Growing Your Bottle Service Revenue
In 2016, UrVenue took close to 8,000 online payments for table service representing over $20 million in business for our customers. This represents under 10% of our customers’ bottle service revenue but it’s going up fast. As of June 2017, only halfway into the year, we have already exceeded these numbers.
Our heart is in Las Vegas where Table Service is king, generating two thirds of a nightclub revenue. UrVenue’s first and second customers were Drai’s After Hours and Tryst (R.I.P.) which Victor Drai partnered with Steve Wynn to open over 10 years ago. Back then, the focus was already on booking and managing tables; specifically, how to get 100 tables sat in one hour efficiently. Today there is only one nightlife group in Vegas who doesn’t use UrVenue at a great disadvantage to them. While our customers sit 2 tables per minute at one station, it takes over a minute to sit just one without UrVenue. It might not seem like a lot of time, but with over 100 tables and minimums of a least $1,000, a minute delay per table is cumulative and represents many thousands of dollars in lost upsells. This efficiency is one of the reasons customer spending is 30% above minimum spends for those using UrVenue.
With the exception of walkups, hosts were responsible for a majority of table bookings, even leads would often be directly sent to hosts. Many guests would reserve at multiple clubs and decide at the last minute where to go. Too often, high revenue real estate was being blocked for customers who would never come. When Drai’s Rooftop was planning its opening, they wanted a new system to book tables requiring their guests to put money down upon reserving tables to better insure they would show up. In Vegas where there are so many great nightclubs and people easily change their mind on where to go, having some leverage ensuring reservations will show up is a real competitive advantage.
To devise an efficient system to take payments for tables, we had to take into account the following:
- Most ticketing companies had all tried selling tables as pre-paid packages with abject failure, selling only a few over the whole year.
- With full presales you are charging the full amount upfront, the liquor and possibly even the service. If the guest does not come, this guest can justifiably claim not to have been provided service or received the product purchased. As such, any dispute will be granted. If a customer knows he can not show up and be his charge cancelled, it lowers his incentive to stick to his plans?
- Dispute for fraud, specifically when the card holder claims another person used their card for purchase unknown to them. Preventing this requires the venue to check the credit card used to book and the identity of the guest in person match, and recording that proof.
- Customers who pre-purchase packages can go to the venue and not pay anything on location adding a barrier to upselling. It is important not to lower the upselling rate in exchange of pre-payments.
- Back then, LET tax was charged on table service some nights and not others depending on the performance. How do you charge for an item for a future date when you don’t know yet if there will be LET taxes? What do you do if you already charged the table and the event type changes?
- Some taxes such as the sales tax can be changed with very little notice. Since the revenue is recorded on the event date, what happens if you presell and the tax rate changes?
The answer to most of the questions above was to take a deposit of no more than 50% instead of a full prepay. The deposit would then be tendered towards the customers’ checks at the venue. A dispute would be hard to win for the guest because the deposit being kept for a ‘no show’ did not pay for a product that was not delivered; the deposit is to compensate for the financial loss resulting from holding valuable real estate for a customer.
We decided to list a spending minimum and to charge a deposit against it. It fulfilled both conditions of discouraging the guest for not coming as planned as well as well as promoting upselling as they still had to spend and provide final payment at the venues. With time, we discovered that a deposit between 20% and 30% was best to accomplish these goals. In terms of disputes, it resolves most of them except those related to actual fraud and the balance at the venue in cash. But even in the few cases of fraud (someone else used my card to pay for the deposit), with still 75% spent at the venue and a cost of goods around 10%, it is actually an acceptable rare reduction in revenue.
We needed a way to present the venue and the different table pricings easily. For that, we decided to go with a 3D cartoonish version of a venue map that would be fast to load over the internet while doing a good job at representing the venue itself. Finding and training 3D artists to respect our vision was challenging but we now have the capacity to develop three high quality 3D maps simultaneously in a matter of days.
If we started selling tables in quantity bypassing the hosts, it presented an issue to our customers. We are talking about their largest source of revenue, their most valuable real estate. Even if an unknown guest puts money towards a table through an automated system, it does not mean he should get it. The venue needs to be in full control of their floor, they cannot let even the most advanced algorithm manage it; a nightclub where some tables require $20,000 spend minimums cannot be managed like a restaurant.
To resolve this, we allowed booking a table section with the venue selecting a specific table later. We also allow customers the ability for the guest card to only be authorized and not charged, treating it like a request with money being held. The venue then needs to accept the booking and capture the transaction. Another advantage of this step in combination with a deposit is that the venue can contact the customer and upsell him, or move him to another section, without modifying the financial transaction; a deposit can be assigned towards a different minimum spend amount without redoing the transaction.
In the past, for a venue to take a credit card pre-payment the customer would involve an email or a fax to the venue with their credit card information. The problem is that this was not PCI compliant and in 2015 our casino clients were trying very hard to become PCI compliant. So we added to our system the ability to create a custom quote and send it to the customer where they would enter their credit for it to be authorized or charged. With everything tokenized, it was an elegant PCI compliant solution to take what we call “PreAuths”. Around this, we also built a system for hosts to create their own PreAuths which, once approved, are sent directly to their customers to for payment.The final remaining issue was how to tender the deposit and reconcile with the financial departments. We have to thank the finance departments of Caesars and Wynn for this because each have patiently spent an enormous amount of time with us on that topic, at times even suffering through its development. Thanks to their effort, we were able to not only sell table service, but basically anything a hotel would want to take a deposit under. We even improved the process of selling admission tickets.
Our system and tools for online sales with proper reporting and reconciliation have been an enormous success for our customers allowing UrVenue to help them once again increase their revenue where it matters most. With our large partners, we are adding more features and abilities to serve their needs and we will continue to lead the future in hospitality, for small and big venues alike.