Vegas’ New Strategy : High Rollers Getting Aced Out by Slots

The long-ignored, much-maligned, lowly slot-machine player has replaced the high roller as the new star gambler of Las Vegas--the player casinos pamper with “comps” and track with computers in the fierce national competition for the gambler’s dollar.

Not long ago, before the once-upscale Strip traded class for mass, the slots were where serious gamblers parked their wives while they tended to business at the felt tables in the pit. The slots were for the rumpled beer-and-hotdog crowd that stumbled off buses from Los Angeles, while gambling bosses kept their own attention on the high rollers whose excesses could turn even the worst-managed casino into a bonanza.

Then several things happened. Atlantic City gambling got under way just as a national recession was taking hold. Airline deregulation led to connection hubs and the end of non-stop flights to Las Vegas from the East Coast. California introduced Sunday horse racing and multimillion-dollar lotteries.

High Roller Faded Away

Also, the government made casinos identify players whose betting had reached $2,500 and report them to the Internal Revenue Service once they topped $10,000. Gradually, like the game of faro, the high roller faded away. With him went much of the city’s mystique and a good deal of its gambling revenue.

The private upstairs casinos that catered to him have been converted to other uses now, and the casino-sponsored chartered jets that used to bring him in from Dallas and New York and Philadelphia on free junkets have been grounded.

The flashy saloons he haunted--the Sands, the Dunes and the Riviera among them--have become cavernous honky-tonk parlors. Stuffed with noisy automated gambling devices, they advertise 50-cent beers, Whopperburgers and little-known entertainers.

Big Revenues

Today, as Las Vegas adjusts its marketing strategy to confront the loss of the state’s gambling monopoly, slots and video games are producing 54% of casino revenues. And while the number of slots is growing--along with slot payoffs that range up to $5 million for a single pull of the handle--the number of traditional table games and their share of the marketplace is shrinking. In the process, Las Vegas has pulled itself out of the flat-growth period of the early 1980s and is about to produce its biggest year in history.

“Let’s call up this player--he’s one of our biggest, a cowboy from Texas,” said Dave Williams, the Frontier’s slot director. He punched the player’s identification number into the IBM computer in his second-floor office over the casino and a detailed profile appeared on the screen: the amount the player gambled and in what denominations, what machines he played and for how long, the dates of his birthday and anniversary, even his wife’s name.

“Now, you can see this guy is obviously an ‘RFB’ player,” Williams said, meaning that his room, food and beverages are “comped”--given to him complimentary by the casino when he comes to Las Vegas. “He’s put $781,283 in the machines this year--that’s right, 700-plus--and had some big jackpots, but we’ve still managed to win $31,899 from him. His last trip was for four days and he put $138,899 through the slots.”

The old high roller on the craps and blackjack tables was always easy to identify: He went to the cage, drew his credit line and took his place under the watchful eye of a pit boss. But the slot player usually labored in anonymity, wandering among the machines, dropping who-knew-how-much into the devices’ bellies. The Frontier solved that by starting a slot club, which 40,000 players have joined for free.

Big Spenders Profiled

They insert a plastic card into each machine and the longer they gamble and the more they bet, the more points they earn that can be traded for complimentary rooms, food or cash. The computer chips in the cards also enable executives to identify and profile the big spenders, giving him a rating--from six in most casinos for a fairly serious gambler to one for a truly uninhibited gambler. The rating determines the level of complimentary services the hotel and casino will provide.

“You might have a 4-plus rating, which means we’re going to pick up your hotel tab, but if you come in here and eat all your meals at the gourmet restaurant and sleep when we expect you to be gambling, then you’re going to drop down to a 5-minus real quick,” said one casino executive. “We have to figure what the cost is for us to generate your action.”

Casinos, in fact, have devised a formula to determine that cost and what they have learned is that they can no longer afford the dollar table player--particularly since the buying power of that dollar is shrinking. The formula: multiply the player’s average bet (say $5) times the built-in house advantage in a game (about 3% in blackjack) times the average number of hands dealt per hour (60) times the hours he gambles (say five). The result, in this example, is $45--the amount of money the casino will win in the long haul from this blackjack player in five hours.

A Winning Formula

“This type of analysis is starting to happen for all players,” said Jeffrey Silver, an attorney who took over the bankrupt Riviera in 1983. “If you’re making only $45 in five hours you can’t afford the supervision it takes to keep the player at the table--the ‘eye-in-the-sky,’ the dealer, the pit boss. You really don’t want him to play at the tables. He costs too much money. So you transfer him into another part of the casino, to the slot department, and you do that by making the slots more exciting and enticing and having bigger payoffs.”

To keep him there, executives have found, a casino needs hotel rooms. Gamblers play where they stay and casinos have responded with a rush of high-rise construction that has increased the city’s hotel room count to 56,000, second only to New York City and Chicago.

Burton Cohen, president of the 1,100-room Dunes Hotel and Country Club, which is being reorganized under Chapter 11 bankruptcy laws, says that his establishment needs 2,000 rooms to be economically viable. The world’s two largest hotels are located here and the Las Vegas Hilton (3,170 rooms) and the Flamingo Hilton (2,950) account for 56% of the chain’s total sales even though only 6% of the rooms in the 270-hotel franchise are in Las Vegas. Hotels that size do not worry about exclusivity.

“People have done surveys to find how to reach a certain market but we don’t waste time on that--everyone’s our market,” said Mel Larson, vice president of the chaotic, wildly successful Circus Circus, which has 2,000 rooms, serves 17,000 buffet meals a day, reserves a limited number of blackjack tables for nonsmokers and has a wedding chapel on the second floor above the casino.

Profitable Holdout

There is one profitable holdout, the 80-room Horseshoe, where the Binions--father Benny, 82, and sons Jack and Ted--are respected by their peers as among Las Vegas’ smartest operators. They do it in an old-fashioned way, “managing by observation,” Jack says, using pricing (better odds for the player and dealing only a single deck at blackjack) as a marketing tool, and avoiding corporate isolation in favor of constant contact with the gamblers. Benny, in fact, has never had a private office, considering the casino itself to be his work space, and has always shunned entertainment and glitzy restaurants on the premise that the Horseshoe was “a gambling joint,” nothing more.

“Dad’s amazing, because he’s a guy with a third-grade education who’s the classical example of a successful executive,” said Jack, the Horseshoe’s president. “He believes you run a casino through good common sense and personal contact. You bring him a financial statement and there is only one line he understands--the bottom line.

“Most of the casinos are full of statistics junkies these days. Sure, I want some of that, but I tell my people I don’t want them even reading the computer printouts on the weekends, when we’re busy. I want them down on the floor finding out what’s making those numbers happen.”

Aura of Opulence

A few of Las Vegas’ 55 gambling properties--most notably Caesars Palace on the Strip and the Golden Nugget downtown--maintain an aura of high-roller opulence and a big-name entertainment policy. But the majority, by their executives’ own admission, are now “grind stores” that survive on volume and compete against each other for the same market.

When, for instance, Warren Kaplan, the Dunes’ casino programs manager, learned that Bally’s Grand across the street was hosting a convention of scrap iron and steel dealers this month, he parked a trailer truck filled with crushed cars in front of the Dunes and posted banners inviting delegates to guess the weight of the load for a $500 prize. They had to come into the Dunes casino, of course, to register for the contest.

Some of the changes that are transforming Las Vegas have their roots in Atlantic City, the once-decaying resort that broke Nevada’s gambling monopoly. Three years before the first casino opened there in 1978, Brendan T. Byrne, New Jersey’s then-governor, flew into Las Vegas to explore the problems his state might encounter. He met in the State Building with Gov. Mike O’Callaghan of Nevada; Hank Greenspun, the publisher of the Las Vegas Sun, and Don Digilio, editor of the Las Vegas Review-Journal.

Competition Woes

“We were trying to discourage New Jersey for obvious reasons,” recalled Digilio, now an executive of Aladdin’s. “We told him legalized gambling wasn’t going to solve the state’s financial problems. We talked about organized crime and said that a lot of the money generated by the casinos wouldn’t stay in the state. And we told Gov. Byrne that we had the big-name entertainers locked up, that stars of the Frank Sinatra quality were never going to play Jersey.”

Nevada then had a statute that casino owners licensed in the state could not have any “foreign” gambling investments. To officials here, “foreign” meant anything outside Nevada. O’Callaghan wanted to test the law, figuring that no casino would trade its Nevada license for the uncertainity of a shabby boardwalk town. But legal advisers told him this would be tantamount to interfering with interstate commerce, so Nevada reluctantly relented and rewrote the law.

“Believe me, I thought about trying to enforce the law when Atlantic City started talking about legalizing gambling,” said O’Callaghan, who is now a columnist on and chairman of the board of the Sun. “If you have the patent on something, you don’t like to give it away if you don’t have to.”

Nevada had good reason to worry since 25% of the nation’s population lives within 300 miles of Atlantic City. New Jersey investors lured away some of Nevada’s top gambling executives with hefty salaries and signed Sinatra and other top names with megabuck contracts.

Jersey Is Booming

Last year, the 11 casinos in Atlantic City won $2.4 billion before expenses (a bit more than Las Vegas) and attracted nearly 30 million visitors (twice the Las Vegas figure). The boardwalk now advertises itself as the nation’s most-visited resort, although the vast majority of players arrive on junket buses--the New York City-Atlantic City run is Greyhound’s busiest route--and stay only a few hours.

“Atlantic City cost us some high rollers, but it also made us analyze our market and define what we were doing and what we wanted,” said Rossi Ralenkotter, director of tourism and research for the Las Vegas Convention Center. “The bottom line is that we got more aggressive.”

Las Vegas went out and stole the National Final Rodeo away from Oklahoma City with a five-year contract. The event this month brought more than $50 million into the city. Hotels began spending millions to stage special promotions, ranging from gambling tournaments to championship boxing matches. Casinos brought in more slots and rearranged their layouts to give the machines greater prominence. (The lemon symbol was removed from most slots as having a sour and, thus, negative image.) The tourist industry started pushing Las Vegas as a family resort.

$190 Billion in Bets

Economists who track leisure-activity stocks on Wall Street believe that the gambling market is “maturing” but not oversaturated. According to Gaming & Wagering, a New York research publication, Americans bet $190 billion--legally and illegally--last year.

Lottery sales across the United States will top $14 billion this year, up from $200 million only 10 years ago. The Las Vegas Hilton opened its new $17 million sports-betting parlor this month and the Golden Nugget recently paid $50 million for 80 acres along the Strip on which it intends to build a $350-million hotel-casino complex.

“Gaming has always been cyclical but whether it’s legal or illegal, it’s never left us,” said Bobby Baldwin, 36, a professional gambler who became president of the Golden Nugget two years ago. “How much of a market is available out there? It’s infinitesimal.”