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Playing It Smart: Does the down economy herald a return of low-limit gambling?17 August 2009
The casinos used to think they were recession-proof. Lately, they've been asking themselves what happened.
Millions of solid citizens used to think the casinos offered lots of entertainment and vacation bang for not all that many bucks. For a while, now, they've been asking themselves what happened.
Much of what happened in both cases was the same. Folks were feeling flush. So the bosses upped the ante and people paid. All across the great gambling divide, low-stakes action disappeared.
The affluence, we now know, was vapor. Those who had owned homes for a while found their property values had escalated; they didn't have the cash at hand but it was like money in the bank and could be withdrawn through equity on which the banks were begging them to borrow. Those who had bought houses more recently found mortgages easy to get with payment terms that put them into MacMansions they could hardly believe possible. Almost anyone could drive a new luxury car by leasing it. Energy prices, while always a topic of griping, were sufficiently low that nobody thought twice about running air conditioners, driving on errands within walking distance, or using the instant-on capabilities of electronic equipment by burning up the Watts 24/7. Goods from developing nations the stock-in-trade of stores like Wal-Mart and Home Depot, were cheap. Food, too, was a bargain. And don't forget that pre-approved credit card offer mailed to your dog.
The casinos rode the wave by going into a high-end mode. They cut off some small-potatoes patrons by killing bus programs. And they deterred others by raising table limits along with prices on meals, rooms, and shows while simultaneously curtailing comps.
The country may or may not be in a recession. But the auto industry is mothballing Hummer and Navigator factories, Realtors and developers are sitting on the vacant houses they can't even unload at deep discounts, and Starbucks is closing latte cafes. Other than the occasional boutique business, companies are trying to survive tough times by attending to a mass market now pinching pennies on essentials and bypassing extravagant extras.
Companies. But, so far, not casino companies. It's no secret that the joints are hurting. For example, The Wall Street Journal (in "Betting on a Comeback," August 2 2008) says June revenues in Atlantic City were 11 percent below the same month in 2007. Other venues are doing poorly, too. Yet, the same article highlights plans to turn back the tide by conjuring up enough of an audience that still either has or acts as though it has money to burn. The Journal reported that the industry is counting on hotel rooms at $540 a night, beach cabanas for $400 per day, and night clubs such as the one that "has go-go dancers and requires bottle service, which starts at around $310, to get a table."
A huge cross-section of middle-America with finite, hard-earned resources is seeking recreation it can access and enjoy on a modest budget. For years, this was the prime customer base for the casinos. The present generation of gaming executives seems to have overlooked, or never learned, that it once did and still can thrive by serving this segment of society.
It's not only feasible but needs no great stroke of imagination or genius. Just intimate knowledge about how money filters to the bottom line at the machines and tables, strategies to stimulate and reinforce player interest, game structures that keep bettors playing on their bankrolls rather than busting out before they know what hit them, and the power of favors worth much more to the recipient than their marginal cost to the provider.
A few casino bigwigs will discover this and thrive by offering good value to a crowd that can't afford and doesn't want a $400 per day cabana on the beach. The others had better hope the economy recovers before their Hummers and Navigators run out of gas. As that pragmatic poet, Sumner A Ingmark, wryly rhymed:
The snobs who think that crass is to cater to the masses,
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