The Nations Casinos Feeling the effects of the Economic depression

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 to increase sales during joker gaming 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 pumping some to consider layoffs and worse.

The Sands Casino in Nevada 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 difficult task simply have multi-billion dollar projects happening all over the world.

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

Most Nevada casinos rely heavily on transient traffic, meaning they need individuals to fly in from other places and world consistently day in and sunday to support the huge infrastructures they have built. There is just not enough local traffic to support these giants. People are not travelling as much as unemployment rate continues to climb and are cutting short 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. Everybody casinos hold 100% of every 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 in exchange for chips.

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