The Nevada gaming industry’s summer 2012 was a bit of a bummer. From June through August, overall gaming win increased by less than 2.5 percent over the year before -- not exactly the recovery summer most analysts were hoping for. The August numbers, released yesterday, pinpoint exactly what the problem with Nevada’s gaming industry is.
Over the past three months, for example, state slot machine win is down by almost 3 percent, and, if the mammoth July baccarat numbers are excluded (those were partially driven by a higher-than-usual hold percentage), even the table game numbers don’t look so inspiring. Last month, I talked a little about why this was a problem. Since the trend is continuing, I’ll elaborate here.
The overall lackluster performance of the industry outside of baccarat shows that the fundamental problem that has dogged it since late 2007—namely, people come to Las Vegas with less money in their wallet—hasn’t gone away. Baccarat is tiding casinos over and putting some cash in the state’s coffers, but big wins there aren’t the same as a broader gain in table or slot win. There are about a half-dozen casinos on the Las Vegas Strip that take serious baccarat action—that’s where most of this money is won. The high rollers who play baccarat are expensive for casinos (they demand and get perks like luxury suites, private jet transportation) and risky: when a player is betting $50,000 a hand for a few hours, there’s an almost-even chance that he can end up beating the house. At that level, there’s just not enough action to spread the risk around, unlike other games, where one or two winning blackjack players are offset by others who lose.
This means that baccarat win is fundamentally less stable even when it’s combined for the entire Strip. Blackjack is a gamble, but it’s a fairly consistent one: From 2004 to 2011, monthly blackjack hold percentage ranged from a low of under 9 percent to a high of nearly 14 percent, with an average of about 12 percent. Baccarat, during the same years, reported one month with a hold below 4 percent and one that approached 20 percent. Over time, baccarat averaged about the same hold percentage for casinos as blackjack, but even when spread out over the Strip, it’s clear that the game is not a steady winner.
Casinos continue to court baccarat players, however, because the high-end trade is potentially very lucrative: those months when the house does well are good ones. But the larger issue for
the state’s economy is that, with so much of the revenue gain coming from baccarat, the gaming industry is falling into two camps: Those who have the potential to profit from baccarat (and often do) and those who are still hanging on by their fingernails.
Looking more closely at the numbers explains the apparent disconnect between the small gain in revenue the state’s casinos posted over the summer and the fact that the industry in general isn’t in growth mode. Small, steady gains are the best that even the most optimistic observers are projecting right now. That this summer’s modest revenue increase appears to be confined to a narrow segment of players and a handful of casinos only underscores that, for much of the gaming industry, the slowdown continues.