Baccarat to the future

In the past few months, the game of baccarat—more than anything else—has been responsible for breathing life into Nevada’s moribund gaming economy.

Baccarat is deceptively simple: Bettors just decide whether to wager on player or banker, then wait as the dealer draws two or three cards for each side. The point totals are added up; whichever side gets the highest total wins, though if the cards add up to more than nine, the first digit is dropped.

“Big” baccarat is played on a double-lobed table, usually tucked away in a semi-secluded corner of the casino in a separate area devoted to higher-limit version of blackjack, craps and roulette. Mini-baccarat, played on a modified blackjack table, can be found on the regular casino floor, but real baccarat players like their privacy.

Baccarat first came to Las Vegas in the 1950s, but didn’t make much headway until the growth of high-end, international play in the 1970s. Caesars Palace and the Hilton led the way, and soon most casinos with any pretension to catering to high-rollers added the game.

The game has had an up-and-down ride over the past two decades. In the 1980s, when mass marketing to small-budget players replaced a reliance on a select group of high-rollers, many casinos junked their baccarat tables. In 1992, there were only 59 baccarat tables in the state, and the game accounted for about $291 million in winnings, less than 5 percent of total gaming revenues.

Although the game gained traction during the booming 1990s, regularly earning more than 7 percent of the state’s total win, the recession of 2001-02 (spurred by 9/11, competition from California Indian casinos and the bursting of the dot-com bubble) saw baccarat play plummet. In 2003, the game accounted for less than 4 percent of the total gaming pie. Casinos removed tables, and it looked like the game was on its way out.

Since the start of the recession, though, baccarat has made a paradoxical comeback. After reviving in 2004 and 2005, the game’s share of the total gaming market grew steadily. It suffered a decline in 2008, but roared back in 2009, when it earned $978 million, almost 10 percent of the total gaming win.

This might be just the beginning. The state’s 251 baccarat tables made more money in January than its 3,366 blackjack and roulette tables combined, and baccarat’s total market share jumped to more than 12 percent.

While there are several domestic high-rollers who prefer the game, it is most popular among visiting Asian gamblers. Top baccarat players generally play on credit—with lines typically more than $1 million—and usually stay in super-luxury suites with gourmet meals delivered to their room—or at the table, should they wish to avoid the hoi polloi of diners spending mere hundreds of dollars for a meal in the restaurants.

The increasing importance of baccarat marks a step back from the way the industry had been moving since the 1980s, relying heavily on a small pool of players instead of generating profits on volume. This may be a concern, since the universe of people who can bet $10,000 and up a hand is much smaller than those who play quarter slots. With competition intense for this small group, casinos may pay too much in comps and incentives to players.

Second, with fewer players betting more money per hand, casinos will face greater volatility. Some months, they’ll have record hauls; in others, the players might come out ahead. This can impact both the financial health of individual companies and the state’s tax collections.

In times like these, casinos are happy to get revenue wherever they can. But it’s worth considering that the high-end basket is a perilous place to store gaming revenue eggs.

David G. Schwartz is the director of UNLV’s Center for Gaming Research.

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