All I remember about my economics course in college was that the book was really heavy and it was written by someone named “Samuelson.” So maybe I’m not the one to bring up questions about the economic situation we’re in right now, but when I hear these “pundits” expound about what the solutions might be, I always seem to wonder, “Where is the common sense?”
The $700 billion “bailout” that has been implemented by Congress and the Bush administration is one case in point. Since when do we reward companies—whether they be banks or automakers—for making bad decisions? And yes, I understand the theories that you “can’t” allow them to fail, but why do we inject public money into companies that still have not proven they have changed their bad policies and business practices?
And for the unfortunate people strapped with those weird no-principal mortgages or adjustable rates that just adjusted sky-high… Well, did you not know what you were signing when you bought the house? Doesn’t the old adage “If it seems too good to be true, it probably is” apply here? Sorry, no sympathy from this quarter.
OK, so now that I’ve undoubtedly proven I know absolutely nothing about economics, let’s talk about the relationship of economics and something I do know a little about, gaming.
It used to be that gaming was pretty simple. You put a few games out on the floor, tables or slots. You’ve got a theoretical hold percentage, so you know what you should be making on each game. So now you understand your costs versus your rewards and you adjust accordingly, and make a nice little living for yourself and your employees. Simple, right?
But then we started measuring dollars with a “B” instead of with an “M,” and things began to get complicated. OK, now we’re getting into another area where I’m not that strong: math. We get a little beyond 1 + 1 = 2 and I start to struggle.
But isn’t that really what it’s all about? Even when you add that “B” to the dollars, it’s just a matter of addition and subtraction.
And we’ve seen a lot of subtraction lately. Gaming stocks were hammered in 2008, even ones that looked like they might be able to avoid a serious downturn, such as MGM Mirage and Las Vegas Sands.
When Las Vegas Sands warned last month that it was in danger of declaring bankruptcy, it surprised me. It probably shouldn’t have, given the huge number of dollars we’re talking about, but it did. I’ve known the upper-level management team at the company for more than 20 years (from when they were running the much smaller Sands in Atlantic City). These are good guys who have made millions (with an “M”) working for Sheldon Adelson. But now the company is in trouble because of massive debt. Did they not realize that the money they were borrowing would one day have to be paid back?
Maybe it started when gaming companies became real estate development companies. That takes a lot of savvy, a lot of knowledge about a lot more than just gaming.
It seems to me, as illiterate as I am in all things economic and mathematical, gaming companies that do what they do best—offer a great entertainment experience—are going to be the ones that survive and thrive.
But that said, the companies that immediately come to mind in that context—Harrah’s Entertainment, Station Casinos, Resorts International and some others—are some of the companies in the most financial distress.
I warned you in the beginning my economic knowledge was limited to a “heavy book,” so if you’re looking for some deep insight or miraculous revelation, you’re reading the wrong guy. This economic downturn and its impact on the gaming industry is unlike anything I’ve ever seen.
What I do know is that there are people in the gaming industry who know how to entertain customers. They know what players want. They understand motivations. They can make the emotional connection that brings customers back again and again.
Those are the people who are going to get us through this difficult time. Those are the people who understand that every customer is important, particularly during this treacherous time. And these are the vast majority of the people who make up the casino industry.
We’re never going to get a penny of the government’s “bailout” money. But then again, we don’t need it, because it’s the people who make up the gaming industry who are going to bail us out. And that’s the way it should be.