Las Vegas declines could be indefinite



Las Vegas is begininng to feel the pinch as more states bring on online gambling and sports betting.

Resort fees, online gambling and sports betting affecting Vegas coffers

It doesn't seem all that long ago that Nevada was seen as the only viable option for gambling in the United States, while New Jersey was viewed as a relic. Atlantic City casinos were closing in droves and the boardwalk was no longer the place to go to gamble in the Northeast. As well, horse racing in New Jersey seemed to be on its last legs as Monmouth and the Meadowlands were seeing decreasing attendances and a drop in handle. This year, however, it appears that trend has changed and for the first time. Gambling in New Jersey has increased, while Nevada is seeing a decline in gambling revenue, hotel occupancy rates and lower convention attendance. In fact, the number of sports betting tickets in New Jersey were higher than those in Nevada in September, which of course was welcome news to the horse racing tracks, since much of the sports betting is happening at the tracks. While it's uncertain whether this will hold true in other states, reports of gambling revenue from states like Delaware, Pennsylvania and even Rhode Island suggest that states are starting to eat into Nevada gambling revenues.

Las Vegas visitors decliningSome people are pointing to the Chinese-U.S. Trade War that Donald Trump has initiated for the big decline in Nevada revenue, but the truth is that the decreases were already happening prior to Trump's threats to China. Moreover, other states aren't feeling the same effects. There's no question that many Chinese nationals are probably avoiding travel to sin city as a result of the trade war (which is mostly being felt at baccarat tables), but most of the decline can almost certainly be attributed to the introduction of legal, state sanctioned online gambling, SCOTUS' decision to repeal PASPA and the increased fees introduced at Las Vegas hotels in an effort to recoup some of the hotel expenses. And make no mistake, many Las Vegas regulars are disgusted by the resort fees and increased costs in general.

Hundreds of jabs at MGM and Caesars have been made on Twitter and other social media outlets claiming that it is ludicrous for a hotel nowadays to charge fees for amenities like Wi-Fi. And more frustrating to gamblers are the charges for alcoholic drinks while gambling and the exorbitant prices at casino restaurants. One gambler who appears to be a New York resident provided the following comment which no doubt summarizes the feeling of many long time Las Vegas patrons:

"I have been going to Vegas at least twice a year since I became of legal age in the late 1970s and the reason I chose to vacation there was because you were treated like a king to gamble. When I first started going with friends to Vegas junkets flights were subsidized by casinos and hotel rooms were dirt cheap. It wasn’t unusual to get a flight from New York City to Las Vegas staying at a 4 star hotel like the Flamingo or Mirage for 4 nights for under $300. And some hotels even offered a larger incentive agreeing to reimburse those costs for gambling at the hotel for a specific period of time. Plus alcohol was always free as long as you were gambling and food was dirt cheap. Who can forget the 99 cent buffets or the 5 dollar New York Strip steak dinner at top casino restaurants?  But it all changed starting around 15 years ago or so. Prices for many things increased but the comps were still pretty good and you still felt like you were being treated well by the hotels for play. And flights and hotels could still be found at a decent price. But starting about 5 years ago the value was gone. Nowadays it’s all about fleecing the bettors for as much as they can. It's almost impossible to get a flight and hotel for under $1,500 and it’s well over $2,000 for 4 nights in prime season. Everything incurs a charge and meals are actually more expensive than at normal restaurants. I can get a buffet at home at Golden Corral for $14. I haven’t found a buffet for under $25 on the strip for as long as I can remember. I was just talking to my bud who I've been vacationing with in Vegas for most of my life about it the other day and we’re seriously looking at going to Atlantic City this year instead. I can drive there and everyone tells me they still treat you right. Hotel rooms are a fraction of the cost, food is cheaper and there are good comps for play. And now I can even wager on sports at a top rate sportsbook or racetrack, so there is absolutely no downside as far as I can see it. We're in the hotel most of the time anyways so whether I choose to struggle breathing from the mist off the ocean in July on the boardwalk in Atlantic City or swelter on the streets in Las Vegas heat there isn't much difference."

It should be noted that the number of visitors to Las Vegas in 2018 was at an all-time high, but if the first 2 quarters of 2019 are any indication, that number will plummet this year. Looking beyond 2019 it seems inevitable that people just won't be going to Las Vegas as they had before and declines in Nevada will be indefinite. Currently there are 4 states that allow online gambling – Nevada, New Jersey, Delaware and Pennsylvania and 9 other states that have some sort of online gambling bills on the table. And if pundits are right, at least half of the states will have some sort of legal online gambling by 2025. As well, 13 states now offer sports betting (which includes Oregon and New Mexico, which offer sports betting as part of their compacts) and six more states will almost certainly allow sports betting in the next few months. And again, if pundits are right, upwards of 35 to 40 states will have some form of sports betting by 2025. That is significant since New Jersey just surpassed Nevada in the number of sports betting tickets written and states like New York, Pennsylvania and Illinois will almost certainly rival Nevada in tickets written once their markets are in full bloom, as New Jersey's is.

Unfortunately that is bad news for Nevada since many visitors to Sin City go there to bet on March Madness, bowl games and weekly NFL games and its hard to envision that people won't choose to simply stay close to home and bet on sports than pay the high costs of venturing to Nevada. Plus, of course, if California can ever get their infighting between casinos, tribes and the horse racing commission worked out and offer sports betting it will definitely have a major impact on Las Vegas sportsbooks, since California residents make up the bulk of non-Nevada resident who bet on sports.

Online gambling is clearly a bigger threat to casinos than sports betting 

Online gambling Las Vegas declineIn countries where online gambling is legal, as well as in New Jersey, online play has far exceeded regular land-based casino play. Bettors in legal jurisdictions have attested that it's much easier and enjoyable to gamble on casino games or poker on their computers or cell phones than making the trek down to a land-based casino. Online casinos attribute that to the ability to play in the comfort of one's own home, and people can play for as short or as long as they want. And the most convenient feature, according to at least one poll regarding online gambling, is that if a person is losing at home, they can simply turn off the computer or app. If that same person has taken the time to travel to a land-based casino they aren't going to simply leave after a half hour because they are losing. There is no doubt that is the reason Sheldon Adelson has been fighting so hard to stop online gambling in its tracks. The Las Vegas Sands is doing okay today, but when states everywhere offer online gambling it's inevitable it will cut significantly into visits to Las Vegas and other jurisdictions where the Las Vegas Sands runs casinos. Las Vegas Sands even admits that Macau will likely be their biggest revenue producer going forward, since that is the only legal form of casino betting in China.

Some will argue that Nevada offers more than betting with all the attractions but the same acts that appear in Vegas play at other state casinos as well. Except for special acts like Donny and Marie, Elton John and Celine Dion, which offered exclusive engagements, almost every other act travels. Even Terry Fator, who has been a staple at the Mirage for almost a decade after winning America’s Got Talent, makes regular appearances at casinos throughout the United States and Canada. More importantly tickets for the same shows are generally cheaper at non Las Vegas casinos and many tickets are comped to those who wager enough via their player cards. In Nevada it’s very unusual to get a comped show unless the patron is an ultra high roller where elsewhere it’s commonplace and it doesn’t seem that will change any time soon. Ironically Sheldon Adelson, who as mentioned is desperate to stop online gambling in the United States, can be blamed for the decision to cut comps too. In 2011 in a blatant cash grab, given the Venetian and Palazzo were showing huge profits, he told investors that the days of cheap rooms and comps were over.

"We've essentially cut all of our comps except our most highly-rated players," he said. "No more comped rooms. No food and beverage. No showroom credits. We're selling rooms. We see it's resulting in a substantial increase in cash income."

And outside of the shows and occasional boxing and MMA matches, there isn't much else that Vegas offers that other states don’t. One can only visit the Hoover Dam so many times and despite the lure to some, legal brothels really aren’t much of an attraction to most gamblers. And besides, if one wants an escort for the evening, they aren't too hard to find in New Jersey or Pennsylvania.

As expected, the immediate impact to The Las Vegas Sands wasn’t really noticed at the time, since there was no real competition. But now with so many other options, analysts and media sites are noticing the lack of freebies and mandatory venue fees and are asking whether the visit to Las Vegas is worthwhile. Casino.org has been running a series of articles about hidden resort fees in Las Vegas and the Nevada Attorney General is looking into those fees to determine if companies like MGM and Caesars are breaking any rules. According to casino.org reports every purchase including drinks has a resort fee attached to it and a mandatory venue fee is charged to hotel rooms which can be as high as $45. The website's reporting also suggests, like the social media poster, that many of these long-time visitors have indicated they have had enough.

What will Nevada do now?

Will they admit they made a mistake and try to lure people by lowering costs, increasing comps and making it worthwhile for people in other states to visit or will they continue on as they are, which will almost certainly lead to declines every year going forward? We'll have to see, but as long as people like Sheldon Adelson are making the decisions for casinos in Nevada, it's hard to envision a change any time soon.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!


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