Winning properties defined by shopping, entertainment

Gaming industry revenues are growing slower these days for a very simple reason: the public's demand for gambling is fully satisfied, a recent study found.

"Supply and demand has now come into balance in all the established markets," said Eugene Christiansen, chairman of Christiansen-Cummings Associates Inc., a New York research firm.

The firm's 1997 gaming industry report, The Gross Annual Wager of the United States, finds flattening demand for what Christiansen terms commodity gaming -- "boxes full of slot machines and hotel rooms."

In 1997, gaming handle rose 8.7 percent, or $51.2 billion, to $638.6 billion, the report found. Gross gaming revenue -- the amount lost by gamblers -- rose by 6.2 percent, or $3 billion, to $51 billion.

Growth in 1997 was stronger than in 1996, when handle grew only 5.2 percent, and gross revenues only 5.6 percent. But it was much weaker than 1994, which saw handle jump 22.3 percent over 1993, while gross revenues grew 15 percent. Even 1995 was a banner year, with handle growing 14 percent, and gross revenues 11.4 percent.

"There still is growth, but it's become, I think, a function of trends in the economy," said Christiansen. "The days when you could see double-digit growth ... have come to an end."

The report found that much existing industry growth is the result of new gaming markets coming online. But in established markets like Las Vegas and Atlantic City, areas with Indian casinos and areas with riverboat casinos, "there's very little unsatisfied demand left," said Christiansen.

Despite saturated markets, there is still room for gaming companies to grow, Christiansen said.

"While Atlantic City and Las Vegas are oversupplied with boxes full of slot machines and hotel rooms, they are undersupplied with respect to entertainment," Christiansen said.

Premier entertainment and retail areas like the Treasure Island pirate show, the Hilton Star Trek attraction and Caesars Palace's Forum Shops are examples of the type of entertainment consumers are increasingly demanding, Christiansen said, "and they're packed."

Indeed, the Christiansen-Cummings study found the average time Vegas tourists spend gambling each day has declined from five hours in 1994 to 3.9 hours in 1997. At the same time, the study continues, average visitor spending outside the casino "skyrocketed" from $79 in 1991 to $113 in 1997.

To keep pace with these changing trends, gaming properties are increasingly finding they need to invest serious capital upgrading their properties. Christiansen notes companies like MGM Grand, Mirage Resorts and Caesars have pumped billions into their properties in the last several years just to make sure returning visitors see something new.

Companies that don't spend money to refresh themselves periodically will find themselves on the short end of a demand stick that is no longer growing, he said.

"If you just maintain a property along the Strip, it becomes obsolete," Christiansen said.

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