Even though I didn’t deal my first hand of cards until 1979, I have come to realize that time now qualifies as the “pioneer” era in the gaming industry.
In those days in Atlantic City, our floor people and pit bosses all came from Vegas. Some came to Vegas via “quasi-legal” jurisdictions like Covington, Kentucky; Steubenville, Ohio; or Union City, New Jersey, only to arrive in Atlantic City following the legalization of gaming there. Oh, the stories we heard about how gambling debts were collected, what a “sawdust” joint was, how dealers would stay on games for 10-12 hours at a time, what it meant to “86” a player, or why we had it easy compared to their break-in days (even though we worked nine or 10 hours a day at least six days a week in those first couple of years).
Yeah, that was gambling back then.
Today, of course, gambling is only an amenity to the total resort experience. We’ve seen gambling revenue on the Las Vegas Strip be exceeded by non-gaming cash. We’ve listened to CEOs diminish the role gambling plays in their resorts, almost to the point of suggesting if it went away, no one would miss it.
Well, pardon me, but that’s a load of hooey, and if we forget the business that we’re really in, we’re bound to lose our focus and our way. Gambling is our business. Yes, I know it’s nice to get revenue from rooms, restaurants, entertainment and even shopping, but if we lose sight of what we’re really here for, we could end up being just another strip mall.
I have been interested in the last few months of the exploits of the Tropicana in Atlantic City, taking the bold step of doing special things to attract the high rollers. Now, for the first eight or nine months, the strategy was brilliant. Higher limits, loss discounts and upgrades in the products used by the high rollers produced the desired results: higher table game revenues and profits.
Then the pendulum swung back toward the players. Several multimillion-dollar wins had Tropicana executives thinking twice about the strategy. Fortunately, Carl Icahn owns the Tropicana. There are not many more shrewd or aggressive businessmen than Icahn. (It also helps that he endures dozens of multimillion-dollar wins or losses each month, so an occasional blip at his casinos isn’t going to shake him up.) Icahn listens to the experts and does the numbers. Then he makes up his mind. Smart.
I was watching an old Vegas documentary a few weeks ago way up the dial on the cable. It was made at least 15 years ago and told the story of Archie Karas, a Greek immigrant who, in the early 1990s over the course of two years, won $17 million from some of the best poker players in Vegas and then another $40 million from Binion’s Horseshoe. But then came a rough three-week period where he lost it all back. That’s why they call it “gambling.”
Ask the casino operators in Macau what business we’re in. There is no doubt there. Non-gaming revenue is infinitesimal in Macau, and if the gaming revenue continues to grow at the pace it is, it will become less than pocket change to those operators.
I’m not for a second suggesting that we should ignore or even do away with the non-gaming amenities that make casino resorts so special. Even in Macau, where it would be much cheaper to build a small casino for the mass-market players and then many private VIP rooms to service the most important visitors, the resorts are getting more fantastic as each new one opens. Hey, Steve Wynn just paid more than $12 million for four Chinese vases as decorations for his new Cotai property. Like I said, pocket change.
But we do need to understand that we’re in the gambling business. Operators need to take chances and be willing to absorb an occasional loss to make long-term profits. Those beautiful rooms you built? Give them away to a real gambler and the revenue that flows from them will be much more than a simple average daily rate.