The February 2018 Nevada gaming numbers are out, and they look positive. As always, though, there’s a story beneath the story—and some cause for caution.
Statewide, Nevada casinos had a nearly 8 percent increase in total gaming win. That seems like great news, particularly when you consider the gloomy-to-meh performance of the casino industry over the past few months. In October, revenues were up less than a percentage point compared to 2017; in November, they were down more than 2 percentage points; in December, they were up less than a percentage point; and in January, they were down more than 2 percentage points. If nothing else, February’s big increase breaks that cycle.
The calendar, however, had as much to do with the better February than any real change in fortunes. Chinese New Year, which in 2017 fell in January, fell in February this year. Since that holiday has, for the past decade, supercharged Nevada gaming, particularly in Las Vegas, this shift in timing can move the needle.
By way of demonstration, in January, baccarat revenue fell by more than 28 percent, while in February, it increased by more than 82 percent. The good news here is that the January decline is significantly less than the February bump. Combining both months, 2018 looks to be a better year for Asian high-end play—much of which is on baccarat—than 2017, which is encouraging.
It also highlights the continuing dependence of overall Nevada gaming results on swings in high-end play, which is a phenomenon that’s intensified since the recession. Before 2007, baccarat was a much smaller part of Nevada’s total gaming win (less than 7 percent in 2006). As high-rollers (apparently) got their mojo back more rapidly than everyday gamblers, that proportion rose to more than 14 percent in 2013. In other words, the relative importance of baccarat—and, by extension, international high-end play—more than doubled in the space of seven years.
Since the Chinese government’s 2013 crackdown on “graft,” baccarat numbers in Nevada have fallen. In 2017, baccarat’s share of total gaming winnings fell to less than 10 percent for the first time since 2009. And yet, international high-rollers remain important, if only because domestic casual gamblers continue to play at lower levels than before the recession.
There are plenty of theories as to why Nevada’s gaming revenue still has not hit its prerecession highs despite a decade of inflation lowering the value of money. It’s tempting and maybe even satisfying to blame resort fees, 6:5 blackjack and the overall erosion of value on the Strip—and that certainly may be part of the picture.
In fact, using slot hold percentage as a proxy for value, the numbers may bear that assumption out. Over the past six months, the state as a whole is up 1.16 percent. The Strip, which has the highest hold percentage in the state at 8.06 percent, is down 1.54 percent, while Washoe County, with one of the state’s lowest hold percentages (5.34 percent), is up 6.3 percent. In this interpretation, gamblers are choosing to play where they get better odds.
But this distorts the picture, since at the end of the day, far more money is wagered on the Strip: Casinos there won $603 million in February, compared to $65 million for Washoe County. So it’s not that nobody’s gambling on the Strip anymore—it’s that, on a percentage basis, it now lags with most of the state.
The month itself, as this UNLV Center for Gaming Research infographic illustrates, shows some seemingly contradictory trends. The Strip, with a big 11.37 percent revenue bump, seems to be the big winner, but in every other game besides baccarat, including slots, Strip casinos won more than 4 percent less in 2018 than they did in 2017—hardly the stuff of a comeback swing. And while the more value-friendly Downtown posted a 2.84 percent increase, the Boulder Strip, which is built on value, saw a 1.03 percent revenue decline.
So while there is some noise in any single month’s results, the overall trends for Nevada gaming are important to watch. They show a steady erosion—or at least a concerted lack of growth—for gaming statewide, with a few areas posting gains and others suffering losses. There are some differences of opinion as to what the response should be. Some suggest returning to what worked in the past—namely, a greater value proposition and better customer service—while others insist we need to move to the future, with new games and an even smaller reliance on gaming itself.
In the end, both have the answer right: There are surely casual players who are put off by rising prices and offering them more value may bring them back. On the other hand, though, innovation and evolution have been the bedrock of Nevada’s resort industry since its founding, and any attempt to remain in the past may cancel out the future.
Slot hold/growth chart: Reporting area, change in win over past six months, average slot hold.
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