Malaru
Malaru
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April 25th, 2010 at 7:09:13 AM permalink
With the recent issues with the recession and all- how muhc impact are other gambling venues- aka more local options, having on vegas?

There has been in the last few years a conserable boom in what casinos in a large number of states can do- an example is here in FL where they have now (officially- unofficially for the past 2 years)- allowed card games and type 3 gambling. You do this over several states and im sure it make at least a notable dent to vegas, biloxi, and AC. I dont know how big of one- but im sure alot more people are more inclides to stay near home (couple hours or less) to do thier thing.

I know there has always been lie the cruise lines, and small indian establishments here and there- but it just seems to be much more examplified over the past few years.
"Although men flatter themselves with their great actions, they are not so often the result of a great design as of chance." - Francois De La Rochefoucauld
toastcmu
toastcmu
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April 25th, 2010 at 7:16:36 AM permalink
I saw somewhere that the slot revenue in 12 Pa. casinos almost equals Vegas slot revenue (or something to that effect). The main issue I see is that each state that brings in gaming seems to think that they'll rake in the money hand over fist merely by opening or adding casinos. The politicos seem to forget that the gaming revenue is a static "chunk" nationwide, and the more states that add gaming, the more the chunk is divided up - and so their revenues are not what were initially 'anticipated.'

From an east coast perspective, Atlantic City has taken a huge hit as more states add gaming (Pa. in particular) - the casinos during off peak times are completely dead, restaurants are closed, and typically have 1/2 to 3/4 of their available tables closed. I can't comment on weekends, as I only have visited on Friday mornings/afternoons, but you can tell that is when they are doing the bulk of their business.

-B
pacomartin
pacomartin
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April 25th, 2010 at 8:48:56 AM permalink
Quote: toastcmu

I saw somewhere that the slot revenue in 12 Pa. casinos almost equals Vegas slot revenue (or something to that effect). The main issue I see is that each state that brings in gaming seems to think that they'll rake in the money hand over fist merely by opening or adding casinos. The politicos seem to forget that the gaming revenue is a static "chunk" nationwide, and the more states that add gaming, the more the chunk is divided up - and so their revenues are not what were initially 'anticipated.'

From an east coast perspective, Atlantic City has taken a huge hit as more states add gaming (Pa. in particular) - the casinos during off peak times are completely dead, restaurants are closed, and typically have 1/2 to 3/4 of their available tables closed. I can't comment on weekends, as I only have visited on Friday mornings/afternoons, but you can tell that is when they are doing the bulk of their business.

-B



What I said was that PA casinos are getting close to equaling the Vegas Strip revenue. Urban Vegas has a lot of local slot machines (downtown, Primm, Boulder strip, North Las Vegas, Summerlin). The strip is becoming more and more dependent on games. And among games, Vegas still dominates in Baccarat which has only a minor penetration into the East Coast markets.

Your comment about static "chunk" nationwide is highly contested. Analysts sometimes call it a zero sum game. Many analysts believe you are essentially correct in that gaming is fundamentally a zero sum game, and states are only stealing from each other. Others believe there is huge room for growth.

I don't know if the entire nation is approaching zero sum game, but it seems to me Vegas is bifurcating. The baccarat revenue has surpassed a billion dollars a year, but baccarat revenue in Macau is increasing by several billion per year and has surpassed a billion dollar a month. But slot revenue and most games are plunging in Nevada. Blackjack has dropped to a 12 year low and is the worst performing important game. The markets from Tahoe, Reno, Sparks, Downtown, Primm and Laughlin are all bottoming out. So are the non baccarat games on the strip. Most or all of these markets may never recover to their 2007 peak. With Tahoe and Reno they essentially resigned themselves that the Sacramento Indian casinos will keep expanding and prevent any further growth in their market.

They are shuttering casinos around Tahoe and in Reno. I think the locals market in Vegas is ridiculously overbuilt. People are trying to buy into the north strip thinking that it will eventually turn around, but it may never turn around. Casinos may fill in between Hard Rock and Planet Hollywood, the vacant lot across from City Center, and along Tropicana toward the airport. Perhaps that will be all the Vegas expansion for the next 20 years as gaming in other states expands.

I am very aware that people said this in the mid 1970's as casino expansion ground to almost a complete halt for 15 years. They also said this in the mid 1950's as people just couldn't imagine a Vegas that could support more than a dozen casinos. People in the 1950's couldn't imagine a world that could put so many people into airplanes for so cheaply. People in the 1970's couldn't imagine that the gaming in Atlantic City and a few other places would create a huge desire to go to Vegas. A lot of analysts couldn't conceive of the Mirage paying off it's construction costs in 15 years, when it paid them off in less than 2.

But right now I think that a lot of the old places will have to be shut down. Vegas will make most of it's money on a smaller group of gamblers. I think growth will be limited by the current airport. I am very very skeptical that Vegas can build a reliever airport south of the city.

A good rail link with Southern California could change things significantly. The unbelievable number of empty rooms midweek in this city could be occupied by people playing hooky for the day, or businesses having a one or two day offsite meeting in Vegas. This equalization of supply and demand would be very important. Tourists could go to Southern California and Vegas in the same trip easily (not with a tortured connection). It would be nice to see Vegas become a little more well rounded like Phoenix.
FleaStiff
FleaStiff
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April 25th, 2010 at 11:33:52 AM permalink
Quote: toastcmu

The politicos seem to forget that the gaming revenue is a static "chunk" nationwide, and the more states that add gaming, the more the chunk is divided up - and so their revenues are not what were initially 'anticipated.'

Not really. All states do compete. Compete for factories, compete for dot.com companies, etc. One form of competition is gambling revenue. States do not like to see sources of tax revenue traveling to other states that is often why legislation is passed allowing gambling.

The trouble is that its not really static. Local populations take up the habit. Local salaries get skewed. California's Indian casinos made driving over the mountains into Reno a fools errand. Why gamble at a great casino in Reno when you can gamble at a good casino three hours closer to home?

The pie tends to grow, not remain static. Although experts always differ depending upon who hires them. Geography does matter. The recent debate in Florida over exclusivity had nothing to do with the tribe's desires, only with the desires of the Tribe's bankers. No one wanted to invest in a casino and then have a competitor right next door skim the cream.

Vegas overgrown with casinos? You ain't seen nothing yet! But those casinos won't be filled by tourists trekking there.
The size and nature of the pie is ever changing but the pie does grow. Casinos are often slow to adjust their sights. Look at Mesquite. Large casinos there were mismanaged and poorly marketed. There were no tie-in agreements to capture passing motorists. And then too late the casinos realized that they were desperate. Markets change and casino strategy has to change rapidly but often fails to respond sufficiently.
pacomartin
pacomartin
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April 25th, 2010 at 1:03:02 PM permalink
Quote: FleaStiff

Look at Mesquite. Large casinos there were mismanaged and poorly marketed. There were no tie-in agreements to capture passing motorists. And then too late the casinos realized that they were desperate. Markets change and casino strategy has to change rapidly but often fails to respond sufficiently.



Mesquite seems illogical to me. It is 340 miles from Salt Lake City (SLC). Once you've driven that far you are going to go the extra 100 miles to Las Vegas. If you want a day trip you drive to Wendover (120 miles from SLC). The market in southern Utah is very small and mostly Mormon.

Wendover is the only place in NV that went up in gaming revenue last fiscal year.

It is sort of like Primm NV, which made money for a given period of time. Now Primm (2600 rooms) has been supplanted by places like South Point (2163 rooms) on the far southern strip of Las Vegas. The changing economy and the plethora of slot parlors in Los Angeles means that most people who drive to Primm now simply go the last 40 miles to get to Las Vegas where an overabundance of inexpensive hotel rooms exist. If people in CA simply want to play slots they go to an Indian Casino. Primm is giving away rooms to Las Vegas locals (I am not sure if that is 5 days or 7 days per week).

Nevada just seems jam packed with these mini-markets with a few thousand rooms here, and a few thousand rooms there. They all made economic sense if you could park the kids somewhere and feed the slot machines and play some sports book and a little table games. Now all these markets (Tahoe, Reno, Washoe county border, Laughlin, Primme, Northern Strip Las Vegas, Mesquite, part of Boulder strip) are overbuilt with aging slots in a box that are constantly being renovated. With the exception of a few small places in Reno and Tahoe very few casinos have actually shut their doors. They can't compete with internet gaming and local tribal casinos in California and gaming clubs elsewhere.

Now you can argue that these places all are better bargains than casinos which have tighter machines because there is no competition. But someone has to think it is worth the transportation expenses to get here to make that worthwhile.
cclub79
cclub79
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April 25th, 2010 at 7:43:21 PM permalink
Quote: toastcmu

I saw somewhere that the slot revenue in 12 Pa. casinos almost equals Vegas slot revenue (or something to that effect). The main issue I see is that each state that brings in gaming seems to think that they'll rake in the money hand over fist merely by opening or adding casinos. The politicos seem to forget that the gaming revenue is a static "chunk" nationwide, and the more states that add gaming, the more the chunk is divided up - and so their revenues are not what were initially 'anticipated.'

From an east coast perspective, Atlantic City has taken a huge hit as more states add gaming (Pa. in particular) - the casinos during off peak times are completely dead, restaurants are closed, and typically have 1/2 to 3/4 of their available tables closed. I can't comment on weekends, as I only have visited on Friday mornings/afternoons, but you can tell that is when they are doing the bulk of their business.

-B



AC has most definitely taken a hit from PA, and it will get worse with table games on July 4th, but I also disagree about the static chunk. There are people gaming in PA now who would never have traveled to AC or Vegas with great frequency. You live in Erie, 8 hours from AC, and you like gaming. So maybe you take a trip once a year. Now there's a casino down the street...AC loses your few hundred for that yearly trip, but maybe you are going to the local place twice a month. The only way it's a zero sum game is if EVERY time you go to that new place down the street, you WOULD have gone to AC. That's a ridiculous assumption.
pacomartin
pacomartin
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April 25th, 2010 at 8:47:10 PM permalink
There are no true Zero Sum Games (ZSG) in the real world. Not in retailing, fast food, or gaming. What happens in economic modeling is that sooner or later the situation start to look pretty close to a ZSG. At some point stealing market share becomes the dominant means of growth.

Since there is obviously stealing from Atlantic City and Las Vegas, the analysts are in disagreement when the new states will start stealing from each other.

When the locals casinos started sprouting in earnest in the 1990's in Vegas there was absolutely no one who could have predicted how big they would grow. The feeling was that you could gamble in a bar or a store, but it was an easy drive to the strip or downtown if you wanted to play in a casino.

Defining the locals market is a little tricker today since there are casinos that obviously cater to upscale locals and tourists at the same time. The usual definition is that it is casinos that are not on the strip, downtown, or Laughlin but are in Clark County. This leaves some casinos like Red Rock, South Point, Suncoast, Green Valley, etc. that cater to both types of customer.

But the market was $2,151,497,239 in 2009 when the local populace was devastated by the recession. That is 39% of the Las Vegas strip. It's a remarkably high number since there are only 2 million people who live in Clark County. Removing the children, aged, infirm, and the non gamblers that is a lot of money per person.

In comparison Atlantic City is just about twice that amount in 2009 (roughly $4 billion). There are over 8 million people in New Jersey and another 5 million in Philadelphia, and 8 million people in New York city.

It is pretty clear that if these states opened themselves up to the same rules as Nevada where there thousands of places with 15 slots or less (bars, golf courses, bowling alleys, supermarkets, etc. ) along with a casino in every town over 20,000 people we would really test the limits of ZSG. But that is not likely to happen.
boymimbo
boymimbo
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April 26th, 2010 at 10:58:47 PM permalink
Quote: pacomartin

There are no true Zero Sum Games (ZSG) in the real world. Not in retailing, fast food, or gaming. What happens in economic modeling is that sooner or later the situation start to look pretty close to a ZSG. At some point stealing market share becomes the dominant means of growth....

It is pretty clear that if these states opened themselves up to the same rules as Nevada where there thousands of places with 15 slots or less (bars, golf courses, bowling alleys, supermarkets, etc. ) along with a casino in every town over 20,000 people we would really test the limits of ZSG. But that is not likely to happen.



I agree with Paco's sentiments here. The market will grow to the opportunity until the market is saturated, and the market isn't quite there yet. The folks in Erie with a casino down the street certainly will continue to go to that casino down the street rather than AC (or up the road to the Falls), but enough of those folks who haven't bothered to gamble before in their lives will go to the casino down the street, and like the habit so much that they'll book a flight to Vegas. It's kind of like Starbucks (which has saturated the market). Who knew that so many people could enjoy paying $4 for a latte? You create your own market.
----- You want the truth! You can't handle the truth!
FleaStiff
FleaStiff
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April 27th, 2010 at 4:44:34 AM permalink
>You create your own market.
How much of the casino's budget is devoted to creating new customers?

Its a bit like the health insurer who knows that giving a woman in her thirties fresh fruits and vegetables as well as a free gym membership will save that woman from a very expensive breast cancer operation thirty years later. Thats all fine and dandy but the insurer also knows that those savings will accrue to some other health insurance carrier.

Casinos may talk about customer loyalty and capturing the market via players clubs and accumulated points but in reality I think the casinos know that their customers are not loyal.
boymimbo
boymimbo
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April 27th, 2010 at 5:54:26 AM permalink
When you make decisions in life as to where you shop, you have four considerations: desire, time, quality, and cost.

Desire: Do I want/need the good or service?
Time/Effort: in the time and effort it takes to procure your goods or services
Quality: as in the quality of service or goods.
Value: the cost of the good with respect to the quality that you receive.

Take the decision to get coffee. At home, I have a choice. I can drive 5 minutes to a Tim Horton's and wait in a 10 minute line to get an excellent cup of coffee for $1.75. I can go across the street to 7-11 and get a crappy cup of coffee with little wait for $1.50. I can drive two minutes later to the local Starbucks and get a hit-or-miss latte for $4. Finally, I can get off my ass and make my own lousy coffee for a few cents. But before all of that, do I even want a coffee?

The decisions that people make to go to a casino are based on the same decision making.

Time/Effort: how far is the casino away?
Quality: how nice is the casino?
Cost: How much will it cost for me to play there?
Desire: Do I like to gamble? Do I like to be entertained?

If you build a crappy casino in Erie (not that it will be, I have no idea), alot of people who like to gamble and have never gambled before will start gambling there because they like to gamble but don't want to drive far to get there. People who already gamble might overlook the quality of the casino because they like to gamble or they offer $5 tables. Alternatively, those same people might not like the quality of the casino and continue to visit the casino they already go to, perhaps because of the value on their player's card or they really like the casino.
----- You want the truth! You can't handle the truth!

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