Gaming revenues tumble again

The slumping national economy has affected the bottom line of Nevada casinos much like what happened in the wake of the terrorist attacks of Sept. 11, 2001.

For the fourth straight month and the fifth month out of the last six, gaming revenues decreased as gamblers cut their discretionary spending.

The gaming win in April was just above $1 billion statewide, a 5.05 percent decrease compared with $1.053 billion won from gamblers in April 2007, according to figures released Wednesday by the Gaming Control Board.

The total gaming win signified the third-largest single-month decline in statewide gaming revenues in five years. Casino revenues were off 14 percent last November and fell 6.9 percent in April 2003. Following the terror attacks, gaming revenues declined for five straight months.

Frank Streshley, the control board's senior research analyst, said the amount casino customers wagered on slot machines declined for the sixth straight month, an economic indicator that shows casino customers are spending fewer dollars.

"You have to assume high gasoline prices have cut into people's budgets," Streshley said. "You can go through every reporting market, and there are declines with what people are spending on slot machines. It falls in line as to how people are spending less in other areas as well."

Gamblers wagered $10.5 billion on slot machines in April, 7.6 percent less than they did a year ago. In March, the amount wagered on slot machines was 8 percent less than last year.

On the Strip, casino revenues were $524.1 million in April, a 1.28 percent decline compared with $530.9 million won in April 2007.

Moody's Investors Service put Strip casino operators on notice Wednesday that they could be vulnerable to negative rating actions if the slowdown is prolonged or worsens.

In a statement, the bond rating service said companies' vulnerability will be determined by the duration and depth of the economic downturn, their position within their respective rating categories, and the companies' financial policies.

"The Las Vegas resorts are not as recession-resistant as they used to be," Moody's Vice President and Senior Credit Officer Margaret Holloway said. "Most operators have some room within their respective rating categories to withstand negative trends, but if the downturn is more prolonged or deeper than we currently anticipate, the ratings could come under pressure."

In all of Clark County, gaming revenues fell 4.8 percent. The Strip had the lowest of decreases. Gaming revenues fell 34.6 percent in Mesquite, were off 22.4 percent in North Las Vegas and fell 12.2 percent on the Boulder Strip.

Reduced slot machine play, Streshley said, was a primary factor.

"Visitation is about the same," Streshley said. "People are coming, but they are not spending as much money."

For the first four months of 2008, gaming revenues are down 3.8 percent statewide and 2.4 percent on the Strip.

Deutsche Bank gaming analyst Andrew Zarnett told investors Wednesday he has a negative outlook toward Nevada's tourism prospects. Higher airline ticket prices and fewer flights, due to increased jet fuel costs, may lead to lower fly-in visitation and reduced spending. He said some consumers may choose to vacation closer to home.

"In order to make up lost room night stays, Las Vegas operators will be forced to accelerate marketing efforts to Southern California residents who are typically drive-in customers," Zarnett said, commenting on a market that could also be affected by higher gasoline costs. "The incentive now as in the past will most likely be lower room rates and possibly the addition of discount gasoline offers."

Statewide, casinos won $671.5 million from slot machines, a decrease of 8.9 percent, while winning $316.4 million from table games, up 4.4 percent.

On the Strip, baccarat win was $59 million, a decrease of less than 1 percent from a year ago. Meanwhile, slot machine revenues on the Strip were down almost 7 percent.

Streshley said the April calendar did not have any significant special events, which kept high-end play away from town. Zarnett was hopeful high-end play would pick up as Las Vegas Sands Corp., MGM Mirage and Wynn Resorts Ltd. try to cross-market their casinos in Las Vegas and Macau.

"Momentum builds from Asian players. Overall high-end play remains more resistant to the current economic slowdown," Zarnett said.

Fellow Deutsche Bank gaming analyst Bill Lerner said conversations with some casino operators lead him to believe that May gaming revenues may stop the downward spiral.

"Collectively, this data is better than the market is implicitly assuming," Lerner said, adding that if May gaming revenues show any increase from a year ago, it would be a positive sign for the industry.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.