April 2010 results
As we know the last quarter was the first quarter in the last 10 quarters that gaming revenue went up (by 9.77%). As usual baccarat led the way with all other sources dropping (but much less of a drop than in the last 2 years).
Vegas Sands and Vegas Wynn Resorts had casino revenue go up by over $25m apiece, but every casino of MGM MIRAGE on the strip (except Monte Carlo) lost revenue. Monte Carlo was largely recovering from their fire. It just goes to show that the non-gaming revenue is still dominating.
If baccarat drops in April it may mean that the Wynn Macau Encore and the Sands Singapore are siphoning off the baccarat revenue. It would be very bad for Vegas if the only game that is going up would start losing out to the same two companies but their overseas locations.
| Game | 1Q 2009 | 1Q 2010 | Difference | Change |
|---|---|---|---|---|
| Total | $1,393,912 | $1,530,091 | $136,179 | 9.77% |
| Baccarat | $186,233 | $365,296 | $179,063 | 96.15% |
| Slots | $735,539 | $703,211 | $(32,328) | -4.40% |
| Other Table Games | $451,294 | $441,977 | $(9,317) | -2.06% |
| Poker | $20,846 | $19,607 | $(1,239) | -5.94% |
Extra inventory is always good for the consumer.
| Year | Air Psgrs | Visitors | Delegates | Rooms | Occup |
|---|---|---|---|---|---|
| 2000 | 36,865,866 | 35,849,691 | 10.75% | 124,270 | 89.10% |
| 2001 | 35,179,960 | 35,017,317 | 14.32% | 126,610 | 84.70% |
| 2002 | 35,009,011 | 35,071,504 | 14.56% | 126,787 | 84.00% |
| 2003 | 36,265,932 | 35,540,126 | 15.92% | 130,482 | 85.00% |
| 2004 | 41,441,531 | 37,388,781 | 15.31% | 131,503 | 88.60% |
| 2005 | 44,267,370 | 38,566,717 | 15.99% | 133,186 | 89.20% |
| 2006 | 46,304,376 | 38,914,889 | 16.21% | 132,605 | 89.70% |
| 2007 | 47,729,527 | 39,196,761 | 15.84% | 132,947 | 90.40% |
| 2008 | 44,074,642 | 37,481,552 | 15.74% | 140,529 | 86.00% |
| 2009 | 40,469,012 | 36,351,469 | 12.36% | 148,941 | 81.50% |
The USAirways loss was the bulk of the lost passengers into McCarran. Visitors are back at the 2003-2004 level and the drop in convention business is profound. Massive room discounts to even get this many visitors.
Air passengers and visitors are back to 2003 and 2--4 levels. Convention delegate percentages, and occupancy levels are even further back in time. Only inventory is at record levels.
The last time occupancy was lower than 2009 was in 1991 when it was 80.3%.
Quote: bluefireIs there any place to get historical data on room prices? It'd be interesting to compare current occupancy rates to inflation-controlled pricing of rooms, to see if they are comparable. I wonder if the current companies are doing more or less in the way of room rates to try to attract occupants.
A rough average daily rate back to 2002 is at the convention center website . There is more detailed information by geographic sector on the gaming commission website under "abstracts
that goes back to 1991, but they make it very difficult to extract as it is all in 1200 page .pdf files.
I did this graph to look at what happened downtown. In Fiscal year 2006 the room rates and the shortage was so bad on the strip that downtown was able to boost their room rates. People who spend an extra $20 on rooms, also spend an extra $10 on stuff from the casino store (booze, snacks, etc.). After so many years of no growth where profits are only increased by cost-cutting, all the extra revenue in FY2006 meant record profits for downtown. Even though the dollar amounts were relatively low compared to the strip, the Golden Nugget upgraded, and some buildings were built, and there was hope of a downtown renaissance.
Room rates are in dollars per rented room (not available rooms).
Quote: likeplayingcrapsandbjA pit boss commented to me that baccarat keeps the place alive. The casinos are chasing the asian players. On hotel occupancy, I am getting totally comped offers everyday from most hotels in Vegas. Reno is coming on extremly strong with quite generous offers to visit.
Baccarat has been the saving grace for the Vegas Strip in the last 11 months. If it goes up in April it will be the 12th straight month.
But Reno is competing (and losing) with the Sacramento Indian casinos. They have the advantage of being newer, and they have the advantage of geography. They are a 100 miles of what can be very tough driving through the mountains. If you live in the San Francisco suburbs it is still a reasonable day trip to the Sacramento Indian casios.
Baccarat is competing globally. The newest Wynn Encore resort in Macau just opened, and the mega Sands resort in Singapore opened in the last part of April. If baccarat players were saving for the grand opening it may show up in Vegas numbers. When ARIA opened the baccarat players swarmed on the place for the first few weeks. ARIA was making a million dollars a week for each of it's two dozen baccarat players. It seemed like the place was a success, but then the first quarter earnings report came out and it was a disaster for ARIA.
Singapore has the advantage of geography, it is within 3-6 hours of most major cities in Asia. It also is visually stunning (blows ARIA out of the water). To top it off, the tax rate is relatively low, killing the big advantage that Vegas had in getting the casinos to fly the high rollers to Nevada. Now they just have to get them to Singapore.
You can literally send dozens corporate aircraft to Hong Kong from Singapore for the same price as a mega jet to fly them to Las Vegas. At three hours of flying time it's a commitment of only a few days to go away there.
Quote: Wall Street Journal
Sep 7, 2001
LAS VEGAS -- Casinos covet Larry Flynt. His baccarat and blackjack bets of $45,000 or so a minute make him one of Las Vegas's best customers. So the publisher of Hustler magazine says he gets an incentive that casinos would like to keep secret: a rebate of at least 20% of his losses.
"I've been offered as much as 25%," Mr. Flynt says. "I can get a deal anywhere. They'll do anything."
Therein lies a dilemma for casinos: They need gamblers like Mr. Flynt more than ever these days, yet such players are harder than ever to find. And in order to reel in these elusive customers, known in the industry as "whales," casinos sometimes risk giving away the house.
Baccarat, a relatively simple 15th-century card game, was once a favorite of French kings. Nowadays it's a pastime of international titans, whose identities casinos shield closely and whose presence means fat potential profits. Baccarat bets are routinely casinos' biggest, with wagers reaching well into the six figures. On a gambling spree that became international news, Australian media magnate Kerry Packer lost a reported $20 million a year ago during a single visit to the Bellagio casino here.
In recent years, almost every casino that has opened in Las Vegas has introduced a high-limit salon, banking on baccarat to support the casinos' extraordinary cost. "It's very difficult, when you've got a $1 billion building, to make a living on slot machines," says Glenn Schaeffer, president and chief financial officer of Mandalay Resort Group, which owns the $1.1 billion Mandalay Bay.
But the slowing world economy isn't producing more whales, and the baccarat business isn't growing. Of $4.4 billion in total winnings last year, Las Vegas Strip casinos won $536 million at baccarat, down from a high of $595 million in 1995, according to Nevada gambling regulators.
As a result, casinos are competing hard over a dwindling resource. They are showering baccarat moguls with ever-more palatial suites, cash, free chips and even rebates on their losses. "It's been a player's market," Mr. Schaeffer says. But since discounts and other financial incentives affect the math behind baccarat, several industry veterans say the odds are turning in favor of some top gamblers.
Jim Kilby, a former casino executive who has built a consulting career helping fine-tune casinos' odds, recently chastised executives for their high-stakes efforts. "If Bugsy Siegel were alive today," he told them at an industry forum last winter, "he'd have you whacked."
In the baccarat salons of Las Vegas, the clanging of slot machines is replaced by the murmurs of gamblers and the casino staff who outnumber them. Dealers are tuxedoed and butler-polite. Baccarat players are notoriously superstitious -- ritualistically kissing, twisting and blowing on their cards for luck. The game works like this: A dealer distributes hands of two to three cards to a gambler who sits at a shallow horseshoe-shaped table. Then the value of each hand is totaled. Tens and face cards are worth zero. Gamblers bet simply on the luck of the draw -- on whether the "banker" or the "player" will have the hand totaling closest to nine.
A single baccarat player can turn a casino's sorry fiscal quarter into a celebration in a matter of hours. But when luck runs against a house, losses can reverberate on Wall Street.
Such casino losses have been more frequent these days. Las Vegas casinos don't divulge many financial details for baccarat, so it's difficult to tell exactly how profitable the game is. But Harrah's, MGM Mirage and the Venetian have all acknowledged feeling the heat of major baccarat losses in recent times.
Gary Loveman, president of Harrah's Entertainment Corp. in Las Vegas, has felt the effects of baccarat losses. He says that's because rivalry is causing casinos to act rashly. "Once you start discounting, you're on a slippery slope to giving away the casino's advantage," he says. "We would argue that at times, our competitors have given more than the house advantage away."
Despite the huge bets, the house edge at baccarat is one of the thinnest in a casino, averaging about 1.3% -- as little as half that of games such as roulette and some slots. In baccarat, it takes at least 15 million hands for a casino to have a 95% certainty of winning that 1.3%.
Andrew MacDonald, chief executive of gambling operations for Australia's Publishing & Broadcasting Ltd. empire, argues that casinos sometimes blame losses on bad luck when they've actually failed to properly factor in the cost of incentives.
Discounting may also contribute to another unsettling trend. Big gamblers are spending less time than ever at the tables. One Las Vegas casino, which declines to be named, estimates the average baccarat player last year gambled for a mere nine hours -- down from 17 hours in 1997. Mr. Kilby says he noticed the downturn when working recently as head of international marketing at the Rio. Discounts encouraged gamblers to hop from casino to casino, he says.
Mr. Kilby says he asked a Rio player with a 20% discount last year why he was leaving after quickly winning $100,000. According to Mr. Kilby, the player calculated correctly that he'd be better off losing at another casino than doing so at the Rio -- where his win could have offset his loss, negating the discount.
Harrah's in June decided that its slot-machine players were subsidizing high rollers at the Rio, Mr. Loveman says. When high rollers won enough to dent Harrah's second-quarter earnings by 10%, or four cents a share, Harrah's began shutting down marketing offices around the world and cut its maximum acceptable wagers to $15,000 from $100,000. That put the Rio effectively out of the baccarat game. "We've become the reverse Robin Hood of the casino world," griped Mr. Loveman at the time. "Take from the poor and give to the rich. It's a stupid way to run a business."
Not all casinos in Las Vegas concede it's a problem. Officials at MGM Mirage, which dominates Las Vegas baccarat with its Bellagio, MGM Grand and Mirage properties, say they're resisting the urge to ratchet up the rebates. Executives at the Venetian, a major incentive-giver in Las Vegas, didn't respond to several requests for comment.
Gamblers at the Helm
Still, casino bosses aren't always as mathematically savvy as they seem. Many make gut-level decisions based more on emotion and tradition than arithmetic. Mr. Kilby says he has witnessed executives giving a night off to dealers who seem unlucky or reducing the betting limit of a gambler on a winning streak -- decisions that defy the statistical probabilities on which casinos make money. The author of the industry's standard textbook on casino management, Mr. Kilby says casinos are regularly seduced by their own game. Executives are often onetime gamblers or dealers and tend to think like their customers rather than like financial-services companies.
"You hear people saying things like, 'Let's take a shot' or 'We can beat him,'" he says. "You'd never hear Allstate or State Farm saying that."
Casinos also hide -- even from many of their own employees -- details of incentive deals. The arrival of a big gambler is likely to be shrouded in subterfuge. The MGM Grand built a separate walled entrance for the limos of these high rollers in large part to prevent rival operators from knowing their comings and goings.
Many baccarat players are wealthy foreigners who come to the U.S. to avoid publicity at home, where gambling may be illegal or frowned upon. "The customers don't want to see their names thrown around," says Jim Murren, MGM Mirage's president and chief financial officer.
Australia's Mr. Packer, a casino owner himself, is widely believed to be the world's highest roller. His sprees in Las Vegas drip with drama. On April 30, 1992, the billionaire strode into Caesars Palace and began placing mortgage-sized bets. By midnight, when the books closed on Caesars World Inc.'s fiscal quarter, he was up $9 million -- with a pile of chips worth roughly 37 cents a share to the company. It halved the quarter's earnings. Mr. Packer "single-handedly, by himself demolished that quarter," recalls Henry Gluck, then Caesars' chairman.
A few days after the incident, the company issued a terse profit warning, blaming a downturn at its casinos in Las Vegas and Lake Tahoe. Fortunately for Caesars, though, Mr. Packer stuck around that night. In the hours after midnight, he gave back everything and more -- earnings that Caesars reported in the following quarter.
Megagamblers may pose too large a threat to a casino. The MGM Grand sent an emissary several years ago to tell Mr. Packer his bets could no longer be accommodated -- and he hasn't gambled there since, according to people familiar with his visits. When the company last year bought Mirage Resorts Inc., Mr. Packer called to ask if he would still be welcome at Mirage's Bellagio casino. He is. Mr. Packer declined an interview request.
Still, hooking whales is one of the most attractive, and highest stakes, jobs in the casino world. It requires living something of the life of a high roller -- entertaining at lavish parties, sitting ringside at boxing matches, even touring the world to visit customers.
MGM Mirage Chairman Terry Lanni is one of his company's most potent marketing weapons, based on his longstanding friendships with gamblers that go back decades to his early career running Caesars Palace. Mr. Lanni, who recently toured Asia visiting customers on their own turf, may approve big players' credit limits and agree to other details of their stays.
Below the top brass, teams of sales people called hosts attend to player whims, shopping for birthday gifts and catering to other needs as well as luring gamblers from competitors. Another host duty is to put rivals off the scent of who's playing and how much. "We love to spread misinformation with our competitors," MGM Mirage's Mr. Murren says.
Casinos also put local hosts in offices around the world. From this vantage point, Las Vegas often sees the cutting edge of international trends. Casino executives joke they can read the world economy through baccarat: Mexican, Japanese and Indonesian players have all come and gone according to their nations' financial fortunes. The industrial reaches of China are hot these days. Gritty cities such as Chengdu, where MGM Mirage recently opened an office, are producing wealthy entrepreneurs who are eager to gamble.
Dining on Caviar
In Las Vegas, high rollers wager among authentic Picasso paintings, dine on caviar, and tee off at the likes of MGM Mirage's Shadow Creek, a $40 million golf course lushly stocked with 30,000 trees and roughly 40 species of exotic birds. MGM Mirage aims to get four trips a year from its top players, scheduling golf tournaments and other events to attract them.
Almost anything goes. A 73-year-old Texas banker who frequents several Las Vegas casinos routinely demands a setup in his suite that costs as much as $20,000, according to one Las Vegas casino host. A recent request of the banker's included two Mont Blanc pens, monogrammed bathrobes, Godiva chocolates and a case of 1985 Sassicaia Tenuta San Guido, a rare and highly rated Tuscan wine that costs $900 a bottle wholesale. The gambler also received a discount on losses of 18% and $25,000 ostensibly to cover his airfare.
In 1999, the MGM Grand raised the stakes for baccarat with the Mansion -- a 29-villa high-roller resort within the casino that cost $180 million. Some of its suites measure 12,000 square feet and feature barber-shop chairs and bathrooms with televisions over both the sink and tub. The Rio later built a less extravagant version, the Palazzo Suites. Caesars Palace recently spent $25 million building two villas for high rollers and the two-year-old Venetian plans to build new high-roller digs next year.
The Las Vegas baccarat business started out far more humbly. The game emigrated from Cuba in the 1950s, where it was played at a handful of casinos using bundles of cash. In the 1970s, casinos sped up the betting by using chips, says Paul Weintraub, baccarat manager at Bellagio.
The drop in gaming revenue was less than 1% on the strip (a mere $4.1 million). No details are released and are often not available for another day.
Downtown casinos were off 9.1 percent.
Boulder Strip casinos were down 25.5 percent.
North Las Vegas casinos were off almost 12 percent.
Casinos that make up the balance of Clark County saw revenues decline almost 13 percent.
Since the strip fared so much better than the rest of the county, I would bet that baccarat saved the day again.
