BACK PAGE: The old ballgame
May 1, 2009
Mired as we are in one or another stage of the longest economic downturn in decades, minds are inevitably turning to what the gaming world will look like when we come out on the other side. Anecdotal conversations with a number of longtime friends at last month’s National Indian Gaming Association convention revealed fairly broad agreement on some basic points, both on where the casino industry went wrong and how things might be reconfigured to fit the needs of a changed marketplace.
The conventional wisdom revolves around some basic points: There will be more players in the game as the bigger operators de-leverage and/or reorganize. Prices will come down, on both the gaming and non-gaming sides of the business. The best operators will focus on the core product, gaming, and we will see a continuation of a trend that is already in place: re-emphasizing service and using the non-gaming side of the business to get gamblers through the door with low room rates and cheaper F&B. Some of this is just fine with a lot of people who have been in this business for a long time. There is no shortage of fondness for the gaming industry “the way it used to be,” and even if some of the memories of the past are selective, any conversation that revolves around how the industry offers better value to its customers is healthy right now.
On the ground, things are already happening. Low-limit blackjack games are no longer the distinct province of Downtown Vegas and have found a new life in casinos across the United States. Conversations about the $5 game still revolve around whether they generate enough tips for dealers, but in this climate such concerns appear tone-deaf.
In Atlantic City, which has been buffeted by the twin terrors of the recession and the boom of Pennsylvania gaming, Resorts Casino Hotel converted eight of its slot machines to pay out in coins, to much media fanfare. “You think you’re playing a real slot machine here,” said one player. “This feels like a game; the other ones, it’s just losing money.”
Naïve as that might sound, there’s a powerful message for operators and suppliers alike: “I love coming here, but please don’t take my money away so quickly.” That some of the industry’s biggest names are mired in debt hasn’t helped matters. Humans, fickle beings that they are, lost as often during the good times as they did in the bad times, but now it’s the greedy operators who are to blame. No matter. If the point of consolidation in the first place was to add value for customers, we shouldn’t be surprised when customers turn cynical as deals go pear-shaped and companies are in the news for their ability (or lack thereof) to meet interest payments and for employee layoffs. Players a long time ago started to suspect they were better off when they could play one slot club’s benefits against another’s, as opposed to a world with fewer choices. That some of the most powerful brands are now teetering on the edge of financial ruin only confirms for them that the game was never set up for them in the first place.
As has been noted in this space before, the current problems stem in no small part from overly bullish assessments of consumer financial health, particularly at the high end. What goes up always comes down, but 15-year economic expansions that are only interrupted by once-in-a-lifetime terrorist attacks have a way of making people ignore basic physics.
If it’s any consolation to the casino industry, it is not alone in building massive projects that probably never should have seen the first shovel-full of dirt overturned. The new Yankee Stadium, for example.
Coming in at an unheard-of price of $1.5 billion, Yankee Stadium is a monument to the good old days of Wall Street, with corporate luxury boxes renting from $600,000 to $850,000 per year and individual seats behind home plate and the dugouts going for up to $2,625 per game. That’s right, Mr. and Mrs. Net Worth are expected to spend over $10,000 to bring their two kids to prime seats at a single Yankee game. At least that’s what the original spreadsheets called for. Now the good old days of Wall Street, which were peaking in 2006 when project development was in high gear, are gone, and those seats have been largely empty since the new Stadium opened.
And there are other problems, of course. The prospect of charging all that money for prime seats led the owners to fundamentally alter the design of the old Yankee Stadium. The lower deck has more rows and is closer to the action, and the upper tiers have fewer rows and seats. Result: Whereas the wind used to swirl at the old egalitarian Stadium, with its three levels of relatively equal depth, it now has a ski slope of seats to play off of, and balls are flying out of the park at an alarming rate. The old cathedral has been turned into a bandbox, and many are pointing fingers at the design.
A reminder, as if we needed it, that financial gain is a great and healthy motivator, but watch out when it starts to compromise the core product.