I’m sure I speak for some of colleagues in the biz when I say that, on certain subjects, we feel like we’re writing the same story over and over again. (Which is provides yet another reason for our collective fascination with Steve Wynn: his unpredictability.) Case in point: the turbulent economic dynamics of the Las Vegas Strip.
Some casino potentates continue to push what I’d call the Volcano Insurance Theory, i.e., things are bad — ergo, they will surely soon improve. There’s no arguing with numbers, however, and the math says that “recovery” is a glass half-full/half-empty proposition. The prevalent dynamic is — and continues to be — a Nevada in which visitation continues to wax (up 4% in June and +2% for the year to date) and gambling revenue wanes (-7% in June). We can take the visitation uptick and a few other positive auguries (read on) and declare victory or keep chasing the chimera that was the mid-decade wealth bubble, in which case the data is bound to cause frustration.
We might also ponder whether the growing number of competing profit centers within any one casino — with room prices heading the list — is exacting an inevitable and worsening dilution upon gambling per se. Is Vegas’ future that of a resort city that happens to offer gambling? Discuss.
The more-visitors-but-less-gambling-revenue dynamic has become enough of a trend that one hopes the casino industry is adjusting to it as the new reality. However, the way that new resorts like CityCenter and Cosmopolitan are positioning themselves, the big companies appear to be marketing to the customers they wish they had instead of the ones who are actually coming. It was a very dubious proposition four years ago that there was a sufficient volume of high-end business to sustain all the new resorts on the drawing board. Today, it’s untenable. The expiry of some projects and the indefinite postponement of others (Echelon, Fontainebleau) has been a blessing in disguise … unless you’re in construction, that is.
A 2% increase in overall drop at Strip casinos at least provides a glimmer of hope. Vegas locals play ($172 million) was about average for 2010. Allowing for the fact that June tends to be one of the weakest months of the year, both the Strip’s $383 million and a statewide tally of $764 million were the lowest such numbers in the last 18 months.
ADRs inched up 6% in June, which compensates for the manner in which new inventory has negated increased tourist traffic. Conventions continue to be fewer in number but more robustly attended. But even in tough times, the Strip is the gambling destination of choice. Its June gambling-revenue decline of nearly 8% looks better when compared to the pallor of Downtown (-12%) and the Boulder Strip (-9%), and when anemic baccarat hold and crappy win (-61%) are factored into the equation. Take that out and you have a flat year-over-year comparison. Unlucky table play by the casinos neutralizd increased drop and slots are tight as ever — miraculously increasing win 1.5% on -3.5% coin-in and higher hold percentages. Still — and allowing for a pleasantly aberrant February — a series of positive year/year comparisons in table play provide a hopeful metric amidst the prevailing air of convalescence.
The amorphous “Balance of Clark County” (including Mesquite) has finally bottomed out and Lake Tahoe evidently has fallen as far as it can, rebounding with a 13.5% gain. The Station Casinos-managed Thunder Valley resort in California continues to bleed Reno (-8%), proving that there are some narratives that never change.
Is Vegas’ future that of a resort city that happens to offer gambling? Discuss.
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You hit the nail on the head. NOW… let me say that the gaming companies have completely blown it. People are writing me and complaining how tight slots are. Those in the know about 6-5 blackjack. (Those who aren’t in the know just KNOW that their money at blackjack vanishes more quickly).
So… gaming companies have shot themselves in the foot there. If you are offering the same crappy odds they can get at the Indian casino an hour from their home, no reason to gamble in Las Vegas.
That’s the major feedback I’m getting from real readers who vent. I’d imagine LVA gets much of the same. (I really don’t feel that those running resorts these days have a CLUE what the gamblers are really saying and thinking. They can’t… or things would be different).
I know long ago, we took the route that we were going to market everything but gaming. I wanted the upscale luxury visitor who may play here and there but really came for the shows, food, and shopping. Hindsight is 20/20 but a decade ago I realized that when you can gamble anywhere, keeping the stranglehold on gaming would be impossible.
But when you are rivaling the major cities of the world in dining, shows, and shopping… you can hang your hand (and fill your wallet) on that. At least I can. We’ll see how the Murren and Loveman react to the changing customer base.
I wonder if any of the new near-empty condominium projects are thinking of just renting out the vacant units on year-long leases, or even (gasp) monthly? That’s what some developers in California are doing – just to bring in income.
Just curious whether they’re getting that desperate for “warm bodies with checking accounts”.
Great points, and while I’m not one to typically whine about the gambling conditions of the strip, I think the fact that that visitation continues to hold steady/mildly increase with the customer spend continuing to hold firm/reduce it seems to be a perfect opportunity for casinos to shift their markerting tactics to gaming.
Once the revenues of a resort hit the magical 50/50 level. It’s interesting that we saw the proliferation of bad gambles. (i.e 6/5 blackjack) And while a bad bet at least Park Place put a marketing campaign around it. I have to believe one of the operators could utilize the fairly known bad gambling conditions on the strip to their benefit. That means some better pay tables, lower limits, better rules, reduced holds, or higher hit frequency, or a combination of all of them. The consumer is more aware of their disposable income and from a gambling perspective the casinos have done little to adjust to the current consumer mindset. They’ve reduced prices on their high end stuff and damn near every lounge and restaurant is offering some type of happy hour or reduced pricing time, but the average consumer is taking advantage of that and moving on to the next one when the hours are up.
Gambling is the one area where they have the opportunity to keep their patrons onsite and longer. The longer a consumer stays onsite has to correlate to their amount of spend for a property. All of the above changes, I’ve mentioned could be enacted without losing the house’s edge. While I know the vocal minority of hardcore gamblers feel like that there should be options to gamble with a house edge, I think there are far more customers that understand that a house edge is necessary, and that’s the tax for enjoying something like the strip. But when they repeatedly get bled quickly they are more then likely to get fed up and move on as their spend is exhausted.
I know many don’t realize the ills of 6/5 blackjack (although I’m a realist and while it’s a bad game for blackjack people, it’s a good bet for roulette people). But if 70% of today’s Vegas visitors do any kind of web research they are going to come across multiple posts on the negatives of strip gambling, even if they don’t understand the ‘why’ I have to believe they become more hesitant to gamble as much as they are already concerned they are being fleeced. Where’s the counter marketing for it. Gaming has become an afterthought to these corporations (not a surprise do to many head honchos not being gaming people). But even at 40 or 50% of revenue its extremely significant and poorly managed by these corporations.
It will be interesting to see what South Point does next and whether their numbers increase with some of the changes they’ve made. I don’t think the strip companies will pay it any attention though even if SP starts booming, after all it’s a locals place and the local operators tend to understand the issue better. But if I’m someone like the Trop or Cosmo I’d be looking for a way to differentiate my resort rather then mimic what the conglamorates are doing.
There was a time when both gambling and Vegas were novelties. Now with the prolifiration of gambling, both gambling and Vegas have become a “been there, done that” activity and destination. Many return visits were based on seeing the next new casino and seeing how over the top it was. That period is over and as you say, Vegas has become a resort city that happens to offer gambling.
I visited Vegas last week, during mid-week. Hotels and restaurants were more crowded than the previous summer, but the casinos were obviously less crowded. I have a poker playing strategy of waking up at my normal 5:30am to 6:00am time and playing against players who have stayed up all night drinking. My family stays at Mandalay Bay. On three of the five mornings there were no games going at either Mandalay Bay or Luxor! Also of note is the dropping of minimun limits on the crap tables. In previous years my brother and I had to hoof it to Hooters just to play 5 dollar craps, and sometimes even Hooters raised it to ten! Mandalay has 5 dollar craps until about 3 in the afternoon lately, and they even take my Players Club card and log in my small buy-ins.
I recently read this and I think it makes alot of sense:
Private employers aren’t hiring at a pace that will get millions of unempolyed back to work. The government put the number of unemployed in July at 14.6 million. Meanwhile, many working people aren’t making enough to pay all of their bills. And then there are those with jobs whlo are nervous and socking money away. This all adds up to weak consumer spending that can’t give the recovery much momentum.
Maybe 2011 will be better. Only Miss Cleo knows the future.
I agree completely with your assessment that City Center is marketing to a marketers fantasy customer, not real people. A great example is the print ads for City Center which have beem running in mags like the New Yorker and Vanity Fair. Let’s face it: Vegas isn’t Bermuda or Monaco but the ads (which don’t mention or picture gambling) portray City Center as a pretentious Switzerland with lots of pools and good weather. Cosmo. so far, looks to be upscale without being quite so uptight. After a visit to City Center last month I thought it had everything except the fun factor. Its got style, maybe too much, it needs smiles and those are few & far between.
To me, this article hints at the kind of visitor Vegas is attracting. Let’s say you have a couple in the midwest and one is into gambling. They can now go to their local Indian casino or slot parlor all year long and not have to take their vacation to Vegas just to gamble. They go somewhere else, while younger singles and couples go to Vegas for the pools and nightlife, not the gambling…
At the risk of sounding like a heretic, is there really middle ground to be had on the gambling front? Would people who read this site religiously really be happy if every casino on the strip offered the best blackjack rules on the planet but at the cost of having continuous shuffling machines at every table? How about if they adjusted the payouts to every video poker machine to a range between 99% and 98$, but adjusted the point formulas accordingly in regards to players clubs? Or what about changing every roulette table to single zero, but increased the play requirements for comps while playing?
I think if folks seriously wanted to market gambling to tourists, these would be good options, but I am not sure that it would make the hardcore folks very happy.
Benniefly, I think you make a good point, the hardcore gambler isn’t happy now and I wouldn’t expect them to be happy with changes the corporations would make. (Not that I expect the corps. to cater to their requests anyway). But I do believe there is a prevailing feeling that Las Vegas doesn’t offer the gamble it used to. Let’s say for a second the average tourist isn’t aware at all of the discussions of the hardcore player. (fairly reasonable assumption) The average tourist is more likely though to believe that the casinos can change their payouts on a whim or tighten the machines to their liking, and with the coverage in the national media of how hard Vegas has been hit after the boom, I don’t think it’s a reach to believe that there are those that think Las Vegas is going to arbitrarily tighten up their gambling to pay the bills.
I’m not sure what the answer is, but some decent PR and some rules adjustments would assist this I think. There would still be diehards that moan over no games being 102% return, but I think a fair amount of the ‘hardcore’ demographic is realistic when it comes to Las Vegas and some positive changes would yield them some decent word of mouth too. With as much information as their is on the web, Las Vegas has sort of been hit by a double edged sword when they stopped martketing gaming, and the focus of news and advertisement exploded online, because the hardcore have been putting out a marketing message that’s extremely unflattering to their product and they’ve basically neglected that whole segment of their revenue stream.
Already happening Bennie. Just go to Red Rock or Green Valley. They have full-pay Video Poker machines that give you way less points. I love to play them. I don’t need no stinking Snuggie or waffle iron, I want to win cash. I go to Vegas about three times a year, so it would take me a few years to get a comped latte anyway.
Vegas lost touch with reality about 3-5 years ago at the height of the boom. As a periodic visitor that used to look forward to Vegas, the emphasis on excess and obscene prices for everything had me about ready to stop going. Then the crash happened and room rates came down and for the same budget, I could stay at hotels that I could only come in and gawk at during the boom times on about the same budget. For awhile, that was enough to keep me coming back. However, the neglect of the gambling end of the business is coming home to roost. I feel I am winning less money and getting less time gambling for the same bankroll. Some increase in comps (especially room rates) is not enough to make up the difference. Add to the fact that is is a HASSLE of majot proportions getting into and out of Vegas and the misery of flying in general coupled with the long flight times from the mid-west and east coast and you’ve got the reason Vegas is in trouble. Why should I spend 8 hours (3 hour flight, connection, then another three hour flight), then a half hour wait for my bags at the zoo of an airport, then another cattle car shuffle onto the bus to the rental center and a mile walk to a rental car when I can hop on a 90 minute direct flight into a tiny airport and walk to my rental car in 5 minutes in a place like Biloxi? My odds are the same there. The perks are better and not one hotel in Biloxi has the stones to think that a $20 “resort fee” is somehow a good business decision. I am not a person who needs high end retail shopping and sorry – seen one Cirque show, you’ve seen them all. Vegas has nothing to offer that can’t be found elsewhere and the sheer scale of the place is not enough to overcome the downsides. Now add in all the cuts to customer service and just lack of maintenance in general (Harrah’s properties have gone so far downhill that it should be a crime) – it just isn’t worth coming any more. What would change my mind is better gaming. Vegas needs to get on board with this ASAP. Ask M Resort – they have gotten it down. The last time we came to Vegas, we stayed in a high end FREE room on the strip and gambled almost exclusively at locals casinos. That is pretty much the only way I’ll come anymore. When the nice free room offers stop coming, I don’t believe there will be any reason for me to spend my money in Vegas as opposed to elsewhere.