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Casino Revenue Decline Mitigated by Gambling Promotions
LAS VEGAS, NEVADA --
Although the news submitted by casino operators on the Las Vegas Strip was already bad enough, a gaming analyst warned that corporations may be sacrificing profit margins elsewhere to boost gambling revenues. Despite figures showing that Strip casino revenue dropped by over sixteen percent in November, Jeffrey Logsdon of BMO Capital Markets said hotel and corporate margins had been reduced in promotions designed to draw gamblers.
The idea of offering room deals, free meals and shows to gambling patrons is a long-established Las Vegas tradition. But in the modern, corporately-evolved casino world, all revenue streams are seen as something to be squeezed for every last drop of profit.
Logsdon noted that filling rooms with specials caused hotel margins to drop, even as the casino floors filled with the extra clientele lured by specials and discounts. Logsdon wrote in a client note that "Most operators feel it is better for their casinos to have players gambling and utilizing other resort amenities than carrying empty rooms simply to preserve hotel margin."
The strategy seems to be as effective in today's recession as it was back when Benny Binion first introduced a widespread comp system at Binion's Horseshoe. JPMorgan analyst Joseph Greff is predicting that the promos will result in December casino take surpassing the November totals.
Vegas casino operators were able to turn a buck in a variety of ways when the economic boom was on, charging outrageous prices for room rents, gourmet meals, and retail shopping. But now, with economic leanness predicted to rule for a year or more, returning to the competitive days of bountiful comps may be what casino companies need, remembering that gambling is the engine that drives the resorts.
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