Estimating the effect of racino restaurant sales on slot wagering volume

Abstract

Purpose

The purpose of this paper is to estimate the effects of onsite restaurant business volume on slot machine gaming volume at a Midwestern racino property. The results provide management with critical estimates for use in determining the overall value of the restaurant space. Additionally, operators are able to examine whether it makes sense to operate restaurants at a loss, based on the notion that the dining outlets are contributing to gaming volumes.

Design/methodology/approach

Time series multiple regression analysis is used to analyze daily performance data, providing an estimate of the change in the dollar amount of slot wagers resulting from a one‐unit increase in the dollar value of restaurant sales.

Findings

The theoretical model advanced herein explained 81 percent of the variation in the aggregate, daily dollar value of slot wagers. A one‐dollar increase in the variable representing overall restaurant sales produced a $91 increase in slot wagers (or $7.44 in slot win).

Research limitations/implications

Regression analysis does not prove cause and effect. The result was produced from a single data set. Operators are encouraged to examine their own data via the method and model advanced herein.

Practical implications

The results provide management an opportunity to examine whether the slot win associated with the restaurant operations exceeds the operating losses incurred by the restaurants, and, if so, by how much.

Originality/value

This is the first study to examine empirically the relationship between restaurant and gaming business volumes at a racino. Specifically, no published study includes statistically derived estimates of the impact of changes in on‐site restaurant volume on a racino's slot wagering volume.

Citation

Kalargyrou, V., Singh, A.K. and Lucas, A.F. (2012), "Estimating the effect of racino restaurant sales on slot wagering volume", International Journal of Contemporary Hospitality Management, Vol. 24 No. 7, pp. 1088-1099. https://doi.org/10.1108/09596111211258937