The February gaming revenue numbers are in for Nevada, and the news is not good. From the LVRJ:
Casino revenue statewide continued a 14-month downward spiral in February. But there was one bright spot in the avalanche of negative numbers — gaming tax collections increased for the first time in seven months.
Throughout Nevada, gaming revenue fell more than 18 percent during February and more than 23 percent on the Strip, figures released Tuesday by the Gaming Control Board show. The raw numbers — $839.5 million statewide and $427.4 million on the Strip — were the lowest single-month gaming revenue totals since 2004.
For the first two months of 2009, gaming revenue statewide is off 16.3 percent compared with 2008 while Strip gaming revenue is down almost 19 percent.
NEVADA ECONOMY: Casino revenue falls – Business – ReviewJournal.com.
I took a look at the Gaming Revenue Report for February 2009 myself, and if anything I think the RJ article downplays the bad news. On the Las Vegas Strip, table games were off by more than 35%. Baccarat was down by over 50%; pai gow took in just under 60% money this February.
Part of this is probably due to the Chinese New Year falling in January rather than February. But it’s not just a calendar issue: for the past 3 months, those games are off 32%, 35%, and 41%, respectively. To me, this suggests a serious weakening in high-end play, particularly from Asian high rollers (if you’ve got an alternate theory, I’d love to hear it).
I don’t see much compensation at the low end. Penny slot revenues are up 18%, it is true, but the installed base of penny slots grew by about 25%, from 8,003 to 10,006. The win percentage also increased by about 1 percentage point, which ultimately translates into less time on machine and less player satisfaction. Good news for the remaining high-denom players, though: $5, $25, and $100 machines all had lower hold percentages this February. $100 machines held only 2.61%, compared to 6.85% a year ago. Yet total win fell by more than 75%, despite having nearly the same installed machine base.
All told, slot win on the Strip was down by over 9%, which is in line with a drop in visitors of about the same percentage.
This suggests that the middle-market gamblers who are coming to Las Vegas are still playing their share; the high end, though, is either staying away or playing appreciably less.
The best parallel is to the early 1980s, when a recession and international economic turmoil kept previously big-spending players away from Vegas. In response, casinos began courting the “middle-class” gambler with a little more fervor. This meant coupon books, cheap rooms, and cheap food. It was remarkably successful, until in the 1990s operators became convinced that if they could make money off of middle-market gamblers, they’d clean house with masses of free-spending upmarket visitors. That worked pretty well, too, until our current difficulties.
The answer simply isn’t to burn all the baccarat tables and install penny slots, though. Reno is the best counter-argument. The casinos there didn’t go upscale or substantially re-invest in their facilities, and by every measure the industry there is smaller than it was ten years ago. If it was just about offering people free and cheap stuff, Primm, Laughlin, and Jean would be the most successful markets in the country. They’re not, so there’s got to be more to it.
For now, though, it seems clear that any company relying heavily on high-end table play is going to be running against the wind for quite some time unless they figure some way to attract high rollers when the rest of the market can’t.