In the fight for survival the weakest lose


Dog Fight

Dog Fights are dangerous events

The Reno Gazette-Journal has done a couple of articles on the present state of the gaming economy in the Reno-Sparks area lately.  In the first article, reporting on the discussions at the recent tourism summit, the Gazette said there was increased cooperation as area casinos tried to overcome the weak economy and the competition from California Indian casinos. The tone of the article was optimistic – an entire industry working together to bring more customers into the area, sharing the efforts and sharing the results.

The second story written by Bill O’Driscoll was the exact opposite, not cooperation but bitter competition.  The casinos are using player points and other incentives to attract and retain customers – and it is turning into a dog fight over every dollar and every customer.  There were a number of quotes from outside experts and casino operators; everyone agreed that in tough times casinos need to increase market efforts and the value of incentives to gamblers;  and they agreed when one casino increases the incentives the others need to follow suit.

The outside experts urged caution and fiscal responsibility, the casino operators cited the pressure to fight back and keep loyal customers happy.  Both groups recognized the growing sense of entitlement among customers for higher and higher levels of incentives and inflation of market costs that have resulted from those expectations.  I remember the casino wars of the early 1990s in Atlantic City when the casinos competed for bus customers – each casino tried to outdo and out-pay the others to gain market share; in one year the aggregate industry lost money.  That was in the days when Atlantic City casinos only competition was each other and yet the let themselves be drawn into spending on “marketing” than they could afford.  One might even argue that some casinos, Trump and Resorts, for example,  never fully recovered.

Trump corporation declared bankruptcy three times in the intervening years and the reason is simple: In those kind of marketing wars, the weaker casinos get weaker and weaker.  Each is forced to pay for for the same level of business profit margins begin to decline.   For those on the bottom end of the scale, that means less or no money for capital improvement; as a result each year they get farther and farther behind, weaker and less profitable, until there is no profit, but rather a loss.  Trump and Resorts both have been through bankruptcies, both finally sold at a small fraction of their values a few years ago.  In Reno and Sparks, the process is more likely to lead in to a casino closing than selling – buyers are hard to find in this area.  The Siena did find buyers, but at 5 percent of the cost of its construction.  The Comstock, Riverboat, Flamingo, Fitzgeralds, Money Tree, Mapes, Riverside and others did not find buyers at any price.

The biggest of species is the most vulnerable in evolutionary terms, but that is the species not the individuals, which very large territories and very few individual competitors.  Species that are smaller adapt more easily and survive as a species more easily.  However, the live of anyone individual is different, each individual is likely to have many predators and many competitors.  The smallest and weakest individuals are least able to adapt and most vulnerable  – even though the species easily survives.  Small casinos will survive in Reno, just not all of them; when the fighting gets really intense as it is getting now there will be casualties.  But, for Reno this is not news, it has been going on slowly and continually for the last 20 years.

 

 

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