Wednesday, March 02, 2005


Posted by Johnnymac 2:17 PM
Junell's post again makes me wonder when the Poker Bubble is going to burst. I understand that poker is popular right now and a lot of new players are going to Vegas and to other B&M's and want to play cards, but regardless of how many tables Bellagio might add, or how big the new rooms at Ballys and MGM might be, the economics still don't add up when compared to other games. Per square foot, a 5c slot machine or a $5 blackjack table is still more profitable than the rake or a time charge on low limit game, which primarily what the casinos are adding space for. This confuses me a little bit and if anyone could forward me a link or a document that might make an economic case for this expansion, I would be very happy to read it.

I am entirely willing to admit that maybe I am thinking about it the wrong way. Perhaps the casinos are seeing new poker players simply as new gamblers and thus maybe poker is a gateway or a loss-leader than gets these guys in the door and playing blackjack later in their lives (or just later in the evening). But the bottom line is that casinos starting closing poker rooms back in the 80's and 90's because there was such a high opportunity cost compared to slot machines and nothing has happened to change that.

6 Comment(s):

Posted by Blogger Junelli, at 3:06 PM, March 02, 2005  

The poker rooms are not being built to add to the bottom line, they're being built to attract players to their casinos. Bellagio isn't going to miss or hit their number based on the rake at the poker tables, but they sure will based on slots, blackjack, craps, etc.

They care about one thing: getting people in the door. To do that they're willing to comp meals, hotel rooms, gifts, etc. And they're willing to miss out on the opportunity cost of the maximum utility of their real estate in exchange for higher returns in other areas of the casino.

They know that people in their casino = more dollars. They know that a lot of male poker players bring along their slot-playing wife. They know that if someone is hot and/or cold at the poker tables, they're likely to try their luck at blackjack or roulette. They know that poker players are gamblers, and gamblers are the target market.

If you think about it, it makes perfect sense from a marketing angle and perfectly indirect sense from a economics angle.

When the poker rooms closed in the past decade, it was because the popularity was waning. Now that poker is hot again, people want to play (and stay) in casinos with poker rooms. Those without them will be left behind.

That's my take.



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Posted by Blogger Junelli, at 3:15 PM, March 02, 2005  

A perfect example is the fact that my entire bachelor party will be staying at the Bellagio primarily because the poker room will be the central hub of activity for us. Without that poker room, we could've stayed anywhere (and most certainly would've stayed somewhere cheaper).

That's 27 guys at the Bellagio for 3 days. Do you think we'll put any money into its coffers during the weekend?? :)



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Posted by Anonymous Tenacious, at 3:46 PM, March 02, 2005  

100% agree with Junell, it's all marketing to people to play the profitable games for the house. and as Junell describes in his second post, it undoubtly works.



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Posted by Anonymous Anonymous, at 10:11 PM, March 02, 2005  

it's called a loss leader

http://en.wikipedia.org/wiki/Loss_leader



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Posted by Anonymous Anonymous, at 10:16 PM, March 02, 2005  

or a low margin product



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Posted by Anonymous Anonymous, at 5:31 PM, March 07, 2005  

poker players come in everyday.
slot players and blackjack players come in on the weekends.



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