After a strong opening last summer, Plainridge Park Casino saw its revenue drop for five consecutive months, a downward spiral that raised questions about its competitive viability. But business at the Plainville slot parlor surged in January and February, stirring hopes for a spring rebound.
That turnaround, however, might have been something of a mirage. A close look at the casino’s monthly revenue reports shows the increase was fueled by a hefty dose of promotional giveaways, millions of dollars in “free play” credits handed out to entice gamblers.
In February, the casino spent $2.4 million in free credits, an 85 percent increase from December. In an advertising campaign splashed on television and highway billboards, the casino invites patrons to “Play up to $500 on us” if they sign up for a rewards card.
The marketing push lifted the casino’s free play spending to 20 percent of revenue, almost twice the level of Foxwoods and Mohegan Sun, their much larger Connecticut competitors.
While the aggressive strategy has clearly produced short-term gains, some marketing specialists say it carries a tinge of desperation and is unlikely to prove sustainable.
“Heavy spending on free play can only do so much,” said Stephen M. Simon, a slot operations specialist from Albuquerque with more than 35 years’ experience in the casino industry. “Pretty quickly the impact of free play diminishes. And then they’ll need a new strategy.”
Free play is designed to drum up business by bankrolling gamblers for a while, giving them extra motivation to play. Some players will quit when they’ve run through their free allotment, but in many cases, the casino will quickly recoup its investment and then some.
That was the case in January, when Plainridge’s revenue jumped an impressive 11 percent. While many factors were at play, that meant the casino brought in $2 in new revenue for every $1 in giveaways.
But in February, the campaign was far less effective. Every new $1 spent on free play brought in just 30 cents in extra revenue, according to a Globe analysis.
“That’s the law of diminishing returns,” Simon said. “Plainridge is trying to buy business, and that’s not likely to work in the long run.”
Penn National, the company that owns Plainridge and 16 other casinos, said the increase in revenue so far this year “indicates that our strategy is working.”
“These are common industry practices that are imperative in a competitive market,” the company said in a statement.
The company said it had planned to ramp up marketing efforts as more patrons enrolled in its loyalty program and that its strategy was helping stop the “decades-long flow of dollars being spent at out-of-state casinos.”
“Just as a typical retail outlet offers coupons to attract new and repeat business, we utilize promotional credits to compete with gaming facilities in Rhode Island and Connecticut that are years ahead of us in developing patron loyalty,” the company said.
‘Too much free play risks customers playing without taking out cash of his own.’Steven M. Gallaway, partner at Las Vegas-based Global Marketing Advisors
Free play is nearly universal in the casino industry, where competition for market share is fierce. At Plainridge, the current promotion reimburses gamblers who lose between $50 and $500 at the slot machines over two return trips to the casino. The initial free credits can’t be redeemed for cash, but any winnings belong to the gambler.
Such promotions seem like safe bets, but too much free play can be costly, specialists say. Many players spend about the same amount of time at the machines whether they have free credits or not and might get their fill without dipping into their own pocket.
“Too much free play risks customers playing without taking out cash of his own,” said Steven M. Gallaway, a partner in Global Marketing Advisors, based in Las Vegas.
Players also quickly get used to playing for free and might lose interest when the offer expires, Gallaway said.
The state’s first foray into the world of Las Vegas-style gambling, Plainridge opened in late June to promising results. But business fell sharply after that, with monthly revenue dropping by nearly $7 million between July and December, before the recent surge.
The state Gaming Commission declined to say how much the casino’s revenue increase owed to free play.
“It is difficult to attribute to any one reason or another,” said Elaine Driscoll, a spokeswoman for the commission. “Like any new business, it is highly likely that they are adjusting their marketing strategy as they acclimate to a new marketplace and clientele.”
In its monthly release of the casino’s financial data, the Gaming Commission had listed the amount Plainridge spent on free play until last month, when it omitted the figure at Plainridge’s request. The casino argued the disclosure placed it at a strategic disadvantage.
The Globe was able to calculate how much the casino spent on free play by using other financial information, and the Gaming Commission confirmed its accuracy.
Twin River Casino, only 11 miles away from Plainridge in Lincoln, R.I., also keeps its free play information confidential. Under state law, however, the casino can spend no more than 10 percent of the previous year’s revenue, plus $750,000. That means that Plainridge’s current level of free play, 19 percent of revenue, is almost twice as high as its chief rival.
Foxwoods Resort Casino and Mohegan Sun, two tribal casinos in Connecticut, are mandated under state law to release their amounts of free play. Connecticut taxes any amount of free play that exceeds 11 percent of revenue.Sean P. Murphy can be reached at firstname.lastname@example.org. Follow him on Twitter @spmurphyboston.