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Even whales feeling pinch of hard times

LAS VEGAS, Nevada -- Even high rollers aren't rolling so high in this recession.

Baccarat play — the game of choice for the biggest gamblers — is down on the Strip, and casinos have raised cash reserves to offset the losses they incur when big gamblers don't pay their debts.

Strip casinos wrote off $116 million in bad debts in 2008, or 2 percent of their total gambling revenue, according to the latest figures from the Gaming Control Board. By comparison, Strip casinos wrote off $112 million in 2007, $80 million in 2006 and $46 million in 2005.

To offset the risk, some Strip casino operators say they have tightened credit. They did the same after 9/11, but relaxed their lending during the boom, said gaming consultant Jacob Oberman of CB Richard Ellis in Las Vegas.

These days, "many players who used to pay their debts on time may no longer be solvent," making the credit manager's job one of the most important in a casino, Oberman said. At the same time, casinos that turn away players whose credit is still good risk turning off players who will go elsewhere to gamble, he added.

Strip casinos are on high alert for deadbeats. Casino boss Steve Wynn recently noted that his company is exchanging information with competitors on credit risks, which are like roving time bombs.

"Whether we admit it openly or not, if Bellagio or Caesars Palace or the Venetian is in trouble, you can bet we are too," Wynn said, referring to credit problems.

One of the biggest gambling events of the year, the Chinese New Year, which falls in January or February, draws Asian high rollers for multi-day celebrations and marathon gambling sessions.

Baccarat players on the Strip wagered $1.4 billion in January and February, an 18 percent decline from a year earlier. Casinos won 22 percent less from baccarat players over that period, or $153.1 million.

Strictly speaking, casinos aren't in the risk business. Games are tested to pay out and keep a certain amount of wagers over time. Although a high roller's streak can influence profit in the short run, over the long haul games tend to take in about their predetermined house edge.

With high rollers gambling less, casinos have fewer opportunities to gain back any losses, while gamblers may be more likely to leave with their winnings. The longer they stay, the more they lose, as the saying goes.

As evidence, Strip casinos kept 10.3 percent of baccarat wagers for the past 12 months compared with 12.5 percent a year earlier.

MGM Mirage, which caters to both high and low rollers, said baccarat volume was down only 1 percent in the first quarter compared with the prior year. Excluding baccarat, table games volume fell 20 percent in the quarter. MGM Mirage casinos kept slightly less of gamblers' table game wagers in the first quarter compared with a year ago.

Wynn Resorts' table games hold percentage was 18 percent in the first quarter, below last year's 20 percent. Table game wagers fell only 3 percent at Las Vegas Sands' Venetian and Palazzo casinos, but the hold percentage was 21 percent, compared with 25 percent a year ago.

Wynn's big gamblers in Las Vegas and Macau are still gambling, but their sessions aren't as long.

That caution cuts both ways. The company attributed part of its 20 percent earnings decline in the first quarter to its move to tighten credit in Macau, a high rollers' paradise.

"People who stay in the gambling business long enough stop trying to use credit as a marketing tool," Wynn said during a conference call. "They stopped giving money to people who are unlikely to pay. That's an earmark of the inexperienced casino executive."

Copyright © Las Vegas Sun. Inc. Republished with permission.

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