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Friday, Jan. 6, 2012 | 2 a.m.
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This has all the makings of a potentially tumultuous year for the gaming industry.
Union contracts expire for tens of thousands of Las Vegas casino industry workers this year, and if each side frames its position by the continuing recession, the negotiations may well be tense and drawn out.
Las Vegas casinos face still-exploding competition from Macau and Singapore, and gaming may spread to Miami and the Boston area.
Internet gambling may be legalized within Nevada, and lotteries may spread across the country and, among all of these events, will intensify the challenges and opportunities that exist for the Nevada economy.
“I don’t recall a time similar to this when there was so much on the horizon,” said Michael Pollock, managing director of Spectrum Gaming Group, an Atlantic City-based market research firm. “New projects, new states coming online, other states considering the legalization of gaming — clearly the industry is going to be significantly different five years from now than it is today, by huge margins.”
The most significant change in the gaming landscape has occurred in the Southern China gambling enclave of Macau, which last year recorded gross gaming revenue of $33.5 billion — 5 1/2 times the number that was likely generated along the once globally dominant Las Vegas Strip during the same time period. Indeed, the Las Vegas-based gaming operations of Sheldon Adelson and Steve Wynn earn about 75 cents of every dollar in revenue from their Asian investments.
Still, annual visitor volume to Southern Nevada could break 40 million for the first time, a significant figure given visitation had fallen from 39.2 million in 2007 to 36.4 million in 2009. The rebound has helped push up hotel room and occupancy rates as well as convention attendance and entertainment spending. Nonetheless, gross gaming revenues along the Strip are expected to be down significantly last year from their 2007 high of $6.83 billion, prompting a collection of financial and economic analysts to note that the nature of the Las Vegas gaming market has changed. The final revenue figures will be released later this year.
“Today’s visitors look a little bit different than the ones we saw in 2007,” said economist Stephen Brown, director of UNLV’s Center for Business and Economic Research, explaining that Southern Nevada tourists are staying longer while gambling less.
It’s in this context of an increasingly complex global gaming industry that Culinary Local 226 will try to negotiate new contracts for its more than 40,000 members at Strip and downtown gaming properties.
“That’s been kind of ignored in the talk about this new year,” said Roger Gros, a casino marketing consultant and publisher of casino industry magazines. “With things looking better, the union might be looking for some givebacks after not getting any increases for years. Management is going to say things might be looking better, but we’re under many of the same pressures here.”
Spectrum Gaming’s Pollock eyes the changing landscape and sees a hub-and-spoke network reminiscent of the strategy employed by the U.S. airline industry, which is also under great economic pressure. Much as the airline industry has primary and secondary markets that feed off one another, Pollock argues that global gaming and regional markets have increasingly come to coexist.
“You certainly can have multiple hubs and multiple spokes. Just look to the deep demographics in Asia and the money those demographics have to spend,” Pollock said. “Ultimately, that creates new markets that Las Vegas can exploit.”
Such a business model has been successfully executed by Caesars Entertainment, which has developed riverboat gambling throughout the Midwest and South and entices its loyal customers to visit the home of it all, Las Vegas. The theory is also employed internationally by MGM Resorts International and Las Vegas Sands, which work to lure their Macau customers to Las Vegas.
“The Las Vegas operators that have positions in other parts of the world have opportunities to market all of their properties, all of their offerings to the demographic,” Pollock said. “The success of one hub versus another does not mean that Las Vegas has lost its place in the gaming universe. It’s always going to be one of the major gaming centers in the world. It’s going to be very hard for other markets to duplicate what Las Vegas has built. It doesn’t mean that Las Vegas has gone away. It creates opportunity.”
That may very well be the case, but the experience of Macau and Singapore, the latter of which is expected this year to generate gross gaming revenue in excess of the Las Vegas total, have created something of an existential crisis for Southern Nevada.
“The center of the gambling universe is now Macau,” Gros said. “By sometime next year, Macau will have more gross gaming revenue than the entire United States. Asia is the place to be. If you’re going to be an international gaming company, you have to have properties in Asia.”
Macau and Singapore easy to get slave workers earning peanuts!
....Las Vegas did this themselves...dont blame Macau....people aren't going to fly to China to gamble....Las Vegas is over built...too many rooms...put the blame where it belongs....you have brand new buildings completed that are going to be torn down...that is insanity....the world gaming market isn't responsible for what happened in Las Vegas ....Las Vegas is responsible for what happened...."their eyes were bigger then their stomach"....pure and simple....
Fact: Visitors are staying longer while gambling less. The casinos in their zeal to make as much as they can in a down economy have the machines set to eat money without so much as a thank you. It used to be you could put in a $20 and play for a half hour to 40 mins before it was gone. Now it's gone in 5 minutes. There has to be a balance between what you lose (or gain) and what's fun. Your money lasting 5 minutes is no longer having fun. When a poker machine takes you for over $100 in a half hour, you've eaten a visitors entire budget within a few hours or less. Word has gotten out.
Let's face it, Las Vegas will always have its character and charm. There's no other place in the world like it. No matter how much the tribal casinos try to match the atmosphere of a Las Vegas style casino, they always come up as a pale initiation.
Nor do I don't think Americans will fly to Macau to gamble either. From all that I've read, the environment is far too sedate for them. While the numbers (in terms of gross revenue) may indicate that Macau is the new gambling capital of the world, for 99.9% of Americans, there is only one place to go to for gambling, good eats, and adult entertainment: Las Vegas.
While internet gambling and the tribal casinos may make it convenient to kill an afternoon gambling, if I want to make it a vacation, there's only one destination.
The mafia understood the concept of smaller but steady profits. The customer came first. And - compared to the corporations that now run this town - at least the mafia had a code of ethics.
This is a good article. Points out that no matter what is built other places in the country/world Vegas keep growing. Always has, always will.
This New years holiday with the 1000's of new rooms, Vegas was still almost full at higher rates. Why? Because people get a taste other places and they want to see the "Real Thing" Las Vegas!
Vegas changes, always has and always will. 20 years ago people said the River Boats in cow towns would put us out of business, all it did was create more call for Las Vegas.
Those crying wolf and saying Vegas "did it to theirself" have no clue and don't look at the long run of this town.
The gaming "Hold" is less today then it was just 10 years ago so those saying the casinos are getting "tight" don't deal in facts. It is public record, look at the facts.
Las Vegas is a great city and will be here long as anyone of us are dead and gone. It is what you make of it.
Vegas also has a strong hold on convention business. The CSE trade show next week, just to name one, is a monster. It may as well be March Madness next week.
The only thing about the folks comming to the CSE convention is that they only bring $20 and a shirt, and don't change either.
Global gaming rivals were inevitable, just as global economic rivals were. Where Vegas needs to focus is on maintaianing & expanding it's position as North America's premier gaming venue, and using that position to draw in customers from other global gaming centers (for a "North Amercian experience") as well as "feeder" locations within North America. There's an opportunity here to expand from gaming into a more broad based entertainment (and related tech) economy -- especially as CA continues to drive businesses out & China expands -- but we need leadership that aggressively seeks out those entrepenuerial entertainment & tech opportunities.
"you have brand new buildings completed that are going to be torn down...that is insanity"
Insanity? Nah, it is Las Vegas. You don't "get" Vegas and that's okay, but please don't act like you do, and write your version of our future as if it is truth.
That, and a smaller Las Vegas can be a much, much better place. Change is our only constant. Embrace change, or waste your life fighting it. The choice is yours.
2012 is going to be a great year.
Backin the heyday 5 years ago when low wage earners were gambling at the $25 tables with home equity money (their jackpot)...Vegas was cranking out the profits.
Those days are gone. Vegas will stay stagnated for a long time. Still a great place to visit and have fun..but for slot players the machines have been squeezed shut.
Get rid of the smut peddlers, commercial speech is NOT the same as free speech (or political speech)!
This is the run-up to a long trend. Once Internet Gambling becomes a reality, another big wack will be taken out of the LV Casino business. The point of Peak Cash has been passed and a more stable economic base is the only answer.
Progress is relentless. Vegas has changed a lot since I first visited some twenty years ago. For those of us that reside in Hawaii its a great vacation destination and its relatively inexpensive as compared to other destinations, as long as you have good money management skills. I usually visit once a year and bring my mom along. This is my obversations regarding slot play over the years. On past posts people have mentioned that the slots are "tighter now" than in the past, and the suits counter that by saying that holds are the same or lower than in the past. I believe that the total paybacks on slots are about the same, but the smaller jack pots, you know the $150, $200, $250 pots are harder to hit and have been replaced by larger pots, like $1000, $1200 ect. That is why the long time slot players feel that the slots are tighter. In the years past it was way easier to hit the small jackpots and thus keep playing for a long time. Today with the larger pots fewer people are hitting them, but the total returns to the slot players are same as in the past, Its just that the returns are being spread among fewer players. Well thats my opinion on slot play and some will agree with me and some disagree, Thats okay because we all have different opinions. Here's wishing everyone a Happy New Year.
I live in Southern California within one hour driving distance from 5 Indian Casinos. The indian casinos try very hard to give the illusion to visitors that they are getting a Vegas experience when in fact they are not - better comps in Vegas, better entertainment better games. Nothing compares to Vegas - that's why I go to Vegas every other month.
I went to a few casinos lately and I was surprised at how empty they were. The Casinos are saying their earnings are up but the Casinos looked like a ghost town with mostly "q-tip" locals playing.
The nature of any industry is very Darwinian. The question is what will Vegas do to make ourselves relevant.
Just because gaming revenue is down doesn't mean a profit can't be made. But it will take the casinos and the union to work together on the solution instead of attacking each other. If they can set aside their squabbling this negotiating session it could mean the difference on how long out takes Las Vegas to get out of the current economic situation.
Key for Nevada future is diversifying the economy. Was great to finally see an economic development committee established in Carson City with Ruben Kihuen as the chair. Looking forward to seeing what Ruben can do as a Congressman.
Wynn, Adelson and Loveman along with their bought legislators have sold out Nevadans and Americans to Macau and elsewhere. 40%+ tax to Chinese, 6.875% tax to Sandoval's Nevada.
The capitalists in vegas in both the gaming and real estate sectors screwed the pooch, themselves, and quite frankly the entire state of nevada along with it. I'm not anti capitalism per se, but facts are facts. The mafia had a better more mid sized or small business approach. Funny how guys from the streets had it down better than today's over educated and over paid gaming execs. I know, let's give the gaming CEOs a bonus and let's bailout the gaming corporations on the government teat and then turn around and say we need to slash SSI and medicare and public employees pay/benes because it's all "entitlement programs," that are responsible for the current downfall!