David G. Schwartz
July 6th, 2010 at 1:57:59 PM
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David Schwartz makes one of the main points that I have been making!
Gaming demand's down, do we need new marketing?
April revenue results for Nevada's casinos contained a not-unexpected surprise. The hands of fate, in the form of a lower-than-usual baccarat hold percentage, finally caught up with the state, proving that an overreliance on high-end gamblers is at best a stopgap strategy and no formula for growth.
This April, players bet about $693 million on baccarat. This was enough to make it the biggest April in Nevada baccarat history, with nearly 30 percent more money played than in April 2009, which was a similar advance over April 2008.
The problem is that the casinos only kept about 8.5 percent of the handle. In a month with a statistically average hold percentage, they would have kept 11.5 percent.
This has real implications: If the cards had fallen the way that they'd been falling, baccarat would have powered the state's casinos to a $30 million or so increase over April 2009's totals; someone would be talking about green shoots (again).
Instead, Nevada got a small but perceptible decline in revenues that at the very least delayed any talk of recovery.
That's the problem when such a high-volatility game accounts for more than 30 percent of the total table game volume -- the overall revenue stream is much less predictable. This is really a big shift. As recently as 2004, baccarat claimed less than half that share of table revenues.
The drop in baccarat hold percentage might actually be welcome, since it reminds us that things really aren't looking so good for Nevada casinos.
Slot handle, a much better indicator of the overall popularity of gambling, continues to fall; statewide, it dropped to 2003 levels in April. Without the bump provided by baccarat, statewide table handle would have fallen, too.
Consumer demand for gambling is falling.
Further, although the Strip has been a bright spot for the state, that's only by comparison. The slot and table handle patterns are the same as statewide. Though big baccarat play has made the Strip look as if its gaming revenue is growing, it's not.
Four months in, it's apparent that CityCenter has not given the Strip the boost that some observers were expecting. A 5 percent increase in the Strip's room inventory just shouldn't translate a 4 percent decline in slot handle. The total number of slots on the Strip has risen, so if "same slots sales" were even treading water, we'd see an increase. Instead, there's a decline, so any new business CityCenter is bringing in isn't even covering the increase in supply.
Clearly, it will take more than a few dozen high-rolling baccarat players or even a new Strip resort to turn around the fortunes of Nevada's gaming industry. Without a broad-based upswing in gambling at slot machines, it just won't happen.
That's easier said than done, of course. If the underlying problem is really that there's just less discretionary income to go around, there's not much anyone can do about it. But if the problem is instead one of marketing -- particularly in promoting the value, real and perceived, of a Las Vegas vacation -- then there's plenty that can be done.
Without convincing more people that they can get value for their gambling and vacation dollar in Las Vegas, it's unlikely that we'll see much of a recovery anytime soon.
David G. Schwartz is director of the Center for Gaming Research at the University of Nevada, Las Vegas. His latest book is "Roll the Bones: The History of Gambling."
Las Vegas Business Press
Gaming demand's down, do we need new marketing?
April revenue results for Nevada's casinos contained a not-unexpected surprise. The hands of fate, in the form of a lower-than-usual baccarat hold percentage, finally caught up with the state, proving that an overreliance on high-end gamblers is at best a stopgap strategy and no formula for growth.
This April, players bet about $693 million on baccarat. This was enough to make it the biggest April in Nevada baccarat history, with nearly 30 percent more money played than in April 2009, which was a similar advance over April 2008.
The problem is that the casinos only kept about 8.5 percent of the handle. In a month with a statistically average hold percentage, they would have kept 11.5 percent.
This has real implications: If the cards had fallen the way that they'd been falling, baccarat would have powered the state's casinos to a $30 million or so increase over April 2009's totals; someone would be talking about green shoots (again).
Instead, Nevada got a small but perceptible decline in revenues that at the very least delayed any talk of recovery.
That's the problem when such a high-volatility game accounts for more than 30 percent of the total table game volume -- the overall revenue stream is much less predictable. This is really a big shift. As recently as 2004, baccarat claimed less than half that share of table revenues.
The drop in baccarat hold percentage might actually be welcome, since it reminds us that things really aren't looking so good for Nevada casinos.
Slot handle, a much better indicator of the overall popularity of gambling, continues to fall; statewide, it dropped to 2003 levels in April. Without the bump provided by baccarat, statewide table handle would have fallen, too.
Consumer demand for gambling is falling.
Further, although the Strip has been a bright spot for the state, that's only by comparison. The slot and table handle patterns are the same as statewide. Though big baccarat play has made the Strip look as if its gaming revenue is growing, it's not.
Four months in, it's apparent that CityCenter has not given the Strip the boost that some observers were expecting. A 5 percent increase in the Strip's room inventory just shouldn't translate a 4 percent decline in slot handle. The total number of slots on the Strip has risen, so if "same slots sales" were even treading water, we'd see an increase. Instead, there's a decline, so any new business CityCenter is bringing in isn't even covering the increase in supply.
Clearly, it will take more than a few dozen high-rolling baccarat players or even a new Strip resort to turn around the fortunes of Nevada's gaming industry. Without a broad-based upswing in gambling at slot machines, it just won't happen.
That's easier said than done, of course. If the underlying problem is really that there's just less discretionary income to go around, there's not much anyone can do about it. But if the problem is instead one of marketing -- particularly in promoting the value, real and perceived, of a Las Vegas vacation -- then there's plenty that can be done.
Without convincing more people that they can get value for their gambling and vacation dollar in Las Vegas, it's unlikely that we'll see much of a recovery anytime soon.
David G. Schwartz is director of the Center for Gaming Research at the University of Nevada, Las Vegas. His latest book is "Roll the Bones: The History of Gambling."
Las Vegas Business Press
July 7th, 2010 at 6:52:31 AM
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And you didn't need a PhD or Ivy League education to figure that out!
(Apologies if you do have a Phd or Ivy League education).
(Apologies if you do have a Phd or Ivy League education).
"Dice, verily, are armed with goads and driving-hooks, deceiving and tormenting, causing grievous woe." -Rig Veda 10.34.4
