Private Gaming Salons

More than six months after Nevada’s first private casino opened at the MGM Grand, private casinos there and at Caesars Palace and Mandalay Bay have attracted only a handful of gamblers and have won a relative pittance, the Nevada Gaming Control Board reports.

Sold as a means to attract international gamblers who want to bet in privacy, Nevada lawmakers and regulators changed state laws and regulations in 2001 and 2002 to allow private casino gambling in “international gaming salons.”

Through April 30, the Strip’s three international gaming salons have won only $3.5 million from gamblers, Control Board member Scott Scherer said Monday.

Those winnings came from about five visits to the three rooms, said Keith Copher, control board enforcement division chief.

“That’s like zero,” University of Nevada, Las Vegas Professor Bill Thompson said. “It’s L-O-W — low, low, low.”

The $3.5 million won from gamblers doesn’t say as much about the private casino action as would the total drop, the amount of money players exchanged for chips, a number the control board declined to provide, said John Mulkey, Bear, Stearns & Co. casino industry debt analyst.

“Without knowing the drop it’s difficult to say, but on a pure return on investment basis, $3.5 million doesn’t seem like much,” Mulkey said.

Some of the operators are using the private rooms but are keeping their doors open and the rooms accessible to the public rather than complying with the strict rules that would accompany private gambling, Scherer said.

“There’s a lot of unanswered questions still (about the demand for private gambling),” Scherer said. “Remember, (these salons opened) against a backdrop of low international play.”

Scherer also said lawmakers’ hopes that the salons would attract new business to Nevada was probably optimistic.

“These salons are not unique to Nevada,” he said. “People can gamble privately in Australia, in Macau and in (U.S. tribal casinos). I think the salons were intended to prevent the erosion of our high-end business rather than to lure new business.”

Executives for the companies operating the private betting salons say they’re not surprised initial response to private gambling has been slow.

Park Place Entertainment spokesman Robert Stewart said Caesars Palace’s marketing efforts geared toward attracting new customers for the private salons didn’t begin until the beginning of this year.

Since then, the war in Iraq and the severe acute respiratory syndrome virus outbreak severely affected Asian high-roller travel to Las Vegas, he said.

“I don’t think (the five total visits and the $3.5 million won by the three private casinos) is a surprise,” Stewart said.

Caesars regularly uses the rooms for high-rollers without closing the doors and triggering the private gaming rules, Stewart said.
“We view (private gaming) as an option for our customers,” Stewart said. “We believe we’re making the best use of these rooms with the doors closed or open.”

Mandalay Resort Group spokesman John Marz said Mandalay Bay has used its salons for private gaming on “a couple of occasions.

“I think it will grow,” Marz said, noting that private gaming was a convenience Mandalay wanted to be able to offer customers. “The level of play will be dictated by the number of Asians who come over here and (request) it,” he said.

MGM Mirage spokesman Alan Feldman cited the economy, the post-Sept. 11, 2001, tourism slowdown, a shaky economy and, most importantly, the SARS epidemic as affecting initial salon results..

“People weren’t going to get on a plane, period,” Feldman said. “As conditions change globally and we have more of a chance to market this amenity, it will grow. It was unrealistic to think there’d be hundreds of millions in revenue or hundreds or dozens of visits.”

Thompson said state rules requiring casinos to log in players, provide real-time video surveillance feeds to control board headquarters and mandating minimum $500 bets reduces the appeal of the private areas to the Asian high-rollers the changes were meant to attract.

“These rules are an administrative nightmare,” Thompson said. “For the players, it’s not worth the effort. A player gets more anonymity playing in the main casino.”

Nevada Resort Association Bill Bible said before this year’s state legislative session that the casino industry wanted the international gaming salon rules relaxed to give operators more flexibility to compete against the introduction of private casinos in California tribal properties such as Barona Valley Ranch near San Diego.

Bible didn’t return Monday phone messages seeking comment.

Scherer said the salon gaming rules regulators crafted were based on guidelines passed by lawmakers in 2001.

“We were simply trying to do what the Legislature intended,” he said, adding that he personally wouldn’t object to lawmakers revisiting the issue in 2005.

The state law enacted in 1931 allowing gambling mandated that gaming be “wide open” to the public. But legislators in 2001 passed Senate Bill 283, which allowed regulators to craft rules enabling casinos to open private gaming areas, and Gov. Kenny Guinn signed the measure.

The Nevada Gaming Commission approved rules allowing international gaming salons in January 2002; they require salon patrons to have $500,000 in cash, credit line or a combination of the two. The minimum table game bet in the salons is $500, as is the minimum slot machine denomination.

The MGM Grand’s private casino license was approved in July 2002. Caesars Palace’s was approved in September and Mandalay Bay’s was approved in December.

Some of the casino operators are using the private rooms, but are keeping the doors open and the rooms accessible to the public, Scherer said.

Scherer said it’s not clear how the salons will fare in the future.

“There’s a lot of unanswered questions still,” Scherer said. “I think the salons were intended to prevent the erosion of our high-end business rather than to lure new business.”

Executives for the companies operating the private betting salons say they’re not surprised initial response to private gambling has been slow.

Park Place Entertainment spokesman Robert Stewart said Caesars Palace’s marketing efforts geared toward attracting new customers for the private salons didn’t begin until the beginning of this year.

Since then, the war in Iraq and the severe acute respiratory syndrome virus outbreak severely affected Asian high-roller travel to Las Vegas, he said.

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