Two Way Hard Three | Las Vegas Casino & Design Blog

April 8, 2011

Thoughts on the February NV gaming numbers

Posted by daveschwartz

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.


Read archived comments (8 so far)
April 8, 2011 5:26 PM Posted by detroit1051

Megabucks' payback is 87.5% for past 12 months. Do players know that?

April 9, 2011 7:13 AM Posted by Paco

The rolling 12 month sum for baccarat is down to $1,074,735 (4 months of decline). That is within $100 million of it's pre-recession peak of $970,726 (Oct 2007).

The over $72 million category on strip is very slightly helped by the repositioning of the LV Hilton into the $36-$72 million grouping. Too bad the NGC can't release a "North Strip" data back for the last five years. As that would be only five casinos (Palace, Sahara, Riviera, Circus Circus, and LV Hilton) that would probably violate the law.

"NV statewide less strip" is a new low since since somewhere between Dec 1999 and June 2000.
(statewide) $10,333,704- (strip)$5,709,684 = $4,624,020

April 9, 2011 2:56 PM Posted by Dave

Thanks for sharing that.

And Detroit--it's certainly not anywhere on the machines themselves, but I'd hope that anyone's who's playing slots more than casually knows that MB offsets those big jackpots with higher holds. FWIW, they still have a better return than lotteries, by a large margin (about 90% vs. 55%).

April 10, 2011 12:19 AM Posted by Paco

Revenue of Megabucks is roughly $300/day vs $100/day for quarter or multi-denomination.

April 11, 2011 4:13 AM Posted by Omlette

Given the importance of baccarat revenue and the fact that the amount is concentrated to a few high-end properties and a very limited number of players wouldn't it be possible for a whale to hedge their losses via the market. For example, Mr. X loses $10M playing baccarat at Aria, he goes home and buys MGM stock knowing that when the revenue for that month is released his play was enough to influence the stock price.

April 11, 2011 3:51 PM Posted by Paco


While baccarat accounts for an average of $3m of the $7m table revenue of the top 22 casinos on the strip, it is doubtful that anyone has the resources to "hedge your bet" by buying stock. MGM-Resorts makes $16.5m per day from all sources.

In 2004 when Tom Breitling owned the Golden Nugget and table games revenue averaged $126K per day for the Vegas property, a single better playing craps at over $100K per throw of the dice did have the power to radically change the profitability of the resort. The story is recounted in his book. The board of directors was forced to re-institute table limits afterwards.

April 11, 2011 7:06 PM Posted by Erin Wootan

Anyone who studies the numbers when they come out takes a look at baccarat first, and if not first, very close to that, simply because that seems to be what is sustaining the industry at this time, at least in terms of gaming revenue on the strip. But do you think that this level of revenue on baccarat is sustainable? The growth rate obviously is not, as you mention above, but at some point, the high rollers from the Far East are going to have enough of a market closer to home and will not have to travel to the US, specifically Vegas, to gamble. Right?

April 12, 2011 12:18 PM Posted by Paco

It is difficult to say what is sustainable. The baccarat market in Asia is now well over US$20 billion dollars per year and growing by billions of dollars every year. So in theory Vegas only needs to capture a small percentage of that growth. But Americans (even Asian Americans) are not expanding the game. Mini-baccarat has failed to popularize the game in the way people hoped.
Baccarat peaked in October 2010 ($1.2 billion for the 12 months up to that month), and for a monthly total peaked in February 2010 ($205 million in baccarat vs $207 million in slots). But the running yearly total has been slipping for the last 4 months.
Singapore is offering a lower tax rate than Macau. The Sands Corp. no longer has as much incentive to charter a Boeing 767 to fly people from Hong Kong to Vegas. It's much cheaper to charter a business jet to fly them to Singapore.
Baccarat peaked at just under $1 billion before the recession hit (for 12 months leading up to Oct 2007). I think Vegas will return to that level (it's at $1.074 billion right now).
More importantly, someone will try and copy the success of Marina Bay Sands (MBS) in Singapore. It might be Barcelona, or Madrid. It might be in Korea or Tokyo. It might even be Los Angeles or Chicago. MBS says that you can build an international class tourist draw, without turning your entire city into a gambling Mecca.