It’s Thursday, which means another edition of the Green Felt Journal in Vegas Seven magazine. This week, as whether the “little guy” still has a chance on the Strip:P

Last year at around this time, “deconsolidation” was the buzzword along the Strip. MGM Mirage had just announced its sale of Treasure Island to Phil Ruffin, formerly of the New Frontier. Investment bankers and industry analysts announced that, just as the previous 10 years had seen Strip casinos swept into progressively larger corporate empires, the next era would see them splinter into smaller fiefdoms fortified by hedge-fund and private equity investment.A year later, it’s now clear that the pundits couldn’t have been more wrong. Rumors of an MGM Mirage fire sale proved immature. Harrah’s Entertainment has actually added a casino to its portfolio, having taken over the management of Planet Hollywood after acquiring a substantial stake via debt purchases.

via Does the little guy still have a shot on the Strip? | Vegas Seven.

As I promised before, this column also has my first overt Star Trek reference.

Also, only in Vegas would a multi-million dollar company with thousands of employees be considered “the little guy.”

Some other highlights from the issue:
- Nicole Lucht talks to Tony Marnell about the M Resort’s first year
–Mericia Gonzalez looks into the future of Vegas nightclubs
–Jeff Haney, formerly of the Sun, writes about HORSE at Aria. He’s a great poker writer, and hopefully this is the first of a regular series of column.
–and if you didn’t catch it last week, check out Jessica Prois’s talk about statistics with author Jeffery Rosenthal (Struck by Lightning: The Curious World of Probabilities)

Tons of other great reading in there–these are just the ones that have the biggest gambling/Strip connection.

Posted in business of gambling, writing on 02/25/2010 06:01 am by Dave

A few weeks ago, I started talking about a tiered pricing model for Strip hotels on the Vegas Gang. I took some time to

On one side, pro-fee advocates argue that they offer convenience. On the other, resort fee opponents maintain that fees are poorly advertised and shock the customer. There may be a way to please both groups of visitors, those who want convenience and those who want low prices. A tiered pricing model, in which customers get to pick one of several levels of service for the same room, might help generate additional revenues and give guests a greater feeling of control over their experiences, which may translate into greater customer satisfaction and stronger bottom lines.

For example, imagine a three-tiered pricing structure for a guest room, with “standard,” “gold,” and “platinum” levels.A guest booking a room at the “standard” rate would receive a room key and not much more. He or she would have to pay extra for virtually every other hotel service; for example, to visit the health club, use the Internet, or make phone calls.

At the “gold” rate, customers would receive everything that came with the standard, plus free wireless Internet, phone calls, bottled water, copies of the local paper, etc.

For guests looking for more, a “platinum” rate could deliver all the benefits of the gold rate, plus several extras — dining credits, a selection of prix fixe menus at select hotel restaurants, tickets to the hotels big show, complimentary spa services, and nightclub admissions.

Guests opting to “go platinum” will value cost-certainty and convenience over spontaneous choice.

Some resorts are already offering something close to platinum-tier pricing. Wynn Las Vegas, for one, offers several packages, including a golf getaway, jetsetter package, romantic retreat, and the Ultimate Wynn Package, that offer guests varying levels of amenities.

We’ve seen the trend towards cost certainty become popular over the past year in Strip restaurants. From all-day, single-price buffet offers to prix fixe gourmet dining, visitors have responded positively to the chance to pay one price for an expected level of service. It stands to reason that an operator to apply this model more broadly to the total guest experience could become a trend-setter.
Companies owning several properties along the Strip are particularly well-poised to offer a variety of dining and entertainment options that will generate true economies of scale and diversity.

Whether it’s called tiered pricing, a vacation package, or something else, this may be an idea that needs to be explored more aggressively as resorts seek to defend their market share in what promises to be a challenging year.

via Las Vegas Business Press :: David G. Schwartz : Tiered room pricing: A modest proposal.

I came in about 250 words over for the article which was shortened for publication, and I included some of the cut material in the quote above where I lay out the proposal.

The industry’s moving in a few different directions right now, and this is one of them. I’m sure that there are a million back-of-the-house reasons not to do this, but coming at this from the consumer’s perspective, it deserves consideration.

Posted in business of gambling on 01/27/2010 12:08 pm by Dave

Things are looking up in Nevada for the first time in a long time. The state’s casinos won more money from gamblers this November than they did last November. Yet there may be another story that isn’t as positive lurking beneath the numbers. From the LVRJ:

For the first time in 23 months, Nevada gaming revenues increased with casinos statewide collecting $873.2 million in November, a 4.35 percent climb compared to the same month a year ago.On the Strip, gaming revenues were also up for the first time in almost two years. Strip casinos collected $473.8 million, an 8.3 percent jump compared with the figures from November 2008.

In the locals market, November gaming revenues were up 19 percent on the Boulder Strip, almost 21 percent in North Las Vegas and 2.6 percent in the balance of the Clark County.

via Nevada gaming revenues increase for the first time in 23 months – News – ReviewJournal.com.

There are some very interesting patterns here. The big winners statewide were baccarat and pai gow, which increased 136.9% and 26.12% respectively. Slot machines actually did a little worse (down 1.58%), and since they account for the bulk of the state’s gaming, it’s very fortunate that bacc win more than doubled.

Does this mean that we’re out of the woods? Handle, rather than win, is probably a better gauge of consumer interest. Let’s look at the total money played on baccarat in the past two Novembers:

Month Win Hold% Handle
Nov 2008: $39,780,000 10.45% $380,669,856
Nov 2009: $94,237,000 13.54% $695,989,660

So while the casinos got much luckier in November 2009, the total amount played increased by about 83%. Even if they had won at the same rate that they did in November 2008 (10.4%), they still would have made about $73 million from baccarat–a definite step up.

Let’s look at slot handle:

Month Win Hold% Handle
Nov 2008: $558,114,000 5.73% $9,740,209,424
Nov 2009: $549,340,000 6.28% $8,747,452,229

So if you’re a glass-half-full kind of person, you can say that slot play decreased by about a billion dollars from year to year–not the stuff of a major comeback, and certainly nothing to pat yourself on the back about. The hold percentage increased by about a half-point. Could this have something to do with the decline in handle? It’s worth considering. While most of the increase in hold has been driven by players migrating to higher-hold denominations rather than managers tightening up existing machines, the decline in slot machine handle is cause for concern.

It’s paradoxical because players are voting with their feet in two separate directions. On one hand they are playing the high-hold denoms more: statewide win on pennies rose by about 10%, on multi-denom by 4%, and dropped off considerably for everything else, including massive declines in every denom over a dollar (though the $100 drop is complicated by a miniscule ,069% hold percentage). On the other hand, they are playing less, almost exactly 10% less than the year before.

Looking at hold is only part of the picture–looking at handle says a great deal more.

How about the Strip? Here are some highlights from November 2009: Bacc win, up 136%, pai gow, up 58%, and bingo, with total revenues of $212,000, up over 800%.
The lowlights? Craps was off by 32%, due in part to a lower than usual hold percentage; slots were down by about 4%, and sports books won much less in football betting than they did the year before, though the hold (5.23%) was a bit on the low side.

With slot handle down and bacc handle up considerably, the lesson seems to be that the high end is doing better than the low end. From that perspective, it’s good news for City Center and bad news for the lower-tier operators on the Strip and statewide. There appears to be some room for growth in the high-end market that will justify the increase in supply, but it looks like demand for slots continues to weaken.

In a nutshell: good news for some, but I’d keep the champagne on ice, at least until someone figures out how to get slot players to come back en masse.

The November 2009 visitor numbers are positive, with the caveat the the increase in visitation (2.9%) was slightly outdistanced by the increase in room supply (3%). People are coming back to Las Vegas, but they are spending less on their rooms (room rates are down 23% year-to-date) and less at the machines.

Posted in business of gambling on 01/12/2010 10:53 am by Dave

If you haven’t read it yet, here’s a link to my latest from the LVBP:

But craps players and conventioneers both, even if they know of the efforts made by designers to craft a green building, are more likely to care about other things: How easy is it to get around this building? Does it make me want to enjoy myself?

via Las Vegas Business Press :: David G. Schwartz : Even amid severe slump for Las Vegas, casino operators can guide destiny.

This dovetails nicely with Chuck’s meditations on the artistry of Aria. The architecture doesn’t mean anything if the resort–and the people in it–can’t consistently get that kind of reaction from visitors.

In essence, I’m saying that they’ve built a lot of hotel rooms on the Strip, and now they have to find ways to keep them full. It’s not going to be easy. And just waiting for better times to return is clearly not going to move things forward.

The point I’m trying to make is that I’ve seen a lot of thinking along the Strip that’s reminiscent of students and gamblers. Here’s what you usually hear when grades come out:
“I got an A in the class.”
“The professor gave me a C.”
In other words, we’re responsible for our successes but not our failures. You don’t have to walk very far through a casino to hear this same mentality at work among gamblers. And these days, you can even hear it upstairs in executive offices.

Back in 2006, I didn’t see any annual reports saying, “Because of rising consumer credit and escalating personal wealth, we’re doing a bang-up business this year.” Instead, it was the bold leadership of the management team that was responsible for all the big rise in shareholder value.

Fast forward a few years, and we hear that “Due to a sagging economy, we’ve had lower than expected earnings.” Well, by now they’re usually expected to be pretty low, but you get the point.

I understand that no manager’s going to come out and say that they’ve done a lousy job of marketing and staffing their property, but it’s important to be more honest internally. Maybe it’s just semantics, but I think what people say reveals a lot about what they’re thinking. In this case, it’s very important for people to accept that the bad economy didn’t do anything to them: the choices they made, whether it was taking on too much debt or not maintaining service standards and the perception of value, put them into the predicament they are in today. They are fully capable of finding a way out of it.

Posted in business of gambling on 12/30/2009 01:22 pm by Dave

Here’s some breaking news: things don’t look so hot for 2010, at least if you’re in the casino business. From the LVRJ:

The impact the recession had on the casino industry in 2009 has not been completely accounted for, but by all measures the year will go down as the worst on record.

Through October, gaming revenues have declined more than 12 percent both on the Strip and throughout Nevada. Monthly revenue figures statewide have fallen to 2003 levels.

Get ready — 2010 may not be any better according to one casino industry analyst.

Fitch Ratings Service, which follows the high-yield bond markets, believes gaming revenues nationwide will continue to be pressured by the economy. Spending trends remain weak and unemployment will continue to reduce how consumers dole out their discretionary dollars.

via CASINO INDUSTRY: Outlook: Unfavorable – Business – ReviewJournal.com.

This is where the casino executives earn their keep. It’s easy to run a profitable resort when the market’s expanding by five percent each year. When it’s shrinking, it’s another story.

I’m of two minds about the continuing economic gloom. On one hand, we won’t just wish our way out of it. On the other, it seems that this is just a continuation of the long-standing predicting trend of extrapolating the present into the future indefinitely.

This is one of the reasons that trying to predict the future, in any except the most rudimentary ways, is futile. Over the past few weeks, I’ve had several reporters ask me if 2010 will be better than 2009. I have told them all that I just don’t know. Of course, if I said, “Yes, it will get better” or “No, it will get worse,” I’d have about a coin flip’s chance either way. There are simply too many variables to try to forecast what’s going to happen except in the most basic terms.

Casino executives should prepare for a challenging year and focus on delivering a combination of value and favorable experience to their customers. Simply dropping room rates then cutting levels of service will be harmful in the long run. In order to compete with the mushrooming number of gaming options, destination casino resorts will have to offer both good deals and unique experiences. In the past, they’ve usually offered one or the other; now, they have to deliver both.

It’s not going to be easy, but battening down the hatches and waiting for the crisis to pass isn’t going to get the job done. That seems to have been the dominant industry paradigm for about two years now (with a few exceptions), and it’s not a viable long-term option.

It will be important for casinos to concentrate their resources where they can make the most favorable impact on customers, be it on the casino floor or off it.

Posted in business of gambling on 12/23/2009 04:19 pm by Dave

I’ve been busy today getting the slot hold occasional paper finished up, so running the risk of CityCenter fatigue, here’s an excerpt from my last LVBP column about, you guessed it, CityCenter:

This might be the most novel thing visitors notice about CityCenter, at first. And its hard to believe that its not by design. One thing that sets CityCenter apart from other resorts on the Strip is that because of the density, you will never be far from the street when you’re in the public spaces. The third-floor pool, for example, faces a parking structure on the west. It’s not close enough to smell the exhaust, but it is in the field of vision of poolside loungers. This is a profoundly different sort of vibe than the usual “desert oasis” feel of most Las Vegas pools, where hotel towers or extensive setbacks remove visitors from traffic and, in a sense, reality

via Las Vegas Business Press :: David G. Schwartz : CityCenters pocket parks, traffic circles stand as symbol of Strips evolution.

Further down in the article, you’ll note my reference to plural “pocket parks.” When I wrote this I hadn’t seen the entire complex and was under the impression that there were more than one–I thought I heard someone calling the area outside Bar Vdara “one of the pocket parks,” but I either misheard or that was an error. Even though there’s just one, though, it’s still significant.

Of course, if you were Steve Wynn and you wanted to really rain on CityCenter’s parade (which he probably doesn’t) you could just say, “Twenty years before you unmasked Las Vegas’s first pocket park, I built its first pocket rain forest.” You got to say it in the “I’m Steve Wynn” voice, though.

Posted in business of gambling on 12/21/2009 04:42 pm by Dave

I’ve been asked by more than one media outlet about City Center, and I thought that I’d just post some of my thoughts here for public consumption.

My single-sentence response to “what does it all mean” is that City Center is a gamble in ways that previous Strip projects haven’t been. There’s been skepticism about everything built on the Strip, probably going back to Thomas Hull’s El Rancho Vegas in 1941. In hindsight, some of this skepticism looks ridiculous: many people predicted Caesars Palace would fail, but today it’s the best-known casino in the world; others thought the Mirage would tank, but instead it kicked off massive expansion on the Strip; in 1997 and 1998, there was considerable doubt in the trade papers about the viability of Bellagio; and so on.

But sometimes the skepticism looks more sensible. Plenty of people scoffed at Bob Stupak’s attempts to build the Stratosphere. The casino’s open today, but Stupak never really got to run it, and the Strat spent a few years in bankruptcy before Icahn et al turned it around. There was skepticism about the new Aladdin, which is Planet Hollywood today.

It’s an exaggeration to say that City Center has the deck stacked against it, but anyone keeping track of the running count has to notice that there are fewer high-value cards left in the deck than there were in 2004 and 2005, when City Center was planned.

City Center is a gamble because we are finishing up our second straight year of declines in revenue and visitation numbers, and there’s no guarantee that the there will be many people lining up to fill the 2,190,000 or so room nights that the project is making available. Assuming a three-night stay, that’s an additional 730,000 trips to Vegas that will have to be sold, and that’s assuming one person per room. City Center is going to have to draw as many as 1.5 million more to Las Vegas in 2010, in the midst of a steady decline in visitation.

There has never been a slide in the two major indicators of Las Vegas’ economic health–visitation and revenues–as severe as the current one. The 1980-1982 period was three years of (inflation-adjusted) flat or downward revenue numbers, and 2001-02 was two years of the same. The 2008 drop in revenues, however, is about twice that of the worse previous year, 1981. If there’s not a reversal in 2010, this will be both the most severe and longest economic downturn Las Vegas’ casino economy has faced.

So the biggest project in the Strip’s history is opening in what is probably the worst economic climate in the city’s history. That’s why it’s a gamble.

To its credit, City Center is an ambitious project that looks beyond the current market in the same way that Caesars Palace, the International, the Mirage, and Bellagio (to name a few) did. It’s unfortunate that the economic and aesthetic strands of the “what is City Center” debate are so inextricably tangled: the fascinating thing about City Center for me is that it puts a new spin on how to organize spaces for visitors to Las Vegas to eat, gamble, shop, be entertained, and rest. Aria really uses things like interior volume and views of the outside in ways that I’ve yet to see any casino do. I doubt that there’s anyone better than Steve Wynn at wrapping the guest in a bubble of luxury and creating a resort that transports them out of the everyday world. City Center doesn’t try to do that: with its traffic circles and extensive views of the neighborhood, picturesque and not, it never pretends to take guests out of the surrounding streets. That’s notable.

The big question I keep getting asked is, “Will City Center be a success?” My short answer is that I don’t know, and I don’t think anyone knows. There are just too many variables beyond anyone’s control to forecast with any degree of certainty. My usual response is, “how do you define success?” No one seems to know.

I think that the physical space that MGM Mirage has created has the potential to attract people who haven’t come to Las Vegas before. Will it? That really depends on how well the company markets and runs the property and how the broader national economic picture develops.

City Center opening means more hotel rooms which, for the Vegas visitor, is a good thing. If you’re coming to Las Vegas for business or personal reasons, you’ve got more choices, and hotels will have to price themselves accordingly.

We’re seeing the first signs of what could be an unintended consequence of these lower rates: first Binion’s closed its hotel, now the Sahara is closing two of its towers. This is the result of the domino effect sparked by low room rates: with $150/night rates at the first tier and $80/night ones at second-tier properties, third and fourth-tier properties are hard pressed to offer anything to compete. If you can pay a little more–or even the same–to stay at a newer, better out-fitted hotel, why wouldn’t you? It’s like a game of musical chairs, and those at the bottom of the ladder are going to be left standing up when the music stops. But that’s how Las Vegas works: if you want people to stay at your hotel, you have to offer them either a great spectacle that they’re willing to pay for or a great value. When your competitors can offer both and you can only offer one, you are in trouble.

From my perspective, City Center is an incredible collection of properties that is facing a formidable challenge along with the rest of the market. As the newest kid on the block, City Center will be better positioned than properties that have been open for decades. With the first guest checking in tomorrow, I see plenty of potential for success. Whether the project realizes that potential is up to the people who work there and those who will be staying there.

All of which is a lengthy way of saying that City Center impresses me, and I don’t know what the future holds for it–or the rest of Las Vegas. In some ways, the debate around City Center resembles the talk in the movie world about James Cameron’s Avatar. They’re similarly big-budget, high-concept projects that are opening at around the same size, and there’s a great deal of speculation about how well they’ll do. Maybe it would be best if we just watched the movie (or visited the casino) to see if we like it ourselves.

Posted in business of gambling on 12/15/2009 12:36 pm by Dave

The Nevada gaming revenue figures for October have been released, and they don’t look promising. From the LVRJ:

Nevada gaming revenues hit a new low in October. Statewide gaming revenues were $800.3 million, the lowest monthly figure in almost six years. The decline was 11.6 percent compared with $904.9 million reported a year ago.

October marked the 22nd straight month of declining gaming revenues.

On the Strip, gaming revenues were $426.3 million, a 10.3 percent decline compared with $475 million reported a year ago.

All but two areas of Clark County reported double-digit gaming declines; the Boulder Strip was down 6.3 percent while North Las Vegas casinos were up 3.3 percent.

Nevada gaming revenues decline 11.6 percent in October

Both the Boulder Strip (M) and North Las Vegas (Aliante Station) have added major new capacity since last year, so naturally those numbers are better than last October.

I wanted to take some time and really dig into these, but it looks like that’s not going to happen today. I’ve got a Vegas Gang podcast in about 15 minutes.

What I would have done, if I had the time, was to correlate the revenues with news that visitation is up over last year’s. I don’t have the time to do a comprehensive quantatative analysis, but here’s the gist of it:

Room rates have fallen precipitously (nearly 14 percent) from last year’s. Assuming an average stay of three days, the average guest should save $48 on their hotel. Add in taxes, etc, and you can round to $50.

The problem is that they’re not spending that extra $50 on gambling. People are just spending less overall, and lowering room rates doesn’t seem to be doing the trick of increasing gaming revenue.

This suggests that there is no magic bullet solution (”cheap rooms! cheap food!”) that the operators are too clueless to figure out that will boost gaming revenue. Instead, they will just have to wait until the people who’ve been coming here have more money, or find a previously-untapped group to compensate.

There isn’t a shortcut. The only way out is delivering value and service to those who are still coming. Easier said than done, I know, but it’s better than the alternative.

Posted in business of gambling on 12/10/2009 03:23 pm by Dave

Side discussion to the Vdara opening: I heard one PR person reference it as “the Vdara,” and it sounded wrong. It’s funny how some casinos need the definite article in front of them, others don’t, and others sound OK either way. I know there’s a debate about “the Wynn/Wynn,” but you’d pretty much never say, “the Circus Circus,” “the Caesars Palace,” or “the Planet Hollywood,” while you always say “the Hilton,” “the Sahara,” and “the Flamingo.”

It’s kind of like ships in Star Trek. I think on the original show they alternated between calling their ship “the Enterprise” and just “Enterprise.” I’m pretty sure that on Enterprise (the show with Scott Bakula), they mostly called the NX-01 “Enterprise.” On Deep Space Nine, they had the Defiant, and I can’t imagine someone saying, “we’ve got to beam up to Defiant.” On Voyager, though, I don’t think anyone ever talked about getting the Delta Flyer back to “the Voyager” before the subspace anomaly of the day hit. This is a show that took “the” serious: one of the main characters was just “the Doctor.” Using “the” correctly is something small but nonetheless important.

So what’s the correct usage for City Center? Here are my suggestions:

1. City Center
2. THE Harmon
3. THE Mandarin Oriental (funny, I must be giddy from all the art exposure; I first wrote that as “Mondrian Oriental”)
4. THE Crystals
5. Veer
6. Aria

I really, really hope that no one ever calls it “the Aria.” Even in a city defined by moral and linguistic relativism, that’s just wrong.

Posted in gambling & culture on 12/02/2009 02:03 pm by Dave

In the midst of all the talk about Vdara, I thought I’d mention my latest article in the LVBP:

While doing some research, I recently happened across an article in the July 1997 issue of Casino Executive magazine in which then-Harrah's Entertainment CEO Phil Satre sounds downright oracular.

“If you're the last person to build that last $1 billion project in Las Vegas,” he told the magazine, “you might be wishing you hadn't spent your money that way.”

Today, it seems obvious that he spoke correctly. Many people still come to Las Vegas, but their numbers don't seem as boundless. Those who bet on a constantly expanding market for what Las Vegas offers look to be guilty of irrational exuberance at best, while most of the rest of us are wondering why so few people were betting against that kind of growth.

via Las Vegas Business Press :: David G. Schwartz : The last billion-dollar casino marks end of an era in Las Vegas.

It’s an elaboration of an idea I started in a post here two weeks ago. Interesting timing in regards to two events this week: the opening of City Center and Harrah’s looking to buy Planet Hollywood.

As for my thoughts on the latter, I don’t think that when you look at Harrah’s Entertainment you can say that one of the company’s problems is not having enough hotel rooms on the Strip. On that level, this move just doesn’t make a lot of sense to me. Do having another 2,500 rooms to fill justify taking on additional debt to buy a traditionally troubled property? Since Planet Hollywood is clearly not a “turnkey opportunity” with a guaranteed cash flow, I don’t understand why the company would use this money to buy another Strip property as opposed to expanding a regional operation somewhere else and diversifying their cash flow.

Also, this is a very 1990s type of expansion, in that the company is spending a great deal of money to buy an asset that may produce revenue. Contrast this deal with MGM Mirage’s latest moves, signing development agreements and management contracts overseas that don’t require it to buy any assets but will allow for cash flow. Like I said in my review of Managed by the Markets, this is what companies in other sectors are doing and, within the constraints of today’s markets, seems to be a better strategy for delivering value to shareholders (or bondholders).

And it’s amazing that twelve years ago Harrah’s CEO was so hesitant to buy or build a second property on the Strip, while now the company is charging ahead to buy its tenth casino there. It’s a totally different company.

Posted in business of gambling on 12/02/2009 08:58 am by Dave

Now that I’ve seen the inside, I’ve got something to say about Vdara and City Center.

The guy in charge of it all says that it can’t be explained, only experienced, but I’m going to give it a shot since it’s sort of my job to explain these kinds of things.

To set the stage, I came in from the Bellagio, parking in the self-park garage. It’s not a very far walk at all–you just head through the ground floor of the Spa Tower, past Sensi, and onto a covered walkway that looks kind of Jetsons-ish.

The porte cochere is on the other side of the building, but we’ll start there. You’ve got a great view of Nancy Rubins’ sculpture “Big Edge” (the one with all of the canoes) that is very much like something you’d see in Manhattan–definitely “artier” than the usual hotel-front attractions in Las Vegas. In fact, it is something you’d see in Manhattan, if you visit the Lincoln Center.

Since the hotel wasn’t open yet, there wasn’t any traffic, but I think that the traffic flow will be as an integral part of the street scene in front of Vdara as the art. One thing that sets City Center–or at least this part of it–apart from other resorts on the Strip is that because of the density, you’re never going to be too far away from the street when you’re in the public spaces. The third-floor pool, for example, faces a parking structure on the west. It’s going to have a different sort of vibe than the usual “desert oasis” feel of most Las Vegas pools, where either the hotel towers themselves or extensive setbacks remove visitors from traffic. It will feel more like part of a cityscape than an isolated vacation paradise. Is this a good thing? I think tastes will vary. I can see some people being put off by the energy and noise, but I can see others who go nuts when they’re surrounded by silence loving it.

Is this deliberate? I don’t know. It’s clear that the designers put a great deal of thought into how to handle traffic flows, so they can’t have been ignorant of the fact that Bar Vdara’s outside area will be surrounded by cars. It sounds ridiculous to call traffic noise an amenity, but I think it will be something that distinguishes this hotel from others, on a subconscious level at least.

I got to tour two suites (rooms 27.001 and 27.003, if you’re curious), and they both had a sleek, sophisticated look with some reassuring touches of color. I’ve stayed in a few minimalist hotels, and these were not at all minimalist, though I’d definitely say they are not fussy. There were lots of whites and browns with splashes of green, red, and blue where appropriate, with big windows and no discernible outside noise, though we had a great view of the Cosmopolitan construction.

Overall, there’s certainly something that’s nearly intangible that makes this hotel feel different from other Las Vegas resorts. Part of it will probably be the traffic. I think that they’ve got a shot at attracting a different clientele here: but for the size, this hotel wouldn’t look out of place in San Francisco or Manhattan. I can see it being the centerpiece of a non-gaming vacation that would make those that traditionally go for Las Vegas happy.

But wait! you might protest. What does Las Vegas want with people who don’t gamble? Isn’t the misguided attempt to pursue free-spending leisure travelers responsible for $200+ room rates and decreased comping?

To that I’d respond that Las Vegas shouldn’t be too choosy about who comes to vacation here. There are a lot of people who like to gamble, but there are also many who don’t, and giving them a reason to visit Las Vegas has always been wise. It’s funny that some people stamp their feet and demand “diversification,” but others complain when an operator does something beside run a slot barn. Like Bellagio, Mandalay Bay, Venetian, and Wynncore, Vdara is at least a step in the direction of diversifying the tourist sector of the economy. If all we depended on was serious gamblers, or leisure travelers, or convention-goers, we’d be in much worse shape than we are now. There are still plenty of places on the Strip for those who want the traditional hotel/casino; something different can’t hurt and will likely help.

I think that, within Las Vegas, the best analog for Vdara is the THEhotel at Mandalay Bay: it’s the same idea (luxury non-gaming hotel), but extrapolated to the next level and physically removed from the main hotel/casino. From my experience today, you’d have no trouble checking in at Vdara and spending a great deal of time at Bellagio, but the hotel doesn’t feel at all like an extension of Bellagio. I don’t know how it will interact with Aria since I haven’t seen that yet, but I imagine that it will be somewhat similar.

As far as the opening goes, there was plenty of gratitude to go around for the various partners, designers, and builders, and a bold promise from Jim Murren that 2010 would be better than 2009 and 2011 would be better than 2010. He said that people in the future will mark this as the turning point, the moment when Las Vegas started to come out of “the Great Recession.”

Is he right? Well, it’s not really a hypothesis that’s falsifiable, so he’ll never be proven right or wrong. If City Center is a “success” (a vague term that hasn’t been defined by anyone to my satisfaction) and Las Vegas recovers economically in the next 2-5 years, it will be tempting to say that this was the turning point. If the overall economic gloom worsens, though, particularly in the aftermath of sudden, unexpected events (war, terrorism, or natural disaster) one could say that, “City Center would have been the turning point if not for…” On the other hand, if visitation and gaming revenues climb, someone could argue that they would have done so anyway.

Turning City Center into a savior or a test case for one’s personal political or economic pet peeves does the project a disservice. As I alluded to yesterday on 2 Way Hard 3, maybe we shouldn’t be asking any more of this development than that it be a well-designed hotel/casino/resort. On that level, it certainly succeeds.

I’ve got a lot more to write about this, so don’t be surprised if I spin this into a detailed newspaper or magazine piece. I’ve also got some pictures that may be showing up somewhere.

In sum, I have seen one part of City Center and I have hopefully found some words to begin to explain it.

Posted in business of gambling, life in vegas on 12/01/2009 07:22 pm by Dave

I was doing some research in the 1997 time frame and happened across this quote in the July 1997 Casino Executive Magazine:

“If you’re the last person to build that last $1 billion project in Las Vegas, you might be wishing you hadn’t spent your money that way.”
–Harrah’s [then] CEO Phil Satre

From the perspective of 2009, truer words have never been spoken. You’ve got to adjust for inflation, of course; if we were only talking $1 billion projects, no one would be worrying at all.

Of course, it’s always easy to make bold predictions on either side since the economy runs in such cycles. Someone preaching doom sounded out of touch in 2006, and someone ringing the bell for expansion sounds like a pollyanna now. When you consider that Satre was speaking before the Bellagio opened, you’ve got to admit that the bulls had a pretty good run.

Posted in business of gambling on 11/19/2009 02:47 pm by Dave

As you may know, I’ve been immersed in a mammoth study of Nevada casino slots’ hold percentages. It’s driven by the question: “Does raising hold percentage actually decrease play?”

That would seem to be the intuitive answer. If people get less value for their dollar (assuming that value=time on device), then they will be less ready to play.

The revenue statistics, however, don’t seem to say so. Here’s a chart that shows the total number of slots, the win, the hold percentage, and the total amount played, or handle, for the Las Vegas Strip 2000-2008.

As you can see, both handle and win steadily rise after the 2000-3 decrease. The hold percentage increased during the slump, and continued to go up as the handle and win grew.

Here’s another chart that may make more sense visually. I’ve had to multiply the hold % by 10,000 to get it to show up.

It doesn’t seem that rising hold percentage has anything to do with the handle. If it did, you’d expect to see handle falling as hold percentages go up.

This is where it gets tricky. You can spin it just about any way you like. Those arguing for loose slots can say that in 2008 casinos reaped what they had sown as players finally got fed up with tighter slots. But the visitor numbers don’t bear that out: people who came to Las Vegas still played, tight-slots advocates might argue.

There doesn’t seem to be a direct correlation, and the fact that revenues grew most impressively during years with big jumps in hold suggest that something else is at work here.

It’s worth mentioning that, thanks to higher hold percentages, that in 2008 total handle fell to 2004 numbers, but slot win fell only to 2005 numbers. That’s an argument that most executives–and shareholders–would probably find persuasive.

Comparing 2008 to 2000, we see more than $800 million more in revenue and over $6 billion more in play, with an installed base that’s shrunk by about 18 percent.

This is why the slot hold study is taking a while–it seems like every time I look at a source of data that will conclusively prove a link between hold and revenue (one way or another), I’m back to square one. After analyzing revenues, I thought that hold might be a fruitful avenue, but I’m still back where I started.

It doesn’t seem possible to prove a connection between hold and handle, and higher holds have led to consistently higher revenues. It’s just possible that the bean counters are right. On the other hand, handle has been falling faster than win, so those who demand looser machines may have a point. On the third hand, a decrease in hold percentage did not figure in the 2004-2007 boom. There just doesn’t seem to be a correlation.

In the paper, I explore some theories for the climbing hold percentages that may suggest the true reasons for the increase have less to do with the dictates of slot managers than changes in technology and player preference.

Posted in business of gambling on 11/12/2009 11:07 am by Dave

Gaming revenues fell about 9 percent in September, compared to the previous year’s take, as the slump continues for a 21st month. From the LVRJ:

Nevada gaming revenues fell for the 21st straight month in September.Casinos statewide collected $911.1 million during the month, an 8.99 percent decrease compared with a little more than $1 billion won from gamblers in September 2008.
On the Strip, gaming revenues were $506.4 million, a decline of 3.58 percent compared with $525.2 million a year ago.Other areas of Clark County suffered much deeper declines during September. Boulder Strip casinos were down 28 percent, and the balance of the county was down 20 percent while Mesquite and Laughlin both recorded 12 percent drops.On a whole, Clark County was down 9.3 percent.Every reporting area of Nevada was down compared to a year ago.September’s gaming revenues translated into a 14.56 decline gaming taxes collected by the state. Nevada collected $54.3 million during the month, compared with $63.5 million a year ago.

via Gaming revenues decline almost 9 percent in September – Breaking News – ReviewJournal.com.

In honor of the 21st straight month of gloom, I’m going to do one of my customary numbers breakdowns. See one man, sitting at a computer, spend enormous amounts of time and energy to look behind the numbers and see what’s really going on. In all likelihood, my conclusion will be, “Casinos didn’t do as well this year as they did last year.”

Since every area was down, I’m not going to break things down by reporting area, which admittedly adds a lot of detail but, on the other hand, takes a great deal of time, which I don’t have a lot of today. I will say that year-year declines are awful news for the Boulder Strip and North Las Vegas areas, since they both added major news casinos (M Resort and Aliante Station) since last September. Things were particularly gruesome at the craps tables on the Boulder Strip–they made only $222,000, with a paltry 2.27% win percentage. Last September, about $11 million was played at Boulder Strip-area craps tables; this September, about $9.7 million was wagered. People are playing less, and this month they got luckier.

Back to the statewide analysis. Let’s compare numbers for the past four Septembers to put this in perspective.

The shrinking of Nevada’s gaming industry continues. In four years, the state has lost 321 table games and 8,301 slot machines. That’s a 4.6% reduction in the total number of slots in the state and a 5.4% shrinkage in the number of tables. The problem is that since then revenues have shrunk by 7.4%. There are fewer seats for players, but they are playing less at the remaining games than they were four years ago.

Looking at slots, in September 2006 players wagered a total of about $13.9 billion on the one-armed bandits.* In September 2009, they only played about $9.1 billion. That’s a 34.5% decrease, which puts the 4.6% decrease in the installed slot base into perspective. There’s a lot less gambling going on in Nevada these days.

I find it interesting that the win percentages have run in opposite directions from September 2006 to September 2009. Table win percentage declined by about 1 percentage point, while slot win percentage increased by about 1 percentage point. I’m incorporating the new numbers into my epic 1992-2009 slot hold study, which is nearly finished and I’m looking forward to seeing what the new numbers mean for the study. Is there a trend, or just a bunch of random walking down the Boulevard?

The shrinking installed base and revenues has implications for Nevada’s tax structure. Look at it this way: In September 2009, the average Nevada casino slot machine made $115 per day. Of that, the state took $7.76 cents out in gaming taxes (there’s also a $250 annual license fee, but we’ll ignore that for now). Considering that the slot base has shrunk by 8,301 since September 2006, that means that, from slot machines alone, the state is getting $64,415.76 less per day in tax revenues from slot machines if people continued to play them at current levels. Extrapolated over a year, that’s a $23,511,752.40 shortfall. That might look small in comparison to the state’s $18.5 billion fy 2010 budget, but it’s a definite problem.

So what does all this mean for the future, particularly the impending increase in gaming supply that City Center will bring in less than a month? Table play actually improved statewide this September, so that could bode well for high-end play. Slots remain in the doldrums, however, and it is hard to see what can reverse that trend.

On the other hand, visitor volume actually increased for the month, so there is some cause for optimism. But it’s clear that the visitors aren’t gambling as much as they once did.

___________________________________
*I calculate the total handle, or amount played, by dividing the total win by the win percentage.

Posted in business of gambling on 11/10/2009 12:59 pm by Dave

I’m full of good cheer over at the Las Vegas Business Press, where I start by looking at where the employment numbers are now and where they seem to be heading:

In July 2007, perhaps the high-water mark of the 2004-07 boom, more than 1.2 million Nevadans were working; slightly less than 27 percent of them were in hospitality. This might have been a sign that the state was diversifying, however slowly. But it also reflects an increase in construction workers busy building new casinos and hotels.

Two years later, the numbers for July suggest that the percentage of Nevadans working in leisure has continued to fall. Despite massive job losses in construction, leisure workers accounted for more than 25 percent of working Nevadans.

This makes hospitality the states biggest industry, but its worth noting that in the past 10 years the percentage of Nevadans working in it has fallen about 5 percent.

via Las Vegas Business Press :: David G. Schwartz : Job seekers shouldnt wait for the casino cavalry; its not coming.

My quick summary is that while Las Vegas gaming and tourism will likely continue to employ many people, there’s no way (minus a landscape-altering shift) that casinos alone are going to return Las Vegas to the rates of job growth that we’d been seeing over the past two decades.

It’s not a doom and gloom scenario–it’s one that I think is a realistic extrapolation of trends that started independent of the current downturn. Since the state’s economy is so heavily dependent on gaming and tourism, I throw this out there as a small policy suggestion: casinos cannot be the golden geese in Nevada’s future.

Of course, unpredictable events can make a hash of any predictions, so it’s possible that five years from now the casino industry will be employing 100,000 more people than it does today. That would be after the federal government offers Americans a $10,000 annual tax credit against travel to Las Vegas, and Las Vegas alone. I’m not saying it’s even probable, but it is possible. This is one of the reasons that I generally shy away from making predictions: there’s just too much that we can’t account for. Even within the highly-contained world of sports prediction, for example, the best professionals can correctly guess the outcome of a game less than 60% of the time. And that’s a system where virtually all the variables are known. Once you get out into the real world, predictions are (in my humble opinion) generally useless.

That being said, I’m not making a prediction–I’m pointing out a trend that I think should be of interest to Nevadans.

Posted in business of gambling on 09/08/2009 12:52 pm by Dave

I heard an ad for this place on the radio driving to work today and started thinking about how odd it is that a nightclub on the Las Vegas Strip seems to be glamorizing mental illness. Live from Las Vegas, it’s Skizofrenia, the Nightclub:

Skizofrenia features “dark alternative music” every Friday at the Harmon Theater. I guess because it’s an alternative/industrial/goth night thing, the place is supposed to be “dark.” Well, schizophrenia’s a pretty serious medical condition that doesn’t sound like a fun night out to me. Here are some of the early symptoms of schizophrenia from schizophrenia.com:

–A blank, vacant facial expression. An inability to smile or express emotion through the face is so characteristic of the disease that it was given the name of affective flattening or a blunt affect.
–Staring, while in deep thought, with infrequent blinking.
–Clumsy, inexact motor skills
–Involuntary movements of the tongue or mouth (facial dyskinesias). Grimacing at the corners of the mouth with the facial muscles, or odd movements with the tongue.
–Parkinsonian type symptoms- rigidity, tremor, jerking arm movements, or involuntary movements of the limbs
–Appearing desireless- seeking nothing, wanting nothing
–Suicidal thoughts or suicidal ideation
–Rapidly changing mood- from happy to sad to angry for no apparent reason (called labile mood)
–Increased withdrawal, spending most of the days alone.
–Becoming lost in thoughts and not wanting to be disturbed with human contact
–Neglect in self-care- i.e. hygiene, clothing, or appearance
–Replaying or rehearsing conversations out loud- i.e. talking to yourself (very common sign)
–Overpowering, intense feeling that people are talking about you, looking at you
–Overpowering, intense feeling you are being watched, followed, and spied on (tracking devices, implants, hidden cameras)
–Thinking that someone is trying to poison your food
The First Signs of Schizophrenia

All the ingredients for a great night out on the town, huh? Why not just call the club “Leukemia” or “Emphysema” or some other debilitating disease? It’s nice to know that a life-threatening mental disease is considered “cool.”

It’s not like I’m coming at this as some kind of joyless Puritan or member of the PC brigade. They’ve got the right to call their club whatever they want to. But I also have the right to tell people how idiotic it is. Do they know exactly what schizophrenia is, outside of “something that is bad?” Like building a casino in the shape of a tomb, it’s one of those things that probably seems like a really neat idea to someone who doesn’t know much about the subject, but is, in fact, dumb.

I wonder if they have “Facial dyskinesias Fridays–display your involuntary muscle spasms and drink for half-price until 2!” If they’re raising awareness of mental illness that’s one thing, but assuming that it’s all about latex nurses and straitjackets doesn’t do anyone any good.

Posted in life in vegas on 08/20/2009 01:30 pm by Dave

The Las Vegas Sun has a graphical “snapshot” of gaming revenue numbers for the past five years:

Gaming win at Clark County casinos – Las Vegas Sun.

As far as revenue per game/slot goes, this is an interesting graphic because even if this number remains constant gaming revenues will still decrease, as there has been a definite shrinkage of both slot and table inventory, as you can see in this handy pdf that we put together a few months ago.

Posted in business of gambling on 08/18/2009 06:12 am by Dave

I’m currently hip-deep in a study of slot hold percentages for Nevada and on the Las Vegas and Boulder Strips for the period 1992-2009. Originally, it started with a question: how have casinos reacted to the recession? Have they raised or lowered their slot holds?

There’s some anecdotal evidence that casinos have tightened their slots–if you consider people complaining that slots are tighter anecdotal evidence. Were the players complaining about tighter slots right? Well, the answer (since late 2007, at least) is…yes and no. I decided to take a look at how each financial quarter since 2007 broke down for the state, the Las Vegas Strip, and the Boulder Strip. This way, I figured I’d have a good gauge of how casinos catering to tourist (LV Strip) and local (Boulder Strip) crowds responded. Here’s a chart that sums up what I found:

From the 4th quarter of 2007, slot hold statewide has bounced around slightly, with a tiny net decline, going from 6.08% to 6.02%. The Strip saw a bigger raise in hold percentage, from 6.73% to 7.01%. The Boulder Strip saw a net decline, from 5.35% to 4.96%.

Bear in mind that much of this isn’t just casino managers pulling a giant lever and making all the machines pay back more or less. The slot mix itself has changed, with higher-hold pennies becoming more popular. That complicates things, but doesn’t change the overall effect, which is that slots are paying back slightly better for locals than they were 18 months ago, and slightly worse for tourists.

What does this all mean? Well, we can theorize that locals casinos have responded to the recession by loosening the machines slightly, although nowhere near mid-1990s levels. Strip casinos don’t seem to have changed much–the hold has been fluctuating around 7 percent since 2007.

In June. slot revenue on the Strip declined 16.08 percent from the previous year. In the Boulder Strip reporting area, slot revenue declined by 17.86 percent, despite adding about 2,500 new machines with the opening of M (the Las Vegas Strip, by contrast, lost 755 machines). This is not exactly a ringing proof of the “lower slot hold–watch the customers come back in droves” theory. Of course, one might argue that the slots simply haven’t been loosened enough, or that the slight loosening of the slots prevented an even bigger decline. But then we’re getting into counter-factual arguments that are impossible to refute.

I cannot put into words the satisfaction that comes with devoting a great deal of time to an important question and arriving at an answer that basically boils down to: “Answer unclear–concentrate and try again.”

You can see the chart–with quarterly slot hold data–on a handy pdf right here.

I’m thinking of making this the first in a series of 1-page responses to statistical queries that I’ll post here and at http://gaming.unlv.edu. I’m not looking to supplant the Las Vegas Advisor’s Question of the Day or anything, but since I get a lot of questions about this sort of thing, I figured that this might be a more efficient way of answering them.

So…any statistical questions that I can answer with a little numbers-checking and eighth-grade math?

Posted in business of gambling on 08/13/2009 01:45 pm by Dave

There’s a great article by Liz Benston in the LV Sun today about the investigation that ultimately deprived a nightclub of its license:

Managing a Las Vegas nightclub requires the deft and daring skill of operating a party environment that almost crosses the line into illegal activity. Anything less would be considered too tame to generate a buzz.

Planet Hollywood knew its tenant, the Prive nightclub, was crossing the line but didn’t stop it, and gaming regulators pounced.

Last week Planet Hollywood agreed to pay a $500,000 fine to the Gaming Control Board after acknowledging it knew of illegal and illicit activities occurring at the club, which operates on the mezzanine level above the casino. On Thursday the county denied the club a permanent liquor license, forcing its closure at midnight Tuesday, when its temporary liquor license expired. The club opened less than two years ago.

As a result of the unprecedented enforcement action against Planet Hollywood for allowing a nightclub to run wild, contracts between hotels and their nightclubs are now being rewritten to give the hotels greater authority to lay down the law with nightclub managers.

via Is the party over for Prive? – Las Vegas Sun.

If you haven’t already, I encourage you to click over and read the whole thing.

The goings-on at Prive bring up a deeper issue that I alluded to in a story about Randall Sayre’s 7/21 Industry Letter (pdf). Here’s most of the letter:

Recently there has been a great deal of attention focused on nightclub operations affiliated with Nevada licensees. Clearly, this is an important issue which, if
left unattended, can lead to serious regulatory ramifications. In addition to nightclub operations, there are a number of other areas where
regulatory concerns have surfaced. Either through lack of knowledge or apathy, licensees are creating regulatory challenges in areas requiring corrective action. Following are just a few examples of these areas of interest:
• The conduct of promotions;
• Approval and conduct of tournaments and charitable events;
• Race and Sports Book Operations;
• Intellectual property theft; and
• Questionable or misleading advertising
The vast majority of this State’s licensees attempt to “get it right” and any indiscretions are typically addressed in a non-disciplinary fashion with the cooperation
of the licensee. The Board recognizes these are hard economic times and licensees are facing increased competitive pressures. This does not mean, however, the Board
can allow a reduction in the regulatory standards governing licensees’ operations. In order to reduce disciplinary actions and foster open communication between
the Board and gaming licensees, the Board is proposing informal seminars covering our collective areas of concern. These seminars would allow the Board to identify some
common pitfalls frequently seen and provide an opportunity for the industry to voice their challenges and concerns. The process will also provide any needed clarification of
governing statutes and regulations.
This would be an operator’s workshop, not a formal seminar on law. The appropriate audience would be mid-level supervisors and program managers. It would
be property individuals that are responsible for following and enforcing policy and legal/regulatory requirements.

I hope that Sayre is successful in getting the casinos to send their managers to these workshops. This is the kind of program that they should be thankful for. Here’s why:
Imagine a homeowner throwing a party. During the course of the night, things get a little loud. The police are called. Should they break down the doors and immediately rest everyone for disturbing the peace, or knock on the door, ask to homeowner to keep it down, and see what happens?

The first option preserves public order and minimizes the burden on law enforcement–imagine if they had to arrest, transport and book everyone in the house, instead of policing the rest of their jurisdiction. Of course, if things get loud again and noise complaints continue, they would have to take “corrective action,” but usually, a little reminder of neighborly courtesy is enough.

This is essentially Sayre’s approach. Some parts of the regulations casinos operate under–the Minimum Internal Control Standards–are completely unambiguous. You’re either in compliance with them, or not. Others are more nebulous. Take, for example, NRS 463.0129, the backbone of gaming regulation in Nevada:

NRS 463.0129 Public policy of state concerning gaming; license or approval revocable privilege.

1. The Legislature hereby finds, and declares to be the public policy of this state, that:

(a) The gaming industry is vitally important to the economy of the State and the general welfare of the inhabitants.

(b) The continued growth and success of gaming is dependent upon public confidence and trust that licensed gaming and the manufacture, sale and distribution of gaming devices and associated equipment are conducted honestly and competitively, that establishments which hold restricted and nonrestricted licenses where gaming is conducted and where gambling devices are operated do not unduly impact the quality of life enjoyed by residents of the surrounding neighborhoods, that the rights of the creditors of licensees are protected and that gaming is free from criminal and corruptive elements.

(c) Public confidence and trust can only be maintained by strict regulation of all persons, locations, practices, associations and activities related to the operation of licensed gaming establishments, the manufacture, sale or distribution of gaming devices and associated equipment and the operation of inter-casino linked systems.

(d) All establishments where gaming is conducted and where gaming devices are operated, and manufacturers, sellers and distributors of certain gaming devices and equipment, and operators of inter-casino linked systems must therefore be licensed, controlled and assisted to protect the public health, safety, morals, good order and general welfare of the inhabitants of the State, to foster the stability and success of gaming and to preserve the competitive economy and policies of free competition of the State of Nevada.

(e) To ensure that gaming is conducted honestly, competitively and free of criminal and corruptive elements, all gaming establishments in this state must remain open to the general public and the access of the general public to gaming activities must not be restricted in any manner except as provided by the Legislature.

The key here is the requirement that licensees “protect the public health, safety, morals, good order and general welfare of the inhabitants of the State, to foster the stability and success of gaming and to preserve the competitive economy and policies of free competition of the State of Nevada.” Technically, a casino could have its license revoked for a kitchen worker forgetting to wash his hands after using the bathroom–that is, after all, endangering the public health. Should that happen? No, because no one would be willing to build a multi-billion casino if their license rested on such a slender thread.

I’m aware that there is some disconnect–some might call it hypocrisy or at least confusion–in the idea of casinos as watchdogs of “morals” when the bulk of promotion for Las Vegas in the past few years has been geared towards proving that the city is a place without morality. But it’s clear that, in the minds of the industry and its regulators at least, that there is immorality and then there is immorality. Gambling more than you should is OK; cheating on your spouse with a consenting adult is OK; engaging in public sex or, if you a prostitute, soliciting clients in casinos is not. I’m not saying that drawing the line between these things is logical, or even rational; I’m just saying that it’s there, and everyone in the industry knows it.

A lot of things that Sayre makes reference to blur that line between permissible and impremissible immorality. The letter is the Control Board’s offer to work with the industry to clarify exactly where the line is, to explain what will put licensees in clear violation of NRS 463.0129. With this letter, the GCB is saying that, regardless of what’s been going on until now, here’s how things are going to run from now on. They’re doing this without staging intrusive raids or indiscriminately levying fines for things in this gray area.

If the operators don’t take the Board up on its offer, they will be out of excuses if they are tabbed for “corrective action.” They have an out–”I didn’t know that was a violation”–and if they don’t take it, they’ll only have themselves to blame.

Posted in business of gambling on 07/29/2009 11:35 am by Dave

Harrah’s had announced–in very unspecific terms–what it plans to do with its fantastic assortment of Strip acreage. From the LV Sun:

They didn’t announce their intentions at the time. The economy was still humming, and with tourism booming and new resort construction expected by consumers and demanded by investors, the decision was something of a dirty secret.

Their plan was nothing less than a rejection of the implosion-punctuated business model that has defined Las Vegas for decades. In place of a new casino resort, Harrah’s came up with an idea that was more Bourbon Street than Las Vegas Boulevard.

Internally dubbed “Project Link,” the plan calls for a collection of about 20 restaurants and bars to be built along a winding corridor between the company’s O’Sheas and Flamingo casinos, on the east side of the Strip.

With a mix of “eclectic” and “mostly casual” restaurants and bars opening to the street, it’s an attempt to create the kind of entertainment district that has developed organically in cities such as Los Angeles, Memphis and New Orleans yet is lacking on the Strip, with its enclosed, casino-centric zones.

via Harrah’s plans new ‘street’ of bars, eateries near Strip – Las Vegas Sun.

This may be a great idea. Or it may be an underwhelming under-utilization of an expensive, unbroken swath of Strip real estate that stretches from Harrah’s to Paris and just about the I-15 and Koval.

Positives: Harrah’s built itself as a company that caters primarily to the middle market. This move caters to the middle market. Harrah’s isn’t going to be borrowing a great deal of money anytime soon. This project sacrifices minimal cash flow and should be less expensive than building something from scratch. Between Wynncore, Bellagio, and Aria, there is going to be a great deal of competition for the finite high-end market in the near future. This doesn’t threaten to intrude into that market.

Negatives: Harrah’s has assembled a pretty big portfolio on the Strip, and it’s hard to see how Project Link takes advantage of this. As the first phase of something bigger, this could be a great idea. Indeed, the artist’s rendering shown in the Sun article has a great deal of undeveloped space fronting Koval. But if this is it, it doesn’t seem to take advantage of all of that land. Besides that, there really aren’t any.

On the other hand, things don’t look so hot for Imperial Palace. Its Strip frontage seems to be replaced by a massive billboard for a show across the street, kind of like when Bally’s was wrapped with a mega-size ad for “The Producers.” Clearly the casino is still there, but it’s not going to be as visible a part of the Boulevard as before.

I think that Project Link is, overall, a positive, in that it rejects the cookie-cutter thinking that’s permeated the industry. Just because Steve Wynn can profitably cater to the high end doesn’t mean everyone can. I think it’s about time that companies started focusing on their strengths and presenting distinct products as opposed to trying to do the same thing.

In a sense, I think that Project Link will solidify Harrah’s Strip holdings as the anti-City Center. Instead of a newly-built collection of luxury hotel space with a single big casino, you’ve got an assembly of already-built mid-size and larger casino hotels. Outside of Caesars Palace, there’s not much retail. If the Crystals and Aria are the axis of City Center, you couldn’t pick a better contrast than Project Link’s food court (which is essentially what it sounds like) and O’Shea’s/Flamingo.

Whether Project Link is heralded as a brilliant strategic move in ten years depends, I think, on how City Center does. If it’s successful, then this will probably be scuttled mid-way in about 2 years and replaced with plans for something more upscale. If it doesn’t, this will be seen as genius.

Will City Center be a success? We don’t know yet. There are just too many variables. Room rates are down, but high-end play seems to be up. What’s that going to mean in December? It’s anyone’s guess. The political and economic situation is just too fluid to make any predictions with any real confidence. Even if the project comes in under budget and is executed flawlessly (neither of which seems to be true), if gas rises to $5/gallon and airline capacity continues to fall, it’s hard to see how it would be a success. On the other hand, if 42 million people have the means and desire to visit Las Vegas in 2010, it’s hard to see how it wouldn’t make a ton of money. The most frustrating thing about making this kind of gamble has to be that most of it is out of your hands. Casino executives should be watching the players down at the WSOP for some tips on how to handle bad beats…or not to handle them. Because if the past two years have taught us anything, it’s that there’s a far bigger element of gambling to the casino-operating business than anyone’s been willing to admit for the past twenty years.

And yes, that is a Deep Space Nine reference in the title.

Posted in business of gambling on 07/13/2009 08:34 am by Dave