Casino Incompetence
It's no secret that the casino industry has been obliterated in this
economy. That was going to be an inevitability whether they were
operated well or not. Gambling in a casino is the epitome of
discretionary use of funds, and anything discretionary has gotten hit
hard in the last several months. Yet, in hindsight, there are a few
things casinos could have done to mitigate the damage. There are also
a few things they could still do to avoid going bankrupt. Bankruptcy
is a possibility for some firms (Harrah's, Wynn) and perhaps a
probability for others (MGM, Las Vegas Sands). Here are a few things
casinos could have done to hedge their damage in this environment, as
well as a few things they would still be wise to do in order to help
avoid bankruptcy. online poker 468x60 Aggressive Overexpansion Most
companies have been hurt by the credit crisis. This is especially the
case for high-end companies. Vegas casinos were flat-out caught with
their pants down. When the economy was doing well, Vegas was expanding
rapidly. It didn't take long for a bubble to materialize. Casinos were
being built or expanded with a "if you build it, they will come"
mentality. Every hole-in-the-wall casino started thinking they needed
a 40-story tower added to their roof. There are many examples of this
senseless over-expansion. Two of Vegas's biggest properties, Wynn and
Venetian, decided that additional billion-dollar upgrades to their
already extravagant resorts made sense. And thus, Encore and Palazzo
were erected. These properties were launched with comical timing.
Encore opened just a few months ago amidst the worst of the economic
downturn. Another high-end Vegas resort that most likely will never
even open is Echelon. Properties like the Stardust and Frontier were
bulldozed to make room for the massive, $4 billion dollar Echelon
project. Construction had only just began before the project was put
on a "temporary halt". If it ever resumes, it likely won't be for
several months or years. Echelon's owners are probably hiding
somewhere after investing hundreds of millions into something that
might conceivably never make a dime! Sub-Optimal Comp Systems "Comp"
(short for complimentary) systems in Vegas are designed to give
players a "rakeback" of sorts on their gambling activities. It has
evolved into a dance between players and the casino. The silent
agreement is that if you play, maybe you'll get your room, food,
transportation, or all three for free. However, the way in which
casinos have implemented their comp systems is less than optimal.
Players are comped based on the duration of their play, average bet
size, and the game. Essentially, they are comped based on the expected
value (EV) that they give up to the casino. In a vacuum, a system like
this makes sense. In practice however, it ignores a few human-elements
such as the fact that if people are winning, they will continue to
play and if they are losing, they will quit. People have a maximum
amount of raw money they are willing to lose, not a maximum amount of
EV they are willing to give up. So essentially casinos will balk at
the requests of a high-roller who blows $3,000 playing $200-a-hand
blackjack for thirty minutes, but will treat someone who bets
$25-a-hand for 8 hours preferentially. Of course, from the casino's
standpoint, this does make a certain amount of sense. After all, the
$25 player gave up much more value to them than the $200 player did.
However, hosts and pit bosses who just "follow the computer" with
regards to giving out comps regularly alienate bigger players who
didn't get a chance to flex their money-muscles since they went broke
so quickly! Sure, they might not have any money left to gamble with on
that trip, but why not throw them a free hotel room as a gesture of
goodwill for next time? After all, they did just win $3,000 from them.
It seems that most casinos have not changed the algorithm of their
comp systems to reflect current economic conditions. In a more
flourishing time when their hotel rooms were in high demand, it made
sense that might not be able to meet every request. But right now,
their hotels are practically empty. It costs them almost nothing to
put someone in a room that will otherwise just remain empty. The comp
system for the table games necessitates the high roller to generally
ask the casino host for a free room or meal. Given people are more
unwilling to part with their cash than ever, it's downright silly for
these casinos to play some sort of cat and mouse game with one of
their many empty rooms. Be straightforward with players. Tell them
that if you lose amount of dollars or put amount in play, we'll comp
your room, guaranteed. Simple as that. No need for some secrete,
elaborate computer system that confuses and angers players. If Vegas
was ran more efficiently, the nicest 15% of properties would be filled
to the brim every night while the rest would be empty. But that isn't
the case because the top 15% have alienated or failed to attract what
customers are still around! Unsupportive of Online Poker The casino
industry has always been neutral at best or hostile at worst towards
online poker. When the UIGEA was on the table, they were silent. No
outspoken opposition regarding the bill was made. This was a slap in
the face to a phenomenon that indirectly led to huge growth for them.
The WSOP and the poker boom was one of the best things to happen to
Vegas since its creation. They basically fell ass-backwards into
having their poker rooms (and thus, their casinos) filled overnight
thanks to online poker! People started playing from the comfort of
their own living room and suddenly decided to head to Vegas on a quest
to become the next Chris Moneymaker. Yet, when the online poker
industry had its back to the wall, casinos sat on their hands. An
outspoken and favorable stance towards online poker might have not
only resulted in no UIGEA, but it could have also paved the way for
legislation that enabled them to acquire and run online poker rooms of
their very own. The resulting value added might have provided for less
reason to worry about whether or not their once-blossoming operation
will even survive.