One of the interesting side effects of the coronavirus outbreak’s impact on the US land-based casino market has only been fully realized now that said casinos are largely back up and running.
In Las Vegas, the mecca of American gambling, casinos have mostly reopened. While a dozen or so high-profile resort venues have yet to get back to work in Sin City, the majority of casinos in the area are chugging along at a maximum of 50% capacity, as dictated by Nevada gambling law.
Several of the big-name facilities that remain closed – namely, a dozen MGM Resorts International venues – are doing so not due to the reduction in gaming floor capacity, but because of current COVID-19 rules impacting indoor dining, drinking, and other amenities.
In New Jersey, for example, the entire AC Strip reopened on July 4, with the exception of MGM’s Borgata, the most famous casino in the Garden State. The rationale was simple, per MGM’s statement at the time:
“We respect [NJ Gov. Phil Murphy’s] decision to postpone the reopening of indoor dining in New Jersey. Given this news, our property Borgata Hotel Casino & Spa in Atlantic City will remain closed. …
Our guests expect a special experience when they come to our property and if we cannot provide that level of hospitality, we feel it best that we remain closed until such time that the Governor lets us know it is safe to offer food and beverage.”
On July 26, however, MGM reversed course in Atlantic City, deciding that these amenities were not quite as important as getting the core business restarted.
Casino amenities, after all, are what the industry calls “loss leaders,” designed to supplement that core business.
That is, gambling venues lose money on these amenities – like giant buffets, comped drinks, nightly shows, and the like – in the hopes that by offering such, more casual gamblers will patronize the property and spend a bit of money on the gaming floor.
If the amenities are compelling enough, casual gamblers, over time, can be turned into regulars.
Thus, with loss leaders, casinos take a gamble up front while hoping to cash in on repeat business to balance their books and lift them further into the black.
But with the impact of the coronavirus, this has been less pressing.
Instead, the main goal for nearly all operators nationwide has been to get their venues back in action by focusing on what makes them money right now: the gambling itself.
And with reduced capacity limitations, casinos are not going after casual gamers anymore. Instead, they have reverted to their core business model and are catering to serious gamblers – or lifers – who aren’t historically enticed by amenities in the first place.
In a recent analyst roundtable about the state of the industry, Truist Securities Director of Research and Gaming, Barry Jonas, had this to say about the potential for historical casino perks to make a comeback:
“The question is, do more amenities need to come online? The answer is yes, but they need to be more profitable. … It was not too long ago where we were questioning every one of our operators’ ability to survive. We have now passed that with revenues coming in and profitability up.”
According to Jonas, casinos have long worried about door traffic and the amenities they believed were necessary to generate adequate revenue.
However, because the coronavirus forced them to “experiment” with a comparatively amenity free casino model, they’re seeing that those amenities might not actually make the sound financial sense so commonly attributed to them. Jonas continues:
“You will see more amenities, but I don’t think we will go back to where we were. Ultimately, the consumer will determine the level of amenities that come back. The operators are seeing margins they never imagined possible, and I think it will be difficult to go back. … Anything [casino operators] thought they needed to drive people into the door will get a second look.”
Of course, this calculus fails to take into account a crucial consideration.
Currently, while there is demand for socially-distanced brick-and-mortar gambling, there is no demand among that clientele for crowded (or empty) concerts, nightclubs, or upscale restaurants with celebrity chefs.
People are still scared of this virus, and playing slots or table games in relative isolation might be tolerable, but many of the traditional casino amenities aren’t.
Unless there’s a flu pandemic every year or two from here on out, casinos will absolutely have to get back to their full slate of non-gaming specialties and amusements. It’s only a matter of time.
But in the meantime, these operators are alienating younger casual customers who are attracted by fancy buffets and comedy acts and musical events and so on.
For them, there is now no reason to patronize a land-based casino, as without those extra perks, gambling at a brick-and-mortar venue offers no benefit whatsoever over playing at a legal online casino.
After all, the only thing that these Internet-based casinos lack – given that they operate online and are headquartered overseas – is the social aspect that US-based casinos used to offer.
With that social element out the window, why would a casual gamer – one who’s interested in convenience about all else and gambling as secondary to food, drink, music, and more – choose to play anywhere but online?
Right now, the US’ reopening casinos are pushing such players online by offering that huge demographic literally nothing to make the trip worth their while.
They are very much flirting with losing those customers forever.
International casinos already had the advantage of being able to legally accept players at just 18 years old and from anywhere in the US. Most states do not offer online gaming in a domestic capacity, remember, and almost all of them set their minimum age for entry at 21 and up.
But now, the best online casinos aren’t just able to cater to those 18-20-year-olds who want to gamble, they’re actually going to get a bunch of business from 20somethings and 30somethings who are only interested in gambling within the context of experiencing other activities.
And with online gambling, because you can participate in mobile casino action anywhere you’ve got an active internet connection, this demographic can do exactly that.
So while we disagree that land-based casino amenities are on the permanent chopping block, the unfortunate reality for brick-and-mortars is that – through no fault of their own – they could be permanently losing a large chunk of potential players.
The solution then, of course, will be for these facilities to lobby their state governments to allow domestic online gambling.
But they better get a move on if they hope to win any business back from the offshore casino market.