to our player reinvestment
policies. Membership in the players’ club is promoted with celebrities who may no longer be in
their prime but enjoy working with the public and can act as sidewalk ambassadors who motivate
the “Wanderers” (see below) into the casino with free play offers. These same guests are told by
our ambassadors that they will receive additional free play if they sign up for a players’ card. Our
guests will be encouraged to get their pictures taken with the celebrity ambassadors. These free
play offers are low level but enough to motivate guests to come inside the property. Our proprietary
software allows us to analyze our players and determine how they should be rewarded based on
their worth. From this analysis we appropriately reward them with points and free play. We have a
tiered players’ club so that guests recognize the more they play the more they can be rewarded. We
use direct mail and email to draw repeat visits, again, tiered and based on a guest’s worth. The
invitations will entice guests to special events, each designed to the level of guest play. Our
marketing costs, including comps, advertising and promotions, total 20% of revenue.
Some characteristics of the medium level player that are attracted by the atmosphere of the PH
- Guests are young and urban, they like to go out, they like to have fun in an inspiring
environment, they are looking for a real experience, they are willing to spend, they want to
be seen, and they are looking for a touch of glitter and glamor.
The main target groups that fit these criteria are:
PH benefits from its proximity to the Bellagio, Mirage, Caesars, and City Center. These properties
attract guests, at least for a substantial part, that meet the criteria of our target groups. Within a half
mile of PH are over 50,000 hotel rooms. Research shows that the average Las Vegas visitor goes to
at least three casinos during their stay. Our celebrity focus will ensure that this property is one of
the casinos that lures visits by these guests. The Wanderers will be attracted by exterior signage and
by welcoming PH hosts. The Wanderers from the other “high level properties” are in the target 25 –
40 age range, of a high level of education (high school and/or college) and are mainly “white
collar” professionals: managers, bankers, consultants, financial specialists, lawyers and
conventioneers. Research shows that they come from a wide range of geographic regions, in fact
from all over the world (they were attracted to the higher level of the Las Vegas Strip). They work
hard and want to play hard. They like to spend their spare time in a luxurious way; comfort and
“feel good” are key words. They like to visit upscale bars and restaurants and visit shows and
cultural exposures. They are mainly young urban professionals, singles, or young marrieds. They
live in the fast lane of life and enjoy new and exciting experiences.
Gays and Lesbians
This market is highly lucrative and with the only alternative nightclub in Las Vegas, PH is in a
great position to attract these guests. According to www.outtraveler.com (a leading internet travel
authority) Las Vegas is in the top 10 gay travel destinations in the world.
The gays and lesbians that PH is aiming at are in the target 25 – 40 age range. Research shows that
they are typically not married, but often in couples. They have dual incomes and earn their money
in all kinds and levels of profession. Important target geographic regions are California and the
larger (world) cities of tolerant nations as in the North part of Western-Europe. They like a luxury
life style and are very outgoing. They are looking for happy, glamorous, exciting and somewhat
extravagant, ambiances. Because of no kids and (dual) salary they can afford quality food, drink
and entertainment. They want high value for their (high) money. They are looking for a safe
environment among “friends” where they are not hassled by those less tolerant.
DINK’s: Dual Income No Kids
Research shows that this market has a disposable income and ability to travel on short notice. In
fact money is not “a problem”. DINK’s are mainly young urban professionals, couples, not
necessarily married and with no kids. Their professional occupations include: managers,
consultants, entrepreneurs, dentists, doctors, medical specialists, architects and lawyers. They are
in the target 25 – 40 age range. They are highly educated (college) and a flashy career is their
choice. They don’t have much spare time, but want to spend it well: without hassle and stress. They
are quite demanding. They are willing and able to pay a lot for their leisure activities. Sports,
culture, shows, trendy bars and restaurant are their world. They travel from all urban concentrations
in the world to Las Vegas. Seeing a fancy show and spending an exciting night in Las Vegas is “a
must” (they can show off to their friends).
This is not a target group as such, but based on the criteria shown above and the characteristics of
the other three target groups, a selection can be done from the Starwood visitors. PH is the only
Starwood hotel on the Las Vegas strip. There is a huge Starwood database that needs to be better
utilized to aim at the target groups Gay, Lesbians and the DINK’s.
Looking at the profile of the new target groups the PH management team does not expect a lot of
incompatibilities or conflict of interests. The age group we target is open minded and does not
discriminate. We are cognizant that there could be guests who disapprove of alternative lifestyles.
In the long run we believe we are making a wise managerial decision by focusing on these groups.
PMI is renowned for their analytical approach to marketing. If a promotion can’t be quantified it
will not be conducted. Every marketing promotion/event/program is proformaed to profit before it
is approved. We seek to get a three dollar return for every marketing dollar spent. Our proprietary
software takes into consideration the impact “free play” programs have on an individual guest’s
theoretical worth and adjusts accordingly so that we do not artificially raise their worth. Evaluating
our marketing strategy is done in a very regulated and structured basis. The goal with all of our
marketing and analysis is increased EBITDA. We have developed a marketing analysis report,
reinvestment analysis and our proprietary guest analysis report to help us manage our business. In
addition, we survey our guests after every special event.
OVERVIEW OF INTERNET AND COMMUNICATIONS MARKETING STRATEGY
PMI has always been an aggressive internet marketing company. The internet is where our guest
base spends much of their time and is the most cost efficient and productive form of marketing in
today’s world. When we took over management of PH, one of our immediate goals was to
dramatically increase the number of internet savvy guests in our players’ club. Part of the process
of recruiting and signing up these new guests was to obtain their email addresses. In the last year
we have increased our database of new players’ club guests by 100,000. With the email addresses
of these players, we have aggressively marketed to these guests using direct offers and social
As outlined in our Phase 1 report, PMI owns a proprietary algorithm software program that helps us
reward our guests based on their worth. Using this program in conjunction with our email database,
we have been able to lure a massive number of guest visits to the property. With a goal of 40%
players’ club guest hotel occupancy, we have email marketed to our guests with attractive room
offers. Depending on the guest’s worth as determined by our proprietary program, we made offers
that varied from weekdays in a standard room to weekends with suite upgrades. To our best
players, we have been able to customize the emails they receive to make it look like a personal
letter from their PH executive host. While not quite hitting our 40% goal, we missed it by just two
points and showed a year over year increase in casino guest occupied rooms of 100%.
To better engage our guests and to get them to think about PH when at home, PMI has developed
one of the most interactive websites in the industry. A trip to planethollywood.com not only leads
guests to our website but welcomes them to a world full of celebrity fun and games, including a
virtual casino with celebrity dealers. Visitors can play blackjack with Whoopi Goldberg or Brad
Pitt, or play one of 1,750 slot machines, and earn comp points that can be redeemed for prizes on a
next visit to the PH in Las Vegas. With cooperation from our slot vendors and a grant from the
Obama Administration, we were able to develop a virtual slot floor that is an exact replica of the
“live” one at PH. We also offer a celebrity blog that has the latest juice from Hollywood and
beyond. And of course, our guests can book rooms and obtain tickets for the latest shows and
Social networking has been a major focus at PH ever since PMI took over the property.
- PH now has 200,000 followers on Twitter. Each day we have a celebrity tweet with fun
facts and offers from the resort. Tweets from Eva Longoria and Lady Gaga are especially
popular and have accounted for over 20,000 incremental room nights.
- Our Facebook/Myspace pages are some of the most popular for any resort in Las Vegas. We
have 150,000 fans and use these social networks for highly effective advertising. As always,
we use celebrities as goodwill ambassadors on our social sites.
- Our marketing department has been adept at getting high volume viewings of celebrity/PH
Youtube clips. A clip of Pamela Anderson in a poolside catfight with Jennifer Aniston has
over one million hits.
Our internet advertising includes banner ads at highly targeted websites and enhanced search using
PMI has placed “deferred maintenance” as a high priority focusing on life/safety. Under this
category we strongly suggest the refurbishment of public areas focusing on the following:
The carpet/tile is in dire need of replacement due to high traffic on the casino floor. This has
become a liability issue in some areas. The cost of replacement will be $600,000 ($50 per
square yard; for 100,000 square feet) at a 7% interest rate this cost will total $642,000. The
carpet is worn and does not currently fit the targeted “celebrity infused” theme.
• Pool Renovation/Atrium cover
The renovation will enclose the existing pool area for year- round utilization. The new adult
alternative pool will cost $ 9,000,000 (based on the cost information obtained from Brad
Friedmutter); and with a 7% interest fee, the total cost is $9,630,000.The associated return
on this investment will appeal to the adult alternative as well as the European guest.
• The capital cost of the new technology server base system and 170 new slot machines is
$ 3.7 million
• The capital cost of renewing the 250 slot games is $ 1 million