I’ve got a new Las Vegas Business Press article up. I got the idea after coming across the quotation that I mention in Hayek’s The Road to Serfdom:
In the past 10 years, the national casino industry has become progressively more concentrated. Through buyouts, mergers, and acquisitions, effective control of the gambling business has been ceded to a select group of operators.
Theres nothing sinister about this; most American industries have evolved in a similar fashion. In fact, this is usually taken as a given. Whens the last time you took a drive in a Studebaker or paid an hourly fee to Compuserve to access the Internet?
Just because concentration has happened in many other industries, however, does not mean that it is an inevitable or necessarily good. Recent events in banking, at the very least, have shown that bigger is not always better.
I think that there is still some debate on the optimal size for a Strip casino operator. Having only one casino means that you can concentrate on promoting one property and do it well, but also means that you’ll be neglecting some markets. Two seems to be working out well for Wynn, though they’re both at the high end of the market. Three might also make sense–high, middle, and low.
Anything past that, and you’ve got to wonder if diseconomies of scale start to kick in.
Or is owning ten plus casinos really the best way to operate, and it’s just that too many operators have taken on too much debt to get the most out of it.
Someone could write a great doctoral dissertation on this subject.