During recent first quarter earnings calls Las Vegas Sands, Wynn and MGM all extolled how well their respective domestic and international operations were doing. Sheldon Adelson of LV Sands particularly remarked about how his Las Vegas property’s results were similar to those of 2008. Steve Wynn spoke of plans for Wynn resort’s golf course turning into a water destination feature along with what seems destined to be world class convention facilities.
Though comments were assuring and seemingly filled with Blue Sky optimism, they begged questions of if Nevada has truly emerged from the recession and if gaming is still the big revenue driver for Nevada resorts.
To answer those questions, Nevada Gaming statistics for the month and 12 months ended March of 2007 were compared with the recently released gaming stats for the month and 12 months ended March 2017. While raw numbers tell a story to get a truer apples to apples comparison the 2007 numbers were adjusted for inflation that between then and now totaled 17.48%, just to see which areas truly gained and which areas are struggling.
In comparing various then and now numbers it was very interesting to see that back in 2007 there were 177,423 slot machines in Nevada casinos compared to 145,038 today; there were 3,190 blackjack tables then and 2,603 now. In fact, other than roulette, baccarat and sportsbooks most major categories of games went down in game count and revenue between 2007 and 2017.
Gross gaming revenue for March of 2007 was $1,054,767,000 and in today’s dollars that would be $1,240,000,000. For March of 2017 the state reported $991,023,000 in gross gaming revenue and allowing for inflation, just to be even with 2007 Nevada casinos would have needed to win another $249,000,000 in March of 2017.
On a trailing 12 month basis, adjusting again for inflation, Nevada so far is trailing the same time periods of 2007 by roughly $3.445 billion in gaming revenue, so gaming has not yet recovered, and maybe from the traditional sense never will nor even need to.
Consider the pressures on Nevada gaming, aside from the recession. In 2007 there were by Nevada’s definition roughly 467 casinos in the US, which has now grown and continues to grow to over 600. Using the 600 number for our comparison period there has been over 28% growth in competition, and that is not counting the growth in the number of international casinos.
Between inflation and external competition, it would not have been unreasonable if the value of Nevada’s gaming revenue had declined nearer 45%.
Though the gaming numbers appear to tell a harsh story, the good news comes from the non-gaming resort revenues as all the other retail revenues of Nevada resorts made up for the short falls in gaming.
The fact that Nevada gaming revenues have not fallen further actually speaks well of the convention, entertainment and vacation value Nevada presents and how certain resorts have mastered becoming “social aggregation locations.” Social aggregation location (SAL) is just a fancy way of saying “a great place for people to gather and have experiences” but people tend to only gather where there are unique and special things to do.
Think about how Resorts have changed. It used to be a property only needed 600 or more hotel rooms, a coffee shop, one nice restaurant, one showroom, a lounge with entertainment and a big casino and they were set. Now that is almost a formula for disaster.
A tourist focused property needs several thousand rooms, multiple entertainment venues, a wide range of dining options, unique retail shops, clubs, selfie-friendly locations and massive amounts of convention space. While Mr. Adelson has already mastered if not set the standard for SALs, it seems Mr. Wynn’s planned changes for the Wynn golf course turning into a water destination feature along with greatly expanded convention facilities is how he plans to become Las Vegas’ premier SAL.
The real secret to an SAL though is the perception of always having something available to do, being able to do it with lots of other people and having an excitement, buzz and vibrancy. It used to be the casino provided the excitement and vibrancy with all the other amenities being the wrapper on the casino candy.
Now the casino has become one of the menu items of the resorts’ offerings. I myself used to think in terms of where I want to go gamble, now I think in terms of where I want to go depending on which place offers the greatest variety of unique things to do in the genre of that day’s mood. Viva the Social Aggregation Location!