Inside Asian Gaming

INSIDE ASIAN GAMING | March 2009 44 Market Outlook certainly if you are a highly leveraged company with extreme demand on your significantly diminished cash flow, there’s just simply not as much money available to spend,” said LaFleur. “Also, there aren’t going to be as many new casinos open to sell the slot machines into. In the past you could look at economic downturns as opportunities for gaming proliferation.” Nowadaysthereareveryfewjurisdictions left for casinos to sprout and fewer racetracks to be transformed into racinos. Even where there are wide-open territories for gaming growth, such as in Kansas, plans have been abandoned in part because of tax rates that now are seen as onerous. Today’s high cost of capital, even assuming somewhat normal access to financing, makes operating in many new environments simply impossible. Dennis Conrad, owner and chief strategist for Reno, Nev.-based Raving Consulting, says the industry still has its unique advantages, nomatter how common casinos may become. “What’s interesting about gaming companies in a recession is they have an opportunity to try different models, unlike other businesses,” he said. “There are the people that are cruising, waiting for [the downturn] to end and keeping their expenses down, and then there are the people that whatever’s there they want it, it’s time to spend money. Then there’s the wisest approach, and that’s to take a good hard look at that 20 that drives the 80.” Conrad is referring to the fact that for most properties it is usually 20 percent of players driving 80 percent of the business, and for some it might even be 10 and 90. “The universal rule is to be loyal to your regulars, who tend to have discretionary income and are less likely to pull their horns in altogether,” he said. “They just like it too much.” There are signs that the more sophisticated tribal casinos have already shifted toward Conrad’s way of thinking. “They’re really shrinking, but where you see them not shrinking ... is in their promotions to entice the regular gambler to come in, by offering them more money,” said Elijah Zuniga, a former special agent for the California Bureau of Gambling Control and now a consultant for California card rooms and tribal casinos. “They’re really shrinking and getting back down to the basics—high jackpots, offering rewards and promotions.” That money, he said, is coming from expansions not undertaken, salaries not being paid to employees who have been laid off, contracts that have been cancelled and other capital-intensive areas that have been cut back. “What’s interesting in California is you have an industry that arguably did not reach its maturity yet. A lot of the tribes that were doing very, very well in the first half of the decade probably were not very cost-conscious, and for the first time Stock prices for the likes of MGM Mirage, Las Vegas Sands, Boyd Gaming and others have nosedived into the single digits from two-year highs ranging from $50 to $100 a share Hotel room prices are falling down in order to entice people to visit Las Vegas