Smoking ban, economics drain slot-route earnings
The odds of earning a profit from gambling are always with the house, but recent legal and economic developments leave operators of slot routes believing that they’re playing against a stacked deck.
Those companies operate slots in convenience stores, bars, grocery stores and similar venues.
A dramatic example of how badly slot-route operators have fared in recent times came in March from publicly held Herbst Gaming Inc., which reported a $70.1 million decline in 2007 in revenues from the 7,200 machines its slot-route division, ETT, operates across the state.
Those machines are in the Terrible’s gas station and convenience store chain, as well as venues such as Albertston’s, Safeway, Smith’s and Winco Foods grocery stores.
In 2006, the company said in its annual report, Herbst brought in more than $347 million from its slot routes. Last year, the take fell short of $277 million.
Such has been the fate of other route operators, both large and small, in the past year and a half since
Nevada voters banned smoking in indoor establishments, such as
restaurants and grocery stores.
“That’s really put a crimp in local casinos in general and slot rout operators in particular,” said Dr. William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno.
Like small casinos, slot-route operators depend on residents, rather than tourists, for their earnings.
More than 95 percent of a route operator’s revenues come from people who pop into the nearest store or bar to drop a few dollars into a gaming machine, Eadington said.
Unfortunately for the slot operators, many of the players are smokers and this group accounted for a hefty amount of play and profit until the ban went into effect.
“We have seen a reduction in the number of visits per year and the amount of spending per visit per year,” Eadington said.
How big a reduction? About the same 20 percent that Herbst saw last year.
The economy itself delivered a one-two punch that has route operators reeling as much as everyone else.
Higher gasoline and food prices have left less disposable income in consumers’ pockets for luxuries such as a few pulls at a slot handle.
On the other hand, Eadington points out, the rise in gas prices also can cause a balancing effect, leading folks to do their gambling closer to home rather than travel a few miles to a larger casino.
“The gambling desire is pretty strong in a lot of people, and they will make the adjustments they need to make to keep on with their activity,” he said.
It’s the first legal action brought against the mining tax proposals, each of which were voted on mostly party-line votes during this summer’s special legislative session in Carson City.