Billion $, Branson & Bitcoin

Billion $, Branson & Bitcoin

April 03, 2018 3:00 AM
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I admit it, I love getting questions on varying topics and this past week I received some on topics ranging from the significance of Nevada’s billion dollar win in February, to the Branson led group buying the Hard Rock, to the wisdom of gaming companies accepting crypto currencies. Each interesting and worthy of an article but to remain timely I will offer responses herein.

Question 1: You had suggested in a past column that February 2018 stood the chance of being one of the best Februarys ever for gaming win. With the strong win, along with January’s strong win, does it mean gaming in the state has fully recovered from the recession?

It is a split answer: Las Vegas Strip, probably; rest of the state not yet. While things are improving the casino side of things still has a long way to go. For instance, the last time we saw a February with a billion-dollar win was in 2013 and prior to that 2007 and 2006. Of those four Februarys, 2013 came in the highest with a win of $1,073,256,000 followed by 2007 with a win $1,055,715,000, then 2006 with a win of $1,026,293,000. February 2018 came in fourth in the billion-dollar February club with $1,017,914,000.

But the real story is in the Las Vegas Strip vs. the rest of the state and how much the Strip earned from non-gaming activities. In February 2018 the Las Vegas Strip enjoyed a win of $603.5 million while the rest of the state contributed $414.4 million. In February 2013 the Las Vegas Strip enjoyed a win of $696.1 million and the rest of the state contributed $377.2 million. Contrast those numbers with February 2007 where the Las Vegas Strip enjoyed a win of $574.7 million and the rest of the state contributed $481 million.

Translation: Strip gaming revenue is doing OK in total and when one considers the gaming win has become a much smaller percentage of Strip resort earnings and there has been material growth in non-gaming revenue categories of Strip resorts, the Strip in total is doing just fine and might be considered fully recovered when considering all revenue sources.

But the rest of the state is a different story. In February 2007 non-Las Vegas Strip gaming revenues were $481 million and if adjusted for inflation the comparable amount for February 2018 would be about $577 million, which is way more than the $414.2 million actually generated in 2018. Strong but a long way yet to go to be considered recovered, especially since the rest of the state does not have the same non-gaming revenue drivers the Las Vegas Strip has.

Question 2: What do you think Richard Branson will do with the Hard Rock?

Richard Branson’s Virgin brand has always been associated with quality, fun if not edgy, so I would expect the fun and wow factor of the remodeled property to be a “must” see and experience. If the buyers got all the land around the property as part of the deal, they will certainly have space to work with and fulfill most any vision.

My concerns for the venture are location and separation of casino operations. The property is too far from the Strip for the walk-in or stagger-in traffic as is enjoyed by more popular center Strip properties. Separating casino operations from resort operations has shown to be ok as a work around till licensing, but long term it has rarely shown to be a success model as the interest of the respective operations are rarely in complete alignment. I do hope they will take a lesson from past successful off-Strip operations and add as many rooms as they can to create their own self-sustaining resort destination.

Question 3: With all the talk about crypto currencies in gaming resorts, do you think casinos should accept cyber currencies like Bitcoin?

Unless it is a privately held and operated property and the owner wants the risk, absolutely not. Cyber currencies such as Bitcoin are like baseball cards in that they only have value as long as someone is willing to buy them. And since there is usually no central authority to protect them, regulate them or assure value exchange, fundamentally you do not have the same protections as with traditional dollars.

Also, for currency reporting purposes, good luck verifying the source of crypto currencies. On the other hand, if the casino’s wanted to create their own cyber currency and use it in the same way as chips or TITO tickets with a fixed exchange basis, that would certainly make a lot of sense, particularly if the casinos allowed immediate purchase and redemption with the patron’s cash, or cyber wallets like Venmo or Paypal.

Loved the questions, please keep them coming.