The casino industry is currently one of the best businesses to work in. Whether you’re a developer, manager, SEO expert and so on, there are plenty of opportunities for everyone. However, those involved in the industry have to stay up to date with all the latest trends and industries that have been proven to increase their earnings ever year.

In this post, we’re going to delve into the ways in which the casino industry has increased its annual revenues by investing in real estate. Is this beneficial or detrimental to the overall business?

Las Vegas

Perhaps you wouldn’t think of linking the real estate industry with casino gaming companies if you’re just here to enjoy some casino games Nevertheless, things are very different if we look at this from a business perspective.

In an article, Managing Director of the Alea Consulting Group, Nicholas G. Colon, touches on the links between the revenues of the real estate industry and casino gaming companies. If we look at places like Vegas, most modern casinos are huge resorts that cover lots of land. In total, we are looking at three aspects: the gaming area, the hotel and its commercial use.

If we look at the hotel, lots of people book a room for their casino night out, or alternatively, while tourists may book multiple nights to spend the duration of there holiday there. All games are hosted in the gaming area, whilst amenities restaurants are part of the commercial side of the whole property. Naturally, most of the are five-star dining restaurants, coupled with the world’s best chefs and tailored menus.

How the Commercial Sector Impacted the Casino Industry

Think of popular shows like Cirque Du Soleil and professional fight events like the UFC, that also fall under the commercial side of things. UFC fighters alone, have recently enjoyed many successes at the MGM Grand Garden Arena.

For starters, the company made over $10.1 million live gate from Conor McGregor’s record-breaking fight with Jose Aldo, after it attracted an audience of almost 17,000 people. Additionally, revenues for the highly anticipated bout between Floyd Mayweather Jr. and Manny Pacquiao in May 2015, were sky high. Initially, it was estimated that the company was going to make around 4.4 million in purchases. Nevertheless, the pay-per-views generated more than $410 million, making it the biggest PPV in UFC history. MGM Resorts, has also hosted other popular fights, including Evander Holyfield vs Mike Tyson II, Oscar De La Hoya vs Floyd Mayweather Jr, Deontay Wilder vs Tyson Fury II etc. In total, the arena has successfully held over 42 sport professional mixed martial arts super fights.

Nicholas G. Colon further remarks that shopping malls are a relatively new concept that new casinos in Las Vegas are using to their advantage. It all started with the opening of Caesars Palace Forum Shops on New Year’s Day 1992. This set the scene for the success that followed. By the time the Bellagio opened its doors in 1998, there was already a huge selection of designer shopping boutiques.

Sales plummeted even more with the opening of Planet Hollywood Resort Las Vegas. Considering the prices were more affordable, these shops attracted more crowds, rather than just A-listers and the rich and famous. City Center Complex followed suit with its opening in Las Vegas in December 2009. Owned by MGM, some of the shops that opened included the likes of high-end designer ones like Louis Vuitton and Prada.

At this stage, the links between casinos and commercial spaces were very evident. Nicholas G. Colon further remarks that Caesars, Planet Hollywood, Bellagio and the ARIA resorts retained the ownership of their commercial spaces as part of their casino resort. To do this, Mr Colon explains that they had to sign leases with retail companies to be able to generate more revenues for the companies. Naturally, this all depends on the sales of the store, but if proven successful, these leases can be renewed and also lease rates can also be negotiated.

So how is this all linked to the casino industry? Nicholas G. Colon explains that all sales made by the stores were directly linked to the traffic rate of the property. For example, a 30% occupancy rating at Caesars reduces the traffic flow of contributors of the Form Shops. In the end, this also reduces the purchase conversion rate.

Is this the Way Forward?

Evidently, all this proves that the casino’s ties to real estate most definitely has its rewards if there are no other revenue streams to consider. For example, if players win casino games or still have money left to do other things during their stay, they can spend the extra cash at the resort’s facilities. Some of these include shopping at the various boutiques, fancy dinners at restaurants, as well as tickets for shows.

Nicholas G. Colon comments that whilst this might not affect one person, it may very well affect other people who visit the casino every year. Look at it this way, even if players don’t spend an estimated amount of money at the casino or it’s simply not for the, they will still spend it elsewhere at shows, shops and restaurants. In the long run, this means huge sales and millions of dollars in revenue by the end of the year. Furthermore, this also causes the value of the lease to increase. Additionally, the casino also can’t make any negotiations for rates on items that are purchased with players’ comp points, as they won’t get anything out of it.

More disadvantages include that Las Vegas Resorts are also charging players and guests for parking. Whilst they do not make any money from their patrons, they just lease out the parking building from an operating company. In turn, the company takes all the necessary measures to install ticket machines, gates and machines. The money collected will solely amount that collected over the lease period. So what does this tell us? Nicholas G. Colon explains that some casino companies are looking at this with a short-term perspective in mind, without realizing that they are creating conflicts with their customers. Bottom line, if casino resorts include more and more cost barriers, this will have a negative impact on revenue if customers aren’t happy about it.

To summarize, Nicholas G. Colon believes that this might turn into a B2B scheme. If not done correctly, the links between real estate and the casino industry may be detrimental to the entertainment aspect. Is this the way forward? Only time will tell.