There’s no denying that Las Vegas, and the gaming industry as a whole, is changing.
Gaming is giving way to non-gaming amenities. The introduction of resort fees and paid parking coupled with higher house odds has led to rampant speculation that Las Vegas has lost its way.
It’s a claim that is increasing in frequency and takes many different forms.
“Everything that made Las Vegas great is being taken away.”
“The average person is being priced out of a trip to Las Vegas.”
“There’s no value anymore.”
The latest incarnation came via an excellent Forbes article by Dr. David Schwartz. He is one of the foremost gaming historians in the world, Director of the Center for Gaming Research, and instructor at UNLV.
Unfortunately, Schwartz’s article is being misrepresented as it makes the rounds on social media.
The article begins by saying that after a good start to 2018, Las Vegas has been in a summer swoon. And right at the outset Schwartz ponders:
“Whether this is a temporary decline or the start of a bigger reshaping remains to be seen.”
Instead, people on social media are suggesting Schwartz reached a conclusion that paid parking, resort fees, and the like are hurting Las Vegas and need to be abolished.
More fees doesn’t necessarily mean more problems for casinos
To be clear, there are grains of truth in all of these arguments. However, all you have to do is take a quick look at some earnings reports or visit Las Vegas to know they’re largely overstated or perhaps wrong.
In fact, the current argument against them is essentially:
I don’t like paying more money, therefore, it’s bad.
As Schwartz concludes, the answer to whether the changes are good for the health of Las Vegas is still unanswered.
The changing landscape is a hard pill for some people to swallow. Talk to any advantage player and they’ll tell you that casinos are playing with fire, pointing to the rising costs, diminishing returns, and fewer comps.
The loudest voices on this topic tend to fall into two groups of experts:
- People with something to sell — themselves or some miracle cure.
- Advantage players and locals who learned to work within and like the old system.
Breaking down the flaws in the Vegas critics’ thinkings
Another great example of this comes from a recent story by Mark Gruetze for CDC Gaming Reports.
After quoting a couple of these experts, Gruetze concludes that casinos are out of touch with their customers.
Gruetze writes that while casino executives believe it’s their customers that have a sense of entitlement, it’s actually the casinos that are out of touch with reality.
He suggests policies like the implementation of resort and parking fees and reducing the return-to player signifies a growing disconnect between the casinos and their customers:
“… a few players are adept at gaming the system to get what the industry considers unearned rewards. However, to see a more blatant example of someone with a warped sense of entitlement, casino bosses should look in a mirror.”
“The hand-wringing about players’ “sense of entitlement” distracts from the many industry moves that have sucked much of the fun out of a casino visit. Loosening the slots and other games and eliminating or lowering those odious fees would buy a lot of good will, not to mention long-term profit.”
But in the middle of making his point, the data he provides appears to prove the opposite.
Gruetze notes commercial casinos reported $38.96 billion in gaming revenue in 2016. Tribal casinos chipped in another $31.2 billion. The article then quotes Michael Meczka, president of MMRC Inc., a casino consulting firm based in Los Angele. Meczka says, despite generating $70 billion in revenue in 2016, “gaming simply doesn’t know its customers.”
This reminds me of the Yogi Berra line “nobody goes there anymore, it’s too crowded.”
It’s safe to say an industry that tallies $70 billion of revenue in a given year has a pretty good understanding of its customers.
A similar doomsday scenario was predicted not too long ago
The complaints against the casino industry are eerily similar to what recently occurred in the world of online poker.
Both industries held the belief that what made their highest-volume customers happy would make all of their customers happy.
Casinos and poker sites essentially gave away the farm to some astute customers who put in the time and energy to fully understand the system. Meanwhile, offering those same perks weren’t enough to turn the majority of their customers into winners.
What poker sites and casinos are discovering is they can make the majority of their customers happy in other ways. At the same time, they do away with a system that could be gamed by a small group of savvy customers.
The advantage players can threaten to take their business elsewhere, but when your business is advantage play, the casino’s response is going to have something to do with a door hitting you on the way out.
Why people will pay a premium… and still complain
In an ideal world, everything would be free. That’s not how it works though.
People complain about the cost of going to sporting events, theme parks, and restaurants. But they still show up in droves.
If you’ve been to a certain very pricey theme park in Florida (you know the one with $100 $125 $135 entry-fees and overpriced food and souvenirs), you know the price hasn’t cut down on another source of complaints: the lines.
Now imagine if Las Vegas was still all about a so-called “good gamble” and budget-friendly luxury. Think about the cluster a $5 Blackjack table with player-friendly rules would create on a Friday night? Or consider how hard it would be to get tickets to shows and make reservations if they were being handed out to every person at McCarran Airport?
Basically, there’s a balance to visitation. Even with the increasing cost, there’s no shortage of people traveling to Las Vegas.
If you keep raising your prices and people keep showing up, how is that a mistake? Further, if you raise your prices and fewer people show up but you make more money and the visitors have a better user experience, how is that a mistake?
2017 was a down year for visitation. However, if you zoom out a bit, it’s not a bad year at all.
Not only was the visitation dip shallow, but it’s still well above historical norms. Visitation was down in 2017 because it had grown so high over the previous three years. Check out this data from Statista:
The sunny side of Las Vegas tourism
Further, occupancy and daily room rates are on the rise.
Most importantly, people are still enjoying their Vegas trips. Yes, it costs more, but people believe they’re getting their money’s worth.
These trips are also something of a status symbol. Like sitting front row at a concert, eating wagyu beef, or going on a high-priced trip, there’s an element of living the good life in overpaying.
Griping about the price you paid for something is often a thinly veiled brag. It’s all part of the game. Like sneakerheads that take satisfaction in the agape mouths when they say they paid $500 for a pair of vintage Jordans, spending $500 on dinner at a Vegas restaurant lets you hold something over the people back home. This is even more so the case in the current social media world.