Friday, December 13, 2002
Copyright © Las Vegas Review-Journal

NEVADA ECONOMY: Gaming revenue rises in October

Results affected by last year's drop-off following terrorist attacks

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Nevada's casino revenue numbers were up in October, but state officials and industry insiders were quick to note that the monthly results benefited from comparison with the depressed figures that followed the Sept. 11, 2001, terrorist attacks.

Nevada's 340 casinos won $807.4 million from gamblers in October, 4.6 percent more than the $771.7 million casinos won in October 2001, the Gaming Control Board reported Thursday.

But the October statewide win was still below the $811.2 million casinos won in October 2000, a 0.5 percent two-year drop.

The October casino winnings generated $48.1 million in percentage fee gaming taxes, collected in November. The collection was 8.4 percent more than the $44.4 million collected in November 2001, but $156,583 less than collected in November 2000.

"On the surface, this month's gaming news sounds good with an increase in gaming win," Gov. Kenny Guinn said in a statement. "We need to be growing by 10 percent per month in order to meet the (projection) upon which the budget is built yet we are behind tax collections of two years ago."

Industry insiders and experts backed Guinn's primary point, that the one-year improvement doesn't make up for the lack of growth reflected in the relatively flat results when two-year comparisons are made.

"The governor's pointing out the obvious, but he's right," Deutsche Banc Securities casino industry analyst Andrew Zarnett. "We've been very careful to compare current results with 2000 numbers, because the 2001 comparisons aren't fair."

University of Nevada, Las Vegas economics professor Keith Schwer agreed, noting that the two-year comparison is consistent with the performance of the national economy.

"To compare with a year ago can give a misconception," said Schwer, director of the Center for Business and Economic Research. "Better to compare with 2000."

And despite Guinn's warning about lagging revenue collections, Schwer said the October results aren't bad.

"It's clearly not a case of the sky is falling," Schwer said. "We took a licking and we're still ticking."

The casino industry's top Nevada lobbyist, Nevada Resort Association President Bill Bible, noted that the two-year comparisons reflect the industry's lack of growth.

"It's good to see recovery from last year," Bible said. "But compared with two years ago the Clark County gaming win is virtually flat despite the opening of the Palms and Green Valley Ranch. Up north, there's been even greater retraction."

The almost flat two-year comparison has a bright side, Zarnett said.

"While there's been no growth over two years, the fact of the situation is that the business is very resilient," he said. "The numbers prove that."

Gaming Control Board statistical analyst Frank Streshley said the month-to-month comparison benefited from Paul McCartney's MGM Grand Garden concert date.

Strip casinos outperformed the rest of the state's gambling halls, winning $395.3 million compared with $358.1 million, a 10.4 percent increase.

Boosting Strip performance were 21.7 percent and 65.5 percent jumps in the respective amounts won from blackjack and roulette players.

Baccarat players lost $24.8 million, a 2.3 percent increase compared with the October 2001 results, but more than 20 percent less than the amount won from baccarat players in October 2000.

Baccarat numbers were aided by a 54.8 percent jump in the drop, the amount of cash and markers exchanged for gambling chips, to $160.6 million from $103.8 million. The number was $170 million in October 2000.

Bible said that although the state's casino industry has rebounded somewhat from the lows of last year, there are still looming threats to the industry.

"I'd like to say my crystal ball forecasts a return to the boom years of the '90s," Bible said. "But there's clearly clouds on the horizon. There's turmoil in the airline industry, and Las Vegas is dependent on air travel. The national economy is still uncertain, California tribal gaming is growing and there are understandable concerns about world political conditions."

Deutsche Banc's Zarnett cautioned that gaming revenue is no longer the only important gauge of Strip financial health.

"One of the important drivers of profitability is room rates, and room rates are under pressure on the Strip," Zarnett said, predicting continuing positive gaming revenue comparisons will be partially offset by continued pressure on room rates.

In other markets, the control board reported:

• Boulder Strip casinos won $61.2 million, up 8.9 percent compared with $56.2 million in October 2001.

• Downtown casinos won $57.8 million, down 1.9 percent.

• Laughlin casinos won $45.4 million, up 4.1 percent.

• Reno-area casinos in Washoe County won $88.8 million, down 4.7 percent.

Streshley noted that Washoe County casino results were down 6.9 percent compared with October 2000.

"The Reno casinos are facing increased competition from tribal casinos, and the market depends on the Northern California economy, which has been hurt by the technology industry downturn," he said.