The finance and marketing dilemma: Do promotional allowances actually increase revenue and profits for Atlantic City casinos?

Abstract

Casinos offer free items to attract new guests or to reward their loyal customers. Casino management and marketing personnel believe these promotional allowances are necessary to maintain customers and to increase revenue. Three regression models are run to determine if promotional allowances increase gross revenue, net revenue, and gross operating profit for Atlantic City casinos. Results show that with a $1 increase in promotional allowances there is a significant increase of$4.53 in gross revenue, $3.53 in net revenue, and$1.29 in gross operating profit. These results will help management better understand the effect of offering complimentaries to their customers