Casinos Need Lessons in Risk Management

In the last few weeks I have read articles about three different casino companies that have missed, or are late on their bond payment to investors. Trump, Herbst and Stations Casinos all announced that they had trouble meeting the payments and other companies are struggling. Last week it was announced that MGM/Mirage would sell Treasure Island.

Selling Treasure Island will help provide MGM with financing for its $11.2 billion CityCenter project on the Las Vegas Strip. Herbst, the owners of Terribles Casino in Las Vegas bought three casinos in Primm, Nevada on the California border, earlier this year before the economy went bad and that is contributing to their troubles.

The casino industry used to be considered a recession proof industry but this is no longer the case as the gaming industry is finally feeling the impact by the shortage of players. Several other casinos have had to cancel expansion plans some of which are already started. Greed and playing at limits above your means has been the downfall of many gamblers and it seems that some of the casinos have failed to learn a valuable lesson from the gamblers they make their profits from. The casinos kept borrowing money to build and expand figuring that the streak would last forever. Unfortunately from them the learned what most gamblers find out, If you play above your means, eventually you get burned.