Jon Gray Is Ready for Round Two – Vegas Seven

It’s always fun to profile interesting people. That’s definitely the case in my second look at Jon Gray:

“I called George [Maloof, founder of Palms] right away. He said, ‘You’re the right guy for the job. If anyone can bring Palms back, it’s you and the Fertittas [brothers Frank and Lorenzo are the chairman and director of Red Rock Resorts, owner of Palms and Station Casinos].’” So, earlier this year, Gray, who started in the hospitality industry behind the front desk, returned to Palms as general manager and vice president.

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Looks like they are shaking things up at the Palms.

Betting on Locals – Vegas Seven

From this week’s Green Felt Journal:

Last year, I wrote that locals gaming was on the rebound (“Locals Casinos Are Back in Business,” July 8). At the time, several indicators suggested it was in the midst of a resurgence after several rough years. Its revival has become even more apparent thanks to recent moves by two locals giants. Read more: Betting on Locals – Vegas Seven

Since I wrote that, Red Rock bought the Palms, which answers the question “what next” in the short term. Long term, I would expect to see more expansion from both companies.

Another day, another bad marker case

Along with word that business in Las Vegas is “bouncing along the bottom,” the big news today is the latest in celebrity bad marker cases, former NBA star Antoine Walker. From the LVRJ:

Walker faces three felony counts related to writing bad checks at Las Vegas casinos between July 2008 and January 2009. According to the criminal complaint, Walker wrote six checks worth $100,000 each at Caesars Palace around Jan. 19. Before that, the 12-year NBA veteran wrote $400,000 worth of checks for chips at Red Rock and Planet Hollywood, prosecutors say.

Walker has paid back a portion of the money but still owes $822,500.

via Walker charged with writing bad checks to casinos – Sports –

I did a quick interview on this subject with KVVU (Fox 5) this morning, so I’ve got a few thoughts.

First, for some reason, as I read the story, I kept thinking that he got a marker for $400,000 in red chips. And the old CCTV operator in me said, “That’s four thousand stacks.” I assume that even though he was playing at Red Rock, he did not receive the money in $5 chips.

Anyway, the serious stuff starts here. Why do casinos even offer credit play? That’s a common question. The answer is that we’re talking about sums so big, few people are going to be bringing in cash, and if they are, the IRS may start to get suspicious, since most legitimately high-wealth individuals don’t walk around with hundreds of thousands of dollars on them. There is a detailed process, filled with internal controls and external checks, before someone is granted credit. Generally speaking, the casino investigates the player’s credit history and, if they seem to be good for it, lets them sign a marker.

Why are unpaid markers considered bad checks? That’s a very good question, and the best answer is that this is because that’s what the law is. Why is that the law? I haven’t been able to find much on the legislative debate over the bill that made gambling debts legally collectible in 1983, but I imagine that the casino industry had a fair degree of input into the process.

How much money are we talking about? In 1998, attorney Bob Faiss estimated that between 5 and 15 percent of all money wagered at all Nevada casinos is bet on credit. If you’re interested in the mechanics of casino credit, Faiss’s testimony before the National Gambling Impact Study Commission is as good a summary of any of the process.

For fiscal year 2008, gamblers wagered about $232.4 billion dollars in Nevada casinos.* Five percent of that is about $11.6 billion. Fifteen percent is approximately $34.9 billion. For the sake of argument, let’s assume that the number is ten percent of all money wagered in Nevada casinos. In that case, we can say that Nevada casinos extended about $23.2 billion in credit during fiscal year 2008.

According to the Nevada Gaming Abstract, in that year casinos statewide reported a total of $132.1 million as “bad debt expense,” i.e., uncollected markers. That seems like a lot of money, and it is. Compared to annual gaming revenues of about $12 billion for that period, though, it doesn’t look so big (“only” 1.1 percent). Next to the estimated total credit play, $23.2 billion, it’s tiny: 0.56 percent. Just over one-half of one percent of casino markers end up as bad debts.

That’s probably worse than a commercial bank’s lending rate, but isn’t that bad. According to a recent news story, Bank of America, one of the largest banks in the US, is writing off more than 10 percent of its credit card loans.

While more alarmist elements may imagine that there’s a tidal wave of bad credit decisions and unpaid markers coming from Nevada casinos, looking at the numbers shows that this isn’t true. Only a small percentage of markers end up unpaid, and it seems that casinos do a pretty good job of due diligence before letting players sign markers. Of course, a few high-profile cases gives a much different impression.
*If you want to check the math, divide the total table and slot revenues by their respective win percentages, then add them.