Interesting story on the M resort a few days ago in the LV Sun. My eyes lit up when I saw this bit, because it answered a crucial question: what’s been going on with the Boulder Strip’s roulette hold percentage since March?
Marnell says he doesn’t shy away from volatility because he knows the casino will prevail in the long run. At the M, a single player’s multi-million-dollar win at roulette has been offset by millions lost at blackjack and craps in recent months, Marnell says.
In 2008, the annual average for roulette win percentage on the Boulder Strip was 21.21%. The statewide average was 20.13%, which is in line with previous years. Across the various reporting areas, roulette hold percentage tends to bounce between 17 and 22%.
In February 2009, with 34 locations reporting, the Boulder Strip casinos had a combined hold percentage of 20.85. Again, that’s well within the normal parameters. Together, the casinos lumped into the Boulder Strip reporting area won about $431,000 at their 24 roulette tables.
But in March, with 27 tables in 35 locations (that’s the M opening), Boulder Strip roulette had a mind-boggling win percentage of -63.19%. That’s right–a beyond-double-digit negative win percentage. Instead of winning about $400,000, Boulder Strip roulette tables lost nearly $1.9 million. If we assume that the rest of the area won its usual amount, that means that Marnell’s casino had a player win about $2.5 million in roulette in a single month. How is this possible? High bets, with lots of volatility.
But what about Marnell’s claim that the casino made up for the roulette loss with better-than-expected play at craps and BJ? We can take his word for it, or we can see if the numbers back him up.
The opening of the M bumped the number of blackjack tables from 169 to 217, an approximately 28% increase. Year-to-year, BJ win nearly doubled, from $2.92 million to $4.795 million. Month to month, with a 28% increase in tables, the win increased by about 80%, with a slightly lower win percentage. Everything else being equal, it seems likely that someone had a very bad month playing blackjack somewhere on the Boulder Strip. It makes sense that this high-end play went down at the M.
Craps, on the other hand, saw a modest bump in overall win, February to March (5%), with a 21% or so drop in win percentage (from 17.17% to 13.60%). This was a bit higher than the state’s average for the month (13.23%), which lends credence to the assumption that someone lost heavily, though not nearly as badly as in February.
Since March, the numbers for the Boulder Strip have bounced around quite a bit. In April, the roulette tables had a 29.52 win percentage, indicating heavy losses outside of the usual range, while craps tables lost $271,000, for a negative win percentage of about 2.6%. In May, the win percentage on craps had soared back up to nearly 30%, with roulette tables again falling into the red: they lost more than a million dollars in that month, for a win percentage of about -21%.
If this is all attributable to the M (and word on the street backs up Marnell’s claims of heavy action there), then it confirms that this is the “sky’s the limit” Horseshoe of Benny Binion’s day, redux. Of course, Benny didn’t pay so much attention to interior design, but these are different times. At the high end, at least, Marnell is running an honest-to-goodness gambling joint.
With his commitment to volatile high-end play, Marnell is at odds with the mentality that’s sought profit certainty. In the past 25 years, slots, which are much less volatile, have pushed out tables as the dominant piece of the gambling puzzle for most casinos. In the past 15 years, non-gaming parts of the resort, which are less susceptible to nightly swings, have outpaced the growth of gambling revenues.
It remains to be seen whether Marnell’s let the chips fall where they may philosophy catches on. I don’t think it will become the industry standard, simply because too many people on the admin and finance sides will think that this is a lousy business model. They want good, solid cash flow that makes shareholders happy. On the whole, they’d rather see $200/night rooms filled to 94% occupancy with less action on the casino floor.
I have a pretty vivid mental image that I’m going to share. It won’t make much sense if you haven’t seen the new Star Trek movie, but bear with me. Jim Kirk and Leonard McCoy have this exchange:
McCoy: Space is disease and danger wrapped in darkness and silence.
Kirk: Well, I hate to break this to you, but Starfleet operates in space.
I’m imagining something like that an a casino executive committee meeting:
CFO: Gambling is disorder and volatility wrapped in panic and fear.
Casino ops: Well, I hate to break this to you, but casinos are in the gambling business.
That may be something else that was funnier in my head than on your computer screen. If you imagine Karl Urban as the CFO, it sounds a lot better.
Eight hundred words later, I’ve said most of what I wanted to say about casino volatility…for now. Seriously, the M will make a great case study for someone’s thesis.