Nevada gaming year-to-date report is out

I response to a few questions, I put together some gaming revenue data and came up with Nevada Gaming Statistics: Year-to-Date Comparison, a look at how this year’s results stack up against last year’s. Found some interesting things.

Statewide, in 2009 the January-August total revenue was $6,944,221,000. In 2010, it was $6,937,680,000. A decrease of less than one-tenth of one percent. So while it’s fair to say that revenues are still in decline, they aren’t showing the massive 10% declines of 2008 and 2009.

The Las Vegas Strip is actually a bit ahead of the game, up just under 5% for the year. This means that the rest of the state is dragging, and it is.

I thought it might be interesting to try to handicap what the year-end gaming revenue total for the state would be. It’s a way of trying to peak into the future. Here goes:

If the current pattern holds, and revenues for the last four months of the year are also 0.09% lower than 2009, we’ll end up with total gaming revenues of $10,347,628,000.
If the last four months see a strong recovery (average gain of 10% in revenues), we’ll see total revenues of $10,727,128,000.

If we see a modest recovery (average gain of 5%), we’ll see total revenues of $10,553,926,000.

If we see a modest decline in revenues (averaging 5%), we’ll have total 2010 revenues of $10,209,522,000.

And if we have a major decline (average 10% down per month), the year-end total for Nevada’s gaming revenues will be $10,037,320,000.

Basically, total 2010 gaming revenues are probably going to range between $10 billion and $10.7 billion. Anything on either side of that is either an unexpected catastrophe or windfall. At this point, it doesn’t look like we’re dipping under the $10 billion mark, a big psychological divide. Macau, by the way, is on track to shatter the $20 billion mark this year.

At the end of the year, the story is going to be “we have reached bottom.” Unless it’s a false bottom.

Or, as I like to tell my running group, “It’s all downhill from here. Except for the parts that are uphill.”

Someone in the news looks at the numbers

Often, folks in the media accept whatever number’s thrown at them when gambling’s concerned. If someone says a study claims that governments will make billions a year legalizing online gambling, it’s accepted without question.

But Josh McMahon of New Jersey News Room actually did some research when it comes to one net gaming proposal:

What I do object to, however, is the ballooning of expectations.Lesniak and others claim New Jersey can collect about $100 million a year from sports betting but their numbers don't add up.I can't follow his math. I challenged him on this last year but never heard from him. He didn't produce the numbers.Here's why I'm skeptical. Last year all 266 Nevada casinos “won” a total of $136.3 million from sports betting. That's what the casinos had after they paid off the winners.

via The over/under of Lesniak’s sports gambling plan | Commentary | — Your State. Your News..

It’s good to see people actually look at the numbers to see if they make sense.

One quibble–in the article, McMahon claims that Nevada casinos had $11.5 billion in gross gaming revenue “last year.” The actual total is $10.3 billion for 2009, and $11.6 billion for 2008. I don’t usually go out of my way to correct other people, but since we’re talking numbers and accuracy, I figure it’s fair play. Although to be fair to McMahon, the sports betting total for 2008 was also about $136 million, so it would be easy to confuse the two years.

A decade of decline?

This is one of those moment of ambivalence that we all face at some time or another. On one hand, I’m pretty happy to be finished working on the 2009 Nevada gaming breakdown (pdf) and the Nevada Gaming Revenue:Long-term trends report (pdf). On the other, the actual data in those reports aren’t really happy fun reading.

Basically, for 2009, it comes down to just about everything but baccarat did worse. Slot win was down more than 11% for the year, with no signs of real improvement. That’s a problem because while there are 334 locations with slot machines in Nevada, there are only 26 casinos that even have baccarat tables. This means any gains from bacc play accrue to a smaller number of businesses–in reality, we’re talking about maybe a dozen or so casinos that really cater to these high-end players. While the industry as a whole shows signs of life, the 300+ places that don’t offer high-end play are doing just as badly as they were six months ago, at least if the stats are to be believed.

Then there’s the whole “putting all of your eggs in one basket” thing (or “overspecialization,” which is the preferred technical term). But that’s a problem for another time.

Last year, I put up a 5-year trend analysis. This year, I went further back, all the way to the 20th century, to make it a 10-year trend analysis. Here are some highlights:

From 2000-2009, the…
Total number of gambling positions fell by 11.58%. Total casino revenues increased by 8.22%. I don’t know how the overall inflation rate from 2000 to 2009, but thanks to the inflation calculator, I’ve found that “What cost $9,602,586 [the 2000 gaming revenues] in 2000 would cost $11,892,995 in 2008.” So in order for revenues to keep pace with inflation, they should be at about $11.9 billion (or higher–this is in 2008 dollars), not $9.6 billion. That’s bad news for Nevada.

Total number of slots fell from 192,844 to 169,872–nearly a 12% drop. Slot revenues increased by about 10%, again not keeping up with inflation.

There are also about 10 percent fewer table games (with baccarat showing the only real increase) and revenues up by less than 10%.

Both blackjack and craps are showing overall negative trends, with craps revenues off nearly 30% from 2000 numbers. Baccarat had the most impressive gain–winning more than 80% in 2009 than in 2000–but win per table declined. In ten years, the number of tables more than doubled, and play didn’t quite keep up.

Poker showed big gains in both number of tables and revenues, but this doesn’t mean too much to the bottom line. Today, the average poker table makes about $440 in casino revenues a day (plus any ancillary F&B/hotel spend), while the average bacc table makes more than $12,000.

Seeing all of the red ink in the charts is pretty sobering–I’d suggest anyone with a stake in the future of the gaming industry–or the state of Nevada–give them a look, at the very least.

Biggest drop ever

The 2009 Nevada gaming numbers are in, and they are not exactly encouraging. From the LVRJ:

Gaming revenues in Nevada fell 10.4 percent in 2009, the largest single year decline in state history.

Casinos statewide collected almost $10.392 billion from gamblers during the year, the lowest one-year total since 2003 according to figures released this morning by the Gaming Control Board.

via Nevada gaming revenues fall by biggest percentage ever – News –

The December numbers have confirmed the pattern that we’ve seen since November: continued weakness in slot play, a big gain in bacc play. In December, bacc win more than doubled. For the year, it was up 26.6%. This is significant: the only games not to have double-digit declines were roulette and let it ride poker, which really shows how off games play has been.

Statewide, slot hold fell slightly for the year–from 6.16% to 6.10%. Slot handle–the total amount played–fell too, from about $125.8 billion to $111.8 billion. In other words, gamblers put $14 billion less into Nevada slot machine in 2009 than they did in 2008.

On the Strip, things were as dire as they were statewide. Given that the Strip has about 98.2% of all of Nevada’s bacc play, the doubling of baccarat revenues basically helped the Strip post its second straight month of revenue gains and essentially avoid catastrophe. Without those high rollers cutting loose in the bacc pits of the Strip, we’d be having a much different conversation.

I could continue crunching these numbers for hours, but the day is short, the work is hard, and 99% of readers want the executive summary. So here it is:

1. Gambling revenue for most of Nevada outside the Strip continues to decline. It’s not as sharp a decline as we’ve seen in Atlantic City (although in some markets it is), but it’s still significant. Many markets that used to have regional monopolies no longer do, thanks to the growth of Indian gaming in California, Arizona, and the Northwest. This is a systemic decline that wasn’t caused by the recession, though the recession has exacerbated it. In other words, there is no easy fix.

2. The Strip was a bright spot. Thanks to a year-ending surge in high-end play, the Strip posted a smaller decline than it did in 2008. The Strip, at least, seems to have rounded the corner.

3. This recovery is unlike the past two major post-recession comebacks. In the mid-1980s, casinos shifted to the mass market–lots of quarter slot players, as opposed to a few international high rollers. In the early 2000s, they shifted to a wealthy traveler who spent more on food, rooms, and entertainment than gambling. The pattern that’s emerging now is paradoxical–there’s more of an effort to get value-driven customers in to fill the hotel, but they aren’t gambling nearly as much as they have historically, so most of the money is actually being made from the high rollers. In some senses, we’ve gone back to the 1970s [insert polyester leisure suit/shag carpet joke here].

4. Looking at the LVCVA’s numbers, it’s easy to see this “split-level” strategy playing out: air traffic is down, while car traffic is up, which would indicate a renaissance for regional feeder markets. This might be the substitution effect: just like some gamblers are staying home instead of driving to Lake Tahoe (down 25.6%) or Laughlin (down 13.4%), others might be cutting out trips to Hawaii or the Caribbean and driving to Las Vegas instead. The good news is that they’re coming; the bad news is that they’re looking for bargains, and probably don’t have the kind of money to spend that they did three years ago due to declining personal wealth.

That’s the executive summary. Now for another point, CityCenter and the dreaded c-word–cannibalization. Here’s the thing: if casinos are shifting back to a 1970s model, where the hotel is essentially a loss leader for a thriving high-end market, it doesn’t really matter if the hotel is full or not. Let’s say you can book every room at Aria at an average of $200 per night. In one night, you’ll make about $800,000. That’s a pretty good haul, but a single baccarat player, laying down $20,000 a hand, can lose more than that in a hour. Of course, it would have to be a pretty catastrophic hour for him, but it makes the point: a casino could invite an unlucky high roller with 4,000 of his closest friends and comp all of their rooms, and if things went against him at the table could still make a profit.

This “split-level” strategy–reaching out to value-hunters and high rollers–is a necessary adaptation, but it has its own inherent weaknesses. For one, there is a much smaller universe of people who can bet $20,000 a hand than there is of those who will pay $300 for a quiet dinner for two, let alone those who have a trip gambling budget of $300. So attracting and keeping them is more difficult, and more costly. Second, there might be less investment in upper-mid-level amenities–the big shows, the celebrity chef restaurants–since they are predicated on a broad upper-middle class of visitors that is being replaced by bargain-hunters.

The end result of the “split-level” strategy may take us to places that no one can predict. But that’s why we play the games.

UPDATE: I”ll be talking about this on KLAS-TV and KVVU-TV tonight.