Las Vegas: From Good Gamble to Expensive Drunk
The plane ride to Las Vegas for the Memorial Day weekend was like many I’ve been on. There’s a certain energy to a Vegas flight unlike a flight to, say, Phoenix. Passengers flying into Phoenix don’t feel the need to get blasted en route with Delta Airlines alcohol, timing their collective buzz just right so as to hit the ground partying once the plane has touched down. The six girls occupying the row behind me just couldn’t imagine facing Vegas sober.
I did notice a game of blackjack being played a couple rows away, bringing back memories of flights to Vegas when the primary sin that Sin City offered was–gambling. A decade ago, airline personnel would wish deplaning passengers “good luck.” Now, the farewell wish is a generic “have a good time.” The excited cabin chatter is not about sure-fire gambling systems anymore, but what nightclub is the hippest.
The business of post-meltdown Vegas is not offering a good gamble, as Benny Binion used to say, but providing the opportunity for an expensive drunk. Back in the day, the Vegas business model called for giving most everything away, either for free or for cheap, because there is “a paddle for every butt.” In other words, gaming revenue would take care of everything.
Not anymore, even the hotel pool is now a profit center. While frugal depression babies who built Vegas by gambling away a bit of their precious savings thought the pool and the golf course were places to relax and wile away a few hours before hitting the tables or machines again, the twenty-somethings that now storm Vegas are there for the party and the party starts in the afternoon by the pool, with a $20 or $30 cover charge to hear the DJ, see the sights, and get a little wet. Don’t plan on swimming laps. This is a live reality show.
David G. Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, writes, “Pool season reflects LV’s ability to evolve.” Some might see it as just the opposite. Rather than playing $20 blackjack (or ‘21’ as it’s known in Las Vegas), the young Sin City visitor is shelling out hundreds for bottles of Grey Goose, buckets of ice, and some glasses. For real mogul wannabes, a cabana can be rented for upwards of $10,000 a day, complete with a flat-screen TV and private wet bar. Who knows what kind of afternoon hijinx can take place in such semi-privacy.
The new Vegas allows a person to blow lots of money before sundown and still get some fresh air. The pool party craze is just a continuation of the expensive Las Vegas hotel nightclub business. A couple members of our dinner party at Aria’s Julian Serrano on Saturday night said they had tickets to get into Haze, a nightclub in the hotel. They had paid $70 each for tickets that would only get them in the door. The night before they had waited in line for two hours to get in, finally getting inside at two a.m. They were out until four but were ready to do it again. They’d sleep when they returned to Orange County.
Another couple in our party was headed down the street to Surrender, located inside the Encore. It was midnight and they were worried they’d be standing in line for an hour and a half to get in.
On the rare occasion I see midnight, standing in line is not something I have an interest in. However, I should note that I’m on AARP’s mailing list.
Professor Schwartz points out that 23 percent of Vegas visitors claim not to gamble at all. This might be right. As Schwartz explains,
Once, the casino floor was the primary revenue center in the average casino resort. In 1984, gambling generated about 62 percent of all revenues for Nevada casinos. Today, that figure is 46 percent — and it’s less than 38 percent on the Strip.
So while Asian gamblers pack Macau and Singapore to–gamble–Las Vegas has morphed into a high-end spring break party. Six years of college isn’t enough. Gamblers in Macau don’t drink alcohol while playing, while Vegas visitors can barely stop drinking long enough to read the cards and dots on the dice.
Instead of offering the opportunity to defy the overwhelming mathematical odds that games of chance present, Vegas is now a place to allow excess alcohol consumption provide the chance for life-changing mistakes to be made. It’s the place to first hold a bachelor or bachelorette party, then a wedding, and eventually then cheat on a spouse. After all, the Las Vegas Convention and Visitors Authority claims, “what happens in Vegas, stays in Vegas.”
If it’s food that turns your crank, and you just can’t get enough to eat in Peoria, come to Vegas and eat to your heart’s content. The “Buffett of Buffetts” allows you to belly up at seven different buffetts around town for less than $50 a day.
The visitor count to Vegas has returned to near all-time highs, but gaming revenue is not close to the boom years. The average gambling spend in Clark County per visitor has fallen from a high of $277.27 in 2007 to $236.71 in 2010. That’s a large percentage drop in a town that added thousands of hotel rooms–Palazzo, Encore, Cosmopolitan, CityCenter– during that same time period.
My Memorial Day weekend visit included an afternoon at the Palms Hotel attempting to predict the futures of certain thoroughbreds competing at Golden Gate and Hollywood Park. The Palms was once the hottest hotel in Las Vegas, popular with hip young visitors and value-seeking locals alike. The Maloof family was thought rich beyond comprehension and George Maloof, particularly, was thought to have the golden touch. .
Post crash, the family’s ownership in the hotel is down to two percent, after the Maloofs restructured $400 million in debt giving ownership to investment firms TPG Capital and Leonard Green and Partners. Those firms own 49 percent of the Palms, each, in exchange for assuming that $400 million debt (the family is still responsible for the reported $20 million debt at Palms Place condo towers).
TPG Partners owns a bit of the Boston Celtics, so the sports book cannot accept action on Celtics games. However, while I was there, the race and sports book was not taking much action on anything despite it being a holiday weekend. And while the Palms pool looked to be busy, there was no line to get in, and the casino was close to deserted. Sadly, the Playboy Club is due to close in a few weeks, ending the partnership that produced so many photo-ops for Hugh Hefner and the Girls Next Door.
Ironically what’s kept Las Vegas afloat has been baccarat play. Baccarat is favored by high-end gamblers–especially from Asia. According to Professor Schwartz, in 2003, as Las Vegas was emerging from the post 9/11 slowdown, baccarat revenue provided less than 4 percent of Nevada gaming win. At the time, homeowners were drawing on their home equity lines to finance trips to Vegas. However, last year, the baccarat percentage rose to its highest point ever, nearly 12 percent.
In other words, more than $1 out of every $10 won by Nevada casinos was won at the baccarat tables in a handful of Strip casinos. With the thinning of the mass market (the state’s slot win crept up by only 1.48 percent in 2011), high-end play has become more important to the entire state, not just the few casinos that court it.
The mass market that used to feed Nevada’s gaming table and machines is still licking its economic wounds, while the slack has been picked up by baccarat players. However, this can’t go on forever. The annual percentage gain in baccarat win has fallen from 27 percent in 2009, to 21 percent in 2010 and to 6 percent last year. “Baccarat has gotten Nevada through a rough patch, but it won’t keep growing at Macau rates,” writes Schwartz.
Wall Street keeps hoping for a Las Vegas rally, but the numbers are not promising. UNLV’s Center for Gaming Research reports that for the Las Vegas Strip,
despite a strong fourth quarter 2011, [the LV Strip] has seen its growth decelerate since January. March’s 15% decline in gaming revenues didn’t entirely erase earlier gains—for the first quarter of 2012, the Strip is still well ahead of 1Q 2011—but it does raise the possibility that the recovery is not right around the corner.
Las Vegas is now a distant third behind Macau and Singapore in gaming revenue. And while Singapore has only two casinos and is a fresh new market, Macau has a billion people that love to gamble living close by, Las Vegas is a like an aging cocktail waitress, protected by her union membership, but relegated to serving unruly drunks in her golden years for meager tips. The present isn’t so great, and the future ain’t pretty.