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Question of the Day - 05 October 2013

Q:
A year or so ago, you reported that for the first time in history, casinos took in more revenue from non-casino sources than from gambling. I just read a report by the American Gaming Association (AGA) that states that ‘more than two-thirds of industry revenue is generated on the casino floor, while the remaining third is generated via the food and beverage, hotel and other lines of business within the commercial casino properties.’ So which is correct? I know that you can make statistics say anything you want, but am I interpreting these two statements wrong?
A:

It undoubtedly varies widely from market to market. Las Vegas’ casino industry has become so diversified that it would fit the ‘one-third’ profile. However, many casinos in the U.S. still have relatively minimal amenities. It is impossible to generalize even within Las Vegas, in fact. According to UNLV’s Center for Gaming Research, gambling revenue represents "slightly over 36%." Downtown, however, "Gaming still produces a majority of revenue … but rooms have increased their share by nearly five times." And out on the Boulder Strip, "other departments still largely exist to enhance slot revenues." Statewide, there is no dramatic spike to which one can point: Rooms, food and "other" keep growing incrementally, chipping away at gaming’s dominance, which fell from 62% in fiscal year 1984 to 45% in 2012.

On the Strip, gambling hasn’t constituted the majority of casino revenue since fiscal year 1998. But while spending on gambling and rooms retrenched during the Great Recession, food and drink, and "other" (read: entertainment) have largely filled the void. Downtown, the latest available data shows gambling representing 54% of spending, followed by rooms (16%), food (15%), drink (8%) and "other" (6%). It’s even more lopsided on the Boulder Strip, where gambling was 70% of FY12 revenue, with food (13%), "other" (6%), rooms (6%), and drink (5%) following at a considerable distance. Gambling was seen to be losing its supremacy in Reno, however, slipping to 50.5% of total revenue.

We tracked down AGA Vice President of Communications Holly Wetzel, to get her perspective. She says that the numbers cited by the AGA apply to the U.S. as a whole and that the less-than-50% ratio is valid only for Las Vegas, with its increasing emphasis upon amenities like nightclubs, fine dining, and big-ticket shows. "It’s definitely skewed toward the rest of the country," she says of the AGA-cited figure. The amenity-driven trend is emerging in other parts of the country, "but it’s not as skewed as it is in Vegas."

The quote you cited comes from the preamble to an AGA report entitled, "Beyond the Casino Floor: Economic Impacts of the Commercial Casino Industry." According to the report, in 2010 casinos grossed $49.7 billion nationwide, of which $34.6 billion came straight off the casino floor. Food and beverage was a distant second, at $6.5 billion. "Spending by the commercial casino industry flowing through the economy is roughly equivalent to $1 in every $115 in the U.S. economy or nearly 1 percent of the … U.S. Gross Domestic Product," the report continued.

At a 9% growth rate, casino spending is outstripping the economy as a whole and consumer recreational spending (6% on average). In 2009, gambling dwarfed the amounts spent by Americans on package tours, photographic goods, and even on pets. In non-tribal casinos, gambling revenues represent 69% of the revenue pie, followed by dining and drinking (13%), hotel rooms (10%), and the ubiquitous "other" (7%). Were tribal numbers to be included, the percentages would probably skew even more heavily toward the casino floor – after all, so-called "regional" casinos derive as much as 80% percent of their income from gambling and most tribal casinos would fit the "regional" profile.

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