God Bless Them One and All

The second week of February had miserable weather in some parts of the country.  Snow storms, blizzards and swollen rivers reaching flood level made headlines from New York to California.  But three articles in particular caught my attention. One was from *Connecticut, another **New York, and the third ***Rhode Island.   In each case, the narrative dealt with extreme weather impacting a casino.  It is uncommon to see one story on the subject, much less three, but the event itself is common for casinos in areas with severe winter weather.  The articles dealt with the challenges.  In Connecticut regular bus tours were cancelled, in New York the newly opened casino had greatly reduced customer traffic and in Rhode Island a couple braved the elements to get to a casino; it was an important place for them to go in the midst of the stress of a blizzard.    To a casino, especially a small casino, those people are the best of customers.  In time they become cherished friends because life without them can be nearly impossible.

Twenty years ago, a friend of mine purchased a small casino in Cripple Creek, Colorado.  Cripple Creek is one of three historic communities in Colorado where casino gaming is legal.  The other two, Central City and Black Hawk are near Denver.  It is just an easy thirty or forty minute drive for the three million people who live in the metro area.  Black Hawk is 8500 feet above sea level and it snows there in the winter, but the road from Denver is a modern four lane highway and the trip is not difficult most of the time.  The casino business slows in the winter, especially during a storm.  But some of those three million people continue to go to Black Hawk regardless of the conditions.

Cripple Creek, on the other hand, is at nearly 10,000 feet and an hour or more from Colorado Springs.  The road between Colorado Springs and Cripple Creek is a normal highway for half of the distance, but then it turns into a narrow, winding mountain road.  It is a marvelous drive in the fall when the quaking aspens are turning yellow and very pleasant in the summer; but when there is a snow storm, it becomes treacherous.  And Colorado Springs provides a much small customer pool than Denver; each individual customer is more important in Cripple Creek than in Black Hawk, particularly in the dark days of winter.  Going to Cripple Creek in bad weather is a courageous act that only the hardy and dedicated undertake. Any customer who is willing to make the journey in a storm is special.  My friend had one of those customers named Ted.  For years Ted barely missed a day.  He owned a business in Colorado Springs that was open from 8 in the morning until 9 at night.  When he closed up shop, he got in his truck and drove to Cripple Creek.  His patronage was one of the most important factors in the casino’s survival that first winter.  So when I saw those stories from Connecticut, Rhode Island and New York, I thought of Ted.  I know over the years my friend and his staff thanked Ted many times for choosing their casino as his favorite.  But these recent articles made me want to thank Ted and all of the loyal customers like him who make it possible for small casino owners to keep their doors open.

*Forecasts of the storm had prompted the early cancellation of scheduled bus runs to Foxwoods Resort Casino and Mohegan Sun. Brian Hallenbeck/Judy Benson, New London Day, 2-10-17

**Whether it was the snow, the work day or a lack of buzz, Wednesday’s mayhem at Rivers Casino & Resort gave way to lighter crowds on Thursday…Weather may have affected attendance to a degree, as a winter storm dumped up to a foot of snow across the Capital Region. Brett Samuels, Schenectady Daily Gazette, 2-10-17

***The biggest gamble in play at Twin River Casino Thursday afternoon was whose car would get stuck in the parking lot on the way out.  Debbie and Mark David of Cumberland were trying to find where the road, as they plowed their way toward the casino… Mark’s Central Falls factory closed at noon because of the storm. “Let’s go do something,” he said, when he got home. Debbie called the casino to see if it was open. Yes, indeed, came the response. Tom Mooney, Providence Journal, 2-10-17

Oh Come On Roger, Let it Go!

Roger Goodell insulted all of us who work in or are associated with the casino gaming industry, and I am pissed. The week before the Super Bowl is a busy time for sports media; reporters gather en masse resulting in an endless series of interviews with players, coaches and of course NFL Commissioner Roger Goodell.  Goodell is the face and voice of the league, so his pronouncements are closely followed.  In a press conference on February 1st, he reiterated that casino guys are persona non grata.  It is not a new thought, but part of the league’s formal policy.  But this time, it had a very particular meaning; Sheldon Adelson is not welcome in the NFL.  It came as somewhat of a surprise because, for the past year, Sheldon Adelson, Mark Davis, Las Vegas and the State of Nevada have been discussing a new stadium in Las Vegas for the Oakland Raiders.

The discussions started at the end of the 2015 regular season when the Raiders filed to relocate to Los Angeles.  The discussions took on a Vegas note in January 2016 when Adelson proposed building a stadium in Las Vegas.  As originally proposed, Adelson would guarantee approximately a third of the funding, the City of Las Vegas, through a room tax, would provide another third and Davis would step up with the final third.  Stadiums that use any public money are always contentious, but this became more so due to its association with Sheldon Adelson.  He is a billionaire and a Republican Party power broker.  Either is enough to make him a lightning rod for controversy.  However, in this case there was an additional element that made Adelson’s participation an issue.

In December 2015, Adelson purchased the Las Vegas Review-Journal for an astounding $140 million.  The purchase caused a major upheaval in journalism, not just in Las Vegas, but nationally.   Not only had Adelson overpaid for the newspaper, he had tried to keep his role secret. His motivation was subject to much speculation, none of it complimentary to Adelson.  So when the Raiders and the new stadium came up, Sheldon Adelson was not a popular and trusted guy with the press.

Still, the deal moved along; the Nevada legislature passed a room tax bill that would fund a major expansion of the convention center and a new football stadium.  Davis and his Raiders seemed bent on moving to Las Vegas and uninterested in staying in Oakland or moving to San Diego.  Davis voiced no opposition to coming up with his part of the financing; the room tax was in place and Sheldon stood by with an open checkbook.  There was only one remaining piece, the NFL’s approval.  But then things unraveled quickly.  Adelson was offended for not being included in some of the Raider’s plans and withdrew his financing offer. At the same time, the backup financing Goldman Sachs had promised also evaporated.  And that brings me back to Roger the Dodger.

All through the process, Goodell had played it very close to the vest.  He never said he would oppose a move to Las Vegas or the way the stadium was to be funded until the deal started to unravel.  But on the biggest stage in sports, the Super Bowl, he said the deal could not happen as conceived.  Now, he did not say those exact words, I am paraphrasing; but he did say something just as clear.

“That is not something that’s consistent with our policies,’’ Goodell said during his televised State of the League address and news conference leading to Super Bowl LI. “Not likely a stadium (ownership role), either.’’

The move to Las Vegas and the new stadium could not happen because of Sheldon Adelson. He could not be part of the Raiders’ ownership or even the stadium.  It is not personal with Roger; the league has a rule against Sheldon and others like him.  The National Football League’s policy manual has long stated that “no owner of an interest in a NFL club may own, directly or indirectly, any interest in any gambling casino.”  In other words, no person tainted with the sin of casino gambling can have a place in that league!  No ambiguity in that.  However, it is okay to own a racetrack with slot machines or be involved in other forms of gambling, but not a casino.  In fact two of the league’s most important franchises were founded by gamblers – the New York Giants by a bookmaker and the Pittsburgh Steelers by a track owner.  Casino tycoons can own baseball teams, basketball teams, but not football.

The league maintains casinos have sports books and they would be tempted to do nefarious things to win a bet.  Of course, only casinos in Nevada have books and those books are highly regulated by the Nevada Gaming Control Board. This is not the first time the league dug in its heels over the issue.  In 1998, Edward P. Roski Jr. bid on an expansion team for Los Angeles. Roski wanted the team to play in his refurbished Los Angeles Coliseum.  But Roski owned the Silverton casino in Las Vegas and thus was in violation of the league’s rule.

So, why does the NFL- and it is the only league that does – insist on barring one class of businesses and no other? In my opinion, it is because it does and changing that stance is not easy.  Would the other league owners refuse to accept a casino owner into their mix?  I don’t believe they would object. Quite the opposite, I think they would be very accepting. The major stumbling block to a change in policy is not “the league” – it is Roger Goodell. He has said the same thing so many times that in my opinion he can’t change his tune.  It might take a new commissioner to usher in a new policy and a new era.  That is what it took in the 1940’s in baseball.

In that era, Bing Crosby wanted to buy into a baseball team, but was prevented by the league’s commissioner, Kenesaw Mountain Landis.  Bing was one of the most famous men of the time and he was rich.  He loved baseball and wanted to buy into the Pittsburgh Pirates; the commissioner stopped him because “Old White Christmas” owned race horses and had an interest in a racetrack.  When Landis died in 1944, Bing was free to become part of the Pirates and major league baseball.  One can almost understand the “no gamblers” policy in the 1940s.  Gambling and gamblers have a checkered history and in the time immediately after World War II it was very much in the national spotlight as a source of crime and corruption.

Gambling was prohibited by law in the United States for most of the 20th century; but beginning with state lotteries in the 1960s, casinos in New Jersey in 1978 and finally when the flood gates really opened in 1988 with the National Indian Gaming Regulatory Act, casino gambling has become common place.  In the 21st century that expansion has accelerated; the latest casino opened on the very doorsteps of the nation’s capital at National Harbor, Maryland.  Roger Goodell is not old and he has only been in the job for ten years, so why does he hold on to 20th century morality?  I don’t know, but I know this: his stance is insulting to all of the millions of people who work in the gaming industry in this country.  Out of all of the businesses in the world, only ours is judged to be so tainted with sin and corruption that we are unfit for the society of more honest people.  The casino industry does have its problems and issues, but so does every industry and we have made a great deal of progress in addressing those issues in recent years.  There is still much to be done, especially in protecting people with an addiction.  But that alone does render us impure.  The NFL’s position on casinos is insulting to everyone involved in casino gaming, but it is also insulting to gaming regulation.  It implies that regulations and regulators do not prevent illegal or unsavory practices.

It is too much to expect an apology from Roger Goodell.  But it is not too much to expect the NFL to move into the 21st century and drop that outdated, unfair and insulting rule from its policy manual.

Wynn and Adelson: Trying to Please in Macau

It is earnings season; in the next few weeks all of the major gaming companies will reveal their 4th quarter results.  The first to do so was Las Vegas Sands reporting $607 million income and $3.07 billion in revenue.  Income was up 5.6 percent, mainly due to the new Parisian in Macau, but results were also good in Singapore, Las Vegas and Pennsylvania.  Sheldon Adelson was optimistic and said he is eager for an opportunity to compete for a casino license in Japan.  It was a good quarter for LVS, although its stock price dropped immediately after the release.  Still it was a good start for the earnings season, sending a positive message on the health of the gaming industry.

Wynn Resorts was next reporting $113 million in income on revenues of $1.3 billion, up 37 percent from the same quarter in 2015.  The reason for the huge increase is simple; Wynn Palace in Macau.  It opened in September and is generating $1.6 million a day in revenue.  Steve Wynn said Wynn Palace was doing a bit more than forecasted, but he expects it twill take a full year or longer for the property to fully “ramp up” and live up to its potential.  Additionally, Wynn stated that the company anticipates breaking ground on Paradise Park, Steve’s next project in Las Vegas, later in the year.  According to Wynn, Paradise Park will rely heavily on “non-gaming” revenues: “We want to take our non-casino revenue to enormously high levels,” he said during the earnings call.

However, the company’s revenue and future projects were not the main focus of Wynn’s remarks.  He was more interested in the relationship between China and the United States which is under a bit of strain lately due to President Trump’s apparent willingness to grant Taiwan full nation status.  President Xi Jinping of China is not pleased; he said the United States is on the edge of violating China’s “one China” policy.  Trump’s actions and Xi’s response have generated considerable tension.  But Wynn thinks it is a misunderstanding that will clear up in time.  He says everyone knows the world is better off when the U.S. and China cooperate.

By his own admission, Wynn is a friend and supporter of Trump and the current administration. And due to insider knowledge he trusts government policy toward China will develop favorably for both countries:  “I am in a position to know that that opinion is held in Washington and Beijing, and it gives me long-term confidence in spite of what happened short-term verbally. We must not confuse long-term United States policy with the short-term conversations that lead to its development.”  And as Steve was just appointed finance chairman of the Republican National Committee, maybe he really does know what Trump is thinking.*  His job will be to raise enough money for the Republican Party to retain control of Congress in 2018.  But it might also put him in the cross-hairs of the Chinese.

Steve Wynn and Sheldon Adelson are both caught in the middle of what might be an unpleasant situation.  They are friends and supporters of Trump, but they depend on the Chinese government’s approval and permission for the majority of their companies’ revenue.  Although a formal review of the licenses in Macau is not due for three years, Macau gaming authorities began this year discussing what appear to be preliminary reviews.  In an announcement, Lionel Leong,Secretary for Economy and Finance, said the reviews would be complete by 2020. Up to this point the media and analysts had assumed the reviews would begin in 2020.**  However, there still are no clear and objective criteria set at this point.  No one knows exactly how each operator will be judged when determining whether or not to extend the existing licenses.

Secretary Leong said only that he would consider the opinion of the community, the upward mobility of casino employees and a property’s ability to help make Macau a world center for tourism.  Noble goals, but without objective measurements it is rather like playing croquet with a Red King down a rabbit hole. Earlier statements by Leong had indicated that all workplace policies and conditions would be considered during the renewal process.  In attempting to meet those standards Wynn, Las Vegas Sands, MGM and Melco have recently announced annual bonuses and in some cases pay raises.  To further complicate the situation, the legislature in January passed a bill limiting the number of foreign executives a casino can employ.  Each casino will be required to promote locals to 85 percent of the management positions.   Leong also indicated lowering the tax rate was not likely, as he considered it to be an unimportant factor in a resort’s ability to meet the government’s foreign tourism objectives.  There is nothing new in any of this. Bits and pieces have been released and discussed for years, but as 2020 gets closer it ceases to be an abstract.  Casino operators are striving to please more than ever as the clock ticks.

Steve Wynn has been on both sides of the issues; some years he has criticized the American government and the economic and regulatory environments in the U. S. In other years, he has criticized the Chinese government for the same reasons.  However, now is not the time to call out the Chinese. Wynn has somewhere between 6 and 8 billion dollars invested in Macau; and Wynn Resorts gets most of its profits from those investments.  It is no wonder that he took advantage of the pulpit an earnings call gives him to deliver a message to both the president of China and the new president of the United States.  “Come on guys, let’s all work together and be friends.” Wynn, Adelson and MGM need to please the Chinese president. At the same time, they are trying to take advantage of their personal relationship with President Trump; it is not an easy course they chart.

*Steve Wynn, chairman of Wynn Resorts, downplayed concerns over “sabre-rattling” between the United States and China under the new Donald Trump presidential administration and was optimistic that leaders of both countries see one another as long-term partners. “We all believed, and I mean all of us, that the most overwhelmingly important event geopolitically for the last 50 years is a liaison – a constructive liaison – between the People’s Republic of China and the United States of America. That truth is undeniable, that dynamic is unquestioned.” “There isn’t a leader in America or a leader in China that doesn’t understand that when the United States and the People’s Republic of China come together on an intelligent basis, the world is a better place,” Wynn said during.  Aaron Stanley, CDC Gaming Reports, 1-27-17

**Secretary for Economy and Finance, Lionel Leong says the government’s review of its six casino gaming operators will be completed before 2020. The concessions of MGM China Holdings and SJM Holdings are due to expire in 2020, while the other four gaming operators’ concessions end 2022.  Asia Gaming Brief, 1-19-17

Reno and the Flood That Swept Away an Era

Just one week into 2017 and Reno was on flood alert. On January 8th the Truckee River reached 14.7 feet and in some areas overflowed its banks.  If you have never watched a raging river, it is a terrifying sight.  Filled with debris, dark, ominous and powerful; nothing in its path is safe.  However, this year Reno dodged the bullet.  Within a day, the weather had improved, the sun was shining and the river receded.  There was some damage, although it was relatively minor.  For Reno, it was a close call.

The 2017 flood was just one of a long series of floods in Reno.  The Truckee River which runs through the heart of the downtown has overflowed its banks eleven times in the last 110 years.  The cause is always the same, record levels of snow followed by rising temperatures and rain.  The rain and the melting snow find their way into the Truckee and speed downstream through Reno and Sparks to Pyramid Lake.  Most of the time, the Truckee is a small, tame river, more a stream than a proper river.  In dry years, there is barely a trickle of water still moving by late summer.  But during one of those unusual runoffs, the water level rises and the river is anything but tame. Twelve feet of water is flood level. The channel is not deep enough, nor is it wide enough to contain that much water.  The excess goes into the streets and neighborhoods of Reno and further downstream in Sparks.

The Truckee peaked at 15 feet in 1955 and the damage was major, but it would have been much worse if the population had been as numerous as today.  In all of those previous floods Reno was only a small town; in 1907 less than 10,000 people lived here and even in 1955 the population was less than 40,000.  The greater metro area is now close to 400,000. Not everyone is in the flood plain, but there are a sufficient number of houses and business in the plain to create serious social and economic problems during a flood.  The year when the water and population reached a critical mass was 1997; although that year did not have as much water as in 1955, the damage was greater and for the casino industry it was the end of an era.

The flood of 1997 started New Year’s Eve and by next day, the streets of Reno were flooded.  The Truckee River moved out of its channel as much as a full city block, in some places nearly two blocks.  The businesses in that zone all closed, including three casinos.  For nearly a week the owners and managers of the businesses along the river filled and stacked sandbags, fighting to save their livelihood.  My ex-wife was one of those fighting the river.  I remember how exhausted she was after 10 or 12 hours manning the barricades.  But the next she was right back in the battle.  In the aftermath of those difficult days, the whole city assessed the situation, city officials and private business people worked together to create plans to prevent a reoccurrence.  The river channel was improved, the banks strengthened and a new bridge installed to allow for a free flow of 15 feet and more of water; with those changes Reno was better prepared for floods.  Nothing can protect the city completely.  After that flood and for the first time in the city’s history the community came together and made the changes necessary to cope with future floods.  For Reno the improvements worked; the flood in 2017 illustrates the success of their efforts.

But for the casinos that were forced to close during the flood, the results were very different.  When the owners assessed the situation, they realized their businesses were no longer viable.  Indian gaming had been eroding all possibility of profit for seven years, but it took the flood to make them realize the hopelessness of the situation.   The larger casinos had been able to withstand the competition, but the smaller ones simply could not adjust.  Operating a small casino in Reno was never easy; the industry in Reno is just too seasonal.  Traditionally, each year beginning in November tourists abandoned Reno casinos and did not return before spring; casino cash flow was insufficient to meet expenses.  Every casino reduced payroll as much as possible, cut every other expense that could be cut and put vendors on a 60, 90 or in the extreme 120-day payment schedules.  Even with those drastic measures it was still necessary to borrow money to get through the winter.  Business picked up every year in March; the casinos used the increased cash flow to pay off the winter loans and then save as much as possible for the coming winter.  It was a never-ending cycle and never fun.

The Riverboat was one of the casinos forced to close during the flood.  After the waters receded and the casino had reopened, one of the owners was discussing his plans for the year with his attorney. He explained to the lawyer the cyclical financial difficulties he faced every year as well as what he hoped to achieve that year.  The lawyer asked a simple question: “What is ever going to change that cycle?”  At that moment, the Riverboat owner realized it was time to throw in the towel.  The rewards just did not justify the efforts.  Many things have changed since 1997, but the seasons still come and go.  Tourism drops by as much as 50 percent between the middle of October to the week before Christmas and only improves slightly in January and February.  For the larger casinos, it is still a difficult time, but not enough to close their doors.  Those casinos that without sufficient cash flow to upgrade their properties and withstand the winters closed.   The final nail in the coffin for the small casinos in the downtown district was the flood of 1997.

Twenty years later, when the flood of 2017 came there were no casinos in its path.  This year the city was ready for the flood and for that we have the 1997 flood to thank.  But Reno has other things to be thankful for in 2017, first and foremost is the changing economy.  Reno is becoming a technology center and because of Tesla and the other technology companies that have moved to Reno, the economy is healthy and expanding.  There are fewer casinos, but the remaining casino industry is much healthier than it was twenty years ago.   The flood of 1997 swept away the era of small mom and pop casinos, which for sixty years had thrived in a two block area near the Truckee River.  Now, the casino industry in Reno is corporate; the casinos are hotel-resorts that are scattered around the valley a long way from the river.  And thus, the flood of 2017 barely made a ripple in the world of Reno’s casinos.

Baccarat and New Year’s Eve on the Strip

Globally, the New Year is rung in with giant parties and fireworks displays.  The grandest of those pyrotechnic extravaganzas are broadcast live to the world; as the count-downs progresses across the globe viewers are treated to dazzling light shows from Sydney, Dubai, London, New York and Las Vegas.  Wait a minute, Las Vegas?  Just how did a tiny little town in the Nevada desert ever get on that list with the biggest, most vibrant cities in the world?  Well, in the first place Vegas is no longer the tiny town it once was; today the Las Vegas metro region has 2.3 million people.  It is hardly on par with London or New York, but much larger than it was in 1950 when 24,000 people lived there.  For most years since 1950, Las Vegas has been the fastest growing city in the country.  It has doubled or tripled in size every decade until the Great Recession, but this year it is back on it growth path.

The two million residents are not the reason the world watches the fireworks from the Nevada desert.  Las Vegas has a compelling storyline; the Strip is a unique phenomenon, 45 million people a year pass through its airport.  The city has more than 150, 000 hotel rooms and nearly every room is occupied during the New Year festivities. The last time New Year’s Eve fell on Saturday, the Strip hotels had a 98.1 percent occupancy rate. This year 320,000 people were expected to be in town to celebrate the advent of 2017.  It is estimated that tourists in Las Vegas spend $200-250 million in and around the city during the holiday.  The major casinos make certain that the fireworks in Las Vegas are as impressive as those any place.  That is what puts Las Vegas on the worldwide celebration list; the party on the Strip is a grand party by any standard.

Nevada, the City of Las Vegas and the casinos are very glad to be focus of the world’s media, but they are happier still that all of those people come to play the games.  The holiday revelers spend a few minutes in the street at midnight, cheering, kissing and wishing each a wonderful new year and then go back into the casinos.  As you might imagine the tables and slot machines are as crowded as the hotel rooms and the atmosphere is charged with excitement.  It is the kind of excitement that drives up the average wager dramatically.  The amount of money being wagered on those occasions would stun nearly anyone except seasoned casino veterans. No other place is like Las Vegas during one of those madcap celebrations.

In the early 1980s I heard a tale of New Year’s Eve that while I understood the words, I did not really grasp the concept.  Clifford Pearlman, who died in September, was CEO of Caesars and was telling an audience of gaming insiders about one such night at Caesars.  He held his audience spellbound; Pearlman said every table was full, every slot machine was being played, millions and millions of dollars being won and lost.  But it was all incidental. Somewhere at a baccarat table one man was betting so much money that his winning and losing would determine Caesar’s profit for that day and maybe the month and even the quarter.  I heard his words and then mostly forgot them, at least until the last year when I was looking at the monthly gaming win for Nevada.

Now, every month when I am trying to make sense of the gaming revenue numbers from Nevada I hear an echo of Clifford Pearlman.  Regardless of the economy, the weather or anything else, the factor that determines whether Nevada’s gaming revenue is up or down is the Las Vegas Strip.  And on the Strip, nothing is more important that baccarat.  In November baccarat on the Strip was off 22 percent and that pulled the entire state down by 3 percent.  In nearly every other jurisdiction and on other games, Nevada was up.  But as Pearlman said all of that is incidental; in the end it is that one guy playing baccarat that counts.  So, let’s hope Caesars and the other casinos on the Strip had a good run on baccarat on New Year’s Eve.  It would be nice to see Nevada finish 2016 up.


MGM Makes a Grand Statement with National Harbor

The most important casino opening of 2016 took place in National Harbor, Maryland late on the evening of December 8th.  The $1.4 billion MGM National Harbor threw open its doors and within 45 minutes was filled to capacity.  MGM played to capacity crowds all through its first weekend.  We will have to wait until sometime in early January before the first revenue numbers are released, but I suspect they will be impressive.  MGM National Harbor is important to its parent corporation and to the entire casino industry for a number of reasons.  It is situated in an ideal location and should be one of the most profitable casinos in the country.  MGM National Harbor signals the parent corporation’s intent to dominate the Eastern gaming market with resorts in major population centers.  And it marks an important strategic change for MGM from primarily a casino company to, first and foremost, a resort company.

According to an interview with James J. Murren, CEO of MGM, the opportunity for building a resort at National Harbor was an accident.  The site had been scheduled for a Disney park, but Disney changed its mind.  A developer suggested to Murren the location was worth a visit and took him to see the 23-acre hilltop site along the banks of the Potomac River. Murren was very impressed with the view and the potential, although it took another five years to realize.  The site certainly has potential.  The metro Washington D. C. area has six million people ranking sixth in the nation after New York, Los Angeles, Chicago, Dallas, and Houston.  It has more people than Philadelphia, Atlanta and Miami.  And within an hour’s drive there are another 3 million people.  Washington gets 19 million tourists a year that spend $7.1 billion.  Next to those five cities with more people, it is the best available location in the United States.

The nearest competitors are Maryland Live and Baltimore Horseshoe, less than an hour away.  Those two casinos have been generating approximately $75 million a month in gaming revenue, a number that will probably decline with the presence of the MGM.  And while the three may scrap over some customers, MGM did not build the resort at National Harbor to fight over the Baltimore market.  There is a grander plan; Murren says he will use MGM National Harbor as an example of what the company can do when he pitches an MGM resort for Atlanta in 2017.  And one has to suppose in time the other cities on the top ten population list will also entertain an MGM plan.  Except for Philadelphia, none of the other cities on the list has a casino.  Although Chicago has one nearby, New York has a racino and Los Angeles has Indian casinos in the region, none have a full-fledged resort of grand proportions.  Some of those cities on the list may never get around to considering a casino, but for those that do, MGM is a strong candidate with a great deal to offer as MGM National Harbor bears witness.  But of course the company has more than one casino resort; there are MGM resorts in Las Vegas, Atlantic City, Detroit, Mississippi, Maryland and soon Massachusetts.  With Caesars on the ropes, MGM is the biggest, most successful and capable gaming company in the country.

There is yet another part of the MGM strategy that National Harbor heralds.  MGM is positioning itself to be something even grander; it wants to be one of the premier resort companies in the world.  Besides  those cities in the United States without casinos, there are only a few places with large populations in the world which also might legalize gaming in the future.  Japan has the most potential; Korea, Vietnam and the Philippines still have some additional possibilities.  Russia is permitting casinos in some locations, Barcelona has a casino on the drawing board and there may be one or two other cities in Spain.  Greece has authorized one casino, India might legalize casino gambling and some African countries are still possibilities.  But for the most part opportunities are drying up internationally just as they are in this country.  Growth is going to be hard to come by in the next decade or so.  What is a company do?  Go resort is the MGM answer.

MGM renamed itself MGM Resorts International in 2010 and it did it with a purpose in mind.  The strategy is to move beyond operating casinos into resorts.  Of course MGM will be willing to build a casino into any resort where it is legal, but it is no longer the primary consideration.  MGM is not likely to be alone in considering a rebranding from casino-resort company to resort company.  Gaming companies of all sizes are going to run up against the same wall.  We are quickly getting to a point where growth by expanding into new jurisdictions is no longer possible.  At that point, there are just two options, mergers or acquisitions and expanding outside of gaming. MGM is pointing the way to transitioning into resorts.  It is also leading the way into the most populous metro areas in the country, but few will have the resources to follow.

Let’s give Jim Murren, MGM Chairman and CEO, the last word on the resorts.  He does not equivocate when proclaiming MGM’s real identity:  “Calling a company like MGM a gaming company is like calling today’s Verizon a telephone company or Google a search engine. It’s like believing Disney’s growth is still driven primarily by Mickey Mouse.”  


No Jeff, It Is Not Breaking News

Breaking news is an important topic around the campfire at CDC.  We do our best to keep gaming industry insiders up-to-date on events and issues that concern gaming.  When a story surfaces after the regular reports have been issued, it poses a question; is this breaking news?  Can it wait until tomorrow, or should we issue a special “breaking news” report?  The discussion goes something like this:“Ken, is this breaking news or can it wait?” The ensuing discussion helps us better understand which events are really important for industry decision makers and which are simply interesting stories.

One of those events occurred recently when the Diet in Japan voted to approve casinos or rather approved legislation that sets the stage for a “real” casino bill.  The next bill will include all of the necessary details, such as the number of locations, the tax rate, the investment to be required, a timeline and even the nature of the customers. The last issue is very important in the region as some Asian countries have banned or limited access to casinos for local citizens.  Ultimately for a casino to generate enough revenue to justify the billions of dollars of investment, it needs local customers as well as tourists.

The timeline element in the story was the most important one for our discussion.  It is hardly breaking news if the actual enabling legislation has yet to pass or if no casino will open for at least five years.  Don’t get me wrong, the possibility of casinos in Japan is a really important issue for the gaming industry.  Growth opportunities are getting fewer and fewer, especially opportunities in countries with a significant gaming culture in place, but no casinos.  Singapore, Macau and the Philippines appear to be nearly built-out and Vietnam, Cambodia and Korea are limited in part because casinos in those countries discourage local patronage.  In fact, what the region does not need is one more jurisdiction that targets Chinese high-rollers almost exclusively.

If the Japanese legislation does not restrict local gamblers, it is an exciting opportunity for the industry.  Japan has a very active gaming culture; pachinko parlors annual draw $200 billion in wagers with a 14 percent win – $28 billion, a number that dwarfs any jurisdiction in the United States.  The horse racing annual handle is $22.5 billion, nearly double the handle here.  All of that is good news for the industry and it has certainly excited the press – enthusiastic analysts are predicting as much as $30 billion a year in casino revenue from Japanese casinos.

However, Japan may not turn out to be the opportunity that has so excited the press.  Getting the first bill passed was a long slow process, it was fifteen years in the making and the next step is not likely to be a slam dunk either.  Polls released in the days following its passage showed the government of Shinzo Abe had lost popularity because of the gaming bill.  That raises a serious question, how much of his hard won political capital is Abe willing to wager on casino gaming?  Even if he is willing and successful with his efforts to pass a full-fledged casino bill, the finish line is at least five and by some estimates as many as eight years away.  The industry’s giants, MGM, Sands, Wynn, Caesars, Genting and Crown have the staying power and possibly the political will to stay the course.  But there will be no increase in revenues or stock prices from casinos in Japan for a long time.  MGM and Wynn have some experience with long waits, by the time both open casinos in Massachusetts eight years of potential revenue will have been lost in delays, lawsuits and a tedious process.  Like Massachusetts, Japan might have some obstacles lying in wait for innocent developers.

Japan has a significant constituency that does not want more gambling. In fact anti-gambling forces would like to rid Japan of pachinko parlors.  Horse racing does not raise the ire of as many people because it is not as ubiquitous as those damn pachinko joints.  There are between ten and fifteen thousand pachinko places in Japan.  The gaming opponents are certain to fight the new legislation, fight the current government and most probably mount legal challenges, especially over sites in major population centers, such as Tokyo.  So, even if a casino bill did pass, it was not a signal for joyous celebrations.  Still, Japan does offer a glimmer of hope for expansion for an industry that has nearly exhausted all of the major expansion possibilities.  But it also offers a word of caution: Any casino development in Japan is in the distant future.  And thus, I said to Jeffrey, “No I don’t think this is breaking news; it is important for certain, but we will all of plenty of time to digest its real value over the next decade or two.”

Gaming operators got the green light they’ve been waiting for after Japan’s parliament approved Thursday an “integrated resorts” law that is a first step toward allowing casino gambling. Passage of the new law left its opponents in tears, but big players said they were keen to get started. Kelvin Chan, Associated Press, 12-15-16

The approval by Japan’s parliament of a bill to legalize in principle casino gambling in the country is fueling excitement among several U.S.-based casino operators. Las Vegas Sands Corp, Wynn Resorts Ltd and Caesars Entertainment Corp have reconfirmed to the Wall Street Journal their respective interest in investing in Japan.  MGM Resorts International went one step further, proposing to “create a coalition of Japanese business partners” to build a casino resort in Japan.  GGRAsia, 12-16-16



This is a personal blog and the information in articles posted here represents my personal views. It does not necessarily represent the views of people, institutions or organizations that I may or may not be related with, and is not sponsored or endorsed by them unless stated explicitly. Comments and other public postings are the sole responsibility of their authors, and I shall not take any responsibility and liability for any libel or litigation that results from information written in or as a direct result of information written in a comment. All trademarks, copyrights, and registered names used or cited by this website are the property of their respective owners. I am not responsible for the contents or the reliability of any articles excerpted herein or linked websites and do not necessarily endorse the views expressed within them. I cannot guarantee that these links will work all of the time and have no control over the availability of the linked pages.


February 2017
« Jan