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Gaming and entertainment business serving up surprises

Mar 4, 2014 3:08 AM

The gaming and entertainment business continues serving up surprises as it responds to the vagaries of politics and the shifting spending patterns of consumers chasing the biggest bang they can get for their bucks.

Growth has taken companies into areas where we were once told legal casinos were not likely to be seen: the deep South, the Midwest and from sea to shining sea in one form or another.

Which proves what? That appetites for entertainment may be insatiable and it is difficult to predict what factors will push spending tendencies this way or that.

Did anyone expect before its opening day that the Revel would fail so totally as an Atlantic City catalyst? And how about Caesars getting knocked out of the running for a coveted Boston area casino license?

Gaming’s ongoing spread has not squeezed the life out of Las Vegas; not even close. The big thinkers who know reality when they see it, spotted the need for significant mid-course adjustments and continued forward.

As for those surprises . . .

Who could have seen Las Vegas as the nightclub capital of the U.S., taking the top four places as it did in a recent survey based on club revenues. XS at the Wynn-Encore complex was No. 1, followed by Marquee at the Cosmo, Tao at the Venetian-Palazzo complex, another Wynn offering Surrender and Pure. Twenty-four of the 100 clubs on the list have Las Vegas addresses.

XS revenues reportedly topped $90 million last year and who knows how much additional spending this encouraged throughout the rest of the property. Table bottle service is said to begin at close to $500.

Create the right environment and, yes, Virginia it is possible to charge outrageous prices for a bottle of vodka and have big spenders standing in line for the chance to do it.

It’s called an Experience. “Our customers have discovered they enjoy being part of the show,” Steve Wynn explained. “They’re not spectators, they are participants.”

A possibly cynical veteran of the business told me, “We’re giving them a seductive experience they probably don’t get back home.”

An MGM executive confided, “We’ve got these young people flying in here, maybe they’re using their daddy’s jet, spending a lot of money in the clubs, eating in some of the best restaurants you’ll find anywhere, paying the menu price,” He grinned, “and they may even do a little gambling.”

Las Vegas’s darkest moments in recent years were the result of global economic issues that had nothing to do with gaming’s appeal as both an entertainment option and economic development tool.

Another of the recent surprises: Las Vegas’s rapid ascendancy to the front ranks of retail shopping destinations.

I recall former Caesars World CEO Henry Gluck insisting in the face of widespread skepticism, “World class shopping is entertainment,” a claim he proved with the early record-setting success of the Forum Shops at Caesars.”

A variety of middle market to high-end shopping and entertainment opportunities has since been written into the business plans at other resort companies. The big investment by Caesars Entertainment in the Linq, a walkway lined by a variety of shops and restaurants and anchored by the giant observation wheel (more than 500-feet tall) that has been described as an experience in itself.

And there is not a crap table or slot machine in sight.

Las Vegas Sands CEO Sheldon Adelson said the value of his company’s retail mall holdings in Macau and Las Vegas is such that their sale would make it possible for the company to wipe out all its current debt. The average mall revenue in Macau is $4,600 a square foot. The highest number associated with U.S. mall operations, Adelson explained, is the $1,200 to $1,400 a square foot at the Las Vegas Forum shops.

And still the surprises keep coming.

Internet gaming as it is now operated within the boundaries of Nevada, New Jersey and Delaware was generally expected to explode out of the starting gate with more momentum than it has so far generated.

The reasons it didn’t might have been foreseen with a realistic view of the big picture, but few people – regulators, service providers and resort operators included – anticipated the reluctance of banks and credit card issuers to leap into a business that federal law continues to prohibit.

People representing each of these groups expect this reluctance to fade as the “education” of banking officials continues, but in the meantime only three Nevada casinos – Caesars, Station Casinos and the South Point – have launched Internet poker operations.

Caesars spokesman Seth Palansky sounds like Caesars will remain content to take its time with the marketing of its brand based on the World Series of Poker, which will begin its seven-week run in late May at the Rio.

It may be late this year or early 2015 before the company has an accurate reading of the success of efforts to reach WSOP participants.

But there is no surprise in the fact that the possibilities for Internet gaming have whetted the appetite of legislators looking for tax revenues in a number of other states.

Phil Hevener has been writing about the Nevada gaming business for more than 30 years. He can be reached at [email protected].

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