Hi Mike,
From this weeks' Barrons' Ground Floor Column:
"Most people look at the increase in rooms,"
says one bearish fund manager who tracks the
gaming industry. "It's the increase in gaming
capacity that's even more worrisome." Along the
Strip alone, notes the observer, who asked not to
be identified, gaming square footage will
cumulatively grow 20% over the 1997 level.
Aside from the simple arithmetic of more slot
machines and tables to fill, the lucrative
baccarat business is also being spread thin.
Figures tracked by the casinos show that
baccarat winnings average roughly $500 million
a year, a hefty chunk of last year's Strip total of
$3.8 billion. That's a big percentage, contends
the observer, "and that's where the battle will be
fought."
In this bleak scenario, gaming overcapacity will
kick off a "comp" war at the high end as casinos
vie to secure the high rollers with packages of
complimentary rooms and other gratuities. This
giveaway strategy could ricochet down through
the customer tiers, as casino operators move
aggressively to fill hotel rooms and thus casino
floors. It's not the expected room-rate war that
will eat into profits, although that will happen,
too, but the comping of chips, standard now in
Atlantic City, that will cut casino margins.
I know you've been calling the cards on Vegas for a while, too bad I ran out of MIR puts last expiration!!!
best, art |
