Looking beyond baccarat in the Las Vegas Business Press

I’ve got a new column in the Las Vegas Business Press today, about the possibly diminishing impact of baccarat:

With the recent release by the Gaming Control Board of the December 2011 Gaming Revenue Report, we can understand what happened to Nevadas gaming industry in 2011, and where the state is headed in 2012.Overall, it wasnt a bad year for the state: Total gaming revenue increased by nearly 3 percent. That hardly matches the boom years of the 1990s, but its the second straight year of revenue gains. As has been the case in recent years, the Strip powered most of the gain, with an overall increase of more than five percent. With visitation rising to near-record levels, this signals that the recession in Las Vegas tourism is over.

via Las Vegas Business Press :: David G. Schwartz : Looking beyond baccarat will serve Nevada best.

The 2011 numbers had some interesting paradoxes, and I think that the fluctuating nature of baccarat in the state’s gaming mix is certainly one of them.

Baccarat and gaming win in the LVBP

In this week’s Las Vegas Business Press, I look at what the continued reliance on baccarat means for Nevada:

Since the second quarter of 2010, the fortunes of the Las Vegas Strip — and, by proxy, of Nevada’s gaming industry — have been tied to baccarat. The game’s had a presence in Nevada since the 1950s, and has been a steady offering for top-tier casinos since the 1970s, but with slot play wilting and midlevel table play suffering, baccarat has risen to unprecedented heights. February’s results confirm what we’ve known since last summer: with baccarat as king, Nevada gaming is more of a game of chance than ever.

via Las Vegas Business Press :: David G. Schwartz : Volatile baccarat can’t reliably lift gaming win.

This isn’t really new–I just saw that I never published this. Still, it might be a fun read. Enjoy!

Baccarat doesn’t = back in LVBP

In my latest Las Vegas Business Press column, I dissect the August 2010 Nevada gaming numbers:

And if your casino doesn't offer baccarat or high-end play, you might be out of luck. With only 22 out of the 329 casinos with nonrestricted licenses in the state 6.7 percent offering the game, only a few are sharing in the baccarat bounty.

via Las Vegas Business Press :: David G. Schwartz : Bounce in baccarat doesn’t signal recovery.

I got an interesting phone call yesterday from a caller who wouldn’t identify herself but still had a very good question: could the rise in gaming revenues be tied to the extension of unemployment benefits?

My first thought was, “I really hope not,” and the nature of the revenues suggests that’s not the case, unless the unemployed are betting big on baccarat. But other revenues are up slightly, and my caller shared an admittedly anecdotal but no less valid example: her neighbor, thanks to the extension, received six weeks worth of checks at once, paid her rent, and gambled much of the rest of it away.

If you multiply that by a few thousand (a big if), you could have a definite bump in gaming revenues, albeit one at taxpayer expense.

You might be able to figure out if this was so by looking at gaming revenues on a day-by-day basis. A big jump in the days after the unemployment checks mail would tend to support the theory. On the other hand, if people from other states are taking their money and vacationing in Vegas, it would be hard to correlate.

Not a happy June in the LVBP

My latest Las Vegas Business Press column is out, in which I dissect the June Nevada numbers:

The June results are in, and whatever the national economic picture, one thing is certain: Nevada gaming remains moribund. The figures released by the Gaming Control Board aren’t much cause for optimism, though things look a little better for Southern Nevada than for the north.

via Las Vegas Business Press :: David G. Schwartz : Latest data provide little optimism for gaming.

Basically, even without the incredibly low bacc hold on the Strip, it wasn’t a good month for the state, as slot handle continues to fall and table handle is mostly kept afloat by high levels of bacc play, play which happens in maybe a dozen casinos. But even if the bacc hold percentage had been more in the house’s favor, it still probably would have been a flat month.

Also, an interesting article in the LV Sun about the decreasing number of slots in Nevada, something I’ve written about. I’ve got one question: if it’s just a matter of having more games on each slot, why has the statewide win per slot only inched up slightly ($108.76 vs. $110.04) since 2004? The total win is declining in addition to the total number of slots, so each slot is doing about the same about of “work” it was six years ago, multiple games or not. Sure, the counter-argument is that revenues would have declined more without the game menus, but still, there hasn’t been a real increase in per-machine revenue generation yet.

Bacc talk in LVBP, thoughts on empiricism

This week’s Las Vegas Business Press column takes a closer look at the game of baccarat, which is becoming more and more important on the Strip:

At the level of the individual casino, there are even greater swings of fortune. Unlike Nevada, New Jersey discloses separate results for each of its casinos. This allows analysts an eye into what can happen in a given month.

via Las Vegas Business Press :: David G. Schwartz : Baccarat and its wild swings crucial to Nevada.

You can read the original baccarat longitudinal microstudy here, if you want to see the numbers behind the column.

One question I sometimes get is what the value of all of these statistical studies are. The answer is that they add a very important dimension to understanding what’s happening around us, which gives us better insight into how to change it for the better. Becoming more reliant on baccarat–as its currently played in Nevada–has definite consequences for the industry and the state, some good, some bad. It’s important to talk about this as the trend is unfolding, rather than waiting until after it’sp already arrived. If everyone had been looking closer at the revenue jumps in 2005-2006, we’d probably had reacted much better in 2007 and 2008.

But numbers never tell the whole story, which is one of my issues with the “purely empirical” approach outlined by Gary Loveman in this Bloomberg profile. Gambling and tourism are hospitality industries, which start and end with customer interaction and creating an experience for the guest. Metrics are an important part of running the business, but they should support, not define, the approach. Whether you call it action, fun, or excitement, that’s what your “core message” should be.

In other words, it’s not “gamble at our casino, because we’ll offer you a competitive package of comps to get your $529 theoretical loss per trip.” It’s “come here and have fun.”

I’ve been thinking a lot about this angle because I spent much of the week at the Star Trek convention at the Hilton, where I was able to really immerse myself in fandom and talk to the people running the show. I’ll be spinning Vegas Seven and Business Press pieces out of my observations, which will also relate back to the “empiricism vs customer-centered” argument.

There were really a ton of great stories there, from both the fans and the actors.

Volatility attacks! in the LVBP

The latest Las Vegas Business Press is on the streets, and it includes my thoughts on the April numbers:

April revenue results for Nevada’s casinos contained a not-unexpected surprise. The hands of fate, in the form of a lower-than-usual baccarat hold percentage, finally caught up with the state, proving that an over-reliance on high-end gamblers is at best a stopgap strategy and no formula for growth.This April, players bet about $693 million on baccarat. This was enough to make it the biggest April in Nevada baccarat history, with nearly 30 percent more money played than in April 2009, which was a similar advance over April 2008.

via Las Vegas Business Press :: David G. Schwartz : Gaming demand’s down, do we need new marketing?.

We’re going to see a lot more of this until someone figures out a way to get more–many more–lower-budget but higher volume gamblers back on the Strip.

New paper on Baccarat

I’ve posted the latest in the Occasional Paper Series over at the Center for Gaming Research. It’s a great read:

Paper 03: May 2010

Theodore Whiting. “The History of Baccarat,” Occasional Paper Series 3. Las Vegas: Center for Gaming Research, University Libraries, University of Nevada Las Vegas, 2010.

Abstract: The true origins of modern Baccarat are probably lost to history. The first time the game Baccarat spelled Baccara was mentioned in print by a contemporary observer was in the early 19th century. The written record that would document the origins and evolution of the game is, unfortunately, incomplete. However, a close examination of the available material reveals some interesting facts surrounding the history of Baccarat, including a much earlier date for its arrival in the United States, that validates its continuing study.

Keywords: casino games, baccarat, game history

View the paper here (pdf)

via UNLV Center for Gaming Research: Occasional Paper Series.

I guarantee that you’ll learn a few things about the history of baccarat reading this paper. I know that I did.

Keep the champagne on ice for now

My extended commentary on February’s Nevada gaming numbers is out in the Las Vegas Business Press. Here’s the start:

The February gaming revenue numbers for Nevada caused some cheer around the state and on Wall Street. Total casino win rose 13.9 percent, the first double-digit increase in nearly three years. But if this is cause for celebration, it should be a muted one; there are still signs that the state's gaming decline is far from over, and this resurgence is resting on an increasingly narrow reed.

For one, much of the increase was due to the calendar. The Chinese New Year, always a big gambling holiday, fell in February, while in 2009 it fell in January. With much of the increase in win coming from baccarat, a favorite game of visiting Asian high rollers, it is likely that the true organic increase in gambling was far more modest.

via Las Vegas Business Press :: David G. Schwartz : Gaming win is nice, but hold the celebration.

I wrote this as an counterbalance to what I perceive as the overly Panglossian view that you often get from reading other people’s interpretations of the numbers. Even in the face of decline, some were asserting that this was still the best possible result in the best of all possible worlds. And this isn’t much of a resurgence, since if you look at the actual levels of play for most games besides baccarat, they’re not that impressive.

I’ve been thinking a lot about something Tyler Cowen said at the APEE conference I attended last week. He talked about 4 different kinds of potential recovery from the recession: U, V, W, and L-shaped. Both U and V are rapid returns to the status quo ante bust, while W is a “double-dip recession.”

Well if you thought double-dipping was the worst scenario, you’re wrong: Cowen raised the possibility of an L-shaped recovery, which means that we’re not really going to recover at all–we’ll just limp along for the next 20 or 30 years with no economic growth. Ouch.

I don’t know what the prognosis for the national economy is, but it seems to me that there’s a very real danger that we’re looking at an L-shaped recovery for Las Vegas. I don’t want to spoil your mood too much so I won’t even mention Cowen’s pessimism about the local real estate market, but the tourist economy is facing some real obstacles to growth that won’t be willed away.

I’d like nothing more than to be proven wrong, and for the big increase in baccarat to lead to a revival of growth on the Strip. But until a broader base of people have more discretionary income, it’s hard to see how overall visitation to Las Vegas can increase.

NV February numbers good, not great

Las Vegas Strip casinos had a strong February. From the LVRJ:

When combining the first two months of 2010, gaming revenues are up 5 percent statewide and 13.4 percent on the Strip.

“February turned out to be the perfect storm,” Control Board Tax and License Division Chief Frank Streshley said. “It was a record for any Chinese New Year. There was a high volume of wagering on baccarat and the hold percentage was well above normal amounts.”

via Gaming revenues jump 13.9 percent – Business – ReviewJournal.com.

Let’s put the month into perspective. Here are the last 4 Februaries’ baccarat numbers for the Strip:

month——–# of games———-win———–% change*———hold %———-handle
Feb 2010_____290_____$205,035,000____255.28%____17.04%____$1,203,257,042
Feb 2009_____214______$57,710,000____-50.57%____11.12%_____$518,974,820
Feb 2008_____198_____$116,637,000_____-0.02%____11.18%____$1,043,264,758
Feb 2007_____171_____$116,384,000_____46.88%____11.36%____$1,024,507,042
* From previous February
Source: Nevada Gaming Revenue Reports for Feb 2010, Feb 2009, Feb 2008, Feb 2007

The increase in baccarat revenue is part of the larger trend that’s charted in the Evolution of Nevada Baccarat, 1992‐2009 report (pdf).

This February, baccarat accounted for 21.76% of all Nevada gaming revenues–an astronomically high number, when you consider that in 2005, baccarat accounted for only 5.71% of the states total gaming revenue. The 21.76% total is likely the highest in Nevada history.

This is the real story here. It’s fantastic that the casinos had a good month, but we should be mindful that there are hazards inherent in a bacc-heavy approach. As I said three weeks ago in Vegas Seven:

The increasing importance of baccarat marks a step back from the way the industry had been moving since the 1980s, relying heavily on a small pool of players instead of generating profits on volume. This may be a concern, since the universe of people who can bet $10,000 and up a hand is much smaller than those who play quarter slots. With competition intense for this small group, casinos may pay too much in comps and incentives to players.

Second, with fewer players betting more money per hand, casinos will face greater volatility. Some months, they’ll have record hauls; in others, the players might come out ahead. This can impact both the financial health of individual companies and the state’s tax collections.

In times like these, casinos are happy to get revenue wherever they can. But it’s worth considering that the high-end basket is a perilous place to store gaming revenue eggs.

This month’s results are a textbook case of volatility. If the casinos had only held 11.20%, closer to the usual bacc hold, they would have won $134,764,788–about $70 million less than they actually did. That would have dropped the total state gaming win to about $876 million–still better than the previous year’s total of about $830 million, but not the stuff of a turnaround.

To me the most interesting thing about the slot numbers is that the average hold fell from 6.13% to 5.84%, with just about every denomination reporting a decline in hold. A sign that machines are getting looser? Perhaps. But let’s look at the February slot hold numbers in perspective (average, statewide):

2010: 5.84%
2009: 6.13%
2008: 5.76%
2007: 5.79%

For further reference, check out the tables and data sets in my 1992-2009 slot hold study or the 2007-2009 short report.

As far as bacc play helping other games, I don’t see it. Slots won about $40 million less in Feb 2010 than in Feb 2009, blackjack won less, craps won slightly more, and roulette tables won about $18 million more–a big proportional increase from the previous February, but well below the 2008 and 2007 totals. Make no mistake–it was bacc play, not a broad-based boost in gambling–that is responsible for the gains.

In short, any gain is positive, but we’re not out of the woods yet. I agree with Frank Streshley that this isn’t a sign of the coming of another golden age of prosperity.

Speaking of baccarat…

I’ve posted a new report at the Center for Gaming Research website: a statistical breakdown of the evolution of Nevada baccarat, 1992-2010. Here’s my description:

This chart shows the trajectory of Nevada baccarat since 1992. The total baccarat win and number of tables grown over the past eighteen years, both in absolute terms and as a percentage of the total gaming win and number of games. Even the 2007‐2010 recession, which has caused gaming revenues to decline, has not slowed the increasing dominance of baccarat in Nevada casinos. Currently, a game which in 2003 represented less than four percent of total gaming win for the state now represents over twelve percent of it. This more‐than‐tripling of market share is significant because the game caters to a smaller clientele than most games and is particularly susceptible to disruptions in national and international travel. The numbers show, however, that in the past five years, even as the industry has declined, it has become more reliant on baccarat revenues.

Important stuff. You can read the report here.