(FORTUNE Magazine) – TURMOIL TIME IN THE CASINO BUSINESS About the only managerial skill that used to be required in this industry was an ability to open the front doors. Now some casino operators look to lose their shirts. Horrifying detail: One out of every three gambling palaces in Nevada was in the red last year. ! IN 1986 something like 56 million customers willingly walked into financial institutions known to offer negative returns. Willingly? Somehow that doesn't do justice to the glint in the average blackjack player's eye. The patrons of U.S. casinos manifested far more gaiety than gloom while losing around $5.8 billion last year. People inclined to moralize about gambling often cite such figures as evidence of human frailty. An alternative interpretation, much preferred by the customers although not in every case endorsed by their spouses, is that they were doing something entirely rational: purchasing $5.8 billion worth of fun and excitement. The players are not the only casinoites with glints in their eyes these days. At a time when shutdowns, contractions, layoffs, and wholesale economizing are major themes in U.S. business news, the U.S. casino business is expanding relentlessly. A group that runs the Showboat in downtown Las Vegas will be opening a monster new casino in Atlantic City in March. Several months later, Resorts International, which opened Atlantic City's first casino in 1978, will start up the 13th, a prodigious gambling palace called the Taj Mahal. Donald Trump, who already has two casinos in Atlantic City, has been trying to acquire a third casino in that seaside burg and is obviously panting to get going in Las Vegas as well; last year he applied for a Nevada license. To be sure, Steve Wynn, casinoland's best-known executive -- he's the fellow playing straight man to Frank Sinatra and Dolly Parton in those Golden Nugget commercials -- was recently trying to sell his company's casino in Atlantic City. But the apparent point of the deal was to help Wynn finance a second casino in Las Vegas, which already has a Golden Nugget; judging from the 83 acres he acquired for the new place, it could end up among the largest in the world. Circus Circus, by some measures the most profitable casino operation in Las Vegas today, has also been expanding big in Nevada's hottest new market, the town of Laughlin, on the Arizona border. While still basically limited to two jurisdictions, Nevada and Atlantic City, the U.S. casino industry has been an unending growth proposition for many years. A good year is one in which casino winnings rise at rates above 20%. The period from 1978 to 1981 was especially good, in part because several Atlantic City casinos came on stream and in part because of double-digit inflation. Harold Vogel, Merrill Lynch's gaming analyst, believes that the industry does especially well in inflationary times because a depreciating currency reinforces the player's instinctive sense that betting money isn't exactly real money. But even in 1984 and 1985, the win was up between 8% and 9% each year. Against this background, an additional news item about American casinos will possibly seem startling. Item: A lot of casinos are in trouble. To some extent the trouble is of the kind you would normally expect to find in any rapidly expanding industry. In Atlantic City, at least, the new casinos opening this year will add 30% to the industry's capacity, measured in square feet of casino floor space, but nobody expects a 30% increase in the win. So, obviously, profits in Atlantic City will be under pressure for a while. And yet not all, or even most, of the casinos now in trouble are in Atlantic City, and those that are cannot blame their problems on overcapacity. Furthermore, the almost complete figures for 1986 suggest that it will prove to be a distinctly downbeat year: The industry's win grew only 6% or so. The growth rate has plainly been shrinking. News of pain and suffering on the management side might seem bewildering to anyone who has been exposed to a few critical details about casino economics. Take slot machines. On average, a casino pays maybe $5,000 apiece for them. The Golden Nugget in Atlantic City had around 1,230 of the machines on its casino floor in 1986, and just standing there for a year, with essentially no human help, they won $124 million from the players -- an average of $100,598 per machine. Try to name another piece of capital equipment yielding a return of over 1,900%. OR TAKE labor costs. The hordes of highly skilled dealers required to beat the players at the major table games -- craps, roulette, blackjack, baccarat -- are paid scarcely more than the minimum wage. The blackjack dealer who on a good night is grinding down the players at a rate of possibly $2,000 an hour is collecting something like $4 an hour from casino management. How is it possible to buy so much productivity for so little valuta? Amazing answer: The $4 is typically supplemented by ''tokes,'' i.e., tips, that bring total compensation to about $12 an hour, which seems to be a competitive rate. In other words, the customers losing over $5 billion a year are also defraying the great bulk of dealer labor costs. AS IS WELL KNOWN, the laws of probability are also on the side of casino management. The house advantage is greatest in slot machines. Casinos compete somewhat on their slot payouts, especially in Nevada, but the player's mean expected return on an average handle pull is only around 89% of what he has just pumped into the machine. The house edge is much less in table games, with returns running to 94.7% in roulette, at least 98.5% in baccarat -- the high rollers' favorite game -- and ordinarily 98.6% in craps. Blackjack, the only major casino game that involves some skill, offers the closest approximation of a fair bet. The expected return would be something like 99.4% to a ''basic strategy'' player in a four-deck game. Said player has learned when to draw another card, when to stand pat, and when to exercise various other options in the hundreds of different dealer-player matchups that arise. Some authorities contend that in a one-deck game the basic-strategy player actually has a wafer-thin edge over the house. And it is firmly established that ''card counters'' -- intensely businesslike types who closely track which cards have been dealt and adjust the size of their bets to reflect the extent to which the remaining cards are favorable to their cause -- can beat the game. Luckily for casino management, a majority of U.S. blackjack players do not know what in hell they are doing. The house's take is substantially higher than the figures above might suggest. The crucial figure is the ''hold percentage'' -- the proportion of player outlays retained by the house after redeeming chips and slot machine tokens. The hold percentage is higher than the edge because the average patron is playing over and over again. A 99% expected return (i.e., a house edge of 1%) sounds like a reasonably fair game, but 0.99 to the 15th power is only 0.86, meaning that when you play 15 times in a row you would expect to lose, on average, 14% of your original investment in chips. In 1986 the 11 Atlantic City casinos as a group held 15.9% at blackjack, 16% at craps, 25% at roulette, and 15.1% at baccarat. All of which sounds as though the major management skill required in the casino business is the ability to open the front doors. That would actually be a pretty fair statement about Nevada casinos as recently as the early Seventies, and it was notoriously true for a while in Atlantic City. During the period in 1978-79 when Resorts International had the only games in town, the lines outside its casino stretched hundreds of yards down the Boardwalk, ! the house win was literally accumulating faster than management could count it, and players urinated on the rug rather than give up their hard-won places at slot machines. Those were the days. Today the rugs in Atlantic City are unsoiled, and a number of operators have convincingly shown that opening the doors is no longer management skill enough. The Atlantis, owned by Elsinore Corp., is operating under Chapter 11 of the Bankruptcy Act. The nearby Claridge, run by Del Webb Corp., has been struggling for years, although it now seems to be in the black. It is also possible for casinos to lose money in Nevada these days. The Dunes is now in Chapter 11, and the Riviera, another famous name on the Strip -- as everybody calls Las Vegas Boulevard -- just recently emerged from it. Last December it suddenly came out that quite a few other Nevada houses were suffering. The Las Vegas Review-Journal published a study of casino profitability done for the state legislature, which was considering a tax increase for the industry. The portions of the study printed in the Review- Journal had financial data for 95 of the state's largest casinos; they were ranked by ''gaming revenue'' (i.e., the house win) but with no indication of which casinos went with which figures, thereby creating a whole new game for people to play in Nevada. The stunner in the figures was the number of losing operations: 30 out of the 95 were in the red in fiscal 1986. WITH SO MANY THINGS going for you, how do you go about screwing up in the casino business? The answer begins with a detail frequently overlooked by the public: The win is not the bottom line. The win is revenue, not profit. The first hotel casino on the Review-Journal's list -- obviously Caesars Palace -- had a win of $195 million and other revenues, mainly from renting hotel rooms, of $129 million. Pretax operating profits, however, came to only $74 million, or 22.7% of revenues, and that percentage is better than average for a large, well-run casino hotel. Aside from the payroll expenses you would expect to find in any large hotel, offsets against revenues are mainly of two kinds: huge debt charges associated with construction of a casino hotel and huge promotional expenses to inveigle people into the place. The casino business today is at once capital intensive and management intensive. The casinos in trouble typically have weak management that shows up in inept marketing strategies. You can think of the confusing present period -- frenzied growth littered with disasters -- as a time of shakeout. The door- openers are getting pushed out of the business. In developing a marketing strategy, casino managers begin with a fateful decision: Where do you position yourself on the high-roller/low-rolle r spectrum? Sometimes that decision is driven by your location. The two Hiltons in Las Vegas, which happen to be the two biggest hotels in the free world -- only the forbidding Rossiya in Moscow has more rooms -- follow quite different strategies. The Flamingo Hilton, located on possibly the liveliest corner on the Strip, depends heavily on walk-in players, which it lures with enormous neon messages proclaiming special odds in craps and blackjack; to fill up its 2,920 rooms, it depends on tour packages. As you might expect, the gamblers at the Flamingo tend not to be high rollers. They come substantially higher at the even larger Las Vegas Hilton (3,174 rooms), which is far from the Strip and gets virtually no walk-in business. The Las Vegas Hilton depends on convention business to fill the rooms and big-name entertainment to attract high rollers. ''We create our own excitement in this part of town,'' says casino president John Giovenco. ''We paid Bill Cosby $500,000 a week. You can't afford that unless you're bringing in the very top players.'' It is plainly important to have a coherent marketing strategy but impossible to state crisply which strategies work best. Arresting detail: Two casino companies with polar-opposite strategies are arguably the two most profitable in the industry. One is Caesars World, a casino empire with a Romanesque theme -- the house has toga parties for big players -- that has been casting itself as High-Roller Heaven for 20 years. The company owns Caesars Palace in Las Vegas, Caesars Tahoe in northern Nevada, and 87% of Caesars Atlantic City. Off at the other end of the spectrum is Circus Circus, whose Las Vegas casino actually does have a circus on the premises. Circus Circus has been immensely profitable selling itself to low rollers, typically married folk vacationing with the kids. Both Caesars and Circus Circus are run by chief executives who came to the business late in life and took over at a time when the enterprise was in disarray. THE HEAD MAN at Caesars World is Henry Gluck, previously president of Monogram Industries, a manufacturer of electrical equipment, among other things. Gluck says that when he took over, Caesars lacked the kind of internal controls needed to monitor the $100,000-a-bet action it was offering. One problem, which has also endlessly plagued other high-roller establishments, was the management of ''comps.'' The casino must decide which rollers get how much complimentary air fare, free meals, free hotel rooms and entertainment. In effect, the casino has a profit-and-loss statement on each player, comparing the expenses of his comps to the size of his table play, which is closely monitored. It isn't easy to manage, and Caesars was not doing it well. The control problems were compounded by a succession of calamities suffered by high rollers around the world in the early Eighties: Skidding oil prices knocked out a lot of Texans and Arabs, the 1982 collapse of the Hong Kong stock exchange devastated some prime customers from Asia, and Mexico's premier dice players were slow in recovering from the 1982 devaluation of the peso. Fewer big players showed up; those who did often ran up huge debts that were more than usually difficult to collect. Most high rollers play on credit, and about 44% of the Caesars Palace win comes from credit play. But credit play has a built-in whammy. Merrill Lynch's Vogel observed in his Entertainment Industry Economics that ''casinos must win their money twice: first beating credit players at the tables, then collecting the amounts they are owed.'' A well-run high roller-oriented casino might normally fail to collect 5% or so of credit extended. Caesars was at around 8% in 1983, when it set up a reserve of $81 million against receivables that looked uncollectible. Today a lot more high rollers have roses in their cheeks, and Caesars World is obviously better run. It swung from an $8-million loss in 1983 to a profit of about $41 million last year. Other casino companies have competed successfully in the upscale market -- they include Hilton, Golden Nugget, and Trump Plaza -- but Caesars today has one enormous advantage. ''What differentiates us,'' says Gluck, ''is our worldwide organization. The man from Singapore who wants half a million dollars of credit at 2:30 A.M. isn't going to wait for some committee to approve the loan the following morning. There has to be an organization in place to tell him yes or no. And that organization has to have someone in Singapore who can get a line on the man's financial situation the moment we hear he'll be flying in.'' One subtle and difficult change effected by Gluck had to do with a gradual shift in the market for casino action. By several conspicuous indicators the market has moved downscale, and soon after he took over in 1983 Gluck felt that even Caesars could no longer ignore the shift. The obvious ''image'' problem was to latch on to more of the lowball bettors without eroding the company's basic high-roller franchise. The transition was doubly difficult because Caesars' own management had learned to think of slot players and other small bettors as an inferior species. ''That attitude was pervasive in our organization,'' Gluck recalls, ''and changing it was the hardest task I had here.'' Evidence of a downscaling in the market was all around: The people walking into Las Vegas casinos were typically middle-class vacationers staying in town for four or five days, and making bets of $5 or less. The average bet was a lot higher at Caesars, of course, but even there Gluck's figures told him that the average was falling. And for the country as a whole, slot machine revenue was growing faster than table game revenue. In 1983 the lines finally crossed: U.S. gamblers lost $2.4 billion at the slots that year, $2.2 billion at the tables. Slot revenue began soaring in the late Seventies when machines accepting $1 tokens -- and inviting you to put three or more tokens in at once -- suddenly caught on and rapidly surpassed quarter machines in earning power. ''The old idea was that the slots were there to give the player's wife something to do,'' Gluck says. ''The new idea is that they're too profitable for anybody to pass up.'' They now account for 25% of the win even at Caesars, and the industry has been working on the public to think of $5 machines, and even $25 machines, as something a reasonable person might consider investing in. Right now only Caesars is offering $100 slot play. The undisputed champ in the low-roller market, Circus Circus, has origins best described as somewhat loony. The casino's initial promoter was the late Jay Sarno, also the original promoter of Caesars, and obviously a man who liked a strong theme in his casinos. It was Sarno's inspiration to combine a circus with a casino in Las Vegas. The loony part is that he wanted the casino to appeal to high rollers. As almost anybody could have told him, those impassive Orientals at the baccarat table aren't looking for clowns and elephants, and Sarno was broke by the time he sold out in 1974. The present C.E.O. at Circus Circus is William G. Bennett, who spent 19 years running a chain of furniture stores in Arizona before getting into the casino business. He and another investor bought out Sarno and immediately began transforming the marketing strategy. ''Circus acts and kids and high rollers -- it doesn't mix,'' Bennett explains succinctly. He got rid of the baccarat tables, got rid of virtually all comps, and abolished almost all credit for the players. The new team also moved rapidly to put some distance between the circus itself and the casino floor. Previously the nets under the circus aerialists hovered directly above the casino, endlessly distracting the players, and a baby elephant had been trained to walk around pulling the slot machine handles. Today the elephant is gone, and the circus, on the second floor, looms less dramatically over the casino below it. The company has built a second circus-theme casino in Reno with a similar layout. CIRCUS CIRCUS is growing in several different directions. Its Edgewater Casino is one of several that have been minting money in Laughlin, Nevada, which is across the Colorado River from Arizona. The area has only recently been developed by casino operators, and right now is the hottest growth market in the business; the win in Laughlin rose by 24% in 1986, and 75% of it -- vs. a bit more than half of the win industrywide -- came from slot action, which is, of course, the most profitable kind. Circus Circus is about to bless Laughlin with another sizable riverside casino, the Colorado Belle, which will have a riverboat theme and lighting effects to make you think its 150-ton steel paddle wheels are turning. The company has been a star partly because it was among the first to pick up on the middle-class market, those vacationing families looking for someplace to go with the kids. It also has an awesome system of internal controls introduced by Bennett. Based on his retailing experience, they feature daily and monthly income statements for every profit center, including the casino, the midway area (where you can play games like skee-ball), and the wedding chapel (a holdover from Nevada's days as a divorce-and-remarriage haven). Although not totally congruent with the vacationing family concept, the chapel makes money on its weddings, priced from $40 to $340. Talking to Circus Circus executives, you are startled to hear them refer to their different facilities as ''stores.'' This reflects Bennett's retailing background, and his determined insistence that just like other retailers, his company is selling a product, which is fun and excitement, and that management's job is to get the customers into the high-margin part of the store, which is guess what. All five of the company's existing stores have operating margins of around 25%, vs. an industry average of around 15%. Circus Circus has been a huge favorite among Wall Street's gaming analysts since it went public in November 1983. Its stock price has more than doubled since then. BY ESCHEWING high rollers, Circus Circus avoids all the costs associated with junkets and other freebies for big players, along with the credit losses and the cost of a worldwide credit network. Says chief financial officer Glenn Schaeffer: ''When you're not in the credit business, you cut down enormously on the number of decision-makers around the place. You don't need all those hosts and pit supervisors on the floor judging some guy's credit quality.'' While its operating expenses are substantially lower than those at Caesars, Circus Circus does have some special costs of its own. It lures customers with $28 rooms and plainly loses money on the hotel operation. It offers a free circus; trapeze artists, for example, are paid $5,500 a week. Its Las Vegas operation serves all-you-can-eat buffet breakfasts ($2.29), lunches ($2.49), and dinners ($3.69). Last year the buffet served over four million meals, with the company losing an average of 50 cents on each one. Its survey data show that 8% or so of the meals are eaten by local folks, presumably stopping by just to latch on to the discount calories. Bennett is obviously not wild about this patronage, but as he observes with a sigh: ''We can't put signs up saying, 'Locals Stay Out.' '' Altogether, the discounts work beautifully to entice people into the casino; an average of maybe 20,000 a day entered last year. (The figure for Caesars Palace was a shade higher.) During the year Circus Circus relieved those nice middle-class mommies and daddies of $110 million. Also on the plus side, the casino's win is dependable. Like other houses catering to low-end players -- the industry calls them ''grind houses'' -- it is a guaranteed winner every day of the year. The action at Caesars, on the other hand, is what connoisseurs of Wall Street risk call a high-beta game. ''They can win more from one player than our whole casino on a good Saturday,'' Schaeffer remarked recently. ''They can take $500,000 from one guy.'' The flip side of this is that the one guy will occasionally turn around and clobber the house. A Caesars executive estimated recently that the Palace has about 50 losing days a year. Casinos opening up in Atlantic City have a narrower range of strategic options than those in Nevada. Atlantic City has trouble competing for some kinds of high rollers: The lack of a jetport makes it a tough trip for foreigners, especially the high-rolling Orientals. The city's comparative advantage resides in the famous statistic that 37 million adult Americans are only a gas tank away. Its big disadvantage was stated pithily by Al Glasgow, publisher of a casino industry newsletter called Atlantic City Action. ''We have this peculiar problem here in town,'' Glasgow observed. ''The problem is: Why would anybody come here?'' Why, that is, except to gamble. The middle-class market in Atlantic City is the day tripper who whizzes into town and then spends maybe four hours gambling. Vacationing families of the sort that made Circus Circus are not notably in evidence. Even aside from the unfriendliness of the local weather during five or six months of the year, the parents would go crazy trying to find something for the kids to do. But the real crusher for a Circus Circus strategy would be the cost of land and construction. At $6 million an acre for land, vs. $1.5 million for good property on the Las Vegas Strip, the casino operator must go high-rise. After spending $300 million on construction, he is plenty leveraged and needs to fill many of those rooms with upscale players. So all of the 11 Atlantic City casinos are competing for at least some high-roller business. All of them offer credit, all promote junkets for big shooters, all have some luxurious suites and what purport to be gourmet dining rooms, all offer the shooters 40-minute chopper service from New York City (the drive takes three hours) as well as limousine and ''superbus'' service. Making the buses ''super'' are easy chairs, plenty of elbow room, bar service, and an atmosphere of boisterous hilarity, at least on the trip down. But the 11 casinos also have to compete for low-end players. Needing lots of bodies to keep the slots ringing on weekdays and not being able to count on many tourists, they have all reached out for the ''bus people.'' Something over 12 million downscale customers, a high fraction of them senior citizens, were bused into town by the casinos in 1986. Typical deal: You give the person round-trip bus service to the casino, a voucher for lunch, and $12 or so in quarters to get him started at the machines; the exact amount is adjusted frequently to reflect competitive conditions in what seems to be a highly efficient market -- the seniors have a terrific grapevine. A certain number of hard-nosed old folks abuse this warm hospitality by pocketing the quarters and auctioning the lunch voucher on the Boardwalk, but many of the retirees get carried away attempting to line up all the bells and cherries, so the deal seems worthwhile -- at least most of the time. Says Marvin Ashner, president of Resorts: ''There are a lot of weeks when I wonder if we're even getting our money back.'' GIVEN THEIR HIGH fixed costs, a fair number of Atlantic City's profitable casinos are asking nervously if they can stay profitable. The Atlantic City win has been growing by 10% or so in most recent years, but casino capacity has risen even faster -- meaning that the growth is not making the average casino more profitable. The win per square foot of casino space was in fact lower for 1986 than for 1985. The question is what happens now, with the industry facing that 30% increase in capacity as the Showboat and Resorts casinos come on stream. Consider the view from the two Trump casinos, the Castle, in Atlantic City's so-called marina area, and the Plaza, on the Boardwalk. Both have been profitable, and developer Donald Trump has some high-priced executive talent running them. But both are carrying a lot of debt. The Castle, which positions itself at the low end of the high-roller market, needs to win about $600,000 a day to cover its costs. In 1986 it averaged a reasonably comfortable $616,000. Robert Fiore, vice president and treasurer, confesses to being worried, however, about margin preservation as all his competitors brace for the arrival of the two new casinos. ''The bottom line is already eroding all over Atlantic City,'' he says sadly. The view at the Plaza, which has separate management, is more buoyant. The Plaza goes after the highest rollers it can get. Its average credit customer has $50,000 to $100,000 of borrowing power, vs. around $7,500 at the Castle. The Plaza's high-roller strategy was to some extent dictated by its physical plant. Unlike the Castle, it had no parking garage, meaning that it could not count on much drive-in business and figured to have fewer bodies on its casino floor. President Stephen Hyde, pirated by Trump from the town's Golden Nugget casino, says this created a need for bigger bettors. The high rollers don't depend on a garage. ''We practically hand-carry them in here,'' Hyde observed, adding that in a good month he will spend over $2.5 million in comps to keep them fat and happy.

The buoyant mood at the Plaza reflects an expectation that it will easily ride out the hard times ahead. This is because it will soon be equipped to expand its market, going after the day trippers as well as the high rollers. Donald Trump borrowed another $250 million on Wall Street last spring and after refunding various other debts had $30 million left over for a 2,700-car parking garage for the Plaza. It will open in June and be located at the terminus of the Atlantic City Expressway, just across the street from the casino. This means, Hyde says, ''I'm going to have the first shot at every customer driving into town.'' His market research tells him that there will be a shade under three people in an average car, that the average individual in the car will risk $75 at the casino, and that the 2,700 spaces will turn over at least two times a day, three times on a summer weekend. When you multiply it all out, you get additions to the daily win approaching $165,000 -- an increase of maybe 28% over the recent rate. ''Those figures are very, very nice,'' Hyde says cheerily. HYDE'S CHEERINESS over the garage is not shared by others in town. If the garage is really going to win an additional $165,000 or so for the Plaza, then it can be thought of as still another addition to casino capacity -- about 3% more, on top of the scheduled 30% -- representing still more competitive pressure on Atlantic City operators. In a normal industry one would expect heavy competition to result in heavy price cutting. How would a casino cut prices? Logically by reducing its edge in various games, which would make the action less expensive for the players. The casino industry does some price cutting along these lines, but it takes place mostly in Nevada. Walking around Las Vegas, you see evidence of ubiquitous price competition. ''Ties Win,'' it says outside the Barbary Coast, meaning that sports bettors win even if they only tie the point spread. Signs proclaim slot payouts approaching 98%. In Atlantic City, however, the industry hardly ever competes on price. Casino managers there generally expect that intensified competition during the next couple of years will mainly take the form of heavier promotional outlays: more advertising, more comping, more spending on big-name entertainers. . One reason the players cannot expect a price break in Atlantic City is New Jersey's heavy-handed regulation. Take slot machines, regarding which the Casino Control Commission has an abundance of regulations. They specify that the machines cannot take up more than 30% of casino floor space, that you cannot increase the number of machines without filing papers in Trenton, that a certain number of the machines must offer nickel play, that no more than half the machines can be made by one manufacturer, and that the payout on all machines must be at least 83%. In fact, the average payout in town is now about 88%. But a casino wishing to compete for handle-puller business by raising that proportion would run into still another regulation, which is that you are not allowed to make advertising claims about payouts. The rationale for this extraordinary rule is that the gullible public might be misled; the result of the rule is that the gullible public loses more in the slots. Peter Boynton, who runs Caesars Atlantic City, recalls that his casino experimented briefly with a 95% payout in 1982, but the commission would not allow him to say, ''Our Slots Pay More.'' Says Boynton: ''We would never do it again. Nobody would know, so what would be the point?'' Some kinds of tough policing are obviously desirable in an industry whose inventory always includes huge amounts of cash. A typical Atlantic City casino will have about $5 million of greenbacks on hand at the start of every business day, far more than any bank branch office. Organized crime inevitably gravitates to cash, and of course, casinoland is territory once totally dominated by the mob; as recently as 25 years ago the bad guys had their hooks into most large Nevada casinos. THE INFLUENCE OF THE MOB over the industry today is hard for an outsider, lacking subpoena power, to judge fairly. However, a reporter inquiring about this matter among casino executives and others who seem trustworthy comes away with these impressions: (1) It would be very surprising to learn that management at any large, profitable casino is influenced by criminal elements. (2) Some small, marginal, and unprofitable casinos in Nevada -- but almost certainly none in Atlantic City -- may still be mob-influenced. (3) There appears to be a problem of mob influence in some unions that work with casinos in Atlantic City. (4) There also appear to be problems with some of the independent junket operators who are paid by casinos to find gamblers. A New Jersey grand jury recently indicted a group of junket operators, some of whom seem to have organized-crime connections. They had allegedly been collecting fancy fees from the Claridge and Caesars Atlantic City for bringing in customers who in fact didn't bet much; to make the scam work, the operators were bribing some casino employees to overstate the amount of action attributable to their players. The regulatory apparatus in New Jersey may be working tolerably well to keep the mobsters at bay, but it is hard to believe that regulation must be as burdensome as it is. The regulators -- consisting of the commission and a separate Division of Gaming Enforcement -- are paid for by the industry itself. In Nevada, by contrast, the cost of state regulation comes out of general revenues. The self-financing feature in New Jersey means that the apparatus has every incentive to continue building its staff and to expand the reach of regulation. Indeed, the head counts at both the commission and the division go up almost every year, and their total was recently around 950. ''The way I look at it,'' says a casino executive who for some reason wishes anonymity, ''it's another public-sector jobs program.'' The industry also feels beset by federal regulation these days -- specifically by the extension of the Bank Secrecy Act to casinos. Stating that its goal was to thwart money laundering by cocaine dealers and other nefarious characters, the Treasury in 1985 persuaded Congress to amend the act so that casinos, like banks, must report all transactions involving more than $10,000 in cash. The effect of the regulation on the drug dealers is thus far unclear, but it has plainly traumatized some high rollers, who obviously do not want the IRS to know they are throwing big money around casinos. You repeatedly hear from casino managers that big players who get hot now tell their dealers to kindly keep track of the score and ''let me know when I'm around $9,500.'' At which point the player cashes in and moves his action to the house next door. Whether many such players will now be taking their play to the Caribbean is a question still unanswered. The Golden Nugget's Steve Wynn observed recently that he thought maybe 10% to 15% of the high rollers had dropped from sight since the Treasury regulations went into effect. ANOTHER LARGE question mark about the casino industry's future growth is where else in the U.S. it will get to be a legal business. The industry has been eyeing a long list of prospective new jurisdictions, including Miami, Galveston, Louisiana, West Virginia, the Pocono Mountains area of Pennsylvania, and the Catskill Mountains area of New York. Getting a third major jurisdiction would represent a big score for casinoland, and not only because it would instantly jack up the industry's growth rate. It could also make the industry seem a much more national proposition, thereby possibly opening the gates in still other parts of the country. Right now, to be sure, that third jurisdiction seems less imminent than it did a few years ago. Miami's prospects got clobbered in a Florida referendum last fall, and some of the other candidates look weaker because state legislatures are discovering the fiscal appeal of lotteries, which casinos compete with. In 1986 state lotteries won over $6 billion from Americans, some $350 million more than casinos did. Alas, the casino industry just may have to make do with slower growth for a while longer.

CHART: NOT AVAILABLE CREDIT: ILLUSTRATION BY JACK TOM CAPTION: Where the Biggest Payoffs Are The casinos always win, and last year they beat the players for $5.8 billion, mostly in Nevada (although Atlantic City's win now surpasses that of Las Vegas). In both jurisdictions, slot machine play is becoming much more significant; last year it represented about 55% of house winnings. Casino stocks have generally done well, but the S&P casino index fell sharply in 1986, partly because of fears that Atlantic City is overbuilt. DESCRIPTION: Three charts showing how the house always wins.