Case Bets: Net Bets, Harrah’s money grab & why China matters

Mark Juliano, CEO of Trump Entertainment Resorts, has been all over the papers lately. First, he came out in support of a massive taxpayer subsidy (backed by two unions) that would forgive Revel 75% of its room and sales taxes for two decades. Yes, 20 years. As outrageous as the request seems on its face, S&G has long been of the opinion that megaresort development in Atlantic City — the former gambling capital’s sole hope of future success — isn’t going to be accomplished without government subventions on a grand scale.

That tax break isn’t the only item on the industry’s wish list as a new gubernatorial administration ensconces itself in Trenton. A fixed tax rate is another wished-for bauble as are unspecified “reforms” of the Garden State’s regulatory framework (uh-oh). New Jersey has the best casino-regulation system in the U.S. You can’t get away with any crap there — like 86-ing advantage players. It would be nice if Gov. Christie resisted the temptation to rejigger the scales of justice.

Juliano is less enthused with a devil’s bargain that would allow racinos into New Jersey in return for casino-run intra-state Internet gambling. The latter is a desperation move which might, just might, stabilize Atlantic City’s casino industry, perhaps even pull it out of its dive. That reliable reverse barometer, Mayor Lorenzo Langford, is in the “for” column and if Langford favors something you can be certain that if it’s not an outright stinker of an idea it ought to at least be approached with caution.

One must balance the possibility that Internet gambling can be made to work (and not create issues with the feds) with the inevitability that racinos will amplify the giant sucking sound that is Atlantic City circa 2008-2010. William Marsh, president of the A.C. city council, is particularly on point when he raises the question of whether Net betting would actually put more bodies in the casinos. Or is Atlantic City’s casino industry so battered and cynical that it doesn’t care how the revenue arrives anymore?

To no one’s surprise, the endgame in Harrah’s Entertainment‘s sluggish negotiations with its dealers has been revealed. And, yes, Harrah’s is extending a grubby paw toward dealers’ tips. What’s more, if the Transport Workers Union is telling the truth, Harrah’s intends to renege on 401(k) matches and vacation days. That’d certainly be the kind of shabbiness S&G associates with the fiasco-prone leadership of CEO Gary Loveman, whose mistakes are amortized at players’ and employees’ expense.

In this instance, Loveman and Caesars Palace President Gary Selesner have played their cards very well. Harrah’s waterlogged financial condition puts the TWU in a poor bargaining position. Harrah’s need only go through the motions of negotiating in order to impose a contract upon the dealers. And if dealers don’t like it, they can either suck it up or strike … when Las Vegas is coming out of one of the lowest ebbs in its history. The odds of Caesars patrons honoring a picket line are closer to “none” than “slim,” and Selesner could have his pick of scabs, given the layoffs that have ravaged this town.

Harrah’s can show it has bargained with some degree of good faith: It took a proposal to change the 1 hour/20 minutes work-break ratio to 80/20 out of the discussion (even though it would have enabled Caesars to thin its dealer pool). However, the rationalization that robbing dealer Peter to pay pit boss Paul is a “cost-effective way to supplement employees’ earnings” is pure balderdash. It’s a means to give Paul a raise at Peter’s expense without Harrah’s being out one thin dime.

When a company is so hard up that it’s reduced to pitting its employees against one another in this fashion, maybe it’s time for a purge of the executive suite … unless Loveman and Selesner are willing to forfeit comparable amounts of their pay packets as a “cost effective way to supplement” those front-workers who are feeling the Great Recession the worst. But the Winter Olympics will likely be conducted in Hell before we see that kind of altruism at One Harrah’s Court.

During one of his frequent displays of ignorance, Nevada Gov. Jim Gibbons proclaimed it a waste of taxpayer money to market to China (potentially erasing one of the signature accomplishments of predecessor — and rival — Kenny Guinn). If Midnight Jim did his homework, he’d know that baccarat revenue is keeping the Strip afloat through some very tough times. What nation’s players are obsessed with baccarat? You guessed it … China.

Baccarat’s share of Strip action has grown and, as Liz Benston writes, “visitors from China probably make up fewer than 300,000 of Las Vegas’ annual visitor traffic of more than 30 million people,” citing MGM Mirage Chief Marketing Officer William Hornbuckle. “These visitors have to obtain travel visas from their government and those visas are hard to get. As a result, most of the tourists are members of China’s wealthy elite, and, Hornbuckle said, they have a significant effect on tourism disproportionate to their numbers.” [emphasis added] Casinos also get a bigger rake of the action here, since they don’t have to share it with VIP-junket impresarios, as is the case in Macao.

If I were Midnight Jim Gibbons and had a budget to balance, I’d be saying a little prayer of thanks for every Chinese “whale” who chose to bring his or her baccarat action to Nevada, especially when there’s so much casino action close to home. But that’s asking for a degree of perspicacity the Silver State’s sorry excuse for a chief executive has never shown.