Is it Really Surprising that Gambling Revenue Continues to Decline?
Michael James reviews what the latest Nevada Gambling Revenue numbers mean to him.
The latest numbers are in, and as has been the trend, gambling revenue is falling further down the list of all resort revenue.
You’ve probably heard various comments along the lines of “As gambling revenue declines, the resorts need to generate more room and food/beverage revenue” as rooms are remodeled, the newest celebrity chef restaurant is signed, or the nightclub gets its latest redesign.
You’ve also probably heard comments like “With video poker pay tables decimated, blackjack payback declining for low rollers and the craps odds bets capped at lower numbers, it’s like the casinos don’t want our play.”
I am curious “Which is it”?
But I also know that the answer is “Both.”
It is true that in these current days of having a casino every 50 miles (well, almost. Sorry Texas) one no longer has to travel to Nevada to cure the gambling jones. It is also true that Las Vegas is delivering room, restaurant and club product that has never been offered before. So to me, there is no surprise that gambling revenue is declining.
The problem that I’m having is that the answer just seems to depend on which mouthpiece is offering the explanation, and the result is that gambling is blamed for both cause AND effect.
First, let’s take a look at where our money is going…
In the first example, I have $100 a day to spend in Las Vegas. I walk in the door, flash my bankroll, and I am comped room and on-property dining. Because I like to be a tourist, I figure it will cost me $10 to eat somewhere else in the valley, and I plan $10 for my day’s activity (museum, show, attraction) etcetera. Now, that leaves me $80 a day to gamble with. The casino knew that the 80% of the money I brought with me was going to end up in their casino, and they were very happy.
Now, tastes in room product shift; gambling is more widespread; the Food Network taught us about indulging (with the unintended benefit of making their TV personalities into rock stars). Dancing and drinking to oontz-oontz enters the picture (I can’t call it music, sorry). Since this is clearly what the new Las Vegas visitor wants, the laws of Supply and Demand say that if the customer wants it, there will be a cost.
The value of money has increased 10-fold in this example (it makes this whole article MUCH easier for the arithmetically-challenged reader to absorb). But with the “new” Vegas, the rooms are no longer handed out, and with Resort Fees, safe fees, taxes, postage, COD and handling charges, $200 comes off the top for a place to shower and sleep. Although my dining where I am staying may get comped (likely on the back end) the current visitor really wants to get to the hottest new restaurant, and it costs more… not only in price but in the percentage of daily bankroll.
After dinner, the visitor wants to be entertained, and the Cirque de Soliel shows or the headliners at Caesars properties are more than happy to oblige, but for a cost that is a higher percentage of the “Good Old Days,” too.
Suddenly, though I have $500 per day to gamble with, it is only 50% of what I brought with me.
Summarizing, of course, the gambling revenue is shrinking, because as visitors, we are being offered so much more than in the “Good Old Days.” So why does the casino end of the business have to give the players the short-shrift? (Side note; I started developing this article before Sammasseur’s brilliant Vegas Bright article that posted on Tuesday, October 11. I swear!)
Because of the 10-fold increase in money value, instead of $80 re-rated to $800, the casinos are now only getting $500 of each visitor’s money. So one can see the desire to eviscerate video poker paytables, infect their casinos with 6:5 blackjack, and (sigh) begin reducing allowable odds bets in craps. However, as Ace Rothstein so brilliantly said in the movie Casino, “In the end, we get it all.”
If they get it all, can’t they let me keep it for a little while longer each day? Like, give me three hours of play for my $500 instead of 90 minutes?
The reality is, though, it won’t go backward. Balance sheets and departmental P/L statements are here for as long as we can see it. But, Dear Casinos, could you at least stop blowing smoke at us and acting so surprised that casino revenue is shrinking?
[Photos: Michael James, Cover: Kyle Kalbus and his pretty good flop]
Michael James is a true Vegas Nerd. First falling in love after hearing details of an aunt’s visit in the ’70s, and nurtured when the gambling bug hit as casinos started opening on every street corner across the country in the ’90s. When not reading Vegas blogs and message boards, he’s a metals buyer by day and a competitive bowler by night in Milwaukee.
11 thoughts on “Is it Really Surprising that Gambling Revenue Continues to Decline?”
Comments are closed.
They should restore the 3:2 payout on blackjack for low rollers, I am sure they would earn more profit in the long run due to the increased revenue. Make the rooms more affordable on the Strip; just cutting out the resort fee, which is almost a con trick, would make a difference. A few years back I saw Alice Cooper at the Palms on one night, and the next night Aerosmith at the MGM. Total cost of tickets for both gigs was around $130. That’s value! Not everyone wants or can afford $500 for a bottle of Vodka served at their table.
One thing to note:
The casino isn’t assuming that you’re parting with all $500. They can only assume you’ll part with a small margin of that, if it is, in fact, your gambling budget. If your game of choice is craps, say an average of a 2% house edge, their assumption is a $10 gross. Even if we were generous and went with the average hold % for craps at about 13%, their gross would be $65. Hardly enough of a margin to offer anything substantial to the player.
I agree that casinos are dwindling player offers, but it wouldn’t be smart for them to assume a 100% hold.
Mathematically I agree.
But casinos get it all. They do. Many, many players play until their money is gone.
I buy in for $200, and whether I play for one hour or four, unless I am on a hot streak or have other plans, I play until its gone. Doesn’t matter the theo or odds on that game. Most people don’t bankroll an individual session to withstand the variance, so once a bad streak hits, they play until its all gone.
This is why there is a boring sports bar where the Lions used to be, a revolving restaurant theme where the Paris fountain used to be, a CVS where there were once Pirates. Will we ever see the day where the Bellagio Conservatory is a Sugar Factory? Heaven help us I hope not…
You really have to normalize gaming win by adjusting for the vagaries of high end baccarat.
If you isolate down to Clark County, slots were up 2% and table games ex-baccarat were about flat.
No, the casinos do not get it all. If that was the case, then the hold % would 100 for all games all the time. The hold is exactly that, the % the casinos retain of the drop. Casinos can expect about 8%-20% of the drop, depending on the game.
You just stated, in your response ways in which the casino will not “win it all”:
“Unless I am on a hot streak or have other plans”.
Those “unlesses” are important. You’re right, many people play until their money is gone. Some, however, don’t or actually win. That’s how the hold % works. It’s the aggregate of all players, not just the losers. Casinos can’t count on all players losing 100% of the time, because it simply doesn’t happen.
So you’re saying Sam Rothstein is wrong? I am aghast :o)
Well, I lose 100% of the time. I bring down the average.
If you are gambling $500 a day and not getting free rooms, you are doing something wrong. My budget when I stay at the Wynn, you know that casino that this site’s podcast incorrectly says only has $5 a spin slot machines, my budget is $500 a day. I have yet to pay for a room there, or a resort fee. They usually throw in a couple of free buffets with that as well.
Hey Bert, c’mon don’t blame the podcast just blame me :) I have not seen any max bet spin at less than $5 at Wynn.