(Bloomberg) — U.S. casinos are making it tougher for players to win at the slot machines, and that’s led to less betting.
The portion of slot wagers kept by casinos rose to 7.7 percent last year from 7.25 percent in 2007, the Association of Gaming Equipment Manufacturers said in a report this week. The total amount bet on the machines fell to $291 billion from a peak of $355 billion over that span.
“Slots have been tightening slowly over time,” Marcus Prater, executive director of the association, said in an interview. “There is a theory out there that when people have a bad experience, they’re not as likely to come back.”
The criticism by slot makers of their biggest customers underscores the changes roiling the industry. Casinos have been wrestling with weakness in betting since the Great Recession sapped the disposable income of consumers. They’ve removed machines and emphasized non-gambling amenities like restaurants and nightclubs to make up for lost revenue.
At MGM Resorts International, the largest operator in Las Vegas, the number of slots at the company’s nine largest, wholly owned casinos there fell 24 percent to 13,453 last year from 2007, according to filings. Caesars Entertainment Corp., the largest owner of casinos in the U.S., returned some 2,000 leased slot machines to manufacturers due to weaker performance, according to the company.
An MGM International spokesman said the company hasn’t had time to review the report. Caesars didn’t respond to a request for comment.
Fewer Players
A particular concern among casino operators and slot- machine makers is that younger patrons are less inclined than their parents and grandparents to sit and bet on the devices. This year, Nevada authorized different types of machines that will let gamblers win partly based on their skills at playing games, rather than random luck.
The payouts on slot machines are set by casino operators, which historically competed by advertising that their slots were “looser,” meaning they offered better chances to win.
Nevada kept the lowest percentage at 6.4 percent last year, according to the report. Players in Iowa probably felt least lucky. Casinos in that state kept 9.4 percent.
The share of slot bets kept by casinos hit a low of just under 6 percent in 1996, according to the report. It has increased since then, most sharply between 2001 and 2007, a period in which personal income and total betting were rising.
“While economic conditions appear to be material factors in slot performance trends, there may be other factors impacting the industry’s overall performance,” according to the report.
Goldman, Sachs & Co. analyst Steven Kent initiated coverage of the two largest players in the slot machine industry, International Game Technology Plc and Scientific Games Corp., with a sell recommendation on Aug. 18. He cited few new technologies that would increase sales, casino managers reducing their slot-machine purchases and heightened competition between manufacturers.
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