Although Nevada casinos don’t make nearly as much money from slots as they did before the recession hit, the machines are starting to make a comeback.
Slot revenue dropped sharply in 2008 and 2009, much like the rest of the state’s gambling business, and still remains far below its peak from before the economic downturn. After a few years of more stable performance, however, recent financial indicators suggest that the situation is improving.
Through May of this year, statewide slot revenue increased 4.3 percent compared with 2014, according to Michael Lawton, senior research analyst for the state Gaming Control Board. On the Strip, which accounts for the bulk of Nevada’s total gaming revenue, slot revenue is up 6.1 percent for the calendar year.
At the same time, statewide slot volume — the amount gamblers actually spend — is up 2.1 percent for the year, according to Lawton. It’s up 2.6 percent on the Strip.
To be sure, the raw numbers remain far from where they once were. When statewide gaming revenue peaked at $12.8 billion in 2007, slots accounted for $8.4 billion — more than 65 percent — of the total. Last year, Nevada’s slots brought in just $6.7 billion, or about 61 percent of the state’s $11 billion total.
“We’re trending in a lot more positive direction than what we’ve seen in some time,” Lawton said. “We’re still nowhere near the peak at all, but it’s starting to move in the right direction.”
The recovery has been slow. Slot revenue was essentially flat for each of the past three years, with the state seeing modest increases or decreases of less than 1 percent. And the amount that slots won from gamblers last year is still less than what it was 10 years earlier.
Still, state figures show that slots remain a critical source of funds for Nevada casinos, particularly the ones away from Las Vegas’ main tourism corridor. Although the Strip — with its big baccarat business — relies on slots for less than half of its gaming revenue, the story is very different elsewhere.
Take Laughlin, for example: There, slots comprised 89 percent of the gaming revenue last year. North Las Vegas, Mesquite and the Boulder Strip all reported similar numbers. Even in downtown Las Vegas, slot revenue was more than 72 percent of the gaming revenue in 2014, and for many years previously it was closer to 75 percent, according to data from the gaming board.
“The local market, as well as the non-Strip market, is very much still a slot machine market,” said Union Gaming Group analyst Chris Jones.
Slots endured in this way even as the number of machines declined by 20 percent statewide between 2000 and 2014. That drop could be due at least in part to the rise of efficient technology such as multidenomination machines, said David Schwartz, the director of UNLV’s Center for Gaming Research.
“I think the machines are getting a little bit smarter,” Schwartz said.
The proliferation of casinos in other states is likely another key reason behind slot machines’ smaller physical presence in Nevada, according to Jones.
In any event, the smaller slot count effectively mirrors changes in the way casinos make their money, especially in Las Vegas, the state’s epicenter of gambling and tourism. While gaming revenue has experienced a modest recovery since the worst of the recession, proceeds in the nongambling departments of Nevada resorts have far outpaced the casino floor.
In fiscal year 2000, for instance, gaming accounted for 53 percent of the total revenue for Nevada resorts with at least $1 million in annual gross gaming revenue, according to the UNLV gaming center. By fiscal year 2014, that figure slipped to 44.5 percent.
Over the same time period, gaming on the Strip dropped from 45.9 percent to about 36.8 percent of the total resort revenue.
That makes sense, given that survey data from the Las Vegas Convention and Visitors Authority indicate that visitors to Las Vegas in recent years are trending younger and gambling less. The LVCVA’s Visitor Profile Study for 2014 showed that the proportion of tourists older than 40 shrank from 71 percent in 2010 to 57 percent last year, while the proportion of visitors who gambled dropped from 80 percent five years ago to 71 percent in 2014.
The slot machine industry is now trying to face those trends head-on with forthcoming changes to its technology. After the passage of a related bill in the state Legislature, gaming regulators are now crafting rules that will govern the way skill is introduced into Nevada slots.
The industry hopes that, by allowing slots to become more like arcade or video games, they can appeal better to younger and more technologically savvy players.
“I think casinos would say that the slot machine model has been a very successful one but that it’s important to look down the road,” said Marcus Prater, executive director of the Association of Gaming Equipment Manufacturers. “There are trends and signs that slot revenues are lagging, not just in Nevada, but in other markets as well. And when that happens, you have to assess the bigger picture.”
It will likely take time before the changes allowed for under the new regulations — which Prater’s group is intimately involved with — translate into big financial changes. Todd Eilers, whose company Eilers Research closely monitors the slot machine industry, said that skill-based gaming should be an evolutionary change, rather than a revolutionary one.
“Everyone’s interested — operators and vendors. But by the same token, I think everyone recognizes there’s going to be a lot of trial and error,” Eilers said. “There’s no magic bullet just because you have this new regulation. Just because someone puts a new game out there based on that, doesn’t mean it’s going to perform well.”
Regardless, the industry is pressing full steam ahead toward the adoption of skill-based slots. Control Board Chairman A.G. Burnett said in an email that he expects to hold the final regulation workshop this month, with the hope that the industry can start submitting game ideas for approval as soon as October.