College betting seen as amenity rather than a profit center

David Strow

Tuesday, Feb. 1, 2000 | 11:06 a.m.

No one can say exactly how much casino bottom lines would be affected if betting on college events is banned by Congress.

Observers, analysts and executives agree on one thing -- there isn't much money to be made in taking these bets. But what many casinos are afraid of losing are the indirect benefits of offering this option to patrons.

"Our doors would not be open just for college sports," said Bill Hornbuckle, president and chief operating officer of the MGM Grand hotel-casino. "We don't offer college sports to make money on college sports.

"But does the customer continue to come into the door (if college bets are banned)? That becomes the bigger question, and one we're fearful of."

"While in the scope of things they're a small operation, they nonetheless constitute huge expenditures by our casinos," said Wally Chalmers, vice president of the American Gaming Association, a Washington-based lobbying group. "They are real crowd pleasers, and they attract people to the casinos. As such, it's just one more appeal they have to our customers and it would have a serious impact on people who otherwise wouldn't come."

Sports betting is a low-margin business, with relatively favorable odds for the player and a high payroll. This margin is whittled down even lower with college sports, because of the tremendous number of games that must be posted, as opposed to professional sports.

That leaves many more opportunities for a skewed betting line -- and that's what professional gamblers prey on.

"I think there's so many college games that the oddsmakers do get caught," said Jason Ader, senior managing director of Bear Stearns, an national investment brokerage. "With the NFL, the NBA ... the pricing of spreads is very efficient. But because of the diversity of college sports, there is an inefficiency for professional gamblers to take advantage of."

Another analyst speculated that this phenomenon probably makes college sports a losing proposition for many books.

"If this were knocked out, it may even be a blessing in disguise," said Dave Ehlers, chairman of Las Vegas Investment Advisors. "I don't think that business is overly profitable. There are too many wise guys in college sports betting.

"When you have to set a lot of lines, you get imperfect markets. I would question just how many tears they're going to shed over this thing if it happens."

Where the money's made is on other games, such as slots, craps or blackjack. Attract customers with your book, the logic goes, and they'll stick around to drop money on your tables, slots, restaurants, shows and hotel rooms.

Problem is, there's little hard financial evidence to support that connection. All that's available are numbers from the Nevada Gaming Control Board, which do not make a distinction between college and pro sports.

Over the first 10 months of 1999, Nevada's casinos reported $80 million in win to the control board from pro and college football and basketball wagers. The final two months of the year would see substantial betting on football games, driving that figure up.

Joe Lupo, manager of the sports book at the Stardust, estimates 30 percent to 40 percent of football and basketball bets are made on college events. That would put the win estimate on college sports somewhere between $24 million to $32 million, suggesting no more than 0.33 percent of Nevada's entire casino win came from college sports bets for most of 1999.

"The amount (of college sports betting) affecting race and sports books is quite considerable," Lupo said. "In gaming revenues, it's quite small."

As far as the indirect impact goes, what's available are figures that suggest sports books are popular with casino patrons.

Ader found in a recent report that 35 percent to 40 percent of all adult males visiting Las Vegas made at least one stop at a sports book. Hornbuckle noted that the MGM's best players -- "rated players" -- often wager on high profile events. During the Super Bowl, Hornbuckle said, 80 percent of rated players make at least one sports book wager.

For college sports, the equivalents to the Super Bowl are football's bowl season and "March Madness," the NCAA's basketball championship tourney. Ader said a group of his friends have been coming to Las Vegas for each of the last eight years during the March tournament.

"They like to go because they like to bet on that," Ader said. "If you take it away, you have one less reason to go to Vegas on those big weekends."

Lupo said the tournament is one of the biggest draws for the Stardust.

"College sports has just boomed over the last five to 10 years," Lupo said. "The first week of March Madness (last year) was the busiest we've ever had. During the first four days, we wrote more tickets than for any four-day span in the entire year.

"The book is the second-best place to watch the games."

And if the bets were gone?

"We'd have a very big book that, on Saturdays during the football season, would have a lot of empty seats," Lupo said. "I'd probably get together with the slot manager and see where he could put more slots.

"You'll still see the sports book available, you'll just see them downsized, that's for sure."

That would mean less customers for the casino. But Ehlers questioned whether that would necessarily mean less profit.

"Everyone's always assumed it's a loss leader," Ehlers said. "That's why customer tracking systems are so important. If you had a customer tracking system, you could take your 10 largest bettors and see how much play they did. That would test the validity of your postulate."