Las Vegas Is on Tilt

Tonight, a new World Series of Poker champion will be named at the Penn & Teller theater in Las Vegas. The highest honor in poker will make a millionaire in a city that's used to taking fortunes from its customers. But in recent years, the tables have turned and the house's advantage has been diminished as customers seek a new kind of thrill in Sin City.

The party looks like it's returned to Vegas, but the gamblers are slower in arriving. We saw it when the Cosmopolitan opened and became the new hot spot on The Strip filling rooms at strong rates and making a killing on food and drinks. But high room rates and popular nightclubs don't make a profitable resort, gamblers do.

Gamblers a world away
Unlike Macau, where gambling is the focus, the young crowd in Las Vegas is less concerned with playing blackjack than they are with making it to the afternoon pool parties. When Wynn Resorts (Nasdaq: WYNN  ) and Melco Crown (Nasdaq: MPEL  ) are focusing on maximizing revenue per table and how to compete for junkets, Caesars Entertainment and MGM Resorts (NYSE: MGM  ) are trying to get customers just to play at their tables.

Another contributor to the struggles in Las Vegas is that the Asian players who used to travel halfway around the world to play the tables in Las Vegas no longer have to, as the newest casinos are in Singapore and Macau. What's the draw to the aging Las Vegas Strip?

The party rages on
So while Las Vegas Sands (NYSE: LVS  ) , Melco Crown, and Wynn Resorts are counting their winnings in Asia, the Las Vegas-focused operators are struggling to survive. MGM lost $107 million in the third quarter and Caesars Entertainment just announced that it lost $164 million in the quarter. They can continue to point to solid room rates as a sign The Strip is improving, but the fact is that gamblers aren't coming back. For the past 12 months, gaming revenue is still down, even though the visitors seem to have returned.

It wasn't the college kids on spring break that built Las Vegas, it was the gamblers who would sit at a table all day. Maybe it's a changing demographic, the spread of gaming in the U.S., or a bad economy, but those people don't seem to be visiting quite as often.

It's too bad, because I enjoyed ogling what those players helped build as I strolled toward one of the city's growing and less profitable poker rooms.

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (4) | Recommend This Article (4)

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  • Report this Comment On November 08, 2011, at 2:48 PM, gwendt01 wrote:

    Maybe Las Vegas should go back to the way they got the gamblers to come there in the first place:

    Cheap (Free) Booze

    Cheap Meals

    Low Room rates

    = more spending money for gambling

    And the half naked servers didn't hurt either.

    Stop trying to be a family destination and bring SIN back to Sin City

  • Report this Comment On November 08, 2011, at 3:27 PM, TMFFlushDraw wrote:

    @gwendt01

    I agree to an extent. A free drink while losing a hundred bucks makes the loss a little easier.

    But the focus on the bottom line has driven those perks off the Strip at the very least.

    Travis Hoium

  • Report this Comment On November 09, 2011, at 10:15 AM, billywoodman wrote:

    The story give away the solution to the problem. When the casions stop trying to improve earnings every quarter over the last, the gambling customers will return. Station Casions are doing much better at gambling revenu that the big houses on the strip. Gambling must be fun and tempting to the player. Duh!

  • Report this Comment On November 09, 2011, at 1:50 PM, catfish69 wrote:

    Well, if they'd actually make it a gambler-friendly environment, then maybe they'd get the real "players" back. When all the games are heavily skewed in the house's favor, it doesn't make for much fun. Used to be able to find decent rules on Blackjack, but no, the big corporations are so focused on trying to get the young, stupid kids out there that they've forgotten about the ones that built their casinos in the first place...the gamblers! But, gamblers want decent odds! Get rid of the continuous shuffle machines (CSMs), make the rules a little more favorable and you'll get the smart people back gambling again. They thought they could make enough by getting the unknowing, young people to play their 6:5, 8-deck games because they dressed the dealers in skin-showing outfits. Works for a little while, but guess what??? It's not the 25-year olds that have all the money! They've gone the wrong direction...as the article said, room rates and partying are up, but the casino-building gambling revenue is way down. Figure it out MBA execs!

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