MARINA BAY SANDS:

PRICING STRATEGIES MARKETING 313

Prepared by: Charles Hanley Flinn V| Lin Daohui | Simon Raun Madsen | Zhang Qian Wen

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CONTENT PAGE

Executive Summary .............................................................................................................................................................. 2

Introduction .............................................................................................................................................................................. 3

Analysis Of Pricing Strategies And Tactics ................................................................................................................ 4

CASINO .................................................................................................................................................................................. 4

Psychological Effects ................................................................................................................................................. 4

MEMBERSHIP.................................................................................................................................................................... 5

Membership Strategy ................................................................................................................................................ 5

Comparison with RWS ................................................................................................................................................... 6

MEETING, INCENTIVES, CONFERENCING & EXHIBITION (MICE) ...................................................... 7

1st Degree Price Discrimination ........................................................................................................................... 7

Add-ons ............................................................................................................................................................................ 7

Comparison with RWS ................................................................................................................................................... 7

Bundling........................................................................................................................................................................... 8

HOTEL ................................................................................................................................................................................... 9

Versioning ....................................................................................................................................................................... 9

Yield Management ...................................................................................................................................................... 9

Lowest Price Guarantee ......................................................................................................................................... 11

Price Promotions ....................................................................................................................................................... 11

Segmentation By Occassion ................................................................................................................................. 13

Comparison with RWS ............................................................................................................................................ 13

Recommendations ............................................................................................................................................................... 14

Facilities Membership .................................................................................................................................................. 14

“All-You-Can-Stay” Membership ............................................................................................................................. 14

Partner with Tourist Attractions ............................................................................................................................ 14

Difficult Comparison Effect for RFP ....................................................................................................................... 15

Order Bias ........................................................................................................................................................................... 15

REFERENCE ............................................................................................................................................................................ 16

APPENDIX ............................................................................................................................................................................... 16

Appendix 1 – Resorts World Sentosa Loyalty Programme ........................................................................ 16

Appendix 2 - Types of rooms in Marina Bay Sands ........................................................................................ 17

Appendix 3 – Price Of RWS Festive Hotel Deluxe Room Observed Over 70 Days ........................... 19

Appendix 4 – Dynamic Nestling Observation In Room Bookings (MBS Deluxe Room) ............... 20

Appendix 5- Room versioning in Resorts World Sentosa ........................................................................... 21

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EXECUTIVE SUMMARY This paper aims to analyse the various pricing strategies and psychological influences that

Marina Bay Sands (MBS) uses in pricing its various products, and also recommend some ways of

achieving the pricing goal. The goal of MBS pricing strategies is to maximize utilization of their

capacity while also capturing as much customer value as possible due to the high fixed cost

structure and perishable nature of the experience they are selling. These strategies will also be

critically compared with those Resorts World Sentosa’s (RWS), which is MBS’ only competitor in

Singapore.

The pricing analysis will be focused on the main revenue drivers – Casino, M.I.C.E. and Hotel.

There is no clear pricing strategy for MBS casino but they use psychological influences of

prospect theory and mental accounting to increase revenues. Both MBS and RWS also tie in

their membership program with their casinos to increase switching costs and create a stronger

lock in effect.

In M.I.C.E, both MBS and RWS use Request for Proposal and add-ons for its pricing strategies –

they customize each proposals according to events’ requirements and sales managers work

within a price range for venue rentals. Both venues have similar venue rental pricing. However,

MBS earns higher margins through their add-ons like renting audio visual equipment while

RWS earns more through their quoted prices in the proposal.

In the hotel sector, MBS uses versioning, price discounts, and yield management in its pricing

strategies. To primarily segment its market, MBS leverage on festivities and occasions to frame

its hotel rooms to become more attractive and increase potential guest’s propensity to purchase

the room packages. RWS, on the other hand, leverage on its 8 different themed hotels to appeal

to different guests with different utility functions.

We recommend that MBS use subscription models for their facilities and less occupied rooms to

further increase utilization of these fixed cost facilities. These programs would essentially

provide free revenue for them because of their cost structure. The facilities membership would

be priced like a typical fixed quantity transferable golf country club membership. The hotel

room membership would include limitations such as blackout periods and extra surcharges for

peak periods so that MBS does not lose on potential revenue from non-members. We also

recommend that MBS bundle their rooms together with tourist attractions to increase perceived

customer value. MBS could also make use of the order bias and difficult to decrease the price

sensitivity of their consumer and business customers respectively.

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INTRODUCTION Marina Bay Sands (MBS) is one of the two Integrated Resorts (IRs) built in Singapore. It offers a

wide range of products, ranging from hotel, retail, M.I.C.E, casino and attractions. In this report,

we will explore a few of the pricing strategies MBS has used over the past two years in its

different segments. We will be analysing MBS’ pricing strategies against Resorts World Sentosa

(RWS) as it is MBS’ only competitor in Singapore.

In the following section, we will analyse on three important revenue generating segments in

MBS – Casino, M.I.C.E and Hotel. MBS and RWS offer similar products which offer somewhat

similar value albeit a different kind of experience. However, RWS has a slightly lower perceived

price as it is targeted at families, who could be more price sensitive.

FIGURE 1: PRICE-BENEFITS MAP

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ANALYSIS OF PRICING STRATEGIES AND TACTICS

CASINO There is no clear pricing strategy for the casinos. The levy for entry into the casino is not part of

the pricing strategy due to the fact that it is mandated by the government.

PSYCHOLOGICAL EFFECTS

Prospect Theory – Framing & Diminishing Sensitivity

FIGURE 2: PROSPECT THEORY

Prospect theory works in that framing a transaction as a loss makes people take more risk than

framing it as a gain. When gamblers put money on the table to gamble, it would most likely be

perceived as a loss and people will take more risk. Following this logic, the more they lose the

more risk they take and so on. As the losses increase, the gambler gets desensitized to the pain

of losing money, and hence this propels them to gamble more (Figure 2).

This benefits the Casino in the long-run because the “house” typically has an advantage from 1%

up to as high as 30% depending on the game being played (UNLV, 2012).

Mental Accounting

The casino also uses chips to their advantage, which resembles fake money. This replaces the

pain of losing real money and causes gamblers to be less sensitive as to how much they are

spending. In addition, the concept of mental accounting states that customers who win money

while gambling feel like they are winning “free money”, and could be looser with the winnings,

potentially spending it at the resort again, or perhaps at the retail space

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MEMBERSHIP MBS ties their membership program into their casino, creating switching cost to retain

customer loyalty (Figure 3).

FIGURE 3: MBS REWARDS PROGRAM

MEMBERSHIP STRATEGY MBS offers 4 tiers of Sands Rewards Club memberships including Premier, Gold Platinum, and

Diamond. Each level includes benefits geared towards attracting and rewarding more frequent

and high spending customers. Figure 4 shows how MBS structures their membership cards: the

more the customer spends, the higher the customer moves up, and they get rewarded with

significantly more benefits.

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FIGURE 4: MBS SANDS DOLLARS EARNING CHART

Switching Cost

The Sands Rewards Club creates switching cost and lock-in effect, retaining customer loyalty.

The cost of earning the same reward level at RWS may be perceived as higher than benefits

because they would have to re-spend the same amount of money just to get similar benefits.

Shared cost effect

Another strategy this membership program incorporates is the shared cost effect. As customers

spend more money, they earn more points. This gives customers the perception that the points

they are spending are not their own money which would make them less price sensitive, and

spend more.

COMPARISON WITH RWS RWS also offers a similar program to the Sands Reward Club called the Genting Rewards

(Appendix 1) program. This program is structured similarly to the Sands Reward Club.

One different program that RWS has introduced is the RWS Invitees program, which follows a

subscription model. Upon paying the $150 per year membership one is entitled to one of six

exclusive events and invitations to VIP events throughout the year

This is a form of price discrimination because the people who want these perks would have to

pay for it, and the segmentation hedge is strong because they would have to show their

membership cards to get these perks.

As with any loyalty program, an important benefit to the Integrated Resorts (IRs) is that it gets

information on the customers and can better serve their needs through customer relationship

management, and targeted marketing. This helps to increase customer value and could

potentially increase the amount of value extracted by the IR.

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MEETING, INCENTIVES, CONFERENCING & EXHIBITION (MICE)

FIGURE 5: MBS AND RWS M.I.C.E VENUES

1ST DEGREE PRICE DISCRIMINATION MBS and RWS utilize Request for Proposal (RFP) when quoting prices (MBS, 2013). Interested

parties are encouraged to submit their event description to the MBS and RWS websites, and the

IRs would customize their proposals accordingly. They are also able to price their products to

match event’s perceived value.

Sales managers tailor their quotations based on some price guidelines. Not stating these

guidelines publicly gives them the flexibility to adjust prices according to the client. In this

regard, they use first-degree price discrimination in setting prices. This helps them to maximize

their share of the customer surplus.

Majority of the events held in both venues are corporate, resulting in lower price sensitivity, due

to the shared cost effect. However, price still needs to be competitive as companies usually

require three quotes to justify their choice of venue to management.

ADD-ONS Besides the rental and F&B prices quoted in the proposals, both venues practice add-on pricing

strategies. The venues charge additional prices to the rental of audio equipment or any other

supports required for the event.

COMPARISON WITH RWS Although RWS and MBS have similar prices in its quoted proposal for the same event (Figure 6),

we observed that MBS charges slightly higher for its rental of Grand Ballroom. However, this

could be attributed to its slightly bigger ballroom than RWS. However, all other components are

quoted lower. Notably, F&B is priced slightly lower in MBS and this price difference could play a

huge difference in events with high attendance. MBS could possibly earn more if F&B is charged

slightly higher. However, with reference to its pricing for add-ons (Figure 7), MBS charges

higher for its rental of audio equipment than RWS. This strategy could help MBS to earn more

revenue from clients who prefer convenience.

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FIGURE 6: MBS & RWS EVENT SPACE PRICING

FIGURE 7: M.I.C.E ADD-ON PRICES

BUNDLING

FIGURE 8: MBS & RWS VENUE PACKAGES

In order to improve their MICE venues’ attractiveness, both MBS and RWS bundles their

facilities into one price (Figure 8).

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MBS bundles the usage of meeting rooms, food & beverage, hotel stays, and other

complimentary products, increasing revenue. Putting the services together in a package also

complicates comparison with competitors, using the difficult comparison effects to decrease

price sensitivity. Furthermore, clients would perceive to have gained through this price

bundling as price is lower in this package as compared to renting the venue without any

package and the complimentary products increases the perceived value.

RWS has not announced similar meeting packages into their website till date.

HOTEL The goal of hotel pricing is increase revenue per available room (RevPar). In order to achieve

this goal, they can do this by matching price with willingness to pay such that more customers

are encouraged to purchase, and they can extract value from each customer.

VERSIONING MBS does versioning of rooms. MBS has a total of 9 different kinds of rooms and two distinctive

categories of rooms – rooms and suites (Appendix 2). Versioning helps MBS to segment the

market effectively; people who want more facilities and privileges would have to pay more. The

segmentation hedge is that these privileges can only be enjoyed by staying in the room or

showing their identification – an effective segmentation hedge because it is easy to implement

and not leaky.

YIELD MANAGEMENT MBS uses yield management to price their hotel rooms. Error! Reference source not found.11

shows the prices for the Deluxe Room over 70 days, and it reflects a dynamic relationship over a

broad range of prices, starting from $359 - $900.

FIGURE 9: MBS DELUXE ROOM NET PRICE BAND

MBS is able to segment the market by selling rooms at a few fare classes (Appendix 4), and

change the availability of pre-defined fare classes over time through yield management. Yield

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management works such that customers who book the same room for a different day at a

different time would pay a different price. This strategy maximizes the value extracted because

it does not offer unnecessary price concessions.

As per observed, there is a dynamic nestling with booking control as room availability changes

over the different booking days (Appendix 4). MBS shifted booking limits and this strategy could

possibly help MBS to increase its hotel’s revenue.

However, the dynamic pricing at work here does not depend solely on the time of the booking,

as seen by the lack of constant relationship between days to check-in and price (Figure 10).

Therefore, we infer that there are other factors coming into play such as the uncertain demand

for the different fare classes. Since the only observable factor is day of week, the variation of

prices with day of week is shown (Figure 11). When plotted against average prices for each day,

the prices show that Friday and Saturday check-ins are the most expensive, perhaps due to

“staycations” or tourists coming in for the weekend.

FIGURE 10: MBS DELUXE ROOM PRICING VS. DAYS TO CHECK IN

FIGURE 11: MBS DELUXE ROOM PRICE VS DAY OF WEEK

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LOWEST PRICE GUARANTEE MBS utilizes lowest price guarantee to capture guests to book through their website instead of

3rd party websites (Figure 12). MBS may be doing this in an attempt to capture more customer

value for themselves instead of giving a commission to the 3rd party. This also allows them to

guide the customer through the purchase process in a way to optimize their capturing of the

consumer value, and provide a consistent brand image while retaining control from all touch

points.

FIGURE 12: MBS LOWEST PRICE GUARANTEE

PRICE PROMOTIONS The goal of these price promotions is to try and transfer the surplus in demand for lower priced

rooms1 to the higher priced Club Rooms and suites, increasing utilization and preventing lost

sales.

The early booking privilege offer (Figure 13) incentivizes customers to confirm their booking

early, decreasing uncertainty in demand and guaranteeing revenue. This time gap between

payment and consumption of the good also decouples the two, increasing the pleasure of

consumption.

1 There are many days when Deluxe Rooms are not available (Appendix 4) – evidence of over demand and possibility of lost sales.

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FIGURE 13: MBS EARLY BOOKING PRIVILEGE OFFER

The Club Room upgrade offer (Figure 14) tries to capture additional customer value from

people who may have only considered the cheaper room. This discount also increases perceived

customer value.

FIGURE 14: MBS CLUB ROOM UPGRADE OFFER

RWS also utilizes promotions and bundling for their hotels. On occasion RWS uses price

promotions of up to 50% off standard prices at a select few hotels (Festive Hotel, Hard Rock

Hotel, Hotel Michael, Equarius Hotel). This may be an attempt to fill up their hotel rooms by

lowering prices on nights when they expect a low probability of selling out the rooms. These

bundles bundle hotel stays with their attractions (Universal Studios, SEA Aquarium, etc.), or

dining options.

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SEGMENTATION BY OCCASSION MBS segment its market through the different festivities and occasions, effectively funneling

customers into the same rooms in the same hotel. As people would have different price

sensitivities, MBS bundled and packaged its rooms based on the different the occasions.

Through this segmentation, MBS would be able to attract groups of guests who have different

spending abilities, and different price sensitivities based on these occasions.

FIGURE 15: MBS ROOM OCCASSION PACKAGES

COMPARISON WITH RWS In comparison, RWS has 8 hotels, each with a different theme and appeal (Appendix 5).

This segmentation caters toward different customer preferences. Different hotels cater to

different interests (art, nature, ocean, etc.), and different customer groups (couples, families,

friends, etc.). The hotels in RWS also use yield management to price their prices, but each hotel

has fewer fare classes than MBS, with an average of only 4 classes in RWS as compared to 9

classes in MBS (Appendix 3 & 4). Prices seem to be consistently higher for weekends than

weekdays, perhaps due to the family-oriented nature of the resort.

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RECOMMENDATIONS

FACILITIES MEMBERSHIP MBS contains numerous facilities that on several occasions go largely underused, such as

the infinity pool and a world class gym. Locals who do not wish to stay in the hotel every

night, but would like to be able to utilize the facilities would provide an opportunity for

substantial revenue at a low marginal cost by purchasing a facilities membership.

To preserve its positioning, MBS would only allow limited amounts of transferrable

memberships to be circulated and let the market decide how much prices would be. The

pricing for these memberships could be a base charge plus a yearly maintenance fee. Since

their facilities are award-winning, the membership prices would likely be high, not affecting

their premium positioning.

To ease the strain on the capacity, MBS could stagger the timing of the payment of the

maintenance fee.2

“ALL-YOU-CAN-STAY” MEMBERSHIP MBS could also use a subscription model for their rooms. It could address the issue of under-

occupancy for their more luxurious rooms, such as the Club Rooms and Grand Club Rooms.3

This membership targets locals.

This membership would allow a maximum of 4 nights per month in the Club Rooms or Grand

Club Rooms, excluding blackout periods, and including fees during peak periods. In order to

retain customers every year they could add extra nights for each year of renewed membership

that maxes out at 15 nights per month. The membership could also have additional perks and

better services to increase perceived value. As this is a monthly or yearly memberships

guarantees a constant stream of revenue which would benefit MBS.

As with all memberships, they can take advantage of people’s overestimation of their future

behaviour, further increasing revenue at no cost.

PARTNER WITH TOURIST ATTRACTIONS Another advantage that RWS offers over MBS is the amount of attractions they have in-

house. RWS also has collaborations with other tourist attractions such as the Duck Tour.

MBS could collaborate with several different famous attractions around Singapore such as

the Singapore Flyer, Singapore Zoo, and the Night Safari, by bundling their hotel rooms with

2 People feel the pain of payment right after they pay it so the use of facilities right after payment is due is high and tapers off as time goes by. By staggering payments across all members, this ensures that the facilities are not overloaded by everyone rushing to the facilities at the same time. (Gourville & Soman, 2002)

3 Although MBS managed to have more than 90% occupancy rate in the past years, the higher priced rooms are frequently not fully occupied. This is based on empirical data when we tried to book rooms for 70 days. Since they are currently running offers for the Club Rooms, we assume that these rooms are less occupied.

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tickets to these places. This can be done by offering the option of booking a room only or a

“Resort + Explore Singapore” option.

DIFFICULT COMPARISON EFFECT FOR RFP MBS can decrease price sensitivity by making their M.I.C.E. proposals difficult to compare to

other venues. For example, MBS could possibly bundle all events requirements into one price

without showing the breakdown of the individual prices. This bundle pricing could making

comparison difficult to other venues as clients would need to increase search cost to identify the

price for each category to determine value. By making RFP difficult to compare, this reduces

price sensitivity and product switching.

ORDER BIAS MBS currently shows rooms in increasing order for their prices (Error! Reference source not

found.16).

FIGURE 16: PRICES SHOWN FROM LEAST EXPENSIVE TO MOST EXPENSIVE

MBS could show the highest priced rooms and highlight the corresponding in-room amenities

first (Grand Club Room) to anchor people on the higher price and better amenities, making

them less price sensitive.

This will result in more people booking a higher priced room, and also shift demand from the

lower priced rooms. We predict that the demand for lower-priced rooms would not fall to a

level that compromises the occupancy rate because there is currently over-demand. Hence, this

would smooth out demand and increase revenue.

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TOTAL WORDS: 2989 (Excluding captions and appendix)

REFERENCE

UNLV (2012.)Understanding Casino Math. Retrieved 31st Nov, 2013 from

http://gaming.unlv.edu/casinomath.html#he

MBS (2013). Request for Proposal. Retrived 31st Nov, 2013 from

http://www.marinabaysands.com/Singapore-Meetings-Events/Request-For-Proposal/

Smith, T. J. (2012). Pricing Strategic: Setting price levels, managing price discounts, & establishing

price structures. Centage Learning.

Gourville, J., & Soman, D. (2002, september 22). Pricing And The Psychology Of

Consumption. Retrieved from http://www.wright.edu/~tdung/Pricing_consumption.htm

APPENDIX

APPENDIX 1 – RESORTS WORLD SENTOSA LOYALTY PROGRAMME

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APPENDIX 2 - TYPES OF ROOMS IN MARINA BAY SANDS The improvements in amenities from the next lowest room are highlighted in italiacs.

Room Amenities Breakfast

Price per

night (2

days in

advance)

Deluxe Room 1 King or 2 x twin No 519

Premier Room 1 King or 2 x twin No 549

The Club Room 1 King or 2 x twin

Nespresso machine

iPod/iPhone dock

Yes

Grand Club Room 1 King

42” television

Nespresso machine

Yes 699

Orchid Suite 1 King bed

1 living room

1 bedroom

Yes 819

Sands Suite 1 King

24-hour Butler service

1 Living room

1 bedroom

iPod/iPhone docking station

Nespresso machine

All-in-one printer

DVD Player with library on demand

Yes 1619

Marina Suite 1 King

24-hour Butler service

1 Living room

1 bedroom

iPod/iPhone docking station

Nespresso machine

All-in-one Printer

DVD Player with library on demand

Private bar

Yes 1819

Presidential Suite King and double bed

24-hour butler service

Dedicated team of butlers

2 living rooms

3 bedroom

1 balcony

iPod/iPhone docking station

Nespresso machine

All-in-one Printer

DVD Player with library on demand

Private bar

Yes

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Frette luxury linens

Baby grand piano

Powder room

Exercise room

Media room

Study

3 Walk-in closets

3 LCD TVs

Chairman Suite King and double

bed

24-hour butler

service

Dedicated team of

butlers

2 living rooms

4 bedroom

iPod/iPhone

docking station

Nespresso

machine

All-in-one Printer

DVD Player with

library on demand

Private bar

Baby grand piano

Powder room

Exercise room

Media room

Study

Frette luxury

linens

Games room

7 LCD TVs

Yes

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APPENDIX 3 – PRICE OF RWS FESTIVE HOTEL DELUXE ROOM OBSERVED OVER 70 DAYS

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APPENDIX 4 – DYNAMIC NESTLING OBSERVATION IN ROOM BOOKINGS (MBS DELUXE

ROOM)

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There is dynamic nestling with booking control a because when trying to book rooms on

separate dates, the prices and availabilities were different – some rooms were unavailable on

22nd October, but were on the 28th of October. The figures below show prices available on

different dates – the blue prices were seen on 22nd October 2013, and the red prices were seen

on 28th October for previously unavailable rooms on 22nd October 2013. From this change, we

can infer that they have shifted the booking limit.

APPENDIX 5- ROOM VERSIONING IN RESORTS WORLD SENTOSA