Retail

Here’s Why Coffee Costs So Much At Vegas Casinos

casino slot machine

Welcome to Las Vegas — pay up! (And at the airport, too.)

No, we are not talking about gambling, or the high prices of those snazzy shows that pretty much everyone seems to love. We are talking about the little things, the coffee and breakfast sandwiches, the midday muffin snacks, the late afternoon caffeine refresh — all those little times that seem to be twice as pricey inside a casino than elsewhere in that desert destination.

Exclusive field research by PYMNTS earlier this week — during a business trip out there — confirmed the pain that has been experienced by so many travelers, whether on expense accounts or not. A certain PYMNTS luminary usually sticks with a simple plan for breakfast: Sausage egg and cheddar, no meat or cheese, and a grande blonde coffee. The typical Las Vegas, non-casino price was $6.31. But inside a casino, the cost was more than double, at $13.61. The server shrugged it off, saying that’s just how it goes.

Captive Audience

Indeed, that is how it goes — that’s how merchants benefit from having a captive audience, whether gamblers on a run, or hurried conference goers and business people racing from session to session, meeting to meeting, with little or no time to seek out lower prices for their daily consumer needs. Even as some Las Vegas casino operations face revenue and growth challenges, there is no indication that such prices — a product of supply and demand when it comes down to it — will come down in any significant manner.

The high pricing is most apparent as Las Vegas megaresorts, according to some observers.

“First and perhaps most obvious, the megaresorts charge more than double in some cases simply because they can,” reads one account of the landscape, from Las Vegas Advisor. “They have something of a captive audience; many if not most hotel guests prefer not to have to schlep through the casino and parking garage, get in the car, and drive to another restaurant, if they even know of one, just to save a few bucks. They can also charge meals to their room, which is a convenience that lets them pay one price for their entire stay.”

Other Factors

But that’s not all. The gambling economy and ecosystem also play a role — as does the psychology of gambling.

As the account in the Las Vegas Advisor described — one also confirmed by other sources — comps serve to drive up those prices. “The higher the food charges in the coffee shop (and all the other hotel-casino restaurants), the more gamblers can feel like they’re getting extra for their action when they’re comped,” the report continues. “Of course, food is a soft comp, not a hard comp like airfare reimbursement or a rebate on losses. The casino isn’t actually shelling out anywhere near the, say, $50 in a breakfast comp for two that the gambler and his wife think they’re getting. So it works doubly in their favor to jack up the restaurant-food prices.”

Think subsidies and how they can drive up prices for others. “The couple paying cold cash for that same breakfast for two is subsidizing the gamblers’ comped meal via the high prices,” the report said, adding its informed speculation. “We don’t know this for sure, but $18 omelets in the coffee shops might also subsidize the six-figure licensing contracts, multi-million-dollar build-outs, big-money development fees, and $1-per-year rents commanded by celebrity chefs up and down the Strip.”

Airport Commerce

It’s not only casinos where seemingly inexpensive items take on what can seem like luxury pricing. Who among us doesn’t know the pain of paying too much for coffee and food inside airports? Yes, the concept of a captive audience also plays a role there, and so does the fact that travelers are prohibited from bringing many items through security checkpoints.

But there’s another force at play, according to Flyertalk.com.

“Although it may seem like you’re paying a 300 percent markup for items just because they’re at the airport, it’s actually because the airport has significantly higher operating costs than anywhere else,” it said. “Products at airport stores are shipped in small quantities, delivered at off hours and go through several security screenings throughout the process. Furthermore, airport rent costs more and off-airport warehouses are needed to store items due to limited storage space on site. And most retailers also pay for employee parking and security screening. So you can see how things begin to add up.”

None of this is meant to excuse hefty markups on prices for coffee and basic food. But the next time you pay way too much for caffeine at a casino or airport, consider the factors that go into it.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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