Every month, Revenue Day is always a bit of a mixed blessing for me. It means a lot of fairly frenetic number crunching (at least by the standards of academia), but also a chance to share my thoughts on what's happening in the gaming industry. I've been mulling over the numbers since about 6:45 this morning, and here's where I'm at right now.
First, if you want to see the numbers I'm referring to here, check out the official release and my February comparison (pdfs both). The February comparison looks at the results from 2004 to 2011, so it gives some much-needed historical perspective. Here, I'm going to focus on the Strip, because this isn't the blog for RateElko or RateBalanceOfClarkCounty.
Year to year, it looks pretty bad. Baccarat revenue was the big loser, declining more than 31%. There were some bright spots--mini-bacc revenues more than doubled, slot revenues actually increased, thanks to higher hold. The funny thing is that table handle increased--slightly--meaning that people gambled more at tables, while slot handle fell. But, because the casinos were less lucky at the tables this February, they had what appears to be an off month.
Zeroing in on baccarat, it's clear that this the Strip didn't do that badly. This is still the second-highest total baccarat win for the month since 2004, and the handle was just under the 2010 record. So people played nearly as much; they just won more in 2010 than 2011. It's important to mention that Feb. 2010 had an abnormally high hold percentage: 17.04% (not a record, but still far from the 12% or so average). Feb. 2011's hold, 11.71%, was really a return to normal.
If you take baccarat out of the equation, table game revenue actually increased from year to year, from $148.9 million (2010) to $153.0 million (2011). Basically, outside of the decline in baccarat, which was really a fall back to reality, the Strip didn't have an awful month--though it didn't have a great one, either.
Baccarat hold percentage is so crucially important to the overall gaming picture for the Strip and the state (55% of Nevada gaming revenues are generated on the Strip) because we're in a baccarat-based recovery, in which the game boosted revenue for much of 2010 while other games that draw more broadly from the spending public (which has less money to spend) stagnated. So, if a few high rollers get a few hot shoes, the entire state's revenue picture darkens.
Putting it in perspective: in February 2004, baccarat win accounted for 6.08% of total Nevada gaming revenue. In February 2011, it accounted for 15.98%. When the house gets lucky, that number is even higher; in February 2010, 21.77% of state gaming revenues came from a few baccarat tables on the Strip.
For those of you investors who are trying to gauge the performance of companies with heavy Strip exposure, there's an even higher reliance on baccarat: from 11.92% (2004) to 27.35% (2011), with the high point in 2010 (36.10%). Since the Strip totals also include resorts that don't have a lot of baccarat action, I'd guess that for WYNN, LVS, and MGM, that percentage is much higher.
It also appears that, in the big picture, the Cosmopolitan hasn't moved the needle much; with slot handle down, it doesn't look like there's a growing revival in broader gambling spending on the Strip.
And here's an interesting fact: for the first time since at least 2004, the number of baccarat tables on the Strip actually fell. This tells me that we shouldn't expect much more growth of this segment; if we're lucky, handle will remain about constant year-to-year, with revenue fluctuating along with the hold. It's not the worst possible scenario, but it's not a recipe for real growth, either.