2012 was a very good year; a very good year for competition and red ink

As I have written before, the torch has been passed to a new generation of casinos. In 2006, the casinos in Atlantic City were second only to the Las Vegas Strip casinos in revenue.  That position now belongs to Pennsylvania – actually it is third, as Vegas has been passed by Macau.  Atlantic City is now in the process of working its way down the list; AC gaming revenues have been in decline for five years.  Possibly most shocking and at one time unimaginable –a casino in Cleveland, Ohio generated more gaming revenue in December than all but one casino in Atlantic City.  The gaming industry is like all other industries, it is dynamic, constantly changing; in the midst of the change some casinos are on the ascendency, taking the place of others who are no longer king of the hill.

And while the guard is changing, things are tough for the old guard.  Granted, it is not always the competition that creates the challenges faced by the established casinos and long standing gaming jurisdictions.  Sometimes the challenge is the economy as the country struggles out of the clutches of the Great Recession; for the most part casinos in Louisiana, Missouri and Mississippi are in that category; and casinos on the Las Vegas Strip might be in that category – might.  But even for Las Vegas the increased competition all across the country also puts pressure on the famous Strip; those 200,000 people that wander the Strip every day come from states that now have casinos also.

About 20 percent of the gamblers in Las Vegas drive from California, but even those Californians have casinos conveniently located closer to home.  There are 61 tribes in California with tribal-state compacts to operate a casino and over 61,000 slot machines in the state; add to that a multi-billion lottery and about 100 card rooms – that is a lot of gambling and gaming revenue that never makes its way to Nevada.  The combination of the competition and the economy was not kind to Nevada casinos in 2012.  The major casinos in Nevada had a combined net loss in 2012, while revenues were slightly higher than in 2011.  In Reno it was the 4th consecutive year of loses, although Reno too had slightly higher revenues in 2012, as it faced no new competition during 2012.

All of those gambling options in the California may not hurt Vegas as much, but they really cut into Northern Nevada and Reno’s market.  It is not a new phenomenon; Indian gaming, state lotteries and card rooms have been taking market share from Nevada for a long time, it is an old story.  However, for Michigan that level of competition is a brand new story and it is having an impact; Detroit casinos had less revenue in 2012 than they had in 2011 and they can expect even less in 2013.  The problem for Detroit is Ohio; Ohio is in the process of opening four casinos and seven racinos – in total there will be about 22,000 slot machines in Ohio by the end of 2013. Many of the customers now flocking to the casinos in Ohio once went to casinos in Detroit, Indiana or Pennsylvania.

Boyd Gaming added a postscript to the results being reported by Nevada and Michigan.  Boyd is laying off an unspecified number of employees nationally; and most tellingly among those losing their jobs are three corporate vice presidents.  That is not a layoff, that is a restructuring. It indicates that Boyd sees fundamental changes in the dynamics of all of its markets.  Boyd did not offer much in the way of detail, but a spokesman summarized the problem succinctly: “As we all know, revenue is unpredictable,” Strow said.  That indeed is the state of the industry as we begin 2013, revenue is unpredictable.

 Detroit’s casinos suffered their second collective revenue loss in their history by dropping 0.5 percent to $1.4 billion in 2012 from the year before…opening in late May of the Hollywood Toledo Casino cut into the revenues of MGM Grand, MotorCity and Greektown gaming halls…MGM Grand, the largest Detroit casino by revenue, was the only one to generate a revenue gain for 2012, up nearly 1 percent to more than $600 million…MotorCity Casino-Hotel suffered the largest loss with revenues dropping 2.6 percent to $460 million. Greektown Casino-Hotel, the gaming hall in which Quicken Loans Inc. Chairman Dan Gilbert is trying to buy majority control, experienced a 0.2 percent decrease to $352 million. Karl Henkel, Detroit News, 1-22-13

 Nevada’s largest casinos suffered a combined loss of $1.2 billion in 2012, despite an increase in revenues…There were 265 Nevada casinos that fell into that category during the 2012 fiscal year that ended June 30 of last year.  Casinos reported total revenues of nearly $23 billion, up from $22 billion the previous year. Associated Press, 1-23-13

Washoe County’s 32 biggest casinos lost money for a fourth straight year in fiscal 2012… combined $102.7 million loss …A year earlier, those casinos lost $44.5 million….total revenues in fiscal 2012 were $1.26 billion, about one-half coming from gaming, a 1.3 percent rise from a year earlier.  Casinos at Stateline on the south shore of Lake Tahoe reported a net loss of $24.9 million in fiscal 2012 on $343.5 million in revenues, and casinos in the Carson City-Carson Valley corridor reported a net income of $7 million on revenues of $150.7 million. Bill O’Driscoll, Reno Gazette-Journal, 1-23-13

Boyd Gaming Corp. laid off an undisclosed number of workers, including three corporate vice presidents. The Las Vegas-based casino operator said the number of layoffs was less than 1 percent of the company’s workforce. Boyd Gaming spokesman David Strow said the layoffs came in several of the company’s markets across the country. He said the company evaluated staffing levels and current business volumes. Howard Stutz, Las Vegas Review-Journal, 1-24-13



1 Response to “2012 was a very good year; a very good year for competition and red ink”

  1. 1 rexdstock1 January 24, 2013 at 5:56 pm

    What were the VP’s that Boyd let go?  Noonan?


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