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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
Michael Kaplan
From the Print Edition:
The Best Places to Gamble, Sep/Oct 02

(continued from page 1)

In the wake of laws recently passed in New York, Indian-owned casinos have been proposed for the Catskills, Niagara Falls and Buffalo. Berman himself, who partially lives off the management of Indian casinos, is working on five separate projects.

But if the explosion of Indian casinos has helped people like Berman, it's created a hardship for other entrepreneurs, such as the guys behind California's 113 card rooms, who must compete with nearly 50 Indian-owned casinos in the state. The card rooms, seemingly quaint operations that foreshadowed Indian gaming by decades, grossed a total of $949.3 million in 2000 (compared to around $5 billion raked in by California's Indian operations), and are only permitted, by state law, to offer games where players do not go up against the house. It's led to the invention of No Bust Blackjack and a retooled version of Pai Gow Poker, both of which are designed to stay within the law. Despite those counterintuitive innovations, however, poker remains what the card games are best known for, and when you consider that poker ranks among the least profitable games in any Vegas casino, that can be a problem for the bottom line in a region where Indian-owned casinos seem ubiquitous.

Some of the California card rooms are lobbying for the same games of chance that make casinos so profitable. "We hope to go in the direction where we can have slot machines and Vegas-style blackjack games in the card rooms," says Al Underwood, a spokesman for Hustler Casino, the California card room owned by Larry Flynt, a notorious sucker at poker who's known to spread the biggest games, even when he is the worst player at the table. "If the Indian gaming establishments have them, we should have them as well. Our position is that this is reverse discrimination. There have been so many opportunities created for the Indian reservations that they now have an unfair business advantage. We are a viable, growing product line. People drive 300 miles to enjoy this kind of gaming in Las Vegas. The state ought to want its money to stay in California and be taxed at the full rate."

There are more than 200 Indian-owned casinos in the United States and the number is regularly growing as tribes recognize something beautiful in the bottomless profits. "Indian gaming continues to proliferate around the country," says Jason Ader, a senior managing director at Bear Stearns and the leader of the firm's gaming, lodging and leisure team. "It's difficult to stop." Berman acknowledges that there are good reasons for the boom: "It takes fewer dollars to open an Indian casino [than one in more competitive markets], and the Indian casinos are prospering. They are adding hotel rooms and becoming full-blown resorts. And if your Indian casino happens to be a monopoly or a pseudo monopoly" -- because there's no other legalized gambling in the area -- "well, then it's the easiest business in the world to run."

The same can be said for riverboats, novel gambling venues that began to spring up in the 1990s. City fathers, strapped for cash, figured that tax-generating gambling wouldn't be so objectionable if it took place on a vessel that needed to be boarded at a specific time and floated along a predetermined waterway. The idea was that this would prevent people from simply wandering on board and treating the boat in the same impulsive way that they might treat a bricks-and-mortar casino.

That worked, at the beginning. Slowly, however, those rules loosened to the point where the boats and barges now stay put, in the manner of any casino that you might find in Vegas or Atlantic City. "Riverboats are one more way of making people comfortable with the idea of gambling," says Steve Rittvo, pointing out that Pennsylvania seems likely to set sail within the next couple years. "Nationally, riverboats generated $9.3 billion" in 2001. Though the money is largely derived from locals, some of the more elaborate operations attract folks from out of state. "Mississippi is somewhat of a destination resort; people fly in from Atlanta," says Rittvo. "Shreveport [Louisiana] draws from Dallas. The riverboats started out local and are becoming increasingly regional."

The longer standing forms of gambling on water are cruise ships and the so-called cruises to nowhere -- boat trips that head into international seas for the sole purpose of firing up casino games. Neither of these operations are the terrific moneymakers you'd imagine. According to Ader, gaming accounts for less than 5 percent of mainstream cruise-line revenues -- even though the audience is completely captive. It seems that the Carnivals and Crystal Cruises of the world simply don't push gaming.

As for cruises to nowhere -- which nationally generated an estimated $318.8 million in 1999 -- they have other problems. The first issue, for all but the most patient among us, is the very concept: you motor three miles from the shoreline to international waters, where gaming is unregulated. "Traveling to that point is a slow process," says Rittvo, who sounds impatient even as he discusses this. "It takes an hour to reach international waters. So you go on a five-hour cruise and spend only three hours gambling. But that's not the worst part of it. The worst part of it is when you are in the middle of a hot run at the craps table and they say they're going back." On top of that, the cruise-to-nowhere lines charge admissions (unlike casinos) and bad weather can cancel a cruise or make it miserable. Even in Florida, where it more or less works because of the plethora of retirees, net gaming revenues are only $150 million, Rittvo estimates, and last year a major cruise operator, Renaissance Cruises, filed for Chapter 11.

When people think of gambling, they usually don't think of being on a boat. Given their druthers, they don't even think of being on an Indian reservation. They think of Nevada in general and Las Vegas in particular. With its $10 billion in action each year, the state accounts for some 10 percent of the entire nation's gambling.

By all accounts Vegas is going through another transformation, having shifted from a naughty place to a family place and back again (see "Las Vegas Update," page 85). Newspaper headlines scream Sin Is In and visitors see that kids are gone. The greatest example of Vegas excess can be found at the MGM Grand's three-year-old Mansion, a $210 million, 29-suite edifice that caters only to the highest rollers.

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