Wednesday, January 24, 2018

What we can learn from the closing of two casinos

It’s not always location.

Those of us who spend too much time thinking about, reading about and talking about Las Vegas, when we’re not enjoying its excesses, know that many of the prominent Sin City casinos no longer rely upon gambling revenue to turn a profit from year to year. It’s well known that with increasing competition nationwide for the gambling dollar, Vegas casinos need to make money many different ways in order to turn a profit.

Two interesting casino developments of the past month have made me wonder if we’re at the point where it’s hard to make meaningful money off of gambling.

When Lucky Dragon closed its casino, (temporarily, it is claimed,) it was seen as a failure for a variety of reasons. The Dragon had opened its brand new, shiny, boutique casino/hotel barely a year earlier, and its casino traffic has been so bad that it could no longer afford to offer gaming.

The reasons most touted: The location was horrible, the gaming was unspectacular and the enticements were missing.

I’d agree.

The location makes Lucky Dragon a tough sell right now, and for the foreseeable future. It’s just off the strip, on the north end, where there’s little of excitement. Yeah, it’s close to the Stratosphere, but it’s a destination casino that doesn’t have the benefit of foot traffic like you would get at Cromwell or Casino Royale. If you want people to go out of their way to visit your boutique hotel, you had better give them something worth going out of their way for.

The fact that the property was designed to target Asian gamblers didn’t seem to help.

And it’s that gambling demographic that resulted in the mix of gaming offered by the casino. I have never set foot in the place, but it was touted as having appeal to the Asian gamblers of the world because it featured plenty of baccarat, and put less emphasis on other table games. Space is limited, and you can’t offer everything for everybody, but you need to have a niche if you’re going to put asses in the seats, especially when you don’t have 1,000+ hotel rooms feeding into your casino floor. And baccarat wasn’t the right niche, evidently.

I never paid much attention to any promotions or enticements that the Dragon was offering, but I never heard much talk about them, either. There were some simple free play or match play promotions, but if you want people to play your games in a casino that’s not convenient, and not in the most glamourous part of the city, give them some incentive, like a lower house edge. Perhaps single-zero roulette wouldn’t have made much of a difference, but offer low-minimum tables with a single zero and you’ll be the talk of the town. If couldn’t have made things worse, could it?

Better promotions and gaming odds would have drawn more people to the casino, but perhaps it wouldn’t have been enough. Perhaps the small casino/hotel couldn’t afford the volatility that a lower house edge exposes. (There’s evidence to suggest that.)

Wouldn’t it have been nice to know?

The one thing the Dragon couldn’t change is its location. Its out-of-the-way location is seen as a major detriment to its success. For any small casino to succeed in that location, it had better attract a significant percentage of its target market, or draw a lot of people looking for an alternative to the stinginess of the big players on the strip. And those people exist, without a doubt.

So, with or without more favorable gambling conditions for the player, if you could just plop the Dragon in a more prominent location near the heart of the strip, it would have a fighting chance of succeeding, right?

Not so fast.

This month has also included the closing of the Westin Las Vegas casino. All gambling was removed from the property, making way for a new restaurant, and meeting space, or something like that.

Yeah, that’s what’s missing, a restaurant in a hotel three minutes from the hustle and bustle of the strip.

The spin seems to be that this is some sort of evolution, some sort of plan, that phasing out gambling was a good thing. The latter seems to be true, but I’m skeptical its demise is by design.

When I first went to Vegas 21 years ago, my first day in town brought me to a cheap, if not free, afternoon magic show at the Maxim. The Maxim was a modest casino/hotel just off the strip, tiny in comparison to MGM, where I stayed on that first trip.

The Maxim had a bustling crowd that Thursday afternoon in early January. Who would have guessed that it was 21 years away from disappearing? Not me.

The Maxim eventually became the Westin. I’m not sure whose guidance drove off the gambling crowd, but I was in that joint a decade ago, after the Maxim name was scrubbed from the property.

I have no special insight. I don’t know why the gambling crowd deserted the property. Was it because it was poorly run, and people stopped coming, or did people stop coming because of the fickle nature of business, and the property failed to react.

A vibrant casino, just a couple of minutes from the heart of the strip, could no longer make a go of it. Is the competition from the major strip casinos too difficult to overcome? Perhaps, but close to the former Maxim is a smaller, less spectacular property known as Ellis Island. It is doing better than ever, despite having less to work with. Its casino isn’t going anywhere any time soon.

Moral of the story: Location is important, and gambling is a tougher business than ever. It remains a viable business for the smaller, secondary casinos in Vegas, but it’s tougher than ever to succeed, and is far from foolproof. We lost the Maxim, and Lucky Dragon is dying on the vine. Casino properties in the tourist districts had better offer a lot of things for a lot of people, or they face a tough battle for survival.

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