The Nations Casinos Feeling the effects of the Economic downturn

It was once believed that Casinos actually performed better in recessions than they did in properous times. The theory is that people down on their luck will roll the chop with their last profit to try and make the mortgage payment. Lotteries tend joker gaming to increase sales during hard times for the same reason. Not this time around. Bettors are hanging onto their hard earned dollars, cheating casinos out of much needed revenues and pushing some to consider layoffs and worse.

The Sands Casino in Las vegas is in danger of violating terms of their loan covenants. Should this happen and they can’t work out terms with the lender, their loan could be called in and the Sands will have to think of cash to pay off all of their loans. This could be a horrible proposition simply have multi-billion dollar projects happening all over the world.

This is the same luck that has gotten on Bear Sterns, Lehman Inlaws, WaMu, AIG, Freddie Apple, Fannie Mae and many smaller firms.

Most Las vegas casinos rely heavily on transient traffic, meaning they need individuals to fly in from other parts of the country and world consistently day in and saturday to support the huge infrastructures they have built. There is just not enough local traffic to support these the behemoths. People are not travelling as much as jobless rate continues to climb and are cutting back on expenditures. To make matters worse flight companies are increasing their rates to compensate for higher energy costs and lost revenues.

Casinos rely heavily on volume since occasionally they have winners and they operate on small margins. I know this doesn’t seem possible, since every time most people go into a casino they come out with nothing. It appears as if casinos hold 100% of each one dollar that is dropped down the box, but in reality their hold rates average around 14%. That means for every dollar that a player transactions for chips the casino will keep 14 cents. That percentage is higher for slot machines, but still less than most people would think. To make as much money as they do, a lot of volume (dollars) goes across the tables frequently for chips.

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