Gambling in America
From Sin City to Atlantic City, from high-end resorts to offshore cruises, gamblers have more choices than ever before to get their hit
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On the opposite side of the country, Atlantic City hangs in there as Las Vegas's younger, dumber, uglier brother (albeit, a brother who's still got plenty of dough and has not yet been written out of the will). At least that is the way it's been so far. Tim Wilmott, the eastern division president of Harrah's and president of Casino Association of New Jersey, sees important changes coming to Atlantic City, which he hopes will dress the place up and brighten its future. He says that 4,000 new rooms will bolster the perpetually overbooked seaside resort, which last year drew 33 million visitors who generated $4.3 billion in gambling revenue.
But everybody associated with Atlantic City, even Wilmott, acknowledges that there's room for improvement -- particularly when viewed alongside Las Vegas. "There is a fundamental difference between Las Vegas and Atlantic City," admits Wilmott. "You go to Las Vegas for four or five days once a year. People typically come to Atlantic City for two days once a month. To change that we need more rooms, additional nongaming components, and more air flights into the city." Wilmott says he and other casino owners are working on it, including MGM Mirage and Boyd Gaming, who are partnered in the soon-to-open Borgata, which is not only Atlantic City's first new hotel in 13 years but also its poshest. "There was just a groundbreaking for 300,000 square feet of retail, restaurant and entertainment businesses. These are nongaming amenities that will appeal to a younger audience. Right now we appeal to a demographic that is 55 and older. We need more of the 35 to 55 group. By offering new restaurants, younger entertainment options, more upscale shopping, we hope to get them. Up until now we have focused on gambling and only gambling. Las Vegas has gotten people to spend more money away from the casino floor. Las Vegas casinos get 50 percent of their revenue from gaming. Here, 85 percent of revenue comes from gaming."
While the Borgata could play a role in turning things around, Jason Ader fears that it might be too little, too late for Atlantic City. "Most of Atlantic City's profitability is derived from nickle and quarter slot players who stay in Atlantic City for four to six hours," the Bear Stearns analyst says. "There's not a lot to do there. Some of the worst slums in the Northeast are in Atlantic City. It is an awful place to go for a vacation, while Vegas is a great place -- great weather, golf and shopping. They call Vegas America's Playground and that's what it is. Atlantic City is a place that brings in people who need a gambling fix. The Borgata will be very nice. It will do fine. But it will be at the expense of all the existing operators. The Borgata will take business from the boardwalk and cause marketing expenses to go up."
Despite Atlantic City's inherent problems, competition from largely nontaxable Indian operations, and the incursion of online wagering, nobody in gaming seems worried about where profits will come from. Gambling is so big and so accepted that, it seems, the profits will be there forever. Maybe they will be. Maybe people love to gamble so much that if you build it they will come -- and that is true to some degree. Nevertheless, if you almost feel like quitting your job, selling your house, opening a joint and getting the best of it, think again.
Over the last couple of years, some of the industry's seemingly seasoned casino operators have had surprising problems. The Aladdin in Las Vegas, for example, is going through bankruptcy hearings. Harrah's in New Orleans (a city where gambling would seem to be a shoo-in), which threatened bankruptcy last year, isn't exactly packing them in, even as riverboats in surrounding waters generated $1.9 billion in gambling revenues for the state of Louisiana. While locals clearly like to gamble close to home, it turns out that few people visit New Orleans to gamble; they go there to eat and listen to music. And, with casinos springing up all over the country, Harrah's New Orleans outpost hardly seems like a novelty.
The Aladdin's problems boil down to surprisingly naive planning, despite a great location on the Strip. "The Aladdin was poorly designed, poorly laid out, and its key drivers of traffic flow -- the parking lot, the shopping mall and the casino entrance -- disintegrated," says Ader. "It didn't work out and it's unfortunate for the market."
Ironically, save for a few ailing operations, the only other truly dark clouds on gambling's sunny horizon seem to be the kinds of high-action sports that ought to be embraced and loved by gamblers. As all other kinds of wagering thrive, horse racing, greyhound racing and jai alai remain buried in the doldrums, seeming to be antiquated victims of a changing world. Attendance in all three areas is dipping and recent betting figures for dogs and jai alai are sketchy (according to Bac Tran, director of marketing for Phoenix Greyhound Park, there are 48 dog tracks in 15 states and handle is $2.3 billion -- but these figures are from 1996. Jai alai handle was $193.9 million last year). In jai alai, a sport that's always accused of being fixed, top players earn only $100,000 per year. And that says all you need to know.
Nevertheless, jai alai qualifies as one of gambling's great secrets, as it centers around a ball that travels at 180 miles per hour and its players exude Nureyev-style grace. These elements help to make jai alai the national game of Spain (at the 1992 Barcelona Olympics, a jai alai event was held as an exhibition sport), but it has never risen above cult status in the United States. Those who love jai alai, however, get off on the aesthetics and feel challenged by its parimutuel gambling format, complete with quinellas, exactas and trifectas. The payouts are higher than in racing and the players are undeniably gifted athletes. "Games last 15 minutes and have the kinds of ups and downs that get you to the edge of your seat," enthuses Marty Fleischman, the assistant general manager and marketing director at Dania Jai Alai in Dania Beach, Florida. "The lead changes more frequently than it does in a horse race or a dog race. There are a lot of factors in a ball game that make it less predictable than a race. That makes for bigger payouts" -- because there are fewer odds-on favorites.
What serious handicappers dislike, however, are the unpredictable finishes (jai alai's hand-stitched balls take wild bounces), modest handle (which makes it hard to win a lot), and the lengthy games that lack the constant infusions of action that you could get with a horse race or blackjack game. Fleischman does offer one secret for gaining an edge: "We get guys betting a number system, because certain players have a statistical advantage. Jai alai is played as a round-robin arrangement. The Îone' player goes up against the Îtwo,' and they score the first points. If you bet on the one and two, you will have an advantage."
What everybody seems to agree on is that interest in jai alai, greyhound racing and horse racing has been declining. In 2000, parimutuel betting in the United States took in a paltry $3.8 billion; charitable games and bingo trailed embarrassingly close behind, grossing $2.5 billion. But this has not dampened the enthusiasm of those who are paid to love the games (Fleischman describes lightning-paced jai alai as "catching bullets").
Gary Guccione, the secretary/treasurer of the National Greyhound Association, enjoys the thrill of this particular chase. "Greyhounds are the fastest canine breed and there are no jockeys in this sport, which means there's no human element to factor in," he says, clearly viewing that as a positive. "The dogs go 47 miles per hour, and they love to race; they'll chase anything that moves. Greyhounds are instinctive runners and the finishes are somewhat predictable." (Talented Mr. Ripley, the hottest dog in the sport, won his first 27 of 30 races this year.) "This sport attracts its share of serious handicappers. Guys predict outcomes based on past performances, the dog's racing style, whether he's a strong breaker or a good finisher or if he likes to run the rail. This is a tremendous challenge, just like handicapping horses."
In spite of all that, even the most ardent boosters of dog racing find it difficult to ignore the sport's uphill battle for popularity. "Dog-racing handle has been declining since 1989," groans Bob Nash, a spokesman for the Sanford-Orlando Kennel Club in Longwood, Florida. "It's turned into a year-round, six-day-a-week simulcast business. We simulcast horses as well as dogs. Saturday we have four greyhound tracks that the public can wager on live, and three that are simulcast here. Plus there's everything from trotters to thoroughbreds." He pauses for a moment and takes a breath. "You don't have people going to the track like they used to. We're out of the tourist business. There are just too many other things to do around here."
Never mind that thoroughbred racing formed its first trade organization only three years ago; in terms of strategizing for the future, it is miles ahead of jai alai and dog racing. "Purses and handle have been going up," says Tim Smith, commissioner and CEO of the National Thoroughbred Racing Association. "Purses are at around $1.1 billion in the United States, but there is a reduction in track attendance and racing is growing at a slower rate than all other gaming. Even lotteries have grown faster in the last decade." In 2000, lottery sales across the country reached $37.2 billion, and last year ticket sales hit $38.4 billion.
On the positive side, Smith says, television exposure has increased by 60 percent since 1997 and the percentage of Americans who say they are interested in horse racing rose by 5 percent in 2001 (the increase is second only to NASCAR). "Racing has gone through a major transformation in its economics," says Smith. "There is now substantially more wagered off track in various ways -- OTB, simulcasting, online, phone wagering. So less is wagered at tracks running live."
Still, Smith hopes to see racing evolve into a sport of kings for a new generation of cerebral gamblers. "This is a wager where history can be made. So we are at the opposite end of the spectrum from slots," says Smith, emphasizing the sport's intellectual cachet. "This is a thinking person's wager. To get in the game, you have to play it in a serious way. The intriguing thing about handicapping is that it's about managing information, utilizing data, seeing things that other people don't see. It's more like day-trading than playing a machine." Looking toward the future, he sees technology as a potential boon: "Use of the Internet or computer technology to place wagers is very positive. We're a little behind Hong Kong and Japan in terms of technology at the consumer level. But TVG [a network that airs racing and doubles as a virtual OTB] is out front to be the next Golf Channel. If we were in 30 million or 40 million homes, that would put us close to the Golf Channel."
To keep from losing even more track-attending crowds to the likes of TVG, forward-thinking track managers are following the lead of New York Racing Association visionary Barry Schwartz and reducing takeout (the commission that the track keeps from every bet). Unusual proposition bets are being promoted and some of the national racing association's member tracks are in favor of allowing slot and poker machines. "They are hugely beneficial to the bottom line," says Smith. "We have 20 million casual fans, who go to the track once a year, and they're our target customer. They don't live and breathe racing, but studies have shown us that another entertainment option at the track would be a big draw."
Jason Ader characterizes Smith's "racinos" as the gambling trend of the moment and he is confident that the machines will help purses to grow -- if nothing else. However, the fact that gaming machines draw business is hardly news to the folks behind full-blown, bricks-and-mortar casinos. Just look at Foxwoods, the world's most successful casino. Though some patrons complain that the casino skimps on perks, that view does nothing to diminish the crowds drawn by miles of machines and loads of table games in an Indian-themed setting. Couples crowd around the blackjack tables. A posse of guys in backward baseball caps and Korn T-shirts dominate a craps table. Jazz music fans file out of B.B. King's Dance and Nite Club. They scatter across the gaming floor and add to the endless click-clack of chips changing hands. Though Foxwoods might not be as technologically tricked out as its nearby competitor, its status as the first casino-hotel in the area has engendered the kind of serious loyalty that gamblers tend to have for their joints of choice.
Unlike those loyal players, though, Bear Stearns's Ader takes a longer and broader view. Looking beyond Connecticut, he voices strong opinions that have a lot of resonance for gambling as a whole. He influences institutional investments made in casino stocks and has an impact on whether burgeoning hoteliers can get the backing they require. Asked to prognosticate a wide-reaching view of the industry, Ader replies without hesitation: "Gambling will continue to grow. It's a very mature business. But in every state that has legalized gambling, it's had a good economic effect. This is a nation that has had gambling for a long time. And it just keeps growing."
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