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Gaming Guru

Jeff Simpson

Jeff Simpson sees good signs in local casino operators' confidence in their businesses

28 November 2006

LAS VEGAS, Nevada -- Nevada's biggest and best casino operators seem to have more confidence in the value of their businesses than Wall Street investors.

Last week's announcement that Kirk Kerkorian plans to significantly add to his majority stake in MGM Mirage is the most recent indication that the men who have invested money in the casino business have faith in their operations and their plans for expansions.

Although the Las Vegas casino resort business has proved to be a fantastic long-term investment, share prices this year have lagged.

But the city's top operators believe in their businesses.

That confidence also has been demonstrated by the friendly $15.5 billion offer made by two private investment groups for Harrah's Entertainment and Securities and Exchange Commission filings by Wynn Resorts that set the stage for Chairman Steve Wynn and partner Kazuo Okada to increase their combined stakes in the company above 50 percent.

When the smartest people in the resort business put additional money into their companies, I think it's a good sign for the strength of the Las Vegas economy - and probably a good example for other investors looking for a smart place to park their investment capital.

• • •

One of the most troublesome reports from this year's Global Gaming Expo was the suggestion from Nevada gaming regulators that they may be willing to consider allowing casinos with server-based slot machines to change payouts based on the customer playing the game.

In other words, a big-bucks player who is a good customer at a casino (and recognized by the slot club card she inserts into the machine) could be allowed to play a game with a more generous payout percentage than another player playing the exact same game and denomination who is a less valued customer.

That would be bad for Nevada, and unfair for the customer.

Casinos can already reward their best players with more slot club points and point multipliers, more comps and better perks - and that's fine.

Operators should be allowed to reward their best customers, but the games themselves should not play favorites.

Any player off the street should have the same opportunity to play a game with 99.9 percent expected return (or any other game and return) as the casino's best player. Just because the new technology provides the opportunity for casinos to alter the games and payouts a gambler can play doesn't mean it should be allowed.

Gaming Control Board member Mark Clayton told one G2E seminar that he would be willing to consider allowing the change, suggesting that the decision should be left up to operators.

Although I'm sure many casino operators would agree with Clayton, I think the move would be bad for the state.

Regulators should protect the state's reputation as a place where a gambler can get a fair bet.

Allowing casinos to download more generous games to their best (biggest betting) players and download less generous games to lesser players would be a reverse Robin Hood system, with the extra per-spin losses from less-favored customers allowing bigger payouts to better customers.

Can you imagine a similar system at work on table games? Preferred players betting $100 at blackjack might be given a full 3 to 2 ($150) payout on a natural 21, while new players wagering the same $100 at the same table would only get a 6 to 5 ($120) return for the same blackjack.

That just smells bad, and so does the same idea applied to the slots.

Nevada regulators need to focus more on protecting gambling consumers and the state's reputation and worry less about being casino industry yes men and women.

Jeff Simpson sees good signs in local casino operators' confidence in their businesses is republished from