Cash value of casino comps?

[Alan Mendelson]

Imagine that casino comps traded on an open market with buyers and sellers offering bid/ask prices. How would you value in US currency (cash) comps from casinos?

For example, would you value $1 of casino comps as 50-cents in cash?

To make this question a bit more complicated (or telling) would you value casino comps from different casino companies differently?

For example:
How much is a $1 casino comp from Caesars Entertainment worth in cash?
How much is a $1 casino comp from MGM Mirage worth in cash?
How much is a $1 casino comp from The Palms worth in cash?

You might want to express your answer in terms of a bid and as an ask price, or you might want to just offer a "true value" price. Please "label" your "value" accordingly.

Again, use an "open market" value and not if you personally would want to use or stay at those company casinos.

[RoeIncarnate]

I would treat it similar to buying foreign currency. I would look for the lowest fees and only buy it heading to vegas and only buy what i need. Therefore you'd expect the prices to be high during busy vegas times of the year.

Now since I can just use dollars, I would require a discount to buy credits. 10% would probably be a good starting point.

I would only sell the credits if I wasn't going to use them, or I thought there was a risk of them loosing value.

The other question to answer would be how secure are these trades? If there is some risk that the transaction is bogus then I would also require a bigger discount.

That would bring to pay $0.90 for MGM credits as that is where I'm staying soon.

[redietz]

I look at this completely differently, so here goes.

First of all, if I would not be staying at a property -- either because it's a bad value if I were paying cash or I don't like the rooms or whatever -- I would assign it the value of the room where I would be staying if the "free" room were not available. So, for example, since the better rooms at The Orleans are comparable to the standard rooms at Mandalay (believe it or not), I would say that "free" rooms at Mandalay are of the same value as the Orleans rooms. And since I get rooms comped at the Orleans all the time, I would slide the value down to very little.

For retail or food or shows -- basically, unless it were a meal or a show or merchandise I would have clearly bought without the comp, I assign it zero value. This is what Rob refers to as "fluff." I agree with him. And if I received a better seat to a show than one I would have paid for, that is also zero value.

Almost all retail, in my mind, is "fluff," because I would likely do without unless comped, so that category has almost zero value. That includes cruises I wouldn't have bought unless comped or won.

Similarly, I treat virtually all shows as "fluff," so they receive almost no value.

Meals, I would say, should be valued as rooms, so (since I'm cheap), an expensive comped meal is worth what I would have spent if I were eating my usual or standard meal in my usual or standard restaurant.

Now, do I actually calculate any of this? The answer is no, because I do not add any of this to gambling assessments. If I lose $500 playing video poker, and pick up $100 in comps, I still put my bottom line at minus $500. I do, however, count free play, but only at the time used. So if I accrue $100 free play in a trip where I lose $500, but I do not use the free play, my loss is still $500. If I use the free play the next trip, whatever value is won gets added to that trip in that assessment.

That's what I do for me. If someone wants to put a 40% of cost figure on the actual value of comps, I have no qualms with that. I just bend over backwards to avoid the mental gymnastics of fooling yourself into thinking comps are worth this or that. It is, as Rob says, an overrated habit that casinos prefer you acquire.

[Dan Druff]

Alan, I will need clarification.

What do you mean by "$1 in comps"?

What can I use it for on-property?

Food? Rooms? Shows? Freeplay?

Please specify.

[Dan Druff]

Here's a situation from September, 2013:

I know someone, I'll call him "Jason", who came to me with an offer to buy some of my Caesars Total Rewards credits. Jason is what I would call a "friendly acquaintance". I generally like him, but we are not close friends by any means, and I wouldn't even say he's really a friend.

Jason wanted to buy some tickets to a certain show at a Caesar's property, which would add up to around $400. It wasn't exactly $400, but it was very close, so we'll say it was $400 for the sake of simplicity.

At first, Jason thought he was doing me a favor, as I can't exchange my Rewards Credits directly for cash, and exchanging them for freeplay comes with a fee. At the same time, he thought he could save himself money.

Jason came to me and offered $300 cash for my $400 in Rewards Credits.

When I said no, he was very surprised.

"What?! I thought that was fair," he said. "How much do you want for them, then?"

I told him I wanted $350.

He got pissed. "$350?! For $400 in RCs? That doesn't sound fair at all."

I then explained the following to him:

1) I can, at any time, exchange my RCs at a 1.25:1 ratio for freeplay. Freeplay is just as good as cash for me, since I would otherwise be inserting cash when playing at Caesar's properties (this was when I was playing regularly). So using that calculation, I could get $320 in freeplay for $400 in RCs at any time. Therefore, selling him this for $300 would actually cost me $20!

2) I can't just easily transfer him the RCs (or otherwise I'd do it for $320). I have to either go with him to the Total Rewards desk to transfer RCs to him, or go with him to the box office when he buys his tickets. So there's a pain-in-the-ass factor for me, as well as a good deal of my time wasted, especially when accounting for Vegas strip area traffic.

3) I didn't say this part to him, but he's not a close friend of mine, so if I sold him the RCs for $320 (the minimum I could do without losing money), then I would be putting myself through all of the hassle and time of going down to the casino just so he could save $80 himself. While I would do this for a close friend, I am not going to waste my time with this crap for the average dude who just wants to use me in order to save money.

So, basically, I was willing to do it for $350, where I would get $30 profit out of it, and he would get $50 savings out of it -- splitting the savings, except he gets a greater share of the savings than I.

Jason was noticeably pissed at me when I wouldn't go lower than $350, finally muttering, "Whatever dude, just keep the points and forget I asked."

[Alan Mendelson]

I used "comps" as being generic, Dan. I wasn't really looking for specifics and was hoping to get general answers.

Let me give you my view and maybe it will help with the discussion.

I think the value of trading "comps" for "cash" has a time factor. For example: If I have a Total Rewards Gift Card worth exactly the price of two buffets at Caesars Palace and I go to a couple standing in line at the buffet, the chances are I could sell my Gift Card at very close to full value -- let's say with a 5% discount. Who standing in line wouldn't buy a Gift Card for the buffet at a 5% discount.

But if I put an ad on Craig's List or eBay offering to sell the same Gift Card worth two buffets at Caesars I would expect to be offered less for it because someone buying it most likely was thinking about a future trip -- and the risk that the trip will not be made reduces the cash value of the gift card.

The other thing I was thinking that for someone buying comps for future use might take into consideration the risk of holding those "comps" for future use. You run the risk that the company changes its comp policy or prices or goes out of business, or that you lose the comps (certificate or card) or that they expire worthless after a period of time.

You might also apply the strength of the companies and figure that comps at MGM are more likely to hold their value than comps at Caesars.

Those were the factors I was looking for when I asked the question.

And Dan, regarding your situation with "Jason" above I think your reasoning is good.

[Rob.Singer]

AP's always value their comps at whatever is needed at the end of the year in order to say they had a WINNING year. I value them at ZERO since the ones I do use are nothing more than gravy on the bacon (yuk!).

[Alan Mendelson]

Gee Rob... you can use some of those comps to buy me that lunch/dinner you owe me. As a 7 Stars you do have one comp for a $500 meal. That would cover four at Gordon Ramsey Steak, my new favorite in Vegas.

[Dan Druff]

The actual "value" of comps varies in two ways:

1) The use that the holder of the comps can make of them. So like in my example with "Jason", I could trade my RCs for freeplay a 4/5 markdown, so I would be a fool to sell them for anything less than 80% unless I really wasn't going to gamble at CET properties anymore.

2) The use that the buyers would have for them. This goes along with the "time, trouble, and risk" principle Alan discussed above. So if someone is going to need them immediately for something they would otherwise be paying cash, they should pay you very close to full value. At the same time, if you are selling the comps to someone who otherwise wouldn't need/use them, then you would be expected to mark the price down a good deal.

But if you're going to ignore the "sale" aspect, comps are worth to YOU what you would have actually paid for the same. You need to be honest with yourself about it.

So....

A comped hotel room in Vegas is worth very little if I wasn't going to go to Vegas anyway. If I'm only making the trip because I have a comped room, then I have to think about what price I would have to get for that same room to want to make the trip without comps. And that's what the room is worth.

A comped/discounted cruise is only worth something if you would have cruised anyway and paid for it. If you don't enjoy taking cruises, you need to be honest about what price you would pay for a cruise to where it would still be worth going, and that's what your cruise comp is worth. And if you wouldn't want the cruise at any price (even free), then it's worth nothing.

And regarding food, that comp is again only worth what you would have otherwise paid for the food -- not the marked-up casino restaurant prices. For example, Old Homestead Steakhouse at Caesar's is pretty good, but they also charge like $70 for a steak. I could get a comparable (or better) steak at a regular prime steakhouse for $50-$60. So I'm not saving $70 for that steak, because I wouldn't go to Old Homestead without a comp. But if that steak was $50, I would go to Old Homestead, so that's what I consider myself to be saving. However, any food you have to "force down" (when you're full) just because it's comped doesn't really count.

It is a mistake to use comps as a justification for why losing is okay, but at the same time, if you are saving real money that you would have otherwise spent without the comps, then you can take that off your losses and be honest about it.

[Rob.Singer]

Gee Rob... you can use some of those comps to buy me that lunch/dinner you owe me. As a 7 Stars you do have one comp for a $500 meal. That would cover four at Gordon Ramsey Steak, my new favorite in Vegas.

Still on the backburner of course. I did have a $500 meal comp and I used it at Harrahs LT when we got back.

[Alan Mendelson]

You have a $500 annual dinner. Did you use it yet? I'm hungry.

[Rob.Singer]

Yes, at LT. Am I getting another one?

[Alan Mendelson]

Yes, at LT. Am I getting another one?

Gee Rob... with all of your play why aren't you loaded with RCs that you can use to buy me dinner?

[Rob.Singer]

You're not getting this Alan. I won't be in LV until after summer 2015. And we're definitely NOT going to have dinner in a casino. I steadily use RC's at Harrahs & Harvey's here anyway.

[Alan Mendelson]

Yes, Rob, you're right. I'm not getting this dinner.