My dad entered coin-op as a teenager in the late 1930s. For $5 a week, he hauled pinball machines after school for his cousin Sam. Learning the business, my dad built an amusement company that offered inexpensive entertainment for anyone, without membership fees or costly equipment.
On a smaller scale, coin-op has often paralleled gaming. Both were born during America’s Depression in the 1930s. The first countertop pinball games were boxes with upright pins. Nevada legalized gaming as a vehicle to build its economy. As affordable entertainment, both industries were considered recession proof.
While casinos involve more regulation and bigger dollars, they mirrored arcades’ instant fun and entertainment value. Gaming later enhanced the experience by introducing retail and dining amenities.
The sky has been the limit, and projects have soared. However, crucial financial markets and today’s challenges facing consumers have begun eroding gaming’s perceived invulnerability.
A January survey revealed that 12 of 19 states with casino or racetrack gambling suffered decreases from the prior year at the same time. Nevada, Arizona and California are three of the states hit hardest by the American housing foreclosure crisis. Nevada’s gaming revenues dropped almost five percent from a year ago to $1.06 billion.
What is the particular problem for Las Vegas? Forget about gambling declines once customers arrive. They have to fly or drive there. Most drive-in customers travel from California and Arizona, where a gallon is nearing $4.00 and rising.
Also, airlines are cutting back …not for national security, but due to soaring fuel costs and insufficient profits. US Airways will cancel midnight flights from Las Vegas to nine cities due to costs. According to the Wall Street Journal, US Airways President Scott Kirby said, “The Las Vegas night system is vulnerable. Flights that made sense at even $85 for oil are not making sense today.”
While fewer night flights may not stop visitor traffic, it will cut their time in Vegas. Travelers flying late night and then going to work upon landing will have to leave earlier. The trickle-down effect will mean fewer meals and drinks, cab rides and less gambling.
Casino development is also slowing. The economic clamp on Main Street has affected Wall Street. The credit crunch has halted several projects around the US.
Following the November 2006 Sands implosion in Atlantic City and a scheduled 2009 groundbreaking, Pinnacle Entertainment has advertised to future gamblers about its $2 billion casino’s 2011 grand opening. However, Chairman and CEO Daniel Lee has put the project on hold, citing credit markets.
The Las Vegas Strip has not escaped problems either. Harrah’s Gary Loveman blames decreasing convention attendance and lower room rates for decreased revenues. MGM Mirage’s $8.1 billion CityCenter megaresort continues its development due in part to foreign investments.
On the Strip, the Cosmopolitan, a casino resort under construction, may be facing foreclosure. The future of The Plaza, a 3,500-room replica of New York’s famed landmark, is questionable, as is the proposed $5 billion Crown resort.
What’s the answer? Do casinos weather the storm, or proactively try to minimize their losses? What should they do? Offer more amenities, make the games cheaper or drop hotel room prices even more?
New Jersey officials aim to maximize their location by easing the journey; direct train services from New York City to Atlantic City should begin by year’s end. A casino group will underwrite the multi-million-dollar project, retrofitting and refurbishing luxury trains.
Las Vegas must also be creative since it sits in relative isolation. While holding down costs, tourist and gaming executives must continually promote their city’s greatness and viability, motivating visitors that it is the place to splurge.
Mississippi’s Gulf Coast must promote its new beauty and airport as a result of rebuilding from scratch after Hurricane Katrina in 2005.
Not to be a “doom and gloomer”, but this year may be tough for gaming. Casino patrons must make tough choices on how to spend any discretionary income. Realistically, leisure gaming, shopping and dining may be on the losing side of that decision.
We will soon know how gaming withstands these challenging days. Indeed, what would my father think, seeing that past economic protections are no longer etched in stone?

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