Las Vegas average is over no arbitrage condition

by on April 20, 2017 at 1:46 pm in Economics, Games, Web/Tech | Permalink

Now operators have started scrutinizing complimentary drinks, introducing new technology at bars that track how much someone has gambled—and rewards them accordingly with alcohol. It’s a shift from decades of more-informal interplay between bartenders and gamblers.

Sports books have capitalized on big events, too. During March Madness, a five-person booth at the Harrah’s Las Vegas sports book cost $375 per person, which included five Miller Lite or Coors Light beers a person. In the past, seating at most sports books was free and first-come, first-served, even during big events. Placing a small bet or two could get you free drinks.

“The number-crunchers, the bean-counters have ruined Las Vegas,” said Brad Johnson, who lives in North Carolina and has come to Las Vegas almost every year since the early 1970s. “There’s no value to it; there’s no benefit.”

Casinos on the Strip now derive a smaller share of revenue from gambling. In 1996, more than half of annual casino revenue on the Strip came from gambling. Last year, the share was down to about a third, according to the University of Nevada-Las Vegas. More of the revenue comes from hotels, restaurants and bars.

That is from Chris Kirkham at the WSJ, via Annie Lowrey.

1 Ray Lopez April 20, 2017 at 2:16 pm

I’ll be the first to say that slot machines have always amazed me. What do gamblers like about them?

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2 Ray Lopez April 20, 2017 at 2:18 pm

I went to Macao last year with my hot, 20-something gf half my age, and we dropped about $5k in a week. But we did not gamble, we saw the shows (the water show is very good, Google it) and HK Disney.

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3 Skeptic April 20, 2017 at 2:34 pm

Slipped away from your gf to enjoy the (human) racetrack at the Lisboa, I trust?!

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4 Ray Lopez April 20, 2017 at 2:53 pm

No, but I just saw it on Youtube. We were going to go to the horse racetrack which is open but one day a week as I recall, but we had something else come up.

https://www.youtube.com/watch?v=vjrRzDPO4AM

The Lisboa Racetrack Lisboa Hotel Macau November 2012
Scores of beautiful Chinese prostitutes parade up and down on the ground floor pass the grocery store day and night in the Lisboa hotel Macau. Many will not go with western tourists

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5 Ray Lopez April 20, 2017 at 2:58 pm

Oh, according to the comments this ‘racetrack’ is now closed…off with the races! Youtube comment: “No more Lisboa girls now. Their boss was busted by cops. This is a direct order from Beijiang govt.” Average is over.

6 Sam Haysom April 20, 2017 at 3:52 pm

Rich people don’t keep track of how much they spend on vacation Ray Low Net Worth.

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7 Ray Lopez April 20, 2017 at 6:13 pm

I’m in the 1% not 0.1%. Not in the 10% (from the bottom) like you Sam.

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8 Brian Donohue April 20, 2017 at 6:45 pm

Plus, with no visible means of support otherwise, you gotta make that pile last.

9 Jan April 20, 2017 at 7:36 pm

Dude, you said your *whole family* only has net worth of about $9 million. If that’s top 1%, then I’m sure I can convince you that a major Passover tradition is removing all the Chaffetz from the House.

10 Ray Lopez April 20, 2017 at 11:47 pm

@Jan – hi, not sure about what you mean with Chaffitz (“Mr. Chaffetz, 50, a Utah Republican” or maybe https://hashtagnow.co/hashtag/Chaffitz) but the minimum net worth for being in the 1% is at least 9M USD as of last year. And yes, I’m counting my intestate share. Peace!

11 Jan April 21, 2017 at 5:29 am

You said $9 million for your whole family–not just you! I bet you’re in the 3% or maybe even the 5%. Sad!!

12 Ali Choudhury April 21, 2017 at 2:58 am

Your girlfriend has been half your age for a while now. Do you keep the same one or replace on a regular basis?

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13 Jeff R April 20, 2017 at 5:35 pm

Less work, better odds than scratching a lotto ticket, I think.

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14 kevin April 21, 2017 at 11:17 am

definitely not less work then scratching a lotto ticket, even if you place no value on your time

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15 Zach April 20, 2017 at 2:20 pm

It seems like they’re forgetting BF Skinner here. You want the rewards to be unpredictable!

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16 harpersnotes April 20, 2017 at 2:51 pm

I always liked the game tournaments, like chess, backgammon, poker, and so on. The event host takes a fee and a percent of the gate, but you don’t at all feel like you’re playing for prize money against city hall — more like the random stranger sitting across the board from you. Such tournaments used to be hosted occasionally at casinos (such as here in New Mexico), but that seems to have been on the decline lately. Also, games of skill are a great way to cultivate epistemic humility, but in terms of entertainment dollars their appeal seems to be very limited with the exception being sporting events such as the Olympics, race-track betting, and so on. Someday perhaps we’ll see genetically-enhanced border collies playing on soccer teams against each other.

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17 Ray Lopez April 20, 2017 at 6:43 pm

+1. Also a anonymous prediction market would be a boon for game tournaments, as money is wagered on them, fostering possibly more interest in the game.

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18 rayward April 20, 2017 at 2:52 pm

Arbitrage. Fifteen or twenty years ago so-called medical practice management companies (PMCs) were in vogue, many of them going public. Their business model consisted of “buying” medical practices, paying a large multiple (around 10-12) for a vertical slice of the practice’s income, paid out to the PMC as management fees under a long-term management contract. Why would a PMC pay a 10-12 multiple for a slice of income? Because the PMC could sell its stock for a multiple of 20 to 30, then reinvest it in a slice of income and pay “only” a multiple of 10 to 12 for it. I think of that business model every time someone mentions arbitrage. I also think of arbitrage when I think back on my first job as a lawyer when the firm decided I should be a bond lawyer, advising clients in connection with issues of tax exempt bonds and how to maximize the return on the investment of the bond proceeds without violating the arbitrage rules that applied. Arbitrage in the case of PMCs was so simple even the ignoramuses in Silicon Valley could understand, but arbitrage in the case of tax exempt bonds would induce one to change careers.

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19 Gary Saturday April 20, 2017 at 3:10 pm

Would a rational person want to go to Las Vegas?

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20 sam April 20, 2017 at 3:21 pm

Rational doesn’t mean “shares Gary’s preferences”.

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21 Sam Haysom April 20, 2017 at 3:54 pm

How rational can you be if you can’t understand why people would like going to Las Vegas? Autism isn’t rationality.

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22 The Cuckmeister-General April 20, 2017 at 6:05 pm

I wouldn’t go to Las Vegas. Much better to spend your money on a trip to Iceland ( well actually better try the Faroe Islands nowadays) or Senegal. These places carry far FAR more status currency with my liberal cuck coastal friends than Las Vegas which carries negative currency. Kudos to Ray Lopez for going to Macau which still has has status points. Of course Las Vegas carries currency with the cuckold right such as the people on this blog except Ray. Left or Right it’s cucks either way for different reasons

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23 Sam Haysom April 20, 2017 at 6:11 pm

You got me there I’m definitely a big cuck

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24 Cucks 'n stuff April 20, 2017 at 7:38 pm

What? We can’t hear you with that BBC in your wife’s mouth.

25 Sam Haysom April 21, 2017 at 12:43 am

This is yet another of my many public humiliations

26 Ray Lopez April 20, 2017 at 6:45 pm

Well actually I went to Macao (HK) not for status or gambling but as part of a mandatory visa run. The alternative was to leave the Philippines for a country like Malaysia or Indonesia, which seemed less appealing since I had my gf with me.

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27 Doug April 20, 2017 at 4:13 pm

Sure, if your name is Ed Thorpe.

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28 Thiago Ribeiro April 20, 2017 at 5:07 pm

American economist Rothbard went to Las Vegas, he said it was much better than nuked Hiroshima.

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29 Axa April 20, 2017 at 5:38 pm

Ski, dune buggies, trophy trucks, SEMA show………man toys =)

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30 Moo cow April 20, 2017 at 3:19 pm

Said the Mirage host to my spouse, a Platinum Tier player, “the hotel is so busy we don’t have to accommodate your request.” Steve Wynn would never let a host say that, even if it were true. The “bean counters” didn’t like how he ran his casinos. But he knows gamblers.

That’s why we don’t stay at the Mirage. We were asking a favor for his 80 year old mom. She can tell you all about the old Vegas.

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31 msgkings April 20, 2017 at 3:25 pm

The “old Vegas” was plenty romantic, but the new Vegas makes orders of magnitude more money. Things change.

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32 Sam Haysom April 20, 2017 at 3:55 pm

Cool story bro.

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33 bob April 24, 2017 at 3:11 am

The old Vegas made more money. Casino profitability in Nevada (and Atlantic City) has declined. Cesar’s, which is a largely domestic company, went into Chapter 11. Macau saved Adelman and Wynn. Current casinos in Vegas are not that are profitable.

Gambling revenues are indeed only about a third of the revenues at Vegas casinos. That is largely because per capita gambling has declined about a third, not because of that much increased revenues in other sections. No new casinos have been built in Las Vegas since 2007-2008 because they are economic dinosaurs.

This is why only Greece has had a worse economic performance. Employees at casinos had to take substantial reductions in compensation.

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34 thfmr April 21, 2017 at 4:17 am

I agree that Wynn puts a better face on his service than MGM does, but your point about bean counters and gamblers is incorrect. Wynn is a slight notch above Sheldon Adelson for the stingiest comps in town, and that’s a low bar. His casino floor is marked by bad craps odds, 6-5 blackjack, and poor video poker pay tables.

Don’t get me wrong; he still runs the best show in town. I’m there several times a week. But he counts the beans like everybody else.

Oh and about your Platinum card…come on, man, if they give everything to the riffraff there’s no point in getting your Noir card.

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35 Erick April 20, 2017 at 3:46 pm

“In 1996, more than half of annual casino revenue on the Strip came from gambling. Last year, the share was down to about a third…More of the revenue comes from hotels, restaurants and bars”

Meh. Revenue is not the same as profit. All those other things take a lot of money to build. MGM almost went bankrupt building CityCenter. High profile acts in clubs don’t come cheap either. But a $4 bottle of rail liquor and a minimum wage employee to shuffle the cards don’t cost all that much. And people who are drinking are less likely to be careful and rational with their money. That’s easy, low-risk money.

Also, the bean counters should remember that there are a lot of cities with nice hotels, restaurants, and bars. There’s a reason people come to Vegas instead of those other places.

I have no idea why Vegas would want to make people more conscious of what they’re doing with their money and how much money the casinos make off each dollar or hour they spend gambling.

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36 Sam Haysom April 20, 2017 at 4:06 pm

Maybe Vegas has decided that with all the competing outlets for time in today’s Vegas that it’s better for average gamblers to be sober. Maybe drunk gamblers are more likely to say screw it I’ll go to a strip club or see a show. I understand what you are saying lowered inhibitions should= more gambling but maybe now it means more strip clubs or more embarrassing attempts to troll a bar for girls.

Clearly with the whales, who are in Vegas prettt much only to gamble, casinos are still pumping them with booze in line with your theory.

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37 So Much For Subtlety April 20, 2017 at 7:27 pm

The free drinks policy is an interesting one and I wonder how long it will be before it is challenged in the courts. After all, if I am trying to sell you real estate and I get you drunk before I ask you to sign, the Courts will probably have something to say.

The casinos are doing something that is on the face of it illegal – they are getting people drunk so they will lose more money. How is that still legal?

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38 Mark Thorson April 20, 2017 at 7:49 pm

Good luck challenging that in a Nevada court.

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39 Anon April 20, 2017 at 9:10 pm

Terrence Watanabe sued on that ground after losing $127 million in one year gambling. He didn’t went very far.

https://lasvegassun.com/news/2010/jul/08/debt-case-dropped-against-vegas-casino-high-roller/

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40 So Much For Subtlety April 21, 2017 at 7:00 am

Are we reading the same article? He refused to pay his gambling debts. Both sides sued each other. The casinos folded and reached an out of court settlement.

That sounds like the casinos were afraid of a bad precedent and so paid him off.

41 kevin April 21, 2017 at 11:26 am

They don’t force you to drink. If you show up at a casino you are presumably there to gamble anyway. If you show up to a mortgage closing and they offer/share campaign with you, presumably you would have signed anyway. I doubt courts would have much to say.

Now if they got you to the signing under false pretenses, got you drunk, and then had you sign, you may have a complaint.

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42 Matthew Powell April 20, 2017 at 6:49 pm

You can quantify how much a gambler is losing to the casino, ergo, how many free drinks you can afford to provide. You can’t quantify how much more he would lose if he were drinking more, ergo, this doesn’t exist for the bean counters.

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43 Doug April 20, 2017 at 7:08 pm

> You can’t quantify how much more he would lose if he were drinking more

Sure you can. Just A/B test by alternating free drink policy on different days or sections. No different than Facebook quantifying click-through rates from different layouts.

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44 kevin April 21, 2017 at 11:29 am

I imagine the fact that alcohol effects different people differently makes this imposible. Even if you know the weight/BMI of all your gamblers, a frat boy is going to play much better after 6 drinks then a 50 yr/old who never drinks except for this one time he’s away on business would

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45 William April 20, 2017 at 4:14 pm

What has happened to other comps (rooms, food and beverage, shows) that are based on tracked play and are not as discretionary? The first paragraph makes this seem less about reduced comps and more about managing the incentive problems associated with the bartenders and servers making the decisions.

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46 The Other Jim April 20, 2017 at 4:45 pm

> a five-person booth at the Harrah’s Las Vegas sports book cost $375 per person, which included five Miller Lite or Coors Light beers a person

This is the only interesting sentence in the post.

Five of those things costs Harrah’s about 80 cents. Why bother giving them at all? And why stop at five?

My guess is that five is enough to get you reasonably drunk, and probably quickly since you are not paying for them. So… then they expect you to make bad decisions? Including possibly paying six dollars for more of them, or maybe twelve dollars for better drinks?

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47 byomtov April 20, 2017 at 5:34 pm

Can you pay extra and not get the beer?

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48 Daniel Hill April 20, 2017 at 6:01 pm

“My guess is that five is enough to get you reasonably drunk.”

They’re talking light beer. YMMV, but I can’t consume the volume of liquid fast enough to get drunk on lites. If the goal was to get you drunk, why not give three full strength beers instead?

Disclaimer: as a numerate introvert, Vegas is my definition of hell on earth.

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49 Mark Thorson April 20, 2017 at 7:58 pm

No, they have the same alcohol content as regular beer. They are lighter in calories. As I recall, Coors regular is 140 calories and Coors Light is 105. They remove some of the sugar and starch.

Not that I have a dog in that fight. Those beers are all crap. For what you’re paying, you should at least get a faux-artisan mass-market beer, of which there are several quite drinkable brands. They should give you one of each brand, to help inform your subsequent purchases.

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50 Jan April 20, 2017 at 8:53 pm

You know calories are largely driven by the alcohol content of the beer, right? Light beers always have a lower alcohol content. Look up the ABV of any macrobrew and compare to its light version. I agree they are all crap, but his point stands that light beers have lower alcohol and, consequently, are harder to get “drunk” off of.

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51 Andre April 20, 2017 at 10:29 pm

I live in the bay area so I love all the craft brews but they are going a little too wild with the alcohol these days. There are so many 8% beers out there that just make your eyes water, it’s more alcohol than a 40 by a mile.

52 Kelly Bowers April 20, 2017 at 5:58 pm

I wonder what this means for Vegas waitresses and their tips.

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53 Mike W April 20, 2017 at 7:09 pm

And…the strip properties now charge for parking.

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54 Mike S. April 21, 2017 at 5:55 am

In 1996, gaming was only legal in very few states. Now, a majority of states have some sort of legalized gaming as they look to close budget gaps with gaming revenues. Vegas could be freewheeling with the comps and perks because they had basically no domestic competition.

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55 gab April 21, 2017 at 1:03 pm

Everyone knows Vegas was better when the mob ran the town…

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56 DevOps Dad April 21, 2017 at 4:49 pm

“More of the revenue comes from hotels, restaurants and bars.”
The bean-counters have applied the same gaming formula to the Indian casinos on Indian reservations in California.

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