Big Vegas Casinos Could Move Online

It wasn't long ago that online poker took the world by storm. Millions of users signed up to play anonymously at home on the multitude of sites that popped up. Then lightning struck in 2003, when Chris Moneymaker won the World Series of Poker main event after qualifying online. The poker boom was on.

But the glory days were short-lived for those looking to play (semi)legally. Congress passed a law in 2006 making it illegal to transfer money to gaming sites, and many sites left the United States. PartyGaming lost more than half of its value in a single day, and the online poker world wasn't the same.

But now a bill is slowly moving its way through Congress that would regulate and likely tax online gambling, including poker. This could be a huge win, not only for online poker sites but for big casino operators. Las Vegas Sands (NYSE: LVS  ) already flirted with the idea of opening an online casino in 2006. MGM Resorts (NYSE: MGM  ) , Wynn (Nasdaq: WYNN  ) , and Harrah's wouldn't be far behind if regulations are approved.

I see the marriage between bricks-and-mortar casinos and online ones as a natural thing. Casinos could offer incentives an online store can only dream of. Night stays for play, VIP club passes, show tickets -- plus everything an online shop could offer. Incentives could even be modified to boost slow traffic dates or fill venues.

If you think this wouldn't be a meaningful impact on casino giants, don't overlook online gaming's potential; it could rival Asia as a growth opportunity. PartyGaming had $977.7 million in revenue and $620.2 million in operating cash flow in 2005, the last full year it was in operation in the U.S. I could only guess at the impact for the casino operators mentioned above, but you can see the general size of the opportunity. The pie may need to be split into more pieces, but the impact would be significant.

My pick to take the largest share is MGM Resorts. It has high-quality brands, a loyalty program, and properties all over the country. But I have no doubt that online gambling would boost all of the big casino operators.

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Fool contributor Travis Hoium owns shares of Las Vegas Sands. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 05, 2010, at 5:28 PM, Senescent wrote:

    I don;t know that online gaming would be a big win for bricks and mortar casinos. Right now, there are a few sites and I think the most active ones are either sportsbooks or poker. Presently, the poker sites are taking out similar fees to bricks and mortar casinos and do some fee rebating in various ways to frequent players. Ultimately, it seems to me that competition has to enter this arena and it will enter more readily if online gambling is legal. That competition will force online sites to cut back dramatically on fees - because it doesn't take a whole lot of money to set up an online site. Entrants may well find that they don't make a whole lot of money online and could also cannibalize bricks and mortar casinos. I have similar concerns about the assumption that Asian growth means that casinos in Japan or India would be wildly profitable for their operators.

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