Friday, March 14, 2014

Are we witnessing "Last Vegas"? No.

Discouraging news for Caesars Entertainment.

Caesar's Entertainment reports $1.756 Billion quarterly loss on Atlantic City weakness. Howard Stutz, Las Vegas Review-Journal
Caesars Entertainment Corp. said Tuesday it lost $1.756 billion in the fourth quarter because of a deteriorating market in Atlantic City, which resulted in nearly $2 billion of noncash impairment charges to the casino company’s balance sheet.
Las Vegas-based Caesars said in a statement the company’s net revenue for the period ended Dec. 31 rose 3.2 percent to $2.078 billion,.
A year ago, Caesars’ said its net loss was $435.8 million. 

Ouch.

This continues a long string of losses for the big casino operators.  To that I can only say "good".

It's no secret that the wife and I love our visits to Las Vegas. I like the atmosphere, the people watching, playing poker and sports betting. I will even dabble a little in penny slots for pure entertainment, fully expecting to have fun losing $10 or so.  All that said you have to possess a pretty poor understanding of economics to not see that casinos and other gambling are a net drain on the economy. They add nothing of significant value and are more insidious than other forms of entertainment because they survive on a lie.

If you believe that you have a significant chance of wining a jackpot at a slot machine, consistently beating the casinos at poker or striking it rich at the craps or roulette table stop gambling now. In many ways those forms of gambling are worse than the lottery (which I consider to be a tax on those with poor math skills)  because the casinos pay out slightly better and advertise winners heavily. This is not to suggest that gambling should be illegal. Quite the contrary, I believe it should be very legal, and not just in Las Vegas.

It all comes down to personal responsibility, a concept that Americans (and the rest of the world really) seem to have given up on.  I like gambling because it's a form of entertainment. I also do not have an addictive personality and have no problem setting a budget and sticking to it. I also understand there are those who do get addicted to gambling and I think the casinos are being forced to do a better job at identifying them and locking them out. The thing is, if you are easily addicted then closing the casinos is not going to stop your gambling, it's just going to move it underground.

I don't think we'll see the end of Las Vegas as a tourist/convention destination just because some casinos are struggling. I do think we might be witnessing the beginning of the end of the big corporations who own multiple casinos with huge expansion and debt loads. If Caesars ever is in danger of going under there will be plenty of suitors for some of its larger properties. The future owners will probably be from Asia and will own fewer properties.  This could be a good thing in that it will bring real competition back to the city, which will improve room rates and possibly result in some of the sagging properties being forced to upgrade their amenities and rooms.

Until then, I'll continue to be their worst kind of customer. I buy cheap rooms, don't gamble much and spend a lot of my time nursing a drink and people watching. However, I do like to spend money on food and shows so they're still getting at my wallet to some degree.

The house always wins. No matter whether or not you gamble there.