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Gambling Debts Are A Good Economic Indicator

The spending habits of gamblers are often used as an economic indicator of the times. The last few years has seen an economic downturn in both the U.S. and Europe with overall spending down. In a positive sign which shows that this is turning around the amount of gambling debts been written off by casinos are less than in the previous years.

An article in Associated Press discusses this unusual aspect of casinos and the way in which they manage gambling debt from high rollers. When the recession was in full force in 2008 all the major U.S. casinos increased their estimates for bad debt but now with the economic upturn have lowered these estimates to levels that were seen before the recession.

Las Vegas is still the home for the high rollers and their gambling revenues have started to bounce back along with the number of visitors .The issue of casinos allowing high rollers to gamble on credit is fascinating look into how the casino business approaches their big customers. Most casinos will allow big gamblers credit for the simple reason that if they did not they would lose out on potential million dollar bets which are not uncommon for a whale to do. As president of global gaming at Las Vegas Sands Rob Goldstein says casinos would be at a “significant competitive disadvantage” in Las Vegas if they did not offer credit. Bear in mind that a high roller can bet millions of dollars in a just a few rolls of the dice.

Las Vegas casinos have seen steady growth since 2010 which indicates that people are more comfortable in spending their money. This however does not mean that casino bosses do not worry about recovering major debts. Unlike other sectors high rollers who spend millions of dollars gambling and lose have essentially nothing with which the casino can repossess. The bets have been placed and the money has gone.

The amount that casinos factor in to their overall budget when calculating bad debt are another indicator of just how much revenues are generated by gambling. While casinos write off tens of millions in bad debts this is actually a drop in the ocean when compared to their overall revenue earnings. The Sands budgeted for $492 million in bad debts, Caesars Entertainment was $202 million while Wynn Resorts and MGM Resorts International were about $100 million. As we said these figures sound high but Sands reported over $1,5 billion in profit last year and $9 billion in revenues. Wynn reported “only” $500 million in profits with $4 billion in revenues.

The issue of collecting bad debts also came into focus with some unexpected findings. While most of us conjure up images of deadbeat gamblers being beaten up with baseball bats for not paying their debts, this is far from the reality. In fact it is not uncommon for high rollers to have their debts wiped free in order for them be given additional chances to spend their millions when times are better.

We discussed the tactics that Macau are using in recovering bad debts which include a name and shame program on the web which is producing some positive results for the casinos. In the U.S. most debts are legally enforceable but most of the time casinos aim to come to an agreement with the high rollers and only use the courts as a last option.

Whichever way you look at it the world of the high roller is quite the life as casinos will do just about anything to keep them content even when they are in debt to the casinos. The positive sign of the major casinos dropping their forecasts of bad debt is however a positive and interesting barometer for better economic times for all.

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