For many decades, Las Vegas was the gambling capital of the world. In recent years, the Las Vegas casinos have been in a very competitive environment with constantly eroding profit levels. Now they are banking on sports betting to turn their fortunes around.
Changing Las Vegas landscape
Gambling was legalized in Las Vegas in 1931, and it became a destination for people from all across the United States and abroad. Slot machines were a new phenomenon, and there were many variations of traditional table games for players to choose from.
As Nevada was the only state in the US where gambling was fully legalized, there was great growth in the subsequent decades. Las Vegas grew from a small town into a very populous city.
Over time, the casino companies in Las Vegas began to turn their attention to other opportunities. This led to many of them investing heavily in the island of Macau in the early part of this century. Macau has overtaken Las Vegas as the gambling capital of the world, and it is set to overtake Qatar as the wealthiest place on the planet by the year 2020.
The evolution of online gambling has had a large impact on land-based casinos such as those in Las Vegas. As people could now play their favorite slots and table games from the comfort of their own homes, they no longer had to make trips to Las Vegas. While many of the Las Vegas casino companies subsequently created their own online platforms, they were only able to secure a very small slice of the pie.
Around the turn of the century, the fortunes of the casinos in Las Vegas began to change with the online revolution. They were hit hard by the recession that followed the 9/11 attacks, and they had to deal with further competition from domestic casinos, such as the tribal casinos in California.
This led to a change in tactics, as the Las Vegas casinos went for a more adult-themed approach, placing less emphasis on the likes of roller coasters and instead adding more nightclubs. This led to a lucrative few years until the Great Recession hit and both their revenue and visitor figures began to nosedive.
Since then, it has been a constant struggle for these casinos to carve out profits and they have largely been able to stay profitable by hosting conventions, attracting high-roller Asian gamblers, and focusing more on entertainment.
Vegas is becoming less about gambling and more about entertainment. People are spending more on shows, drink, and food and less on gambling than ever before. Before the Great Recession hit, 41% of the revenues for casinos on the Las Vegas Strip came from gambling. That figure was down to 34% last year and it is only going to decline.
Is sports betting the savior?
Sports betting has very much been an afterthought for Las Vegas casinos over the years. However, faced with falling profits and the legalization of sports betting nationwide, many of them now see it as a potential way for them to reignite their businesses.
Sports betting was not a focus of the casinos for many years due to the limited house edge and the 10% excise tax that had to be paid on sports bets. Over the years, this excise tax was whittled away, which led to sportsbooks being formed at most casinos, but they were still very much an afterthought. Some of them even sublet their sports betting operations to international companies like William Hill.
However, with sports betting being legalized across the United States as of May 2018, the headline news coming out of Las Vegas has largely been about casinos striking new sports betting deals. They clearly see this market as being largely untapped and offering massive growth potential.
Illegal sports betting has always been a massive market in the country and, now that casinos can offer it in an online environment for most states in the country, they could position themselves nicely to benefit from these legislative changes.
They will not worry about having room occupancy numbers decrease if they manage to secure a significant slice of the sports betting market in the country, which could lead to them enjoying significant levels of profit once again.