Who Wins Today—The Cheetah or the Antelope? Does It Matter?

Casino gaming properties and their patrons represent a prime example of how two parties whose business outcomes are at cross-purposes must establish an uneasy peace in order to maintain their mutual existence. The clinical term is co-dependence. Players need gaming and gaming needs players. Each side enters into this symbiotic relationship with the goal of one side trying to take the other side for all they are worth without going so far as ensuring mutual destruction. The primary bargaining chip at the center of this nature channel drama is what the industry calls a “comp.” A “comp” is short for “complimentary” which refers to something given as free as a courtesy or favor with the goal of “incentivizing” patrons to play longer, bet higher, and visit more often.

Even though everyone knows before stepping foot onto a casino property or logging onto a gaming site that sooner or later “the house always wins,” it doesn’t keep some or most of us from believing that on this day the prophecy has foretold that we are the long-awaited anointed ones that have been divinely chosen to bring down this house of ill repute. It is this attitude that drives this particular “circle of life” (or debt).

For the players it’s all about the comps. Casinos generally offer four levels of comps:

  1. The first level offers “free” cocktails and other beverages. Some casinos offer everything, while others are limited to simple “house” drinks.
  2. The second level typically consists of free meals. Many casinos have several restaurants and may require more play to earn a comp to the higher-end restaurants.
  3. The third level offers free hotel rooms. Many casinos have attached hotels, but those that don’t may have the ability to comp rooms to a hotel nearby.
  4. If you are fortunate to ascend to the fourth and final level, you are considered a high roller and you can expect premiums such as airfare reimbursement, limo rides, tickets to shows, private gaming areas, private jet service, and other mostly legal premiums.

Interestingly enough, high rollers are said to provide only a small fraction of casino “action.”1 According to John Eldsmoe in his book Legalized Gambling : Americas Bad Bet, he claims that it is actually gamblers from the lower and lower-middle classes in the United States that provide much of the gambling money. “The occasional wealthy ‘high roller’ does indeed exist, but he is the exception, not the standard. The fact that more than 50% of Nevada’s gambling income comes from slot machines as opposed to the card tables should be an indication high rollers are not the main source of revenue.”

Representing the other side of this constant tug-of-war is the gaming property. For them it’s all about “THEO,” short for “theoretical loss.” It is the amount of money a player is expected to lose based on the long-run statistical advantage the casino has on the particular game being played. Theoretical loss is calculated as follows: Theoretical Loss = (Casino Advantage) X (Total Wager). Casinos use this statistic to classify you as either a high roller (or “whale”) or a low roller.

The bet for whales typically starts around $50,000 and can go as high as their history says they can cover, while a low roller usually begins with low limit tables ($5) or slot machines.

A perfect example of how THEO works is provided by award-winning online city guide Vegas Tripping2: if you lose $1,000, you’ll get $400 worth of comps—two nights in a $200 per night room, or 50% off the room and two $100 show tickets, or one night free and $200 in resort credits, however they decide to slice and dice. The calculation is that the size of your future wagers will increase with the size of your comps. Think of it like the two-for-one coupons offered at your local grocery store except that instead of spending a few extra dollars on that second box of detergent that you don’t necessarily need, you risk hundreds of thousands of dollars that you don’t necessary have in hopes of at least a two-to-one payout.

So who do you think is left at the end of this week’s cheetah vs. antelope episode on The Discovery Channel? Is it the casino property whose job it is to provide you pleasure while also encouraging you to go outside of your reasonable betting comfort zone, or is it the player who believes that sometimes numbers do lie and that they have invented the perfect betting system that will allow them to go down in history as the “ONE” who beat the house? Or maybe the point is that no matter what the outcome, the system is setup so that everybody gets what they want—win, lose, or draw. What do you think?

Sources

  1. John Eidsmoe: “Legalized Gambling: America’s Bad Bet”
  2. Vegas Tripping
  3. http://www.ace-ten.com/casinos/comps
  4. http://www.lasvegasinsider.com/html/lvi_comps.htm

Why “Boarding” Is Not As Much Fun As It Sounds

In a previous article I wrote that your chances of surviving a serious injury was largely affected by the field triage decisions made by emergency medical professionals. In what could be considered Part II of this conversation is the experience you could expect once you arrive at the medical destination chosen by the Emergency Medical Service (EMS). If you experience a serious injury, assuming you are stabilized by EMS and assuming it makes the correct decision as to which destination hospital is best given your injuries, your next stop will be on the steps of your local neighborhood emergency room.

For those of you who remember the TV drama ER, the emergency room is clearly where much of the action happens. When you arrive at the door, the speed and accuracy of your treatment will depend on many factors that are outside of your control, including:

  • Average level of boarding that occurs
  • Ongoing nursing shortages
  • Current availability of long-term care beds
  • Timeliness in doctor consultations
  • Number of uninsured patients visiting for routine checkups on that day

The factors listed above have been found to directly contribute to overcrowding and long wait times in emergency departments. Addressing these issues will not only increase revenue; it will also increase the quality of care delivered by the emergency department. This article will focus primarily on the challenges that “boarding” can present.

Boarding is the process in which hospitals admit emergency department patients when no rooms are available and leave them in hallways for extended periods of time. According to the American College of Emergency Physicians, half of medical directors surveyed this year reported boarding one to five patients for four or more hours daily, and the practice is the main cause of overcrowded emergency rooms, long waits for treatment, and ambulance diversions.

Boarding also can increase liability risk for hospitals because the conditions of boarded patients, who often are critically ill and “less likely to be carefully monitored” by hospital staff, “can deteriorate quickly,” the Wall Street Journal reports.

There are three answers to three very important questions that everyone should have before visiting an emergency room:

  • How long does a patient typically have to wait to be seen?
  • How long after performing lab work, imaging, or other functional tests does it normally take to reach an accurate diagnosis?
  • How long does it normally take to process paperwork, get patients into a bed, and provide whatever medications or procedures they need?

“High rates of patients leaving without being treated are poor for patient safety,” said Jason Wilson, MD, of the University of South Florida in Tampa. “Our study affirms that long waiting room times correlate with larger number of patients leaving prior to physician evaluation. And we know that long waiting room times are directly connected to boarding in most hospitals.”

In order to begin establishing effective measures and standards, the Centers for Medicare and Medicaid Services (CMS) will require hospitals to begin tracking and reporting their median times for two National Quality Forum benchmarks in emergency care:

  1. The number of minutes between the “door,” the time the patient arrives at the emergency department, to the moment he or she “departs” the premises of the emergency department to be admitted to the hospital.
  2. The time from the moment a decision is made by the emergency department physician to admit the patient to a hospital bed to the time the patient departs the emergency department and is actually placed in an inpatient bed.

Look for these results to become publicly reported on the U.S. Department of Health and Human Services’ “Hospital Compare” search engine. For now, CMS has not said it will impose a payment adjustment or penalty for slower hospitals, but that may come with future Outpatient Prospective Payment System rules, perhaps the one released for 2013.

How important is it for you to know if your local emergency room has a recurring problem with boarding? Tell us about your personal experience with boarding.

Sources

  1. Juran: The Urgent Problem in U.S. Emergency Departments, Tina Pietraszkiewicz, 3/29/10.
  2. American College of Emergency Physicians.
  3. The Wall Street Journal: Hospitals Open Up Space in the ER, Laura Landro, 10/18/06.
  4. Jason Wilson, MD, University of South Florida in Tampa, six-month analysis of Tampa General’s 72-bed emergency department.
  5. HealthLeaders Media: Top 12 Healthcare Quality Concerns in 2012, Cheryl Clark, 1/4/12.
  6. U.S. Department of Health and Human Services: Hospital Compare.
  7. HealthLeaders Media: Speed of ED Care Goes Under Quality Microscope, Cheryl Clark, 7/28/11.
  8. News-Medical.net: Hospitals taking steps to limit ED patient ‘boarding,’ 10/19/06.

Friends With Benefits or Frenemies? How Franchise Relationships Really Work

Since the rise of hotel franchising in the late 1950s and 60s, the relationship between the individuals that owned hotels (corporate) and the people that ran them (the franchisee) can best be described as a conflicted “Frenemyship.” They usually begin as cautious but optimistic friends but, somehow through negative personal and business experiences, they have devolved into pessimistic enemies with conflicting agendas. In 2010, consumers rented out 4.7 million rooms at 50,800 different properties, and in 2009 the industry took in a total of $127 billion. The strength of the hotel industry gives us a pretty clear indication of both the overall mood of the country and the current state of the economy.

The hotel industry employed over 1.7 million workers last year and paid out about $186 billion in wages to a very diverse group of employees occupying both low and high skill and wage positions. This is not just a discussion on how to bring two warring parties together. Given the people involved and the economics at stake, the real question is how do we make sure that the relationship between corporate and franchisees remain profitable such that both sides continue to see the value in true collaboration?

The first step in understanding how things can go so wrong over time is to understand the reasons why anyone would ever want to enter into this type of business relationship in the first place. In the beginning, franchising enabled entrepreneurs to expand their operations without the use of substantial capital. For much of their history, hotels were owned and operated by individuals. However, as franchises and chains began to appear, individually owned hotels found that they were increasingly at a competitive disadvantage.

Corporate (franchisor) is involved in securing protection for the trademark, controlling the business concept and securing know-how. Being in this role usually brings the following benefits:

  1. Expand brand presence without significant investment
  2. Collect a lucrative profit stream of franchise fees and marketing revenues
  3. Save money, as franchise agreements cost less to negotiate and monitor than management agreements

The franchisee (property owner) is obligated to carry out the services for which the trademark has been made prominent or famous. Owning a hotel franchise usually brings the following benefits:

  1. Access to the brand’s marketing muscle and reservations power
  2. Greater operational control through self-management or management by an independent operator
  3. Facilitation of debt and equity financing (many lenders will not finance hotel construction or acquisition unless the property has a strong national brand)

The franchisor/franchisee relationship can best be expressed as an adaptation of the social exchange theory. In our version, it proposes that business behavior is the result of an exchange process. The purpose of this exchange is to maximize benefits and minimize costs. Both sides of a partnership should weigh the potential benefits and risks of forming a mutual alliance. When the risks outweigh the rewards, either or both parties will terminate or abandon the relationship.

Costs involve things that are seen as negatives by both parties such as having to put money, time, and effort into establishing and growing the partnership. The benefits are things that both parties get out of the partnership such as fun, profit, growth, and professional support. Social exchange theory suggests that we essentially take the benefits and subtract the costs to determine how much the partnership is worth. Positive relationships are those in which the benefits outweigh the costs, while negative relationships occur when the costs are greater than the benefits.

We all know that real life is much more complicated than theory, but the underlying goals are the same. How do we avoid or minimize the personal and professional costs involved in building a profitable business relationship? How do we develop the level of realistic group decision collaboration necessary to grow the partnership?

Sources

  1. Don Sniegowski. Blue MauMau: Denny’s Serves Up Collaborative Leadership
  2. Robert Braun is a senior member of JMBM’s Global Hospitality Group and a partner in the Corporate Department.
  3. Franchise Help: http://www.franchisehelp.com/industry-reports/hotel-and-travel-industry-report
  4. Wikipedia: http://en.wikipedia.org/wiki/Franchising