Las Vegas’ gleaming mass of entertainment experiences continues driving the Southern Nevada industry toward bigger numbers as regional casinos – some of them little more than “boxes of slots” – feel the pressures of increased competition and an uncertain economy that has dampened middle class spending habits.
This fact of life has been apparent in the recent quarterly results of companies large and small, results that have been influenced by a couple of factors: millions devoted to updating resorts, expanded marketing strategies that rely heavily on the Internet and inter-company agreements that link regional operators and the biggest of Las Vegas-based companies.
Here’s one example. Last year’s fourth quarter for Penn National was “softer” than the company (which owns the south Strip’s M Resort) would have liked, according to CEO Peter Carlino.
“These are uncertain times,” he acknowledges, citing both increased competition in regional markets and a “despondency” among customers that Carlino contends is a product of November’s election results. “We’ve got higher taxes (which means less discretionary spending power) and despite promises that this would not affect the middle class…we all know that it has.”
Pressures will continue evolving across the Midwest as Caesars and Penn ramp up new casino operations in Ohio.
Penn owns more than a dozen slot-oriented gambling halls across the U.S. This led to continuing efforts to improve its ability to offer a quality experience at a conveniently located mid-Strip property. This has not yet happened although industry followers continue to see Penn as a possible buyer of either the Rio or Cosmopolitan. Both are said to be on the market for about $300 million although this could not be confirmed.
Penn officials continue to be high in their praise of the M but have never seen it as an ultimate answer to their desires for a Las Vegas presence.
Las Vegas-based Pinnacle Entertainment has a marketing agreement with the Wynn properties and is enhancing agreement potential with a pending acquisition of the Ameristar casinos.
Boyd Gaming and Caesars were established in Las Vegas before they began moving into regional markets with a combination of purchases and new construction. The result has been improved access to growth possibilities.
Yes, size does count.
MGM and Caesars alone operate about 20 of the most significant hotels and casinos along the Strip corridor. They will not be building any 2,000 or 3,000 room Las Vegas properties during the next several years but have collectively spent tens of millions updating what they now have.
Have you wandered through the new Nobu Hotel at Caesars Palace or considered all that’s being added across the street between the former Imperial Palace and the now-closed Bill’s Gamblin’ Hall? Nothing stays the same on the Las Vegas Strip for long.
MGM Resorts CEO Jim Murren points to the “fully remodeled rooms in Las Vegas at the MGM Grand and the Bellagio Spa Tower as just two examples of spending that is paying dividends. Additionally, there are “several new entertainment and dining options that are generating nice returns.”
It’s an approach, he says, “will allow us to continue gaining market share on the Strip” through the rest of this year and the next.
The company’s view – and it seems reasonable all things considered – is that such improvements have added to the appeal of its Las Vegas properties. It’s a conclusion complemented by recent results at other major Strip operations. We will see if this thinking is borne out as Caesars reports fourth quarter results this week.
Slot revenues at the MGM Strip casinos were up 4 percent during the last three months of 2012, a result that’s seen as evidence of the marketing boost provided by upgraded non-gaming features.
Company officials anticipate a continuation of these improving trends during the first quarter. The ripple effect of Las Vegas improvements has been felt at MGM’s “regional properties” in Detroit and Mississippi.
The company may classify these as “regional” but they each offer more non-gaming appeal than can be found at much of the other “regional” competition. It’s more evidence that size and variety continue making the kind of positive difference only the biggest companies can afford.
“We were able to maintain a premium market share despite increased competition in each of these markets,” Murren said, thanks to the continuing attention paid to non-gaming features and the marketing power associated with its players club known as M Life.
Las Vegas may have been superseded by Macau as the world’s largest generator of pure gaming revenue but that “critical mass” of features continues to pack appeal that gets wide attention.
Murren was saying the company had recently debuted a private gaming salon at Bellagio that was the site of an extended reception for officials of the Diayoutai State Guesthouse, the company’s influential partner in non-gaming hotels on the China mainland, including Beijing.
The VIP event included senior elected officials from both the United States and China in addition to what Murren described as “some of the most important customers that we know.”
Phil Hevener has been writing about the Nevada gaming business for more than 30 years. He can be reached at [email protected] ngToday.com.