Billion dollar casinos - and what is going to happen to them

Written by Posted On Saturday, 15 September 2018 06:44

Las Vegas isn’t the only location home to massive casino complexes. Whether in Las Vegas, Atlantic City, Macau, Monaco, Johannesburg, or Manila these massive concentrations of entertainment and gambling can cost billions to build. Naturally, there is a reason the companies behind the buildings have invested such mind-boggling sums into their ventures: gambling is an extremely profitable business to be in. People all over the world seek out these unique experiences that combine entertainment with the chance to walk away with millions. In the USA alone the gross gaming revenue is close to 40 billion USD, according to a report from americangaming.com.

Yet, there are fresh winds blowing that might change all of this. Gambling on the internet has grown into a massive business, with plenty of people preferring to play slots and table games from the comfort of their own home as opposed to travelling vast distances and paying hefty sums for it. This, naturally, means that the one major contributor to the value of these locations is undergoing a very volatile change.

Online casinos open up new possibilities - for the customer

Ever since the so-called Black Friday of 2011 online gambling has beenillegal in the USA. It should come as no surprise that the promised land of lobbyists saw the established providers, such as the ones in Las Vegas, protect their investments with all of their power. The result was that all reliable providers left the country, with plenty of shady operators mostly popping up in Caribbean countries to fill in some of the void. For the most part gambling in the USA is done in physical establishments.

Online gambling legislation has mostly been on the rise in Europe, where EU and different countries debate the topic continuously. Thanks to the legislative framework of the European Union, individual countries can offer their services to a far wider audience than would normally be the case. This works wonders against specialized locations, such as Las Vegas.

In the last few years, the matter has arisen again in the USA, with the Supreme Court deciding in 2018that the government cannot overrule what the states themselves have decided on the matter. This has quickly led to several states legalizing sports betting and other forms of gambling. For the most part, the offering is still very limited and very much tied to the established casinos. This, without a doubt, will change.

Online or offline, what's the catch?

Brick-and-mortar casinos require people to travel to where they are. They also require the players to spend exorbitant sums at the location. They need to maintain not only the gambling halls but all the infrastructure that comes with it from hotels to restaurants. sOnline casinos have no need for any of this: all they need is their offices and their servers. As a result, slots, table games, sports betting, and poker offered by these companies follow a completely different formula when it comes to payouts. The difference is not astronomical, but it is noticeable. These days online casinos tend to offer an average return to player of 96% in slots, whereas in places like Las Vegas it is closer to 94%. In table games there is very little difference.

And like we mentioned: there is no need for the customer to pay for anything else but the bets he or she makes. On the other hand, this also means that the customer only experiences the gaming part of gambling when playing in online casinos. Playing via a mobile phone from the comfort of your own home is not quite the same as sitting on a table at one of the most famous casinos in the world. There is none of that hustle-and-bustle, no-one else to chat and play with, no one to serve you drinks, and clicking buttons is hardly the same as being served by a real dealer. There is none of that feeling that the casinos are famous for.

What happens when the gambling profits fall?

Quite a few casinos are already struggling to stay afloat. Some remain extremely profitable, others break even. The local gamblers are not likely to change their habits, but domestic and foreign visitors might change their preferences quite drastically. It is the latter two that might turn into online gambling completely, as has happened in Europe.

It is hard to imagine that this change would bring anything positive for the casinos or the real estate empires that operate them. Certainly, there is a need for innovation in the changing ecosystem. And if these billion dollar projects fail to provide profits and stay afloat the situation will without a doubt reflect on the whole area. Then again, where there is risk there is usually profit to be made: that is why gambling is such a big business. It all depends on how the locations decide to innovate and change, if at all. However, the brick-and-mortar casinos have the added benefit of not solely relying on gambling income.

One possibility for these locations is to simply diversify. Offer better deals, offer more entertainment, concentrate on the experience instead of simply flouting the possibility to walk away as a millionaire. This is something that might eventually translate into value gains in the whole area.

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