Transcription
Borgata Hotel Casino & Spa:Diamond in the roughIntegrated Marketing, Fall 2014Chen YangMichelle DefazYang ZhaoYuyan Wang1
Table of ContentsExecutive Summary . Page 4Company Background . Page 6Situation Analysis . Page 65 C’s . Page 6Customers . Page 6Company . Page 6Competitors . Page 7Collaborators . Page 9Context . Page 10S.W.O.T. Analysis . Page 14Strengths . Page 14Weaknesses . Page 14Opportunities . Page 15Threats . Page 16Market Trends . Page 18Casino revenue declines . Page 18Online gaming . Page 18Consumer spending . Page 19Gambling as a leisure activity . Page 20Global market . Page 20Marketing Strategy . Page 22Mission . Page 22Objectives . Page 22Segmentation . Page 24Target Market . Page 29Marketing Mix . Page 31Product. Page 312
Pricing . Page 31Distribution . Page 32Promotion . Page 33Action Plan . Page 34Overview . Page 34Execution. Page 36Timeline . Page 41Finances . Page 42Projected P&L Statement . Page 42Marketing Plan Financial Breakdown . Page 43Breakeven Analysis . Page 44Implementation Controls . Page 45Appendix . Page 46Works Cited. Page 503
Executive SummaryThe Borgata Hotel Casino & Spa is the market leader in the Atlantic City gambling industry.However, because of the strict casino regulations and the unstable state of the U.S. economy, thegambling market in Atlantic City has been drastically shrinking. In the past year alone, the Trump Plaza,the Atlantic Club, the Showboat, and the Revel have shut down. The Trump Taj Mahal filed forbankruptcy and may close later this month depending on union negotiations.Atlantic City casinos are also facing strong competition from casinos in neighbouring states.Although the situation may seem dire, Borgata can use these closings to their advantage in order to gainadditional market share and ultimately increase profit. The online casino market especially has potential,as there is still limited competition in the market and tremendous room for growth.Since the gambling market is expected to decline continuously in the coming years, the key issuewe see for Borgata is figuring out a marketing strategy that would allow them to continue business inAtlantic City while capitalizing on the decreased competition and turning a profit.To achieve this objective, we have integrated various marketing strategies focusing on three areasthat showed the most promise for return on investment: online casino gaming, pursuing new targetmarkets (families & foreign markets), and focusing on a very personalized customer experience byoffering customized vacation packages.After analysing Borgata’s financials for 2013 and 2014, we project the net profit in 2015 to be 650,194,000 after applying these new strategies. This is a 23% increase in our first year of launchingthe new marketing campaigns, compared to profit in 2014. In order to achieve this financial objective,we will require a 290 million ( 289,576,000) marketing budget inline with budgets from previousyears.4
Company BackgroundThe Borgata Hotel Casino & Spa in Atlantic City, New Jersey opened in 2003 as a result of thejoint venture between Boyd Gaming and MGM Mirage. The Water Club, Borgata’s upscale hotel,opened in 2008. It features 2,000 rooms and is currently the largest in New Jersey State. Since thecasino’s opening in 2003, it has been the top-grossing casino in Atlantic City, as well as the bestperforming casino in the U.S.1In 2010, Borgata underwent some changes in terms of management and ownership. The NewJersey Division of Gaming Enforcement found that Stanley Ho, MGM Mirage business partner inMacau, China, was an “unsuitable” person under state casino law due to suspected ties with Chineseorganized crime.2 As a result, MGM announced it would sell 50% of its ownership in Borgata and stopdoing business as a gaming licensee in New Jersey rather than cut ties with the Ho family. No buyerswere found and in September 2014, the Casino Control Commission reversed its earlier decision andallowed MGM to keep a reduced portion of their stake after finding that Stanley Ho's role in MGMMacau had been reduced. Fortunately for Borgata, the news never negatively affected business.Borgata has experienced over 10 years of success and profitability in Atlantic City, however inthe past few years, the market has changed dramatically. The state’s limited financial resources, declinesin the gambling industry, and even natural disasters have prevented Borgata from further growth in themature Atlantic City market. They also have failed to obtain an attractive number of new customerssince there are more alternatives and convenient gaming alternatives now emerging throughout thetristate area. The future of Atlantic City depends on establishments such as Borgata to help attractcustomers and tourists, and once again make Atlantic City into the popular entertainment and vacationdestination it used to gm-keep-half-borgata-casino/5
Situation Analysis5 C’sCustomers Needs analysis – Borgata offers the convenience of Las Vegas style entertainment and highquality vacation amenities in a desirable location. In a survey conducted by the Lloyd D.Levenson Institute of Gaming, Hospitality & Tourism, it was reported 38% of Atlantic Cityvisitors in 2013 made the trip as a getaway or a vacation. Only 27% visited with the sole purposeof gambling, which is down considerably from 33% in 2012.3 Decision-making process – The hotel and casino customers are very holiday and vacation driven.In the tristate area, there are not many quick getaway locations and Borgata capitalizes on this.Last minute discounts and promotions prompt guests to stay at the hotel. The casinos are notmarketed as the main attraction with the intention that guests will try their luck at the casino onceat Borgata.Company Business modal – Hotel services, amenities, entertainment and recreational activities are used todraw in customers and extend their stay at Borgata. Once a guest is at Borgata, the goal is to getthem to play with incentives such as free play for new members and loyalty program perks. The“My Borgata Rewards” program offers members benefits such as free valet parking, compdollars, buffet access, discounts on merchandise, priority check-in and reservations, discountedrooms, ta.com/casino/my-borgata-rewards/benefits6
Competitive strategy – Borgata’s key competitive advantage is bringing the entertainment andinnovation that has made Las Vegas casinos legendary, to Atlantic City. Before Borgata, such alocation did not exist in Atlantic City and they have been able to maintain this positioning for thepast decade even despite the Revel’s attempt to compete as the only other luxury casino/hotel onthe boardwalk.5Competitors Direct competitors – Direct competitors include casinos operating alongside Borgata in AtlanticCity. The city has been steadily downsizing leading to four casinos closing in 2014 and morescheduled to close in December 2014.6 Current competitors now include: Bally’s Atlantic City,Caesars Atlantic City, Golden Nugget Atlantic City, Harrah’s Atlantic City, Resorts CasinoHotel, and Tropicana. The following table shows how the Atlantic City casinos have performedin the previous two years as compared to Borgata:Company NameMarketShareCompetitor Analysis7CasinoMarket Share ofWinInternet WinEmployeeTotal GamingSpaceAtlantic Club75,41620135.0% 141,8701,66320124.2% 127,1751,741Borgata160,287201321.6% 616,970201220.0% 612,69144.8%5,8415,936Bally's A.C.115,07720138.5% 244,4503,14720129.7% 014/12/taj mahal casino in atlantic /2013 ccc annual report.pdf67
Caesars140,749201311.8% 336,447201211.7% 358,56528.4%2,8502,996Golden Nugget70,25020134.4% 124,87120124.3% 130,4512.1%1,8811,779Harrah's A.C.155,073201312.4% 356,3673,639201213.1% 399,2403,924Resorts81,21920134.6% 130,8031,88420124.3% 130,8331,962Revel126,74120135.4% 155,1532,79220124.0% 122,3163,516Showboat125,95520136.7% 193,2472,15920127.4% 225,4102,308Tropicana123,98020138.0% 228,02220128.2% 249,9948.9%2,7482,918Trump Plaza86,92320132.5% 73,95420123.4% 102,5065.1%1,0461,177Trump Taj Mahal 159,99820139.1% 259,91420129.7% 295,49210.6%2,7773,051Indirect competitors – Tribal casinos such as Mohegan Sun, racetrack casinos, slot parlors, andeven riverboat and card rooms in neighbouring states. New entrants – New entrants to the industry in the traditional sense (physical locations) are notviable competitors as the barriers to entry are very high both financially and politically and8
Borgata has already been established as the market leader in Atlantic City. Online gamblinghowever is a new challenge for Borgata that will be explored further in the action plan.Collaborators Atlantic City Alliance – The ACA is dedicated to developing programs benefiting Atlantic Citypartners. Benefits include year round advertising campaigns, public relations efforts, onlinemarketing, and other promotional programs. The “Do AC” campaign launched in 2011 and 30million dollars a year was spent on promotional efforts to aid the struggling casinos. Successfulefforts included free beach concerts, party buses, and commercials airing on prime timetelevision. Just this November however, the casinos of Atlantic City have taken a vote to disbandthe alliance in hopes the money could be used instead to financially offset the cost of business.8 Celebrity chefs – Borgata has five fine dining restaurants all highlighting a celebrity chef some ofwhich to name are Bobby Flay, Michael Schulson, and Wolfgang Puck. These signaturerestaurants and chefs have helped position Borgata as the leading source for high-end culinaryexperiences in the tristate area. Yearly events are even held promoting the restaurants and allowguests the exclusive opportunity to interact with the chefs as their food is being prepared.9Atlantic City competitors seem to be following in Borgata’s footsteps, chef Gordon Ramsey hasrecently signed a contract with Caesar’s to open a restaurant in the coming year.10 Entertainers – Borgata features comedians, musicians, entertainers, etc., year round attractingwide varieties of customers. Past entertainers include: Rob Thomas, Kathy Griffin, Joan Rivers,George Lopez, and most recently, comedian Jerry Seinfeld, has signed on to perform at Borgatathrough 2016.11 Online gaming platform – Bwin.party is Borgata’s online gaming partner who provides 94812 1 ex.ssf/2014/09/gordon ramsey restaurant atlantic city s-releases/current/jerry-seinfeld-at-borgata99
platform for the online gaming casino and poker sites. Online gaming partners – On November 6, 2014, Borgata announced a new partnership with PalaInteractive, LLC expanding the number of games offered online. The Pala gaming sites areexpected to go live in early 2015.12 Recruitment program – Income Access partnered with Borgata to launch BorgataPartners.com, arecruitment program targeting New Jersey’s online gaming market. Online partners promoteBorgataCasino.com and BorgataPoker.com on their website and receive a commission based onnew registered players. This partnership allows Borgata and their marketing teams to receivecomprehensive analytical data for measuring KPIs (key performance indicators).13 Boyd Gaming – Frequent players at Borgata can redeem “Comp Dollars” through the MyBorgata Rewards loyalty program for stays at Boyd Gaming Hotels across the U.S.14Context Demographic15oAge – People between the ages of 21-35 visit casinos the most however this age group isonly slightly ahead of those between the ages of 50-64.oGender – Men are 75% more likely than women to visit a casino and about one in threemen between the ages of 21 and 34 regularly visit a casino.16oIncome – 37% of Atlantic City visitors reported incomes between 50,000 and 100,000per year.oFamilies – This is a possible segment to pursue as non-gambling activities are 20141106 Borgata Pala Indians OKd for online le-gambling-us-june-20141310
more popular in Atlantic City and more visitors are travelling with children. In 2013, 18%of visitors travelled with children. This is up 106% from 2011 when only 8.7% did. EconomicoMarket size – The market has decreased in Atlantic City in recent years due to a pooreconomy and more conservative spending from consumers. The online market however isstill very much in the introductory stage and has potential for growth.oIndustry profitability – The gambling industry is on the decline however Borgata has theadvantage that they are not solely a casino, but also a hotel, entertainment center, spa,provide rentals for special events, conference center, and so on. Now is the time tocapitalize on this diversification as much as possible. Socio-economic environmentoProblem gambling – As gambling addiction continues to be a serious problem, moreorganizations are being founded to combat this issue. While less than 5% of thepopulation is considered to have a gambling addiction, they account for 35% of gamblingrevenues. Many states, New Jersey included, provide funding for education and treatmentprograms for people with a gambling problem.17oOpposition to casinos and online gambling – Currently, there has been a lot of oppositionto casinos opening in new locations at the local resident level and a push to reinstate theFederal Wire Act once again making online gambling illegal.18 Political/legal environmentoLaws – Although gambling is legal under US Federal law, the laws vary by state and allhave very strict restrictions. Online gambling is also a completely separate issue, 014/39661811
requires its separate set of laws.19oRegulations – Regulations are set at the individual state level. The New Jersey CasinoControl Commission regulates within New Jersey State and limits gambling to only smallgeographic areas.20 Nevada and Louisiana are the only states that allow gamblingstatewide.oTaxes – New Jersey State has one of the lowest taxes in the country for gambling and itwill drop even lower in coming years. New Jersey state senators are proposing a two-yearplan to help the struggling casinos by reducing taxes between 28% and 48% in order tostabilize the market and enable further diversification to stimulate growth.21 Technological environmentoApps – Mobile apps could possibly be the future of the gambling industry. At this point,Borgata has only been in the market for about a year however they are already the marketleader with 40% share.22oNew technology – There have been many recent technological advancements Borgatacould implement to improve the customer experience in the hotel and on the casinofloor.23 Check in/out kiosks – Similar to those at airports, kiosks are being used in LasVegas to help expedite the check in and check out process. Interactive systems – Apps can be downloaded to a guest’s personal smart phonegiving access to hotel amenities such as room service, wake up calls,housekeeping, etc. Interactive “way finder” – Scattered throughout the hotel/casino, these devicesgive information about all the offerings and events occurring at any given -first-hotel-guests.html2012
Digital concierge – Ability to make restaurant reservations, hotel bookings, buyconcert tickets, and so forth, on the spot at “digital front desks” set up throughoutthe hotel and casino. Natural environmentoAtlantic City Linen Supply – Borgata has worked with AC Linen Supply since opening in2003 to provide guests with high quality environmentally friendly linens. 24oHeart & Soul Foundation – The Borgata Heart and Soul Foundation is a nonprofitcorporation that gives charitable donations in various areas including community andenvironment.25oReusing towels and linens – Borgata now offers guests the option to reuse towels andlinens if staying for multiple nights. This was not an option before April 2014. 26oReducing print materials – Borgata has cut down on printed materials by includinginformation, directories, menus, etc., on the interactive televisions instead of printedpamphlets and brochures.24http://www.aclinen.com/environmental spa/2513
S.W.O.T. AnalysisA S.W.O.T. analysis has been conducted based on Borgata’s current standing with the mainfocus being on the gaming aspect of the company.Strengths High brand recognition on the East coast. Borgata has established a strong history in AtlanticCity. Atlantic City has a low tax rate, which is appealing to both businesses and consumers alike.27 Borgata has a good reputation compared to their direct competitors in Atlantic City. Borgata isknown for upscale accommodations and Las Vegas style of entertainment. Borgata is located in an already popular gaming destination. The Atlantic City location is great for tourism and attracting large masses of people year round.Atlantic City has many leisure activities for families and wide varieties of people: the boardwalk,the Marina District, Tanger shopping outlets, fine dining restaurants, etc. In 2013 alone therewere 26.7 million visitors.28Weaknesses Borgata only has one location in an area that has been declining in sales and growth since 2006when gross gaming revenue peaked at 5.2 billion.29 The financial crisis in Atlantic City is ofserious concern as New Jersey governor Chris Christie has proposed various proposals to helpthe remaining failing casinos such as tax reductions and new ventures such as sports cfm?siteID 150&pageID 14
The gaming industry is highly regulated and is affected directly by new government policies,laws, taxes, licensing costs, and even zoning laws. The business is very capital intensive. Significant resources are required for ongoingmaintenance and to employ the high volume of employees. In 2013, Borgata reported having5,841 employees, the largest staff among all the casinos in Atlantic City.30 There is a constant risk of having difficulties with unions therefore increasing Borgata’s laborcosts. For example, the Trump Taj Mahal is scheduled to close December 12, 2014 if unionnegotiations do not pan out.31Opportunities Potential to increase market share by targeting international markets. Capacity and demandshouldn’t be an issue because of the difference in the holiday/vacation periods. Increasing online/mobile app users. This is a huge market and a great opportunity for growth asthere is still limited competition in the market. Online gambling became legalized in AtlanticCity on November 25, 2013. One year later and it has only brought in 10% of the 1 billioninitially forecasted for the first year.32 Offering new services and forms of entertainment as an investment in non-gambling attractions.For example, family oriented services will be explored as part of the marketing strategy.Although gambling revenue is down in Atlantic City, non-gambling revenue is up 162 millionsince 2012.33 This includes new attractions, restaurants, concerts, nightclubs, shopping ts/docs/2013 ccc annual t-to-fall-atlantic-city-struggles-to-rise.html3115
Reach out to broader demographics within driving distance of Atlantic City in order to becomethe leading gaming entertainment destination on the East coast, not just Atlantic City. Focus on targeting more upscale customers since lower value customers are being lost to moreconvenient casino locations/substitutes. Borgata has already seen some success here with highend restaurants such as Bobby Flay Steak and Wolfgang Puck American Grille. Implementation of new technologies to help streamline processes and offer better services. It willhelp Borgata gain a competitive advantage and it also increases competitive barriers. In LasVegas, interactive technology is used to give guests information about events at the hotel,concierge desks allow you to purchase show tickets or make restaurants reservations yourself ontouch screen devices, and kiosks are set up to bypass long check in and check lines.34 Partnerships with local business to attract more local residents in the area. Perhaps New Jerseyresidents would be more likely to go to Borgata if offered a perk or discount for something theyuse/attend regularly. Sports wagering is a possibility in New Jersey’s near future. The casinos would get a cut of theproceeds and a survey found most Americans are in favor of sports betting (55% believed itshould be legal).35 Governor Chris Christie and top lawmakers support the plan and are pushingto remove restrictions to make it legal in 2015. Currently, Nevada is the only state with legal,operational sports books. In 2012, Nevada casino visitors wagered more that 3.4 billion dollarson sporting events alone.36Threats Government and politics are becoming more threatening to the business. As previouslymentioned, new regulations could once again make online gambling 4/11/continue fight to legalize sports betting in nj s/default/files/uploads/docs/aga sos2013 fnl.pdf3516
The legalization of gaming in Pennsylvania and New York has dramatically increasedcompetition. There are currently more than 40 casinos in Pennsylvania, New York, Maryland,and Delaware.37 Substitutes such as slot parlors and racetrack casinos are becoming more popular. There arecurrently 20 slot parlors located in Delaware, Maryland, New York, and Pennsylvania, and 4racetrack casinos located in New Jersey alone.38 More convenient casino locations are a major threat for example, Resorts World Casino inQueens, New York. Visitors who would once cross state borders to go to Atlantic City no longerhave a need to, especially since many casinos now offer complimentary am17
Market TrendsCasino revenue declinesSince 2006, casino revenue in Atlantic City has declined by more than 45%.40 Table revenues havealso seen a large decline unlike Las Vegas where it reversed its decline in 2010 and has been steadilyincreasing. The following revenue trends are strong indicators of where the market is headed: From 1978-1985, Atlantic City gaming saw rapid growth, with average growth rates of 55.07%. From 1986-2006, the industry grew at a less impressive growth rate of 4.37%. From 2007 to 2013, the industry saw an average decline of -8.19%.Fortunately, Atlantic City is undergoing a major restructure both financially and politically. As withany large-scale change, there is a chance of financial turmoil however in the long term, the restructurecould increase the sustainability and stability of the city.Online gamingOn February 26, 2013, Governor Chris Christie signed a legislation authorizing Intrastate Internetgaming for Atlantic City casinos. New Jersey originally projected 34 million in tax revenue frominternet gambling (certified in the state budget of June 2013) however, as of April 2014, only 7.7million was collected. Online gaming did not grow as quickly as expected but it still shows promise asover 250,000 online accounts have been created to date.41In addition, Mintel Research Company conducted a survey on over 1,548 internet users askinghow much they agreed with the statements in the chart below. Results show nearly 30% of respondentsbelieve online gaming can be as much fun as going to a c
joint venture between Boyd Gaming and MGM Mirage. The Water Club, Borgata's upscale hotel, opened in 2008. It features 2,000 rooms and is currently the largest in New Jersey State. Since the casino's opening in 2003, it has been the top-grossing casino in Atlantic City, as well as the best performing casino in the U.S.1
