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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 3)

However, do not take that to mean that Internet gambling has cleared all its hurdles. Legislators are doing what they can to make offshore gaming unpopular in the United States. One potentially effective way is to stymie methods of payment. "Legislation [being debated] in the House of Representatives says that debt to a credit card company that is the result of an illegal Internet wager is unrecoverable to the company," states Frank Fahrenkopf, the president and chief executive officer of the American Gaming Association.

Considering that he heads a trade organization for the commercial hotel-casino industry, it is no surprise that Fahrenkopf does not sound especially bummed while relaying the above information, pointing out that American Express and Discover have stopped taking charges from the offshore operations, and adding that Citibank is prepared to follow suit. "Prohibition never works," Fahrenkopf continues. "But if you force the credit card companies to police the Internet, they will not want to be involved." Asked for his take on the Internet-betting boom, Fahrenkopf replies, "Officially we are opposed to Internet gambling because we don't believe the technology exists today to regulate and control it with law enforcement oversight. You have these places in third world countries with no regulations. You need regulatory control or you cannot have legitimate gaming."

If it is not 100 percent legal to gamble online in the United States, it's also unlikely that you'll go to jail for doing it. While the risk of being ripped off by some fly-by-night operator is always there, the discounts and anonymity are too much for some gamblers to turn away from. One big advantage of betting online is that not only can you bet higher than some of the casinos will allow -- even if it means clicking from site to site to get down your wagers (particularly on sports) -- but you can also bet a lot lower., for example, offers inexpensive poker games that casinos could never afford to put on. "Sport betting came on the Internet before poker," marvels Greg Pierson, CEO of ieLogic, the company that writes software for Ultimatebet. "Now the online sport books have created so much interest, there's got to be hundreds of millions of dollars bet on the Web. For the future of online, I see a continual addition of games and variety."

Lupo, the Stardust manager, considers online consequences and acknowledges an upside for Vegas. "Offshore has taken a lot of professional business away from Vegas. However, that's not the worst business to lose. Our handle has gone down to 1993 levels, but the revenues have not decreased. Right there that tells you the money we are losing to online operators is smart money [from professional bettors]."

Indeed, sport-betting handle for the 2001 fiscal year in Nevada was $2.1 billion, down $400 million from the previous 12 months. "The last time handle dipped below 2.2 billion was in 1993," says Lupo, adding that if motions to do away with NCAA betting come to fruition, sports betting will deteriorate further. "And this year will be even lower than $2.1 billion, but that will be because of 9/11. On the other hand we set a revenue record from 1999­2000 with $117 million. In 2000­2001 it dipped down to $112 million, which is the second best ever. I fear that our handle will continue to drop" -- and then it might not be the pros who are fleeing to online bookies. In a what-can-you-do tone of voice, Lupo adds, "From an operational standpoint we've tried everything to stimulate business. We put up more prop bets and are more aggressive with our betting menu. But you can only give away so much and take bets on so many things."

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.

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