Gambling in America
It's Saturday night in Uncasville, Connecticut, a little town in the middle of nowhere. Common wisdom holds that the place should be dead. And it is. Until you proceed down a new four-lane road, buffered by dense forest and illuminated by a long parade of headlights. At the end of the road resides a natural, flowing river, beautifully landscaped foliage, and a hard-angled building that shimmers like an enormous multifaceted diamond. You've arrived at Mohegan Sun, a casino that serves as a three-dimensional exemplar of everything that gambling wants to be in the twenty-first century: sleek, efficient, alluring and immensely profitable.
Inside, the place is anything but dead. Situated on land belonging to the Mohegan Indians, a tribe that predates the American Revolution, the casino offers the kind of scene you'd never expect to find on a reservation. Decorated in a style that's more haute Southwest than pure Native American, the casino has enormously high ceilings draped with what appear to be woven rugs. The elevator walls are made of textured aluminum, giant glass sculptures hang in the lobby, and an entire wall has been done up to resemble a stone waterfall -- complete with percussively rushing currents. A neo-Four Tops act performs in the casino lounge, animatronic wolves perch on faux mountains that bookend blackjack tables, and the restaurants (including a Michael Jordan steakhouse, a Mediterranean place under the stewardship of celebrity chef Todd English, and a seafood eatery overseen by Jasper White) rival those of Las Vegas.
The casino feels comfortably crowded. Blackjack action is lively, craps tables swell with high-betting exuberance, and the poker room is SRO. Considering all of this, you might be only mildly shocked to note that Mohegan Sun is one of the most successful casinos in the world. What's truly shocking, however, is that the most successful casino in the world, Foxwoods Resort and Casino, is only 15 minutes away. Suddenly, northern Connecticut is the place to be on a Saturday night. A spokesman for the Sun -- which has just completed a $1 billion expansion to become the largest casino in North America and, it's been said, the world -- attributes the casino's success to blessed proximity and only one nearby competitor: "There are 22 million people within an hour-and-a-half drive of us [an estimated one-third of them have gambled at one of the two casinos during the last year]. And our property can compete with anything in the world."
He's not kidding. Together, Mohegan Sun and Foxwoods take in $2 billion annually in total gross revenues. And while that might be a drop in the bucket compared to the estimated $100 billion that gambling in America generated during 2000, it's a pretty good sum of mostly tax-free cash -- especially when you consider that prior to 1983, the Mashantucket Pequots, who own Foxwoods, weren't even recognized as a tribe.
In a broader sense, the figures speak volumes about what many Americans like to do with their free time and extra income: gamble. Even in the wake of 9/11, Vegas slowed down for little more than a hiccup before regaining its footing and climbing back. The American Gaming Association reports that casinos attracted 53.2 million visitors in 2000, and gaming stocks rose more than 40 percent, on average, in the past year. Forty-seven states have some kind of legalized gambling (including lotteries and bingo) and 30 states allow casinos of some sort to operate.
Even though casino gaming remains controversial, it holds a special allure for legislators during cash-sensitive times like these. Considering that commercial casinos (including riverboats) grossed an estimated $28 billion in taxable revenue during 2001 (up from $26.8 billion in 2000), the allure is downright magnetic. Steve Rittvo, president of the Innovation Group in New Orleans, a company that does feasibility studies for the casino industry, routinely articulates the appeal of gaming. "Budget deficits, border wars -- states watching dollars crossing to other states -- and the success of Native American casinos have all led lawmakers to seriously look at gaming opportunities," says Rittvo. "[When it's legalized] gaming becomes part of a city's entertainment mix. Gaming subsidizes tourist marketing. It generates more money, more jobs, more air travel. It's getting to the point where not having casino gambling can be a liability." Punctuating the point, state and federal revenues from taxation from all gambling enterprises reached $27 billion last year.
Mainstream hotel chains, not necessarily famous for gambling in the way that Bally Park Place or MGM Mirage might be, are getting in on the act as well. Hyatt Gaming Management Inc., for example, owns or manages several casinos in the United States, Canada and South America. Its casino building process is as intensely strategized as any hotel construction. "We like to be in areas that are less than competitive, where we can provide a product unique to the region," says Larry Lewin, president and chief executive officer of Hyatt Gaming, explaining why Hyatt has avoided the Las Vegas Strip and focused instead on Middle America. This approach obviously works, as the Hyatt gaming empire generated more than $600 million in adjusted gross gaming revenues last year.
Not only are Americans gambling more than ever, they are doing it in increasingly varied ways: on Indian reservations, aboard riverboats, inside state-monitored casinos, at the track, on the Internet and over the telephone. We're betting on sports, horses, dogs and table games that range from classic (blackjack) to newfangled (Caribbean stud) to, let's be honest here, just plain dumb (casino war). What we're not yet doing is regularly watching gaming on TV, though that may change in the near future. Poker star and casino consultant Lyle Berman is taking gambling to the next level by turning it into a spectator sport. This past Memorial Day, Berman launched the first leg of what's been dubbed the World Poker Tour.
His plan is to videotape 13 poker tournaments around the world (employing a technique that allows viewers to see players' cards), boil the matches down to 60 or 120 minutes of compelling television, and broadcast the events every week. He maintains that there has already been interest from four media outlets. Berman is so bullish on the concept that he vows to broadcast the show himself if he does not have a deal by mid-January. "In a few years we will have this running four hours a week, just like the PGA," predicts Berman, speaking by telephone from his debut tournament at the Bellagio. "TV studios don't want one event" -- like the World Series of Poker -- "they want continuity. They want 13 weeks. My company has put up the money for this [somewhere in the vicinity of $3 million], and now is the perfect time. Poker is legal in many states. We estimate something like 50 million people play the game. It won't be long before we broadcast live or with a 10-minute tape delay. Almost every tournament will be open to outside players -- anybody with the entry fee. I see this as being like bowling or tennis. We're trying to elevate poker to a sport. It's not gambling, per se. It's a sport with big prize money."
Regardless of what Berman wants to call it, the boom in casino gambling -- including poker and blackjack and everything in between -- can be largely attributed to Native Americans. In 2000, Indian casinos ed for an estimated $10.4 billion slice of the U.S. gambling pie and they likely represent the fastest growing segment. They owe much of their success to the tax breaks accorded them. For instance, while the slot machine revenues at Foxwoods and Mohegan Sun are taxed at 25 percent -- ing for around $333 million in state revenues annually -- table game proceeds are exempt from taxation.
In the wake of laws recently ed in New York, Indian-owned casinos have been proposed for the Catskills, Niagara Falls and Buffalo. Berman himself, who partially lives off the management of Indian casinos, is working on five separate projects.
But if the explosion of Indian casinos has helped people like Berman, it's created a hardship for other entrepreneurs, such as the guys behind California's 113 card rooms, who must compete with nearly 50 Indian-owned casinos in the state. The card rooms, seemingly quaint operations that foreshadowed Indian gaming by decades, grossed a total of $949.3 million in 2000 (compared to around $5 billion raked in by California's Indian operations), and are only permitted, by state law, to offer games where players do not go up against the house. It's led to the invention of No Bust Blackjack and a retooled version of Pai Gow Poker, both of which are designed to stay within the law. Despite those counterintuitive innovations, however, poker remains what the card games are best known for, and when you consider that poker ranks among the least profitable games in any Vegas casino, that can be a problem for the bottom line in a region where Indian-owned casinos seem ubiquitous.
Some of the California card rooms are lobbying for the same games of chance that make casinos so profitable. "We hope to go in the direction where we can have slot machines and Vegas-style blackjack games in the card rooms," says Al Underwood, a spokesman for Hustler Casino, the California card room owned by Larry Flynt, a notorious sucker at poker who's known to spread the biggest games, even when he is the worst player at the table. "If the Indian gaming establishments have them, we should have them as well. Our position is that this is reverse discrimination. There have been so many opportunities created for the Indian reservations that they now have an unfair business advantage. We are a viable, growing product line. People drive 300 miles to enjoy this kind of gaming in Las Vegas. The state ought to want its money to stay in California and be taxed at the full rate."
There are more than 200 Indian-owned casinos in the United States and the number is regularly growing as tribes recognize something beautiful in the bottomless profits. "Indian gaming continues to proliferate around the country," says Jason Ader, a senior managing director at Bear Stearns and the leader of the firm's gaming, lodging and leisure team. "It's difficult to stop." Berman acknowledges that there are good reasons for the boom: "It takes fewer dollars to open an Indian casino [than one in more competitive markets], and the Indian casinos are prospering. They are adding hotel rooms and becoming full-blown resorts. And if your Indian casino happens to be a monopoly or a pseudo monopoly" -- because there's no other legalized gambling in the area -- "well, then it's the easiest business in the world to run."
The same can be said for riverboats, novel gambling venues that began to spring up in the 1990s. City fathers, strapped for cash, figured that tax-generating gambling wouldn't be so objectionable if it took place on a vessel that needed to be boarded at a specific time and floated along a predetermined waterway. The idea was that this would prevent people from simply wandering on board and treating the boat in the same impulsive way that they might treat a bricks-and-mortar casino.
That worked, at the beginning. Slowly, however, those rules loosened to the point where the boats and barges now stay put, in the manner of any casino that you might find in Vegas or Atlantic City. "Riverboats are one more way of making people comfortable with the idea of gambling," says Steve Rittvo, pointing out that Pennsylvania seems likely to set sail within the next couple years. "Nationally, riverboats generated $9.3 billion" in 2001. Though the money is largely derived from locals, some of the more elaborate operations attract folks from out of state. "Mississippi is somewhat of a destination resort; people fly in from Atlanta," says Rittvo. "Shreveport [Louisiana] draws from Dallas. The riverboats started out local and are becoming increasingly regional."
The longer standing forms of gambling on water are cruise ships and the so-called cruises to nowhere -- boat trips that head into international seas for the sole purpose of firing up casino games. Neither of these operations are the terrific moneymakers you'd imagine. According to Ader, gaming s for less than 5 percent of mainstream cruise-line revenues -- even though the audience is completely captive. It seems that the Carnivals and Crystal Cruises of the world simply don't push gaming.
As for cruises to nowhere -- which nationally generated an estimated $318.8 million in 1999 -- they have other problems. The first issue, for all but the most patient among us, is the very concept: you motor three miles from the shoreline to international waters, where gaming is unregulated. "Traveling to that point is a slow process," says Rittvo, who sounds impatient even as he discusses this. "It takes an hour to reach international waters. So you go on a five-hour cruise and spend only three hours gambling. But that's not the worst part of it. The worst part of it is when you are in the middle of a hot run at the craps table and they say they're going back." On top of that, the cruise-to-nowhere lines charge issions (unlike casinos) and bad weather can cancel a cruise or make it miserable. Even in Florida, where it more or less works because of the plethora of retirees, net gaming revenues are only $150 million, Rittvo estimates, and last year a major cruise operator, Renaissance Cruises, filed for Chapter 11.
When people think of gambling, they usually don't think of being on a boat. Given their druthers, they don't even think of being on an Indian reservation. They think of Nevada in general and Las Vegas in particular. With its $10 billion in action each year, the state s for some 10 percent of the entire nation's gambling.
By all s Vegas is going through another transformation, having shifted from a naughty place to a family place and back again (see "Las Vegas Update," page 85). Newspaper headlines scream Sin Is In and visitors see that kids are gone. The greatest example of Vegas excess can be found at the MGM Grand's three-year-old Mansion, a $210 million, 29-suite edifice that caters only to the highest rollers.
Originally built to compete with the Bellagio's luxe villas (back when the hotel was run by Steve Wynn), the Mansion's design was partially inspired by a visit that nowMGM Mirage chairman J. Terrence Lanni made to Tuscany. This is reflected in the Italian tiles that cover some of the floors here and an ancient-looking fountain in the parking lot where MGM limos idle in wait of guests' whims.
Step out of your limo, clear the gates, and you come across a large courtyard filled with the kinds of flowers that you don't usually see growing in Las Vegas -- tulips, orchids and lemon trees. Mozart plays in the background, and, miracle of miracles, you are not perspiring even though the outdoor temperature is nearly 100 degrees. Though you feel as if you're outside, the Mansion's courtyard is actually a big room, bubbled inside glass, and perfectly climate controlled.
For guests who might brave a trip to the outdoor pool, strategically placed misters prevent elite players from getting too sweaty. Guests are assigned butlers and chefs, selected to correspond with precisely the kind of food that may be desired. For instance, when a Japanese gambler announced that he'd like a plate of fugu sashimi upon arriving, a chef was recruited who is licensed to prepare the potentially lethal blowfish. The Mansion comes equipped with fine old wines such as a 1966 Chateau Latour and an '86 Chateau Margaux, the humidors are stocked with Cohibas and Montecristos, beds are made with Frette linens, the robes are silk, and the bathroom floors are heated. A screening room, furnished with plush club chairs, is available for guests' use, and private rooms can be reserved for workouts and spa treatments.
Finally, lest anyone forget what they're really here for, there is a casino attached to the Mansion, situated far from the clanging of slot machines, decorated in soothing earth tones, and populated by people who are just like you.
There are those, however, who complain that Las Vegas has gotten too big, too corporate, and strayed too far from the Benny Binion ideal of "good whiskey and a good gamble." For them, Reno and neighboring Sparks -- the former is billed as the "biggest little city in the world" -- resemble a bastion of cozy sanity. You won't find Bellagio-style sophistication or a trace of The Venetian's faux gilding in Reno, but you will find a resolutely western town with 25 casinos, 15,965 hotel rooms, more cowboys than you can shake a six-shooter at, and a sense of low-rise intimacy that has long ago been skyscrapered out of Vegas. Top hotels there include the El Dorado, run by the family of Don Carano. This past February, Reno's gambling revenues topped $67 million, an increase of more than 10 percent over January (and a 4.4 percent rise from February 2001, the first such increase in nearly a year).
Still recovering from a 9/11 drop-off, Reno is repositioning itself as more than just a gambling hub. "We are trying to change the image of Reno from a small, cowboy hick town, with a few casinos, to America's adventure center," says Gordon Forrester, the ing supervisor for Reno Sparks Convention and Visitors Authority. Expressing hope that a newly expanded convention center (it's gone from 240,000 square feet to a half million) will bring business travelers who can spread the word, Forrester adds, "We have skiing, hiking, mountain biking and lots of golf courses" -- not to mention a cool climate that makes it a pleasure to play those links from May through September.
In Las Vegas, casino hosts like Steve Cyr, who works primarily for the Hard Rock, outhustle one another to land the big whales -- guys like Larry Flynt, Kerry Packer and game-show magnate Roger King, all of whom bet more than $1 million per trip.
Cyr estimates that the whales get 7 percent coddling (meaning if you're a million-dollar player, the casino will give you $70,000 in perks and freebies). "We give out Rolexes like they're candy bars," brags Cyr, whose hosting exploits will be collected in the forthcoming book Whale Hunting in the Desert by Deke Castleman and Dave Berns. "I'll eat 10 or 15 percent of a guy's losses and might give him $50,000 just to walk through the door. But I know that his first bet with us is going to be $10,000 and that he is at a disadvantage from the second he enters the casino. Nobody has an advantage over the house. Yet you get these smart guys, playing games with the percentages against them, and they think they are above the game." How far does Cyr go to land a big player? "I'll cancel people's reservations and set them up at my hotel. I'll give them Super Bowl seats on the 50-yard line, send them cars [not limos, cars, to keep, as gifts], hijack them from other casinos and take them across the street to Club Paradise. It's host wars out there."
Whether you're a whale or a minnow, one thing that makes Vegas the gambler's Mecca is its sport betting. Las Vegas ranks as the only place in America where you can legally lay down money on the team of your choice, make wild proposition bets, and watch Charles Barkley place $600,000 in Super Bowl wagers without so much as a marker. However, despite its popularity, sports betting s for less than 2 percent of the total take in Nevada. Joe Lupo, a veteran sports book manager at the Stardust, says, "There is a lot more competition out there, with the Internet and offshore wagering. Individuals are feeling more comfortable wagering from home. They are finding it less necessary to make trips here for sport betting."
The major threat to casino-backed sports betting -- and a smaller threat to casino gambling in general -- is the Internet. With offshore locations willing to take more action than the casinos and asking none of those pesky tax-related questions when wagers exceed $10,000, no wonder Bear Stearns expects online gaming to grow into a $5 billion industry by 2003. And that thinking is resonating on the Strip. MGM and Harrah's have hedged their bets by dipping toes into Internet wagering with recent launchings of play-for-fun sites.
However, do not take that to mean that Internet gambling has cleared all its hurdles. Legislators are doing what they can to make offshore gaming unpopular in the United States. One potentially effective way is to stymie methods of payment. "Legislation [being debated] in the House of Representatives says that debt to a credit card company that is the result of an illegal Internet wager is unrecoverable to the company," states Frank Fahrenkopf, the president and chief executive officer of the American Gaming Association.
Considering that he heads a trade organization for the commercial hotel-casino industry, it is no surprise that Fahrenkopf does not sound especially bummed while relaying the above information, pointing out that American Express and Discover have stopped taking charges from the offshore operations, and adding that Citibank is prepared to follow suit. "Prohibition never works," Fahrenkopf continues. "But if you force the credit card companies to police the Internet, they will not want to be involved." Asked for his take on the Internet-betting boom, Fahrenkopf replies, "Officially we are opposed to Internet gambling because we don't believe the technology exists today to regulate and control it with law enforcement oversight. You have these places in third world countries with no regulations. You need regulatory control or you cannot have legitimate gaming."
If it is not 100 percent legal to gamble online in the United States, it's also unlikely that you'll go to jail for doing it. While the risk of being ripped off by some fly-by-night operator is always there, the discounts and anonymity are too much for some gamblers to turn away from. One big advantage of betting online is that not only can you bet higher than some of the casinos will allow -- even if it means clicking from site to site to get down your wagers (particularly on sports) -- but you can also bet a lot lower. Ultimatebet.com, for example, offers inexpensive poker games that casinos could never afford to put on. "Sport betting came on the Internet before poker," marvels Greg Pierson, CEO of ieLogic, the company that writes software for Ultimatebet. "Now the online sport books have created so much interest, there's got to be hundreds of millions of dollars bet on the Web. For the future of online, I see a continual addition of games and variety."
Lupo, the Stardust manager, considers online consequences and acknowledges an upside for Vegas. "Offshore has taken a lot of professional business away from Vegas. However, that's not the worst business to lose. Our handle has gone down to 1993 levels, but the revenues have not decreased. Right there that tells you the money we are losing to online operators is smart money [from professional bettors]."
Indeed, sport-betting handle for the 2001 fiscal year in Nevada was $2.1 billion, down $400 million from the previous 12 months. "The last time handle dipped below 2.2 billion was in 1993," says Lupo, adding that if motions to do away with NCAA betting come to fruition, sports betting will deteriorate further. "And this year will be even lower than $2.1 billion, but that will be because of 9/11. On the other hand we set a revenue record from 19992000 with $117 million. In 20002001 it dipped down to $112 million, which is the second best ever. I fear that our handle will continue to drop" -- and then it might not be the pros who are fleeing to online bookies. In a what-can-you-do tone of voice, Lupo adds, "From an operational standpoint we've tried everything to stimulate business. We put up more prop bets and are more aggressive with our betting menu. But you can only give away so much and take bets on so many things."
On the opposite side of the country, Atlantic City hangs in there as Las Vegas's younger, dumber, uglier brother (albeit, a brother who's still got plenty of dough and has not yet been written out of the will). At least that is the way it's been so far. Tim Wilmott, the eastern division president of Harrah's and president of Casino Association of New Jersey, sees important changes coming to Atlantic City, which he hopes will dress the place up and brighten its future. He says that 4,000 new rooms will bolster the perpetually overbooked seaside resort, which last year drew 33 million visitors who generated $4.3 billion in gambling revenue.
But everybody associated with Atlantic City, even Wilmott, acknowledges that there's room for improvement -- particularly when viewed alongside Las Vegas. "There is a fundamental difference between Las Vegas and Atlantic City," its Wilmott. "You go to Las Vegas for four or five days once a year. People typically come to Atlantic City for two days once a month. To change that we need more rooms, additional nongaming components, and more air flights into the city." Wilmott says he and other casino owners are working on it, including MGM Mirage and Boyd Gaming, who are partnered in the soon-to-open Borgata, which is not only Atlantic City's first new hotel in 13 years but also its poshest. "There was just a groundbreaking for 300,000 square feet of retail, restaurant and entertainment businesses. These are nongaming amenities that will appeal to a younger audience. Right now we appeal to a demographic that is 55 and older. We need more of the 35 to 55 group. By offering new restaurants, younger entertainment options, more upscale shopping, we hope to get them. Up until now we have focused on gambling and only gambling. Las Vegas has gotten people to spend more money away from the casino floor. Las Vegas casinos get 50 percent of their revenue from gaming. Here, 85 percent of revenue comes from gaming."
While the Borgata could play a role in turning things around, Jason Ader fears that it might be too little, too late for Atlantic City. "Most of Atlantic City's profitability is derived from nickle and quarter slot players who stay in Atlantic City for four to six hours," the Bear Stearns analyst says. "There's not a lot to do there. Some of the worst slums in the Northeast are in Atlantic City. It is an awful place to go for a vacation, while Vegas is a great place -- great weather, golf and shopping. They call Vegas America's Playground and that's what it is. Atlantic City is a place that brings in people who need a gambling fix. The Borgata will be very nice. It will do fine. But it will be at the expense of all the existing operators. The Borgata will take business from the boardwalk and cause marketing expenses to go up."
Despite Atlantic City's inherent problems, competition from largely nontaxable Indian operations, and the incursion of online wagering, nobody in gaming seems worried about where profits will come from. Gambling is so big and so accepted that, it seems, the profits will be there forever. Maybe they will be. Maybe people love to gamble so much that if you build it they will come -- and that is true to some degree. Nevertheless, if you almost feel like quitting your job, selling your house, opening a t and getting the best of it, think again.
Over the last couple of years, some of the industry's seemingly seasoned casino operators have had surprising problems. The Aladdin in Las Vegas, for example, is going through bankruptcy hearings. Harrah's in New Orleans (a city where gambling would seem to be a shoo-in), which threatened bankruptcy last year, isn't exactly packing them in, even as riverboats in surrounding waters generated $1.9 billion in gambling revenues for the state of Louisiana. While locals clearly like to gamble close to home, it turns out that few people visit New Orleans to gamble; they go there to eat and listen to music. And, with casinos springing up all over the country, Harrah's New Orleans outpost hardly seems like a novelty.
The Aladdin's problems boil down to surprisingly naive planning, despite a great location on the Strip. "The Aladdin was poorly designed, poorly laid out, and its key drivers of traffic flow -- the parking lot, the shopping mall and the casino entrance -- disintegrated," says Ader. "It didn't work out and it's unfortunate for the market."
Ironically, save for a few ailing operations, the only other truly dark clouds on gambling's sunny horizon seem to be the kinds of high-action sports that ought to be embraced and loved by gamblers. As all other kinds of wagering thrive, horse racing, greyhound racing and jai alai remain buried in the doldrums, seeming to be antiquated victims of a changing world. Attendance in all three areas is dipping and recent betting figures for dogs and jai alai are sketchy (according to Bac Tran, director of marketing for Phoenix Greyhound Park, there are 48 dog tracks in 15 states and handle is $2.3 billion -- but these figures are from 1996. Jai alai handle was $193.9 million last year). In jai alai, a sport that's always accused of being fixed, top players earn only $100,000 per year. And that says all you need to know.
Nevertheless, jai alai qualifies as one of gambling's great secrets, as it centers around a ball that travels at 180 miles per hour and its players exude Nureyev-style grace. These elements help to make jai alai the national game of Spain (at the 1992 Barcelona Olympics, a jai alai event was held as an exhibition sport), but it has never risen above cult status in the United States. Those who love jai alai, however, get off on the aesthetics and feel challenged by its parimutuel gambling format, complete with quinellas, exactas and trifectas. The payouts are higher than in racing and the players are undeniably gifted athletes. "Games last 15 minutes and have the kinds of ups and downs that get you to the edge of your seat," enthuses Marty Fleischman, the assistant general manager and marketing director at Dania Jai Alai in Dania Beach, Florida. "The lead changes more frequently than it does in a horse race or a dog race. There are a lot of factors in a ball game that make it less predictable than a race. That makes for bigger payouts" -- because there are fewer odds-on favorites.
What serious handicappers dislike, however, are the unpredictable finishes (jai alai's hand-stitched balls take wild bounces), modest handle (which makes it hard to win a lot), and the lengthy games that lack the constant infusions of action that you could get with a horse race or blackjack game. Fleischman does offer one secret for gaining an edge: "We get guys betting a number system, because certain players have a statistical advantage. Jai alai is played as a round-robin arrangement. The Îone' player goes up against the Îtwo,' and they score the first points. If you bet on the one and two, you will have an advantage."
What everybody seems to agree on is that interest in jai alai, greyhound racing and horse racing has been declining. In 2000, parimutuel betting in the United States took in a paltry $3.8 billion; charitable games and bingo trailed embarrassingly close behind, grossing $2.5 billion. But this has not dampened the enthusiasm of those who are paid to love the games (Fleischman describes lightning-paced jai alai as "catching bullets").
Gary Guccione, the secretary/treasurer of the National Greyhound Association, enjoys the thrill of this particular chase. "Greyhounds are the fastest canine breed and there are no jockeys in this sport, which means there's no human element to factor in," he says, clearly viewing that as a positive. "The dogs go 47 miles per hour, and they love to race; they'll chase anything that moves. Greyhounds are instinctive runners and the finishes are somewhat predictable." (Talented Mr. Ripley, the hottest dog in the sport, won his first 27 of 30 races this year.) "This sport attracts its share of serious handicappers. Guys predict outcomes based on past performances, the dog's racing style, whether he's a strong breaker or a good finisher or if he likes to run the rail. This is a tremendous challenge, just like handicapping horses."
In spite of all that, even the most ardent boosters of dog racing find it difficult to ignore the sport's uphill battle for popularity. "Dog-racing handle has been declining since 1989," groans Bob Nash, a spokesman for the Sanford-Orlando Kennel Club in Longwood, Florida. "It's turned into a year-round, six-day-a-week simulcast business. We simulcast horses as well as dogs. Saturday we have four greyhound tracks that the public can wager on live, and three that are simulcast here. Plus there's everything from trotters to thoroughbreds." He pauses for a moment and takes a breath. "You don't have people going to the track like they used to. We're out of the tourist business. There are just too many other things to do around here."
Never mind that thoroughbred racing formed its first trade organization only three years ago; in of strategizing for the future, it is miles ahead of jai alai and dog racing. "Purses and handle have been going up," says Tim Smith, commissioner and CEO of the National Thoroughbred Racing Association. "Purses are at around $1.1 billion in the United States, but there is a reduction in track attendance and racing is growing at a slower rate than all other gaming. Even lotteries have grown faster in the last decade." In 2000, lottery sales across the country reached $37.2 billion, and last year ticket sales hit $38.4 billion.
On the positive side, Smith says, television exposure has increased by 60 percent since 1997 and the percentage of Americans who say they are interested in horse racing rose by 5 percent in 2001 (the increase is second only to NASCAR). "Racing has gone through a major transformation in its economics," says Smith. "There is now substantially more wagered off track in various ways -- OTB, simulcasting, online, phone wagering. So less is wagered at tracks running live."
Still, Smith hopes to see racing evolve into a sport of kings for a new generation of cerebral gamblers. "This is a wager where history can be made. So we are at the opposite end of the spectrum from slots," says Smith, emphasizing the sport's intellectual cachet. "This is a thinking person's wager. To get in the game, you have to play it in a serious way. The intriguing thing about handicapping is that it's about managing information, utilizing data, seeing things that other people don't see. It's more like day-trading than playing a machine." Looking toward the future, he sees technology as a potential boon: "Use of the Internet or computer technology to place wagers is very positive. We're a little behind Hong Kong and Japan in of technology at the consumer level. But TVG [a network that airs racing and doubles as a virtual OTB] is out front to be the next Golf Channel. If we were in 30 million or 40 million homes, that would put us close to the Golf Channel."
To keep from losing even more track-attending crowds to the likes of TVG, forward-thinking track managers are following the lead of New York Racing Association visionary Barry Schwartz and reducing takeout (the commission that the track keeps from every bet). Unusual proposition bets are being promoted and some of the national racing association's member tracks are in favor of allowing slot and poker machines. "They are hugely beneficial to the bottom line," says Smith. "We have 20 million casual fans, who go to the track once a year, and they're our target customer. They don't live and breathe racing, but studies have shown us that another entertainment option at the track would be a big draw."
Jason Ader characterizes Smith's "racinos" as the gambling trend of the moment and he is confident that the machines will help purses to grow -- if nothing else. However, the fact that gaming machines draw business is hardly news to the folks behind full-blown, bricks-and-mortar casinos. Just look at Foxwoods, the world's most successful casino. Though some patrons complain that the casino skimps on perks, that view does nothing to diminish the crowds drawn by miles of machines and loads of table games in an Indian-themed setting. Couples crowd around the blackjack tables. A posse of guys in backward baseball caps and Korn T-shirts dominate a craps table. Jazz music fans file out of B.B. King's Dance and Nite Club. They scatter across the gaming floor and add to the endless click-clack of chips changing hands. Though Foxwoods might not be as technologically tricked out as its nearby competitor, its status as the first casino-hotel in the area has engendered the kind of serious loyalty that gamblers tend to have for their ts of choice.
Unlike those loyal players, though, Bear Stearns's Ader takes a longer and broader view. Looking beyond Connecticut, he voices strong opinions that have a lot of resonance for gambling as a whole. He influences institutional investments made in casino stocks and has an impact on whether burgeoning hoteliers can get the backing they require. Asked to prognosticate a wide-reaching view of the industry, Ader replies without hesitation: "Gambling will continue to grow. It's a very mature business. But in every state that has legalized gambling, it's had a good economic effect. This is a nation that has had gambling for a long time. And it just keeps growing."
