This is the online home of David G. Schwartz, who Recession evolution
The big talk at G2E has been the recession. Last year, it was how to fight it. This year, it’s how to survive it. Anyone else get the sense that we’re living in an age of rapidly diminishing expectations? Here’s a bit from the story from the LV Sun:
The recession is forcing Las Vegas to return to its roots as a more value-oriented destination, and that’s not a bad thing, Boyd Gaming President and Chief Executive Keith Smith said.
“The town has now evolved back to its original roots,” Smith said Wednesday at the Global Gaming Expo. “I think the industry will continue to evolve and refine itself and eventually find a norm between value and high-end.”
via Boyd chief: Recession forcing Vegas back to roots – Las Vegas Sun.
Later in the story, there’s something that must be a typpo:
But with the addition of new technology, costs have increased and operators aren’t buying. Khin said slots stay on casino floors for an average of 25 years without replacement.
That’s impossible. If that were true, most of the machines on casino floors would have been installed in 1984. Slot managers would buy one set of machines when the casino opened and then wait a quarter-century (on average) to buy more. In that case, why would they have a big annual trade show to showcase the newest slots if managers keep machines for 25 years? Is it actually 2.5 years? That seems right. Hopefully someone over at the Sun can clarify that.
Smith makes a great point. I think that perception of value–rooted in real value–is going to be the key for Las Vegas for the conceivable future. The high roller/low roller tilt in this town is definitely a cyclical phenomenon that’s rooted in supply and demand: we’ll be in a low-roller turn for a while, but once things come back room rates and ticket prices will start creeping up again.
Remember, this is an industry where casinos in a city that’s been steadily losing ground (my hometown of Atlantic City) charge people $10 and more to park just because they can. Things like this don’t bode well for the customer. I’ve really got to question the aptitude of an executive who thinks that having customers’ first experience of their resort be reaching into their wallet to pay for something they can get for free elsewhere provides the foundation of a good customer experience. Sure, they don’t do that in Las Vegas, but several casinos tack on resort fees and other add-ons that have a similar effect.
My still-in-process slot hold study indicates (if I’m reading this right, and you may read it differently) that ultimately price isn’t the major determinant for players, it’s entertainment value and convenience. As a group, players are choosing higher-hold, flashier games over lower-hold, more sedate ones. Can this insight be applied to the non-gaming dimension of casino resorts? I think so, and this may be the key.
Posted in business of gamblingon 11/19/2009 07:48 am by Dave
11/19/2009 at 8:42 am
I see your last paragraph’s point differently. I assume that slots players are unsophisticated by definition. If they were sophisticated, they wouldn’t play slots due to the -EV. I also assume that casinos are very sophisticated and will do what they can to make their higher profit machines more available and attractive. My conclusion is that the sophisticated slot player is just taking the bait that is offered. It’s a very elastic market in Vegas. Does this hold any water?
11/19/2009 at 10:54 am
Even if the parking is free you still pay seven dollars to the valet parker as you arrive, though I admit, we all hate parking fees.
An exploration of the market for used slot machines shows that casinos can not possibly be holding onto them for 25 years! New slots are probably being bought frequently so that the players get variety and no slot room is locked into only what was popular at one time.
I think there has been a dampening of the overly enthusiastic excesses in tipping and parties but the general spirit still remains of a “fling” in Vegas, so the emphasis will still likely be on excitement rather than narrow house edge.
11/19/2009 at 5:55 pm
Gee. I didn’t realize your home town was Atlantic City. I always imagined AC was sort of just an amusement area (like Coney Island). I didn’t realize people actually live there. If I ever said anything bad about AC, it was only due to ignorance. haha. Please excuse me for that.
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That article must have had a typo (I’d hope). But if not…I’d like to take my mom to a place that has 25 year old machines and still ejects actual nickel-jackpots. She loves that sound and rush. :>)
11/19/2009 at 7:46 pm
Curtis–I’m not sure whether it’s a lack of sophistication or getting more of what economists call utility (I’d call it entertainment value) out of playing a machine that’s got a negative expectation but is colorful or offers the possibility of a life-changing jackpot. I’m not sure whether the casinos are offering better “bait” for the higher-hold games or the players are demanding them, but they are definitely popular.
11/21/2009 at 9:06 pm
Here is part of a newspaper article from The Las Vegas Review Journal that journalist Howard Stutz had in his INSIDE GAMING column from September 13, 2009:
Janney Montgomery Scott gaming analyst Brian McGill says his biggest concern surrounds airline capacity into Las Vegas. The average daily arriving number of seats into McCarran International Airport has FELL ALMOST 18 PERCENT IN THE PAST TWO YEARS. Airlines, notably US Airways, have eliminated flights in answer to the recession.
McGill, in a note to investors, estimates that airlines need to restore 10 percent of the lost flights to help Las Vegas fill the new rooms. Fat chance of that happening.
“The new supply, without an increase in airline capacity, will not allow for the required number of visitors,” McGill said.
The Strip, he said, will become more dependent on drive-in customers if the airlines don’t respond.
According to the Las Vegas Convention and Visitors Authority, drive-in tourists spend about 15 percent less than airline customers.
“We expect this to continue to impact profitability across the Strip,” McGill said.
Other travel means, such as a high-speed train between Southern California and Las Vegas, are still years away. McGill said regaining lost airline capacity is key to the Strip’s survival as the number of rooms grows in 2010.
Hopefully someone talked about this during the G2E conference but I doubt it.
This is a huge, huge problem facing Las Vegas today and in the near future
11/21/2009 at 9:39 pm
Paul,
This was discussed at G2E, but the conclusion was that once people start coming back to Vegas, the airlines will respond with added capacity. It’s a chicken-and-egg kind of thing. And the decrease in USAir flights is not so much because visitation to Vegas is down, it’s because the company can’t raise prices to Vegas because visitors are now so focused on the value market, high priced tickets don’t fit the equation. Plus, it’s a terrible airline and managed ineffectively.
11/22/2009 at 10:15 pm
I am glad to hear that Dr. Schwartz. The economy seems to be getting better throughout the country and I think (and hope) 2010 will be a lot better than 2009. This hopefully will bode well for Las Vegas.
The last 5 or 6 times I have been out to Las Vegas on business I have flown Southwest Airlines and its been great every time. The flights leave on time and arrive on time and the price is usually between $250-$300 round trip from Chicago.
Vegas Gang again was once very good. I’m glad Hunter got a chance to tour City Center and give us an update. Hopefully yourself, Jeff Simpson and Chuck Monster will be able to see City Center before it opens. Keep up the good work and good luck in the Las Vegas marathon.