What the Crash of 2008 Means for Poker Part II

This is Part II of a two-part series on perspectives of the economic crisis and its possible impacts on the gambling and poker industries. Read the first part of What the Crash of 2008 Means for Poker

He has homes in both Los Angeles and Las Vegas.

Predicting the impact of the ongoing economic disaster on gambling and poker is soothsaying at its finest, given that the times we are going through are unprecedented. Comparisons to the Great Depression don't make much sense since there are controls in place that can prevent some of the chaos that occurred from 1929 to 1932.

But there are other factors, particularly the blistering speed at which both news and nonsense travel, that muddy the waters considerably.

It's clear that, in the short-run, gambling as a category won't escape this downturn as it did in 2001 and in the early 1990s.

Las Vegas and Atlantic City are already experiencing unprecedented declines in business and the increasingly desperate offers from Las Vegas casinos (including top-shelf rooms on the Strip for under $60) are unlikely to change this trend.

Americans have the uneasy sense that the current situation may not be the type of trough that we have seen in the past; we may, in fact, be on the edge of a precipice.

Until there are some indications that this sense is untrue, the disposable income that Las Vegas is so historically good at soaking up will continue to be carefully guarded.

The poker economy doesn't yet seem to be suffering.

Turnouts at major poker events remain strong (for example, the PokerStars Caribbean Adventure's attendance this year was up 19% despite the economy and the expense of staying at Atlantis for non-satellite winners).

It seems reasonable to assume that, at least in the short-term, players will continue to treat poker as they have in the past - not as gambling, but as something that's endemic to society, at least in the U.S.

Traffic on the two leading online poker sites, PokerStars and Full Tilt Poker, seem to be unaffected.

However, this is likely to change if the sense that we are in a "serious recession" turns into a "depression."

For the most part, poker continues to be played with discretionary income (excepting, obviously, the small fraction of the poker community that plays professionally).

This discretionary pool is hardened to some extent from the economic downturn by poker's social nature - it's a cheap way for people to have a good time.

However, the middle of the poker market is in for some serious pain by the end of 2009 if we don't start to see at least some light at the end of the tunnel.
__________

Dr. David Croson holds a PhD in Business Economics from Harvard University and has published dozens of scholarly articles on strategy in uncertain environments, managing risk, and the value of information.

Dr. Croson has been an avid poker player for 15 years and regularly uses poker as a teaching tool inside the classroom.

The key to handling a slowdown in spending is to realize that consumers don't cut back on everything equally.

But on the other hand, they'll still drive across town to save money at stores where there are sales, drive to places they otherwise would have flown, and choose recreational spots that are drivable.

People also tend to spend money on small splurges in a downturn.

High-end lipstick, for example, does well in economic contractions; it lasts a long time, is a visible indulgence, and yet costs only a few dollars more than the basic kind of lipstick.

The same is true for premium ice cream in the supermarket (at the expense of Baskin-Robbins and other full-service ice cream parlors).

If casinos could convert just a few table game players into a weekly poker tournament, the poker rooms would boom at only a slight cost to the pit.

The key for Las Vegas in the current recession is to appeal to people's instincts to go to Las Vegas rather than, say, Virginia Beach, to show them what Las Vegas can offer them that no other destination can.

In Las Vegas in particular, a stellar vacation can center on poker games, the pool, and a few good value restaurants.

Casinos need to recognize that some of their clients are a little stretched right now, but still in need of relaxation and recreation; making investments in keeping these players coming back once things turn around will pay off and need not be expensive for the hosts.

Certainly, most of my poker friends make a point of being loyal to a place that's treated them well, particularly when other things aren't going so well.

If I were running a casino, I would be sending out room comps to everyone I've ever interacted with (and some that I hadn't).

Toss in a poolside cabana during the week (which will generate some tips for servers as well) with a complimentary bucket of ice and a hotel branded bottle of mineral water.

Let the customers pay for their own hamburgers if they're trading down from filet mignon, but make them feel that this was the best value vacation they've ever experienced.
__________

Prior to playing poker and writing about the game for a living, New York-born Lou Krieger was a management consultant in California and Washington, D.C.

As one of the most respected writers in poker, he has written over 400 columns, 11 books, and is the host of "Keep Flopping Aces," a weekly show on Rounders Radio.

He lives in Palm Desert, California.

Last Friday, I walked in the Agua Caliente Casino poker room in Rancho Mirage, California, which is about six miles from my house and where I usually play poker.

Long lines existed for the majority of games and here we are in a recession, which made me wonder.

Earlier in the week, I heard a local radio interview with Richard Milanovich, Chairman of the tribe that owns Agua Caliente as well as the Palm Springs' Spa Resort and Casino.

He said that while the tribe was feeling the economic pinch in the same way everyone else was, the numbers for Agua Caliente Casino were a lot better than the numbers he was seeing for casinos in Las Vegas.

He pointed out that it's less costly for locals to play here and less costly too for weekend visitors from Los Angeles since Agua Caliente is only about 110 miles from L.A., while Las Vegas is a good 250 miles.

I guess I didn't really buy it at the time, but having witnessed it in person, it sure made sense to me.

Of course, it was impossible to tell how many poker room patrons were locals and how many journeyed there from Los Angeles or San Diego, but the room was packed and Milanovich's assessment seemed spot on.

I'm still a bit confused by all of this.

On the other hand, for a small, weekend getaway vacation, Agua Caliente is a less costly alternative to Las Vegas and also provides full casino gambling in addition to poker. Non-poker playing family members can have their fill of slots and other games, take in shows, and play golf.

I'm hearing anecdotal data from guys who have been forced into poker playing to feed their families and that might account for some of the crowding at the tables too.

On my weekly internet radio show, "Keep Flopping Aces," one caller last week told me he lost his job as a restaurant manager, couldn't find employment, and had to turn to his hobby, playing poker, as a job rather than an avocation.

He's at his local casino every day, grinding out a living at the tables, and it's paying better than anything he could find in the work-a-day world in this economy.

My summary is that Las Vegas will show reduced numbers for the duration of the recession, while local casinos, although not flourishing, will pick up some of the folks who heretofore were regular visitors at the Strip.

I'm sure some players will try to ply their trade and earn a living at the poker tables, although the majority of them will probably fail at this endeavor in the long-run.
__________

Russ Fox is a tax specialist and poker author.

Unfortunately, history tells us that government interference in the economy could actually make the situation worse, which is what happened during the Great Depression.

I see two possible near-term outcomes.

While I'd love to see online poker legalized in the United States, I believe that to be very unlikely to happen in the near future.

Alternatively, poker could prosper in the coming years.

It would also be ideal to have a personable individual win the WSOP Main Event, who could then represent the game.

There's no way to predict the future with any degree of certainty, but I'm hopeful that poker will continue to prosper in the next several years.

Overseeing this series was Nolan Dalla, who has been a poker player, writer, and casino executive for many years.

He is perhaps best known for his long association with the World Series of Poker as its Media Director. Dalla is the consummate industry insider and also co-wrote the best-selling and critically acclaimed biography "One of a Kind: The Rise and Fall of Stuey 'The Kid' Ungar."

A provocative cover story by writer Richard Florida in current issue of The Atlantic magazine...Online Gaming Feeling The Effects Of Financial Downturn

The outlying islands of Taiwan will now be open to legal land-based gambling, according to...Wall Street Journal Opinion Article Attacks Gambling Industry

In an opinion piece that appeared in the Wall Street Journal newspaper on Tuesday, Dale...Harrah's Refinances Short Term Debt, Resolves Cash Flow Issues