Monday, May 07, 2007

Las Vegas casinos suffering from consumer woes?

The Sports Economist says:

"According to an article at, "MGM Mirage Inc.'s chief executive does not want the NBA All-Star Game to return to Las Vegas, saying Thursday that the casino's first-quarter earnings were potentially hurt by the rowdy crowd that turned out for the league's showcase game."

While none of us here at The Sports Economist would stoop so low as to say "we told you so", we did tell you so.

The article states that the All-Star game visitors crowded out Asian gamblers during the the weekend (which happened to overlap Chinese New Year.) Furthermore, the sports fans tended to spend less money at local businesses (like casinos) than regular visitors. "Crowding out" and "leakages" are two of the three primary reasons why us dismal economists tend to discount claims of large economic impacts from sporting events."

I am not sure what the motivation of MGM's CEO would be in blaming the NBA All Star game for an earnings decline other that it being a convenient excuse to white-wash what is likely the real problem for his casino. That problem being that cash-strapped Americans consumers are eliminating plans to visit Vegas because they're having a hard time making ends meet due to resetting mortgage loans and sky-high levels of credit card debt. MGM's people knew well in advance about the timing of the Chinese new year and the all-star game, and I find it very hard to believe that there are capacity constraints at the casinos. Especially for gamblers who wager large amounts. The casinos' technology allows them to monitor in excruciating detail the activities of everyone in their buildings, and I have no doubt that they would push aside small-time players to make room at the tables for every high roller they could get their hands on.

In addition, NBA players and their entourages are notorious for being big time gamblers; and they have large amounts of cash that they don't mind losing at casinos.

So I think that this claim that the All-Star game hurt Las Vegas is completely bogus.

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