Tao of Poker

2008 WSOP Day 2: 4,000 Donkeys to the Rescue?

By Pauly
Las Vegas, NV

Before Event #2 $1,500 NL kicked off, Jeffrey Pollack mentioned that the tournament would become the largest ever WSOP event that was not a Main Event. This is the first year that one of the donkaments was broken up into two Day 1s. Day 1a was sold out at 2,050... although that number was a bit lower due to a couple of refunds. At last check, Day 1b had over 1,500 entrants and that number is expect to climb closer to 2,000 for a total combined field of 4,000 players.

Whenever I was asked if the WSOP would have an off year, I always said, "We'll have to wait and see how many players buy into the first donkament."

I have heard a lot of people in the Amazon Room declare that the popularity of Event #2 is a clear cut indication that poker as a whole is not slumping and in fact on the rise. Although the record-setting field is an indicator of a strong poker market, I'm not 100% sold yet.

The $1,500 donkaments are popular among amateurs and weekend warriors. Harrah's purposely scheduled the $1,500 NL events on the weekends in order to maximize the popularity of the lowest buy-in NL freezeouts at the WSOP. It goes without saying that the first $1,500 event attracts more and more players each year since the buy-in is well within reason.

I want to wait and see how many runners the medium-priced buy-in events attract. I'm hypothesizing that those events will experience a decline in entrants and prize pools since the amateurs who previously played in those events are feeling the economic crunch (especially since plane tickets and gas prices are more expensive than in previous years) and will choose to play in lower buy-in events since they are more affordable.

Of course, I could be totally wrong and there will be an increase in players across the board. That really won't be answered until the end of the WSOP... but it's something I'm going to keep my eye on.

According to Amy Calistri in a recent Poker News article, she wrote...

Prevailing wisdom has held that businesses that rely on gambling are recession-proof, and to some extent, that may still be true. But while gamblers are still making their ways to the tables, the economic slowdown is definitely being felt on the Vegas Strip. The Strip has profited over the last few years by reinventing itself as a luxury destination, replete with $200-and-up-per-night rooms, high-end dining, upscale nightclubs and top-flight entertainment. But straying from its gambling roots appears to be making the Strip more vulnerable to economic conditions.

This month the Nevada Gaming Control Board released its gaming revenue numbers for March 2008, which showed that the Strip was off -4.82%. Meanwhile, less tony destinations seemed to fair well; revenues for downtown Las Vegas were up +2.0% while North Las Vegas posted an enviable +27.15%. Overall, the Nevada gaming revenues were down -1.52% when compared to March 2007...

Here's something of note...


MGM stock chart
You don't have to work on Wall Street to be able to comprehend the above graph. Seven months ago, MGM Mirgae (MGM) stock was trading at over $100/share. Now? It's under $50 a share representing a 50% decline since October of 2007.

According to a Newsweek article...

The stock price of MGM Mirage, owner of Bellagio, Mirage and eight other Strip resorts, has halved, from $100.50 in October to about $49 on Friday. In recent weeks the company eliminated 440 middle management jobs to save $75 million annually. "We made a structural change in our company to become more efficient and provide the same level of service, but we did have to advance that effort because we were also seeing a softening in the marketplace," says MGM Mirage spokesman Alan Feldman.

I love the deceptive buzz words that PR people use to cover up bad news. When my penis is hard and then I unexpectedly experience a "softening," well that's a bad thing. In Las Vegas, a softening is also a bad thing because it means people lose their jobs since visitors have less and less "fucking around money" than they had in previous years.

How about these examples?


Las Vegas Sands (LVS) chart


Wynn (WYNN) chart


Boyd Gaming (BYD) chart
Since November 2007, four major casino gaming stocks went into a tailspin; MGM, BYD, LVS, and WYNN. It seems as though Harrah's managed to avoid the devastation. Their stock is actually up a couple of bucks from their November 2007 numbers. So aside from Harrah's, their competitors are all having a tough time.

Editor's Note: I totally spaced and forgot that Harrah's went from being a public company to a private one with their buy out from Texas Apollo. Thanks to everyone who pointed it out including Kevin Mathers and the Quiet Lion)

The harsh fact is that non-gaming revenue (restaurants, shops, shows) comprise almost 60% of total revenue for Strip casinos. That was also addressed in a recent Newsweek article...

By contrast, in 1991 and 1992, when the last comparable slowdown occurred, nongaming activities provided just 42 percent of overall revenue. "This is different from prior downturns," says Bill Lerner, a Deutsche Bank gaming-sector analyst. "Now that there are a lot more nongaming amenities, the visitation mix is leaning toward nongamblers, and the consumer coming to Vegas is different now than it was."

People with limited budgets would rather spend their money on gambling than high end restaurants and shops.

And then there's the housing crisis and mortgage fiasco that has infected the Las Vegas valley. Several major construction projects have been delayed due to financing issues, such as Trump's latest vanity project a condo-hotel on the North Strip. He planned on building a second tower, but even Trump is having trouble raising capital. And the future of the $3 billion Cosmopolitan Casino project has yet to be determined since their developer defaulted on a $760 million loan from Deutsche Bank.

Yeah, Vegas is in a bit of trouble and 4,000 donkeys are not going to save a sinking ship.


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