Is Vegas Signaling The Consumer Is Folding?

Tyler Durden's picture

Visitor volume to Las Vegas is the highest since 2007, despite rising hotel rates, but gaming revenues are near flat.  Online gambling is popular with Europeans – the Brits and Greeks in particular – yet it has slowed over the past 3 months. ConvergEx's latest off-the-beaten-path economic indicator – gambling – shows an increasing global reluctance to leave household finances at the whims of blackjack and poker tables, be they in actual casinos or online betting parlors. Discretionary spending behavior is reliant on consumer sentiment and economic outlook; gambling is the ultimate “luxury item” because there’s absolutely no guaranteed return, so gambling behavior is a near real-time indicator of changes in consumer confidence.  Our gambling indicators, both domestic and abroad, show what feels a lot like recessionary behavior and point to another leg down in the latter half of 2012.

ConvergEx: Know When to Walk Away and Know When to Run

I’m not really a gambler so when I won 110 bucks on a hand of 3 card poker last weekend I was ecstatic.  I’d never even sat down at a “Real” casino poker table and realized very quickly how gambling addictions can happen.  Yes, I know there are rafts of academic papers on the biological reactions to the win-loss cycle of gambling.  But reading about the rush of endorphins and adrenalin and actually feeling them are two different things entirely.  Anyway later that night, I was dragged out of the casino after forking over $30 to the blackjack slot machine in 15 short seconds.  All said and done, though, I went home a net winner.  Perfect – considering I’d expected to lose my entire pre-determined gambling budget.

 

It was a budget I viewed as a purchase.  I paid “X” amount of dollars for “Y” number of entertainment hours, the goal being to maximize “Y.”  Gambling is therefore the ultimate form of discretionary spending – you’re essentially guaranteed absolutely zero in return for your money.  And for this reason, it makes for a colorful – and useful - economic indicator of consumer sentiment and consumption patterns.

 

First up, gambling in America.  The Las Vegas Convention and Visitors Authority (LVCVA) publishes an assortment of facts and figures, which we’ve compiled as a barometer of middle class America’s spending behavior and economic outlook.  But before we dig into the economic implications of the Vegas data, here’s a closer look at the segment of the U.S population which we’re analyzing.  These demographics are the result of in-person interviews with 3,600 randomly selected visitors in 2011.

  • An overwhelming majority is either currently working (66%) or retired (25%) – virtually none are unemployed (1%).  The remaining 7% is a mix of students and homemakers.  We can’t help but wonder about the “Unemployed” statistic – but that’s what the LVCVA publishes, so that’s what we’ll use.
  • It’s a relatively well-educated group: 50% graduated from college, versus 24% of the entire U.S. population.  25% have taken some undergraduate courses and 20% earned a high school diploma or less.
  • 73% earn at least $60K a year, well above the national average of roughly $44K per year.  32% take in more than $100K, while only about 6% earn less than the national average.
  • The average age is 49, and there’s a 1:1 ratio of men to women.  77% are married.  86% are white.

And here’s what we’ve found regarding the current economic condition of this cross-section of the American middle class, based on visits to Las Vegas and consumer behavior while there.

  • They’re going to Vegas in bigger numbers, despite the rising cost of hotels.  The average cost of a hotel room is $110 thus far in 2012, up from $105 last year and nearly 20% higher than the average of $93 in 2008.  Hotel and motel occupancy rates in the city average 84.3% this year, topping last year’s 83.8% and a low of 80.4% in 2010.  Even when lodging was comparatively dirt cheap, Vegas struggled to attract visitors.  Now that room rates have firmed, people appear to have little problem forking over the extra cash.  All good signs, thus far.
  • But while they have the means to vacation in Vegas, they’re more likely to be found at the pool or at a show than on the casino floor.  Visitor volume is up 2.4% in 2012 year-to-date (January through May) over the same period last year.  And in 2011 more people went to Vegas (39 million) than in any year over the past decade except 2007.  Gaming revenue on the strip, however, is up just 0.2% year-to-date.  Last year’s grand total of $6.1 billion was 5.1% higher than in 2010, so it seems the economic choppiness of 2012 has continued to shrink gambling budgets.
  • Google search trends for the terms “Las Vegas” and “Las Vegas vacation” for U.S. based Internet users support the notion of a very slight slowdown in online interest for the destination.  Interestingly enough, these searches seem to peak in January, presumably because of the annual Consumer Electronics Show (CES) that takes place that month.  Since the 2012 show, however, the search count seems pretty solidly down compared with prior years.
  • Closer to home, the Google Trends data for “Foxwoods” and “Mohegan Sun” show a similar slight, but perceptible, slowdown.  Internet search interest in both Connecticut gambling destinations is lower than at any point in 2011 when the economic recovery seemed on firmer ground.  As for Atlantic City, NJ’s star attraction – the Borgata – search traffic looks to be on par with 2010, but below the same time in 2011.  This location’s peak traffic is in the summer, in keeping with its location on the Jersey shore.

Overseas, gambling is also seems to be losing popularity.  The world’s most popular online gambling websites – illegal in many countries including the U.S. and China – are largely frequented by Europeans, according to data published by Alexa.com.  In the attached table we’ve included a list of the top sites followed by their biggest customers, in terms of countries.  For example, the most popular site, William Hill, is the 23rd most visited website in the country of Greece.  That’s equivalent to the likes of ESPN, the Huffington Post and the Weather Channel in the States.

 

Reach, or the estimated percentage of global internet users who visit a particular site, is down 1% in the past month for the top 6 gambling sites, while average time spent on the sites is down 9%.  Over the past 3 months, reach is down 6% excluding one outlier, and gamblers are spending 7% less time per site visit.  Greek and British citizens appear to be the most enthusiastic online gamblers, so a slowdown in activity likely could be a result of worries over the region’s ongoing debt crisis.

 

While Americans are still going to Vegas and Europeans are still gambling, sentiment is certainly suffering, as evidenced by a slowdown in global risk-taking.  Consumption patterns shift when economic outlook changes.  Gambling is the ultimate “luxury item” because there’s absolutely no guaranteed return, so gambling behavior is a near real-time indicator of changes in consumer confidence.  Our gambling indicators, both domestic and abroad, show what feels a lot like recessionary behavior and point to another leg down in the latter half of 2012.

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SHEEPFUKKER's picture

I guess blowing your money in Vegas on hookers and blackjack is more fun that getting it MF'd. 

I think I need to buy a gun's picture

maybe they can use monopoly money on the floor from now on

The They's picture

Time to blow my welfare check on hookers, whiskey and wasted time at a slot machine!

12ToothAssassin's picture

Is that why NYSE volume is down?

THX 1178's picture

There's blackjack and poker and the roulette wheel-- A fortune won and lost on-a every deal...

idea_hamster's picture

An overwhelming majority is either currently working (66%) or retired (25%) – virtually none are unemployed (1%).  The remaining 7% is a mix of students and homemakers.  We can’t help but wonder about the “Unemployed” statistic – but that’s what the LVCVA publishes, so that’s what we’ll use.

If the person thinks their "career" is "professional [poker|craps|3-card monte] player" then are they working? Or unemployed?

ihedgemyhedges's picture

I took my wife to Vegas about 12 years ago.  While standing by me at the craps table she asked the stick man "Where can I get a drink real quick?"  He replied "Liquor in the front, poker in the back"

To this day, she doesn't get it............

sessinpo's picture

She doesn't get licked in the front and poked in the rear? Is that her fault or are you waiting for something?

Peter Pan's picture

Money spent on gambling can't possibly be down if you include Wall Street and the likes of Corzine and others.

On a more serious note I suspect that gambling expenditure is actually up across the board if internet gambling is included. I would hazard a guess and say that gambling during recessions actually increases due to the desperation of people who hope to score a big one as a means of escaping their predicament.

ACP's picture

All on the ol' EBT!

Vegas needs to make low-budget EBT rap videos if they want to survive.

ZeroAvatar's picture

Time to blow my welfare check on hookers, whiskey and wasted time at a slot machine!

 

And then waste the rest!

Lost Wages's picture

Yep. I'm sure there were people who wished they had blown it partying rather than letting Corzine vaporize it.

WALLST8MY8BALL's picture

That wish was fulfilled, by Corzine!

francis_sawyer's picture

So basically, now... It's JEW vs. JEW...

~~~

The Jew casino operators are now pissed because the Jew Corzine stole all their money...

Junk away!

Doña K's picture

I am wondering if by a twist of fate some farmer who was hedging his crop was actually wrong on his hedging bet and therefore, his partial recovery of the liqidated proceeds were more than he would have had if Corzine did not steal his money.

Fake Jim Quinn's picture

Corzine is a Quaker. At least get your facts right. In a 2x2 matrix of rascist/moronic, you hit the jackpot

Reese Bobby's picture

“I remember Christian teachers telling me long ago that I must hate a bad man's actions but not hate the bad man: or, as they would say, hate the sin but not the sinner. ...I used to think this a silly, straw-splitting distinction: how could you hate what a man did and not hate the man? But years later it occurred to me that there was one man to whom I had been doing this all my life -- namely myself." - C.S. Lewis

Peter Pan's picture

I hardly think that issues of race are central to the economic problems afflicting the USA. People will steal regardless of their race and regardless of the race of their victims. Hitler stole from the Jewish people but so did Madoff.

francis_sawyer's picture

Peter Pan is an appropriate username...

~~~

Look ~ I didn't say anything about any 'central economic problems'... All I said (which is probably true), is that it's ironic that these casino operators would be pissed because we are at a point that the bad behavior is now washing up on their shores...

As for the 'race' issue... I'm going to tell you something (which you'll consider or ignore)... Today's society exists in a very delicate bubble... That bubble is kept alive mostly by 'skittles & unicorns' thinking liberals... Frankly, it's probably a good thing, tio think that we can all hold hands & work things out together... alas ~ it's naive...

The very second that things start to break down, all the doe eyed liberals will revert to survival mode (just like everyone else)... I'm betting that RACIAL divide will be one of the first set of lines that will be drawn which will segregate people into groups... Not that I WANT it to be that way, just that I think it will end up that way...

I'm not a hater, I'm not even a facilitator (in the above described scenario)... I'm just an observer of human nature... Nature goes in cycles... Societies are built up, & societies crumble... This most recent attempt at society had its chance & is now in the process of disintegration... I can't stop it by singing verses of kumbaya... In fact, NOBODY can stop it by singing verses of kumbaya because it's rigged to the point that there are no more tickets to the show (and those attending the show aren't about to give up their seats... You can stay in Neverland if you wish...

Silver Bug's picture

I was just there a week ago. My sixth time there for business. That place is gradually falling apart every year.

 

http://ericsprott.blogspot.ca/

AgShaman's picture

I was there a couple months ago at the Moneyshow.

It is drying up...little by little, from what I've seen and can remember.

Vegas wasn't built for the bad times....it will suffer a drought most likely....for how long and how much worse remains to be seen

Roandavid's picture

I would never blow my money in Vegas on blackjack.

veyron's picture

We take the ultimate gamble every day: our wealth is in $$ and we are betting the federal reserve doesn't just print trillions of dollars overnight.

fonzannoon's picture

When all your retirement money is in the market who needs vegas?

blunderdog's picture

   blackjack slot machine

I'd avoid that in the future.  The poker roulette ferris wheel is suspect also.

eurusdog's picture

I live 6 hours away and used to go 4 or 5 times a year. I haven't been in 3 years. To busy buying silver, gold and putting straddles on AAPL

q99x2's picture

'I know there are rafts of academic papers on the biological reactions to the win-loss cycle of gambling.'

Try jogging. You don't get the true sense of gambling until you've worked all day in LA and then driven out to Las Vegas to stand all night by yourself, along with a shill and the house at a craps table, to see if your martingale strategy can bring in a hundred bucks.

What did you do with the winnings buy your fish some food.


SqueekyFromm's picture

OH, there is no surprise in this report. They simply forgot to add in all the Gold Bugs gambling on Gold. Add that back in and I just bet that Gambling is way UP.

Squeeky Fromm, Girl Reporter 

HungrySeagull's picture

I understand gambling.

What I do is take say... 500.00 to the Table. Sit down and play the cards as they are dealt. (You are dealing with at least 4 decks out of the monster shuffler)

If you break even take that chip into the right pocket.

If you win a hand on a profit.. example 15 dollars on a 5 dollar hand... put those chips into the left pocket.

When your 500.00 that rides in your shirt pocket is all gone, Go to the cashier booth and cash out what you have. The left pocket will be your winnings and right pocket will be your net.

Never... Never... Never

Celebrate a win. You invite bad guys to target you.

Always play at a empty table with a Dealer. One or two others will join, always sit at the end of the row, never in the middle.

 

And take care in indian lands... they have Soveriegn rules in which Tribal law applies to you. I think it's 5 years hard labor for stealing for example.

I don't gamble much anymore. I might purchase a lotto now and then (Using the same system but only 200.00 for the year)

The last time I gambled, I let myself stay at the table too long and ran 300.00 to 5K and then back down to around 450 after a day and night. Time stops for you there.

 

Should have walked out of there with 5K... I suppose the ladies are nice and the drinks are welcome.

I still have a Union 76 Coin from Vegas truck stop where they had a very large one armed bandit. I sunk a 5 in, pulled the handle cashed out 20 dollars right there and then. Spent 19 of it and kept one all these years.

Kim Jong-Il's picture

Always mail your winnings home.

Reese Bobby's picture

My understanding of gambling:

Only play blackjack.  Follow the simple rules of the game, except,

Try and count 10's but know you think you have a better grasp than you do,

If you are on a hot streak and they change dealers, LEAVE THE TABLE.

Tip and compliment the drink girls.

If you don't have a few buddies to yuck it up with ask yourself why you are bothering to imitate a computer.

Stop when you lose what you have decided before hand is "entertainment value."

yabyum's picture

No need to gamble in Vega$, I have a 401k! We do not have the buffet/.99 cent shrimp cocktail, but the criminals like MF and PFG keep it very interesting.

agent default's picture

Vegas? Who needs Vegas, we have the "fair and  efficient" markets here.  Vegas is for pussies. 

Russian Roulette Bitchez!

capitallosses's picture

I'm down to my last black chip. Ready for roulette, but I can't decide whether to put it on gold or silver (green is just debt and I won't go there).

BlackSea's picture

Gold. Always. Just like a central bank.

Seasmoke's picture

used to take the 5 hours flight to vegas every year.....have not been back in over 7 years and you couldnt pay me to go back.......but dont get me started on Atlantic City ....LOL

TrainWreck1's picture

TSA adds to the fun. Not to mention all the states with local gambling.

Outside of hookers and over-the-top glitz, Vegas is toast. All that wll be left is retirement buffets & gang wars (oh, we're not s'posed to talk about them)

 

cynicalskeptic's picture

Last time my wife was ther evisiting her sister, her bil (a LV cop on the gang detail) was in a firefight (LOTS of bullets flying) outside a Starbucks.  They don't liek to talk about such things - scares the tourists.  You wouldn't believe the firepower in his cruiser's trunk.   Gang problem in Vegas is HUGE and growing.  What's worse is the amprphous nature of Vegas.... no defined neighborhoods ' a 'good' walled in development is right next to a 'bad' trailer park.  Schools are all 'bad' - big parochial/private school population as a result.

But no worry... the way Lake Mead is dropping they're out of water in a couple years.

Vegas is the supreme example of mankind's stupidity - a huge city where NOBODY should be living whose whole economy is based on vice and people traveling there (by air or a LONG drive) to lose their money.   Even the big whales are staying closer to home now - Europe or Macao.

Freddie's picture

It cannot implode fast enough.  Use it for A-Bomb testing again.   Didn't it go from Italian/Jewish mafia to Howard Hughes and his Mormon enforcers to corprate junk bond owners to Israeli mafia now?  What a dump.

Wonder where those gangs will be going when the SHTF?  Those walled developments will be the first stop.

Fake Jim Quinn's picture

Vegas has three things: The Strip, Strip Malls and Strippers. It is however the true "silicon valley", except the silicon is not exactly in chips. 

Someday the water will run out and Vegas will be a ghost town. Can't happen soon enough. Then Harry Reid's train to nowhere will really be a joke

J in Vegas's picture

Yes that is the key. WATER! I know that and will be outta here right before the third "Big Straw" in Lake Mead goes dry. And to all  the haters here on Vegas, its not that bad. It reminds me alot of L.A. And speaking of L.A. , where is momofader?

J in Vegas

element115's picture

Where's MomoFader with the (FOSL, LULU, CMG, CRM, CUM) all time world highs facing ripping, monkey hammered, blow torched quotes today? I haven't seen that waste of sperm and eggs in 24 hours, what gives?

blunderdog's picture

I think one of the Tylers took over his acct.  They're pretty busy, so you only hear from "Robo" once a day or so.

WALLST8MY8BALL's picture

What ever happened to the Mad Hedge Fund Trader? It was alot of fun abusing that shart!

blunderdog's picture

He had to change his name to "PissedOffFastFoodDealer."

Mr Pink's picture

I'll bet my unemployment check that we are headed for another recession

lotsoffun's picture

i took 'early retirement'  i was told.  enjoy the check, and please vote for big bad bama.  he's got you covered.