What Happens in Vegas...Might Tell Us Something About the US Economy

Transcript

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Speaker 1 Welcome back to Risky Business, a show about making better decisions. I'm Maria Konakova.
And I'm Nate Silver. Today on the show, we're talking about a decision that Maria and I make frequently.

Speaker 1 In fact, Maria, of course, lives part-time in Las Vegas, but that's a visiting Sin City.

Speaker 1 I am

Speaker 1 about to head to Las Vegas for my first poker tournament since the World Series of Poker. Maria and I are both playing in the, it's it, NAPT, North American poker tour.
Exactly.

Speaker 1 They might let some Euros, other non-North Americans, some Brazilians, not technically North America, They might be there too.

Speaker 1 But November, December, I'll be there, hopefully running deep in some events. I'm a little rusty.
How about you, Maria? Have you been playing much lately or not?

Speaker 1 No, I have not. My last poker stop was EPT Barcelona, so the European Poker Tour.
That was in August. And I haven't played since then, but the NAPT,

Speaker 1 Obviously, we do our disclaimer. I'm a poker stars ambassador, member of their Team Pro, but this is an event that is really near and dear to my heart.
It's their flagship in the U.S.

Speaker 1 And if you remember, last year, Nate, I went incredibly deep. Final two tables.
I think I finished 10th or 11th.

Speaker 1 I don't actually remember, but it was one of those like really, really frustrating bust outs when like, I don't remember how much I cashed for like.

Speaker 1 between 40 and 50,000 and first place was like a million dollars. And I was like, fuck, you know, it's one of those.
It's one of those moments.

Speaker 1 But yeah, today we'll be talking about the Vegas economy. I'm actually already in Las Vegas.
I'm recording this from Lovely Resource World, which is where the event is taking place.

Speaker 1 I'm in my hotel room there. And so.

Speaker 1 Why aren't you in an apartment?

Speaker 1 Because, Nate, when I have to play until very late and we have to tape and then I have meetings right after, I need a space that is not 20 minutes away, but actually right here.

Speaker 1 Nice.

Speaker 1 Well,

Speaker 1 one thing you might notice too, pertinent to this topic, is that lately, for people who know what they're doing hotel rooms have gotten cheaper in Las Vegas I was able to stay at some places this summer for I don't know maybe 50 or 75 dollars less a night than I would have expected to pay I know so funny nate I'm gonna I'm gonna interrupt you for a second I thought you were gonna end that sentence at for 50 or 75 dollars I'm like whoa whoa whoa where are you like yeah I say I say I stay like where are you staying I stay at the middle plus cheer plus right I'm not I'm not and there are places you can stay, you know, with comps and stuff for, for

Speaker 1 $700 a night, right, or less. In fact, I,

Speaker 1 this spring, I was booking hotels for the World Series, right?

Speaker 1 And I noticed that there was a lot of availability at relatively low prices. And so therefore, I actually

Speaker 1 took some money out of like some small gambling related stocks and put them in Walmart instead.

Speaker 1 I'm like, oh, it seems like the economy is, and I don't usually do that kind of active trading thing, right?

Speaker 1 But it felt like this is a pretty unmistakable signal that demand is weakening.

Speaker 1 I know those prices well enough where like, I don't want any particular hotels, but you're getting $220 a night for a luxury hotel without any comps or discounts.

Speaker 1 And I'm like, okay, something is going wrong in Vegas. Yeah.
And let's just say that there has been this news cycle of like, is Vegas dead?

Speaker 1 And this is a conversation that comes up every so often, right?

Speaker 1 This is not the first time that people have been having this conversation, but people have been saying, you know, there have been a lot of reports that say, oh, visitation's down, this is down, this is down, Vegas is dying, Vegas is over, blah, blah, blah.

Speaker 1 So that's kind of framing the discussion. That's what we're going to be talking about.
Is Vegas actually, you know, in a rough spot right now?

Speaker 1 And we're going to actually be looking at the data and using a more risky business lens as opposed to vibes. And, you know, man, the vibes just felt off-nate.
All right, let's get into some numbers.

Speaker 1 Okay, so according to the Nevada Independent, I am doing, by the way,

Speaker 1 Nevada. Let's do it.
Nevada. Let's get you pronouncing it correctly.
For Nevada Independent. For the Nevada Independent, I'm doing an event, by the way, for them.

Speaker 1 I guess the weekend after next. I'm a big supporter of their independent journalism, so you'll see me there at IndyFest, I believe it's called.

Speaker 1 However, September saw the strip record its first monthly gaming revenue decline since May, but the nearly 5.5% dip wasn't a surprise las vegas boulevard's two largest resort operators or so they spin sorry that last phrase was mine you know a five five five point five percent drop is pretty material um the gaming control board i'm now quoting again said wednesday that strip game revenue fell to 687.8 million last month not bad primarily because of a 42.7 percent decline in high-end baccarat income yeah so baccarat is a game have you played baccarat ever no No, I've never played Baccarat.

Speaker 1 I know a lot about it because, as you know, I'm working on a book about cheating, and Baccarat is a very popular game to cheat because

Speaker 1 it is a game where the casino has one of the lowest edges. And if you are,

Speaker 1 even if you're not cheating, if you're a skilled baccarat player, it's where you can make the most money, technically speaking. But if you're cheating, then, you know, sky's the limit.

Speaker 1 But this is the game where even though the casino has the smallest edge, they actually make the most amount of money because this is what the high rollers come for, right?

Speaker 1 The big whales that come from Asia's Baccarat is their game of choice.

Speaker 1 So even though the edges might be smaller for the house, the total volume makes a huge difference because when you have people betting, you know,

Speaker 1 thousands and tens of thousands and hundreds of thousands of dollars at hand, shit gets real.

Speaker 1 No, I mean, the house edge is like 0.9%.

Speaker 1 Baccarat is a funny game. I don't actually play in Lipits that often.

Speaker 1 Maybe twice a year. There'll be a friend when I'm out in Vegas or something else.
Like, oh, let's go do this.

Speaker 1 And like, you know, you're getting a little expected value, but you get drinks and it helps your rewards points. I think once or twice a year is the optimum outcome, at least for me, right?

Speaker 1 Baccarat's interesting in that there's no actual

Speaker 1 decision made by the player, whereas craps, you roll the dice, blackjack, you have decisions to make, right?

Speaker 1 So in principle, if you're playing those games optimally, the house edge, depending on the rule set, can be lower.

Speaker 1 But anytime you give players a decision, they tend to make bad gambly bets and or otherwise play non-optimally.

Speaker 1 Whereas Baccarat, it just, you know, you slide a lot of money in and you have a coin flip that's slightly weighted against you. But yeah, it's a game for pure gambling D-gens, pretty much.

Speaker 1 However, it's not just the high-end that's being affected here. Again, back to the Nevada Independent.
Meanwhile, strip visitor volume fell. Nevada, Nevada,

Speaker 1 Nevada, Sierra Nevada. It's the Sierra Nevada mountains.

Speaker 1 Meanwhile, strip visitor volume fell for the ninth straight month, according to Las Vegas Convention and Visitors Authority, declining 8.8% with just under 3.1 million visitors, still a lot coming in September through nine months.

Speaker 1 Las Vegas visitation is down 8%

Speaker 1 from 2024, which includes double-digit declines in July and June, the events that we were out there, or I was at least, for the World Series. Yeah.
So last week, a lot of the gaming companies

Speaker 1 reported their quarterly earnings, and they didn't do that well, right?

Speaker 1 There wasn't good news, especially for Caesars, but also for MGM. And we see them blaming a lot of things.
So first of all, the MGM call was among the most eyebrow-raising that I've heard.

Speaker 1 I didn't listen to the whole call, but I saw kind of some excerpts and the transcript. And this is very rare, but the president and CEO, Bill Hornbuckle, actually said, shame on us.

Speaker 1 This is a direct quote, because he attributed some of their decline. So some of it, he's like, oh, yes, factors, you know, summer was bad for everyone, all this stuff, blah, blah, blah.

Speaker 1 Spirit Airlines has limited flights, which is true.

Speaker 1 Visitation is down, Nate, as you just said, he said, but

Speaker 1 he said that they

Speaker 1 basically lost the plot on pricing at MGM properties, and we talked about that on the show, um, before when we were talking about, you know, yes, um, you can get some room deals, but then there was kind of an infamous thing at ARIA.

Speaker 1 Someone posted a $26 bottle of Fiji water

Speaker 1 when they saw that they were doing this, like, you know, flexible pricing where there was surge pricing basically at some times of day. And your bottle of Fiji could actually cost $26.

Speaker 1 Apparently, at Excalibur, I learned this from the the earnings call. I didn't know because I haven't been in Excalibur for a while.
I have been there for events.

Speaker 1 And I've been there for what's it called? That dinner with like the fighting, you know, the where you eat with your hands, whatever it's called.

Speaker 1 Anyway, so I've been to Excalibur for those things, but I've never had Starbucks there. And apparently, the coffee at Starbucks was started at $12.

Speaker 1 Anyway, so he said that they have now tried to price correct because, and I'm quoting, now I'm quoting Hornbuckle, quote, we should have been more sensitive to the overall experience.

Speaker 1 And then he continues, you can't have a $29 room and a $12 coffee. We lost control of the narrative over the summer.
I think we would all agree to that in hindsight.

Speaker 1 Now, in the moment, people were trying to tell them, right? There was no way in hindsight, like these things were going viral. People were saying the prices on the strip have become outrageous.
Now,

Speaker 1 I am a Las Vegas resident. You know, I don't care.
A vegan. I'm a vegan.
I'm a vegan baby, spelled the same way as vegan, except with a capital letter, which is very confusing to me.

Speaker 1 But so as a resident, I don't, you know, I don't feel it as much because I don't really go to the strip for stuff, right? I'm on the strip when I'm playing poker and that's it, right?

Speaker 1 I don't, I don't actually do that much here. But even for me, like.

Speaker 1 I've realized that a lot of the garages have stopped offering free parking, which means that, you know, I won't go there for dinner anymore.

Speaker 1 Usually there's like, oh, if you're a Nevada resident, you get like two hours free or something like that. But come on, guys, right? That's that's something, but, but it's still kind of annoying.

Speaker 1 So there are things that even affect locals. And I think people's habits started changing and people got really mad.
And there was a segment of the population that was like, you know, fuck you. Like.

Speaker 1 I don't want to. And I think this is crucial because sure, like you come to Vegas, like, you know, you're kind of a sucker when you're gambling, but you have have fun.

Speaker 1 You don't want to be treated like a sucker. You want to be treated like a human being who has a functioning mind and understands when they're being taken advantage of.

Speaker 1 It's a horrible feeling, that feeling of like knowing that you're being taken advantage of. You're like, you know what? Fuck you.
Don't do that to me.

Speaker 1 No, and look, if you're an experienced traveler, then there are various things you can do, right? Number one,

Speaker 1 if you're in the, I don't want to sound like a shill, if you're in these casino comp programs, even at the the lowest tier, they typically give you lower rates.

Speaker 1 Also, my finding is that like Vegas hotel prices are quite spiky based on conventions or other events that are held near the major properties, right?

Speaker 1 If there's something big at Allegiant Stadium or T-Mobile Arena, right, that might affect like Mandalay Bay prices across the bridge from the Raiders games, right?

Speaker 1 Or if there's a big conference at Venetian, it might be more expensive. So my recommendation is that like,

Speaker 1 you know, you price shop pretty aggressively. Don't just have like one property you're loyal to.
You can usually find good deals, at least some options.

Speaker 1 You know, but also like, yeah, there are little hacks where like you will notice sometimes

Speaker 1 experienced Vegas travelers, the day they get in, will come in with giant 24 packs of water and. 24 packs of modelo beer and snacks and whatever else, right?

Speaker 1 Because the Walgreens on the strip have relatively normal prices or whatever, right?

Speaker 1 Whereas in the casinos, it's a lot more, right? They're even like little mini hacks. If you feel like just walking around, maybe you're waiting for your poker table to get up and

Speaker 1 have a drink or something, you can go to like the little

Speaker 1 kiosks where they sell supplies, right? And those are like a little bit cheaper than if you go to the bar, right? But just for little supplies and stuff, right?

Speaker 1 You know, I'm a person who's definitely of means, right? But like, it's almost a matter of spike. Sure.
Let's say I need some fucking like socks because I never bring enough socks, Maria.

Speaker 1 And the Vegas trip's always stay longer than I thought. And I go through the socks, right? You know, that's really funny.
Nate, I'm learning something new about you. I need to do this.

Speaker 1 I'm just going to go across the street to the Target or Walgreens and buy socks.

Speaker 1 Cause even though if I'm like being hyper-rational about like, yeah, it's probably worth it paying fucking 30 bucks for a pair of socks in the gift shop, like it just offends me

Speaker 1 on some level. And, you know, look.

Speaker 1 The notion of Vegas is to some extent like the easy life, right? Things are easy and you're feeling good and casual about things, and that might let you

Speaker 1 spend a little bit more on indulgences like gambling, for example, or certainly, you know, if you go to like the high limit lounge somewhere, they may comp your drink because you're gambling big, but if not, the price of wine there is going to be a little bit more expensive potentially.

Speaker 1 But like the

Speaker 1 notion of this like kind of lower tier of like, oh, I can have a room for 50 bucks. Yeah, if you're charged, if you're paying every type of resort fee and every water or beer

Speaker 1 costs a lot, you know, know, the low to middle end restaurants on the strip are getting cycled out in favor of kind of high-end concepts and things like that, right? There are options off the strip.

Speaker 1 That, by the way, Nate,

Speaker 1 that's another recession indicator, both in Vegas and in New York. When you see like all of these incredibly high-end steakhouses opening, you're like, uh-oh, you know,

Speaker 1 we're heading for a crash.

Speaker 1 No, but like it, it partly reflects like some degree of of greed where you're optimized you know people a lot of people roughly speaking have like fixed budgets for expenses and gambling that they're going to spend in las vegas right maybe you have one big night out that you put in a credit card but like you know if you're like i can afford to lose 500 bucks on blackjack and maybe you know you're probably going to lose most of the time or buck or whatever else right and you're paying like $13 for a bottle of Fiji and then and then your dinner, you're paying, you know, New York prices plus 30%.

Speaker 1 Again, another hack, if you know it, is like the Ubers are pretty cheap in Las Vegas. If you don't have a car, go off strip.
The food can be remarkably good and remarkably cheap, right?

Speaker 1 But like, but you're not creating this ease of like, I'm going around from place to place and there's some good deals and I'm having fun. Just the whole attitude seems kind of short-sighted.

Speaker 1 It's incredibly short-sighted. And I think that all of these, you know, corporations are looking to maximize revenue, right? And they sometimes will become short-sighted to do that.

Speaker 1 And I think that for Vegas, there was a really important inflection point during COVID, right? Where

Speaker 1 Vegas shut down, the strip shut down, properties cut staffing by huge amounts, right? There was no room service for a long time, but they even cut, you know, valet, they cut everything.

Speaker 1 And all of a sudden, their profit margins were much better. And they were like, oh, this is good.

Speaker 1 This is actually great. And then they're like, wait, maybe we can keep doing this.

Speaker 1 And then also during the pandemic, when they were, when occupancy was like really, really low, they cut rates and they saw something they didn't like.

Speaker 1 So what happened at properties like Caesars, and this is something, you know, I was here, if you remember, for about six months when Vegas was fully reopening to report on that.

Speaker 1 And so I learned kind of a lot about what was going on on the ground and what we saw in places like Caesars.

Speaker 1 And I'm quoting Caesars because I actually had, I talked to a lot of people at Caesars who described this to me by people I mean staff, like dealers, etc.

Speaker 1 They had very negative experiences because the prices had gotten so low that they were getting a customer that they didn't. want, right?

Speaker 1 They were getting people who were mistreating the dealers, who were not treating hotel rooms correctly, who were causing disturbances,

Speaker 1 who weren't tipping. Like it was not the experience that they wanted.
And so there were two things that happened at the same time.

Speaker 1 We had the staffing meaning, you know, higher margins, staffing reductions meaning higher margins.

Speaker 1 And then we also had this, uh-oh, like if we reduce room prices too much, things are starting to get bad. So what ends up happening? They start.

Speaker 1 raising prices on rooms and on other things so that they can get their quote-unquote target customers, right? We don't want the rapple rousers.

Speaker 1 We don't want the people who are, you know, who are yelling at the dealer and throwing things. We want a slightly higher caliber of clientele.
And at first, kind of that's that works, right?

Speaker 1 They actually get exactly what they want and occupancy rates are going up because people have been cooped up during COVID.

Speaker 1 And so it's this amazing rebound because everyone wants to come and like gamble and socialize and all of these things. But crucially, they don't staff back up.

Speaker 1 And now I'm talking about all of the properties because they're like, wait, we can operate with fewer people.

Speaker 1 And so I don't actually know if the numbers are 100% accurate here, but my feeling is that no properties actually went back to pre-COVID staffing, even today, that everyone, that even as they ramped back up, it's still not at 100% of what it was.

Speaker 1 I might be wrong. I'm saying this is, this is what I think based on kind of the research I've done.
I know that this is true at some properties.

Speaker 1 When you say all, you know, that's that kind of sweeping statement might be incorrect. So this is why I'm caveating it.
But in general, properties have not staffed back up to the same levels.

Speaker 1 And then what ends up happening is they try to, they're like, ooh, it worked. Like we have high occupancy and we raised prices.
Let's raise prices a little more.

Speaker 1 Oh, you're telling us that we shouldn't do this, that people are feeling exploited, but they're still coming. Well, there's a lag, right? There's a lagging effect.

Speaker 1 And this is where the short-sightedness comes in.

Speaker 1 Like people will tolerate it for a little bit, but then you start putting prices up even more, being like, ooh, where's, you know, maybe, maybe they're totally price insensitive.

Speaker 1 Ha, ha, ha, let's, let's do this. Let's do that.
And then suddenly it's like, you you know, the frog in the boiling water, right?

Speaker 1 You're raising the heat a little bit. And all of a sudden, your customers are like, what the hell? Right? Look at my room rates.
Look at my water. Look at my coffee.

Speaker 1 And you're not treating me as well because you don't have, I have to wait 10 minutes at the valet because you didn't hire back enough valet. Like the experience is worse too.
What the fuck?

Speaker 1 And that is an appropriate reaction. So I think that's what we're now seeing.

Speaker 1 And we'll be right back after this break.

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Speaker 1 Now, you know, in terms of Vegas as a kind of barometer for the rest of the country, because it often is, right? Like when there are bubbles, when we're about to hit a recession, like when

Speaker 1 things are starting to get out of hand, Vegas is often the place where you start feeling some of those things first.

Speaker 1 It's human-driven, right? It's a service economy, and it's driven by kind of trends in general in individual habits, right? How are people traveling? What are they spending their money on?

Speaker 1 What are they spending discretionary income on? How are they kind of spending their leisure time?

Speaker 1 All of these things, Vegas will start feeling that first. And so, you know, at the beginning of this episode, I kind of made a joke about high-end steakhouses being a recession indicator.

Speaker 1 It's not really a joke, right? There are things like that where you're like, uh-oh, you know, too many, too many things. Like

Speaker 1 we're hitting peak, right? And you're going to, you're going to see that fall off soon. I remember Nate a number of years ago going to Miami when Miami was going through, this was like.

Speaker 1 maybe 20 2009, like post recession and like really,

Speaker 1 back when I could stay at the satai for like $200 a night.

Speaker 1 And the satai, by the way, is a hotel that's like over $1,000 a night. But yeah, so

Speaker 1 Miami wasn't doing well. And I just saw abandoned luxury construction projects everywhere, right? Like it was just, it was just a graveyard for cranes and like these half-finished high-rises.

Speaker 1 That was one of my first real-world experiences where I was like, oh, right. When you see something like this, like that was probably a sign beforehand that there was kind of a real estate bubble.

Speaker 1 So since

Speaker 1 thinking about the economy more broadly,

Speaker 1 there are certain things that we talked about today that are Vegas specific, but then there are other things that I don't think are like the Vegas is dead narrative, but more of a, hey, there are some troubling signs, right, in consumer sentiment and in the way that consumers are feeling right now in this part of the economic cycle.

Speaker 1 Yeah, it's it's can be a leading indicator, right, of

Speaker 1 consumer optimism, although weirdly, so it's a little weird to live by modal, where like, um, um,

Speaker 1 you know, in general, people feel like I have money, look, to, to go and spend a bunch of money on a Vegas trip and then also spend money gambling and they want you to do both, right? Right.

Speaker 1 Um, no longer true that unless you're a VIP who is guaranteed to gamble a lot, the hotels, restaurants are no longer just a loss leader, right? But

Speaker 1 you have to be feeling pretty optimistic about the state of things to say, I'm going to go and have a big boys' weekend or girls' weekend, bachelor weekend in, in Vegas, right?

Speaker 1 Especially if it develops a reputation for no longer being a budget destination, but a luxury destination. That's part of it, right? I mean, ironically, like some Sin

Speaker 1 stocks and Sin activities, cigarettes, booze, gambling can go up when conditions are really bad because people feel like, fuck it, fuck it. You know, the world's coming to an end.

Speaker 1 I might as well blow it in Vegas. But we're kind of in this stagnation area where there's been a lot of consumer pessimism for a long period of time, right?

Speaker 1 There is from some countries declining international travel too.

Speaker 1 You know, I think poker players, there were at least some people I knew that didn't want the experience of like going in the United States and maybe being harassed by an immigration officer suddenly carrying all these.

Speaker 1 I guess you probably wouldn't carry that much cash, right?

Speaker 1 No, but there, but the visa, the more stringent visa requirements, how long you're supposed to stay, like having to check in the fact that people were being detained and sent away, like it was, yeah, it's it's something that does deter people from coming.

Speaker 1 Yeah, and that can be like a little bit precious, right? But you're relying on these VIPs from,

Speaker 1 let's be honest, you know, East Asian countries

Speaker 1 in particular, for the most part, right? Yeah, especially since Baccarat is your leading revenue source, right? The reason that the revenue growth that was seen in Vegas over the last several months,

Speaker 1 not talking about these reports that we were talking about, that were bad, but before that, we had some great growth and they were all driven by Baccarat, right?

Speaker 1 And now we have a bad month and it's because Baccarat's down, right? Like there, there are certain things that, you know, you do, you do need to be,

Speaker 1 you don't want friction. Right.
And we are seeing things that are adding friction to the experience for a lot of people. And I think that's true, not just of Vegas, but of visitation.

Speaker 1 You know, that's something I think everywhere saw decreased tourism numbers. New York did, like that I know, but

Speaker 1 a lot of places all over the country definitely felt that.

Speaker 1 Companies also struggle a lot with like pricing. So these resort fees, for example, right?

Speaker 1 Yeah.

Speaker 1 I actually, the last time I stayed at the win, I had some promotion where

Speaker 1 there weren't resort fees, but then you go to the gym and it's like 20 bucks to use the gym. And there's like a psychological thing where it's like, I mean, what was the resort fee?

Speaker 1 Probably 49 bucks, right? Like that was the only thing I was using. I was doing it every other day, right? So like, it's actually a good deal, but you feel like, you feel like nickel and dimed.

Speaker 1 I mean, you know, shifting those equilibriums away where prices seem more, it's hard because like if most people are not sweating the small details, right?

Speaker 1 They have some notion that like there's always tacked on expenses. And in Vegas, I know those are particularly bad, right?

Speaker 1 But like, you know, if you're listed at $210 a night on Expedia and the other property is $250 and they're all inclusive and you have $56 in fees, you're actually more expensive, but maybe you kind of trick people a little bit when they're signing up, right?

Speaker 1 I mean, that's kind of one aspect of it. This is actually a place where like legislation could do well, right?

Speaker 1 Where it's like, okay, we can break that equilibrium by saying you need to have more transparency whenever you're selling an experience, right?

Speaker 1 That there are not add-on fees that are, as their default are tacked on for every customer. I mean, you have this with sports tickets and lots of other things too, right?

Speaker 1 And like, you know, you could have that better default. There's also a general sense of like,

Speaker 1 I remember like going like Gibson's Steakhouse in Chicago, right? And the steaks are.

Speaker 1 expensive by Chicago standards. Their wine list is not particularly marked up.
There's actually some good deals on the wine list. I know it sounds like a stupid example, right?

Speaker 1 There's like an old school mentality of like, you are paying a lot to have a good experience and to get in, right? And

Speaker 1 you're paying a lot for the steak, and we're not going to nickel and dime you for other stuff, right? You're paying a lot for the good, high-quality stuff, right?

Speaker 1 But like, it's not, you know, it's some, I went to Carnegie Hall the other day, and there, the concession prices are like

Speaker 1 not as marked up as at other venues because and it's just like it's a classy experience, right? And like, if I want a little Prosecco at intermission or a snack of peanuts or something, right?

Speaker 1 I'm still paying twice as much as I should, right? But like not four times as much. And it's just like the constant small irritation.

Speaker 1 If you never feel like you're getting like tweeted,

Speaker 1 you know, you know, hey, look, these guys give me a break. I never, I could have, they could have charged me more, but I paid more, but I'm paying a lot for the experience.
It just, I don't know.

Speaker 1 I, it's exactly the kind of stuff that you think would have like a short-term spreadsheet maximizing quality to it that would have effects that accumulate over two, three, five, 10 years. Right.
Yep.

Speaker 1 I think that's absolutely right. Also, like all these interlocking rewards programs, on the one hand,

Speaker 1 they can incentivize some consumers to gamble more or spend more in the resort or whatever else, right? On the other hand, like...

Speaker 1 It can be frustrating when you're in line for an overpriced brunch or something. And then there's another line of diamond seven stars and another line of super, whatever, right?

Speaker 1 Like that experience can be a bit frustrating. Steve Wynn at the Wynn famously, or not famously, when I talked to people for the book, right?

Speaker 1 He always thought you want to, if you're coming to a luxury property like the Wynn, everybody should be treated like a VIP. Yep.
Right.

Speaker 1 And we understand that, like, yes, there's probably some tower suite for the true baccarat degenerate VIP, but we don't want too much tearing.

Speaker 1 And by the way, the Wynn is a place where like they seem to go the extra mile for staffing. Not that I've never had a problem there.
I stay these places so much.

Speaker 1 I've had a better experience at every Vegas Resort at some point, right? But you notice a consistently higher effort level from staff and you feel like, oh, yeah,

Speaker 1 this is the luxury that I'm being promised, right? Yeah, there's, you know, it's psychologically, I just want to pause here for one second.

Speaker 1 It's really interesting because there's one school of thought, which is like, oh,

Speaker 1 make everyone see, you know, the seven-star diamond line so that they have, they aspire to it, right? Like, see that if you like, pay, if you play here more, you get to cut the line.

Speaker 1 On the other hand, like, if you're waiting incessantly, it's really annoying to see people who keep on cutting you, right? And it can backfire.

Speaker 1 What the wind does is actually, yes, they have exclusive, like incredibly high-roller experiences, but you don't really see it, right?

Speaker 1 Like the, there are suites that are like, it's their own check-in, it's their own area, like it's their own everything.

Speaker 1 The really nice nice ones that are on the golf course with the outdoor space, like, that's a whole different thing, right? So,

Speaker 1 I'm very admitted. Yeah, it's like it's a whole different part of the resort.
So, when you go there, you do feel like a VIP. By the way, Wynn Resorts,

Speaker 1 their properties in Macau saw revenue up 19% from 2023 to 2024. And its Vegas ones also grew from 2023 to 2024, but less so, 3.7%.

Speaker 1 But Wynne has been showing actually kind of more, more positive results. And

Speaker 1 I think that those counterexamples, including Macau, by the way,

Speaker 1 it's a chink in the narrative. A lot of people are saying, oh, well, you know, Vegas is dead and dying because of all of you can now sports bet from everywhere, like online gambling, et cetera.

Speaker 1 But that's, I don't, I don't think that that's actually true because we see that Macau revenues are actually like up for everything

Speaker 1 for all properties. Like people are, people are gambling in person, like none other.

Speaker 1 And regional casino revenue so you were talking about seminal etc etc regional properties are actually doing really really well right like those those revenues are going up so even within vegas there are very different stories of what's happening on the strip downtown and in casinos that are locals casinos um that are you know just you know scattered throughout las vegas so um we see very different revenue patterns but i just want to say that to the first one you know psychologically speaking you have to be careful like there's a fine line between showing people something aspirational and then making them feel like you're treating them poorly and letting other people get in front of them and, you know, really ruining their experience.

Speaker 1 And especially if you're paying a lot already, then you want to be treated well. You want to be treated like a VIP.
Yeah, there's basically three markets in Vegas, right?

Speaker 1 There's like the locals market, which is almost entirely off-strip and like it sounds like maybe some budget travelers, but people who were in and around Las Vegas probably live there, right?

Speaker 1 There's on the other hand, the high-end luxury market, which has, you know, wasn't as much of a thing 20 years ago. Like people like Steve Wynne have a lot of responsibility for this.

Speaker 1 You know, you can kind of subtract that into like,

Speaker 1 you know,

Speaker 1 rich domestic people who like to gamble and have fun, but also internationally.

Speaker 1 You know, if there are options, and this also gets things like international relations and how easy it is to get your money in and out.

Speaker 1 If you're gathering a lot of money and you're like a Chinese national, you're going to have a hard time at the border, right?

Speaker 1 Macau goes through cycles where China seems to be encouraging or discouraging more money to flow through there for different actual or rumored reasons, right? So that's part of it.

Speaker 1 But like kind of this middle market has gotten

Speaker 1 squeezed a little bit and like, you know, if a friend were to recommend,

Speaker 1 oh, I want a nice baseline experience in Vegas where I don't feel nickel and dime and then I might indulge in a few things like I'm not sure I'd have like a

Speaker 1 great property to recommend them necessarily I don't know I don't maybe I don't know yeah I'd probably I mean I'd probably steer them downtown honestly.

Speaker 1 I'd probably steer them to one of the newer or remodeled properties downtown, like a, you know, like a circuit type of place that has a really nice sports book and has new restaurants.

Speaker 1 By the way, we mentioned this a few months back, but the Rio, you know, under new leadership, has actually invested in renovating and has some like hot happening restaurants.

Speaker 1 And people like for the first time, yeah, for the first time, the Rio is, you know, it's been a joke, you know, we're poker players and the Rio has, you know, always been kind of a dump when it comes to like the World Series and all of that.

Speaker 1 Everyone was really happy when the World Series left the Rio. There was an outbreak.

Speaker 1 I remember, I think my first or second year playing poker when I was just starting to, you know, when I was researching the biggest bluff, there was a Legionnaires disease outbreak for people staying at the hotel.

Speaker 1 Like bad, right? Bad.

Speaker 1 Robberies. Yeah, robberies.
But robberies happen on strip too. Like, man, robberies, I know people who've been robbed in their hotel rooms at properties as nice as the Bellagio.
Like, just to

Speaker 1 be perfectly candid, like the, it can happen anywhere. But yeah, but the Rio was especially bad.
But now people, I think,

Speaker 1 because they were trying to turn it around, they started trying to make people feel better, right? And give them a better experience. And a little goes a long way, right?

Speaker 1 If you start doing a tiered service of room service, like MGM properties did at some point this year,

Speaker 1 I don't think, I don't know if Bill Hornbuckle specifically mentioned this in his call. I don't remember.

Speaker 1 But this is one of those like, what were you thinking missteps where they started having tiered room service where if you wanted actual like plates and silverware and like the stuff that you normally want when you order room service, you had to order premium room service for like an additional, I don't remember $20, $30, $40.

Speaker 1 And the basic room service just came in takeout containers. And come on, you're already paying ridiculous amounts for this room service.
Like that would make me feel like shit, right?

Speaker 1 As someone staying there. And so a little goes a long way.

Speaker 1 Just don't do that right like you're actually over the long term going to have higher margins which is all to say that those problems though are easily fixable um i think but for your friend who's looking at middle tier properties yeah that's that's why i would say like maybe don't even go on strip because it's really hard to find like a good experience where you feel good and unless like you've found good rates.

Speaker 1 Like it's possible, you know, sometimes midweek, like some really nice hotels, even like the Wynn, will have rates that are really nice.

Speaker 1 And you're like, whoa, I can stay at the Wynn for like a hundred and something dollars a night. Yes, please.
Right. But like, absent that, like, your baseline rates, yeah, it's really, really tough.

Speaker 1 And we'll be back right after this.

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Speaker 1 Okay, I mean, we have, you mentioned the pandemic in passing.

Speaker 1 I do think, in fact, I kind of had this thesis in my book, that there was like a lot of pent-up demand for bad quote-unquote behavior and for risk-taking behavior and for socialization.

Speaker 1 Like the scenes in Vegas in like summer going into fall 2021 I mean there was one time when I like I nearly thought I was going to get like there might have been a crush on one of those pedestrian bridges right like Vegas kind of swinging together back into life faster than other places was like was a lot of fun for a period of time but things were also a little bit bit cheaper then right the long-term trends I mean

Speaker 1 you know

Speaker 1 since the pandemic I mean um

Speaker 1 you know, there are things like, for example, people are taking Ozempic

Speaker 1 more. Yeah.
That can reduce the desires

Speaker 1 and drinks.

Speaker 1 And gamble. Anyway.
And gamble a little bit. And gamble.

Speaker 1 There is, I would argue, like a little bit of a wave of like prudishness. I mean, look, things are always sensitive at the high end to like the crypto economy a little bit, which has been good lately.

Speaker 1 Actually, maybe that contradicts the trend, but like, but, you know, the preferences of like

Speaker 1 people of means

Speaker 1 and, you know, maybe that Vegas trip becomes a ski trip because they're being a little bit more health conscious or something like that, right?

Speaker 1 Or maybe they feel like, you know, Vegas has always struggled between do we want to be family inclusive and gender inclusive or is this for the bros, you know?

Speaker 1 They struggle with that a little bit. But, you know, you know, a problem in lots of businesses is like,

Speaker 1 you know, as a middle-aged 40-something guy, right? Like, you know, they're kind of doing a good job to hold on to those customers, but yeah, the young people are different. The Zoomers are different.

Speaker 1 They may not be, you know, first of all, they're less sociable. In general, if you do not like people,

Speaker 1 then Las Vegas is not a good place, right?

Speaker 1 And the whole mass of humanity, I mean, I part of why I like Vegas is because you get like a real cross-section, you do all types of context from different people.

Speaker 1 I enjoy in doses the people watching in Vegas, but like, but if you're a little bit agoraphobic, then

Speaker 1 that's not going to be the best experience. And so, um,

Speaker 1 yeah, look, every business has to worry about

Speaker 1 churn or not acquiring enough new customers because a lot of times you look at traffic to something and it's steady, and it looks like oh, all the same people are coming, right?

Speaker 1 What's really happening under the surface is that, like, maybe you have 20% new customers over a six-month period, but 20% leave, right?

Speaker 1 And you tend to have a steady state most of the time, right? If one of those two numbers gets off, right? And I haven't looked in the details as much as

Speaker 1 it loyal customers not coming back, or my

Speaker 1 guess is it might be more intimidating to like to new customers potentially. Because if you're loyal in Vegas, then A, you probably have status, and B, you just have this like street smart.

Speaker 1 So, like, how to navigate and find the better experiences and the better deals, right?

Speaker 1 Like, if I were you, I had to Vegas, certainly, if you were Marie, I'd be like, here are the shows you should go to, go to Absinthe, for example.

Speaker 1 Here are the restaurants you should go to, most of which are off-strip. Here are little hacks you can buy socks and water and beer for cheaper than in the little thing they have in the casino, right?

Speaker 1 Um, and do these four things and keep your points, and then that's great but like it's a little bit intimidating to to yeah to new visitors absolutely absolutely and if you are someone who's kind of young and planning you know a fun birthday weekend bachelor party whatever it is um in the past you might have just default said, oh, Vegas, right?

Speaker 1 That's the best place for it. And now you might actually think twice and actually

Speaker 1 look at other things. So just to kind of sum up everything we've been talking about, let's let's answer the micro and the macro questions.
First, like, is Vegas dead?

Speaker 1 And second, like, is what's happening in Vegas an indication that kind of we should be worried about broader economic health right now?

Speaker 1 Like I said, I thought it was an interesting indicator back in the spring when consumer sentiment really started to go down. I think now that's more well established across a wide variety of data.

Speaker 1 Look, some of it is cyclical. Vegas has always been highly cyclical, right?

Speaker 1 this is like nothing new and ironically vegas very cyclical decisions to build these high-end resorts they might take five or ten years to build and 30 years to realize a profit oh my god and fontaine blue was just a was just an absolute cursed property the number of years it took to finally open was just mind-numbing no it's pretty hard to anticipate long-term kind of secular trends and desires for for gambling and entertainment.

Speaker 1 But yeah, look, I mean,

Speaker 1 look, the younger generation is kind of nitty and they're kind of introverted, actually. And those epic, I think, is material for some categories like restaurants and booze-related businesses, right?

Speaker 1 Like,

Speaker 1 that all seems like material to Vegas' bottom line in the long run. It is quite international,

Speaker 1 maybe not as much as some American cities, but if the U.S. becomes a less desirable destination, I think there are some actual headwinds here.

Speaker 1 Yeah, I would say that there are some troubling indicators. I don't think Vegas is dead.
I don't think Vegas is dying.

Speaker 1 I think that Vegas needs to change some of its habits if it wants to have long-term appeal and sustainability and be able to capture that demographic that may want to just have a nice experience.

Speaker 1 But yes, they're a kind of younger. generation that has different habits, right? And different

Speaker 1 points of, oh, this is what makes me want to go somewhere and actually actually spend money on a trip. By the way, you know, in the past, we've had these like Vegas is dying, et cetera, et cetera.

Speaker 1 And we've had amazing innovators who've reinvented

Speaker 1 Vegas, you know, like Steve Wynn most recently, who, you know, realized that, oh, you know, the old way of building casinos is wrong, right?

Speaker 1 We're actually going to like let in light and like do all these different things and change the way that we make people feel. And it worked, right?

Speaker 1 And it actually, people who go to Vegas today don't realize like what a huge change that was and how much it changed the face of the strip.

Speaker 1 And so, maybe there's someone coming up right now who will figure out a way to really

Speaker 1 capture a lot of this younger demographic. In the meantime,

Speaker 1 I don't think it's dying, but I do think that there are some troubling indicators throughout the entire U.S. economy, and especially in Vegas, you got to treat people well.

Speaker 1 Let us know what you think of the show. Reach out to us at riskybusiness at pushkin.fm.
Risky Business is hosted by me, Maria Kanakova. And by me, Nate Silver.

Speaker 1 The show is a co-production of Pushkin Industries and iHeartMedia. This episode was produced by Isaac Carter.
Our associate producer is Sonia Gerwit. Lydia Jean Cott and Daphne Chen are our editors.

Speaker 1 And our executive producer is Jacob Goldstein. Mixing by Sarah Bruguer.
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