Lake without a casino

The centerpiece casino of the Lake Las Vegas development announced today that it will be closing. Following the news that the Ritz Carlton is soon to close, this raises even more questions about the future of the development–and ties into a Nevada gaming trend that pre-dates the recession. From the LV Sun:

Casino MonteLago at Lake Las Vegas will close at midnight March 14, the casino owner announced today.The closure is a direct result of last week’s announcement that the Ritz-Carlton would be closing on May 2.The casino is owned by CIRI Lakeside Gaming LLC and is leased through Village Hospitality LLC, which is an arm of Deutsche Bank and owner of the Ritz-Carlton at Lake Las Vegas.More than 170 people will be out of work as a result of the closure. Employees were informed by management today.John Tipton, a spokesman for the company, said the casino was in the middle of negotiations with other investors when the announcement of the Ritz-Carlton closure hit, resulting in those investors pulling out of the casino.

via Casino MonteLago at Lake Las Vegas to close next month – Las Vegas Sun.

Obviously, this is awful news for the 170 people who work there, and it’s hardly a bellwether of economic recovery. With luxury on the Strip selling so cheaply, luxury on the lake is difficult to sell.

As far as the state goes, I’m currently in the middle of crunching the numbers for 2002 to 2009 to get a handle on where gaming is going. I’ve noticed some interesting macro trends.

The total number of gaming positions (slots + seats at tables) is down again in 2009; the number has fallen every year from 2002 (221,476) to 2009 (217,962). Nevada’s casino footprint is 8.11% smaller than it was eight years ago, and continues to shrink. Casino Montelago will be part of that trend continuing in 2010: its 635 slots and 12 tables will probably not be the only ones missing come next January. All told, Nevada has lost 16,558 casino slot machines since 2002, a total reduction of nearly 9 percent. As I’ve said before, the implications of this shrinkage for the state’s tax structure are significant, even if they are not commented upon.

Decreases in volume have partially been offset by net increases in win per unit. The average gaming position made $139.90 in 2009, an decrease again from the 2007 high of $168.04, but still an improvement from 2002 ($116.87). All told, the average gaming position makes 19.7% more money today than it did in 2002, which may or may not have more to do with inflation (money is “cheaper” now than it was eight years ago) than increased operational efficiency.

In 2009, table games got slightly looser (from 12.51% to 12.04%) and so did slots (6.16% to 6.10%). The overall trend has been for slots to get tighter and tables looser, which is likely a result of slot players gravitating towards lower-denom, higher hold machines, while baccarat, which has a lower hold than the table games average, continues to gain as other tables fade.

I haven’t finished crunching everything yet, but expect an update within the week.

6 thoughts on “Lake without a casino

  1. shrinkage and tax base?
    Well, a specialty niche casino at what was basically a geographically isolated pseudo-highend golf resort closes and there is indeed shrinkage, but is it significant?
    Slot rooms always need vacant slot machines for psychological comfort to the gamblers, so overall shrinkage may not affect the tax base negatively.

  2. Gaming positions = slots plus chairs at Table Games.
    Okay.

    So if an ill-conceived and poorly marketed niche casino fails during an economic shakeout we would consider this to be a just and proper event irrespective of its regrettable effects on the employees. Yet this economically valid and foreseeable event alters the entries in that Positions figure.

    If a casino installs dual-seating slot machines, that is still One machine but two people are playing, so the Positions figure is again skewed.

    And we all know that blackjack table is often perceived as not inviting unless more than one seat is vacant, so those seats which are occupied are valuable and those seats that are empty are valuable but the Positions figure takes no account of this anymore than it takes account of the fact that some slot machines have to be vacant for the slot players to feel welcomed.

    Some gaming is going to in-hotel online wagering and these electronic devices being used at the hotel will not be getting counted in the Positions figure at all.

    So how valid is the concept of Gambling positions.

  3. How valid is it? It’s an indication of the size of the market. Generally speaking, more positions=bigger market. Public policy folks use metrics like number of positions and average win per position to forecast, which is mostly useful to state governments looking to get into the gaming game to offset tax increases. The standard formula would be something like, “We’ll legalize 10,000 slots across the state. Each one will make an average of $200 a day. That will generate about $730 million in revenue per year. If we take 30% off the top, that’s $219 million in state spending we don’t have to cut.”

    The point I was trying to make is that Nevada’s lawmakers need to think about this:
    “Nevada’s casino footprint is 8.11% smaller than it was eight years ago, and continues to shrink. Casino Montelago will be part of that trend continuing in 2010.”
    This is the significant thing: despite plenty of high-profile casino openings in Las Vegas, the Nevada casino industry is smaller than it was eight years ago. This is not entirely due to the recession: the trend has been steady since at least 2002, since the regional markets (Reno, Tahoe, Laughlin) have been losing ground to Indian casinos. That has serious implications: what had been a state-wide industry (gaming tourism) is now becoming one focused on Las Vegas. It should be another reminder that economic diversification is critical.

    I don’t believe that wireless gaming won’t be included as a position, but I will check with the Gaming Control Board to see how they will account for them.

  4. Another aspect of gaming positions are the multiple games that are offered on one machine. Now, a casino doesn’t have to have 5-10 different video poker games. They need only have a few that offer the same games, so while this is a reduction in gaming positions, I don’t think you can draw any conclusions based on this fact alone. You’d have to compare the drop in slot revenue vs. the reduction in gaming positions to make any reasonable conclusion….

  5. >Statewide gaming/tourism is becoming concentrated in Las Vegas.
    Yes. The peripheral casinos seem to be doing poorly. (Lake Las Vegas, Mesquite). Even Reno seems to be seeing its casinos become merely hotels as Californians patronize Indian casinos instead and crack addicts in Reno scare away local customers.

    I’m reminded of those touristy gift-shop gag maps that show the state of California and just east of it, the state of Las Vegas. For years those maps were a joke, but as with much humor, there is often a kernel of truth.

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