My brother Craig has a business partner we’ll call Uncle Steve.
Uncle Steve has a love affair with Las Vegas. But lately, the romance has soured.
The grim economy has played havoc with the Southern California real estate market, Uncle Steve’s primary source of income. The stock market’s downturn has shrunk his portfolio. Translation: His budget for gambling has been reduced. The recession means Uncle Steve will take fewer trips, if any, to Las Vegas.
Uncle Steve was a regular at MGM Mirage properties, visiting at least four times a year. His $10,000 line of casino credit was good for a three night’s stay in a free room with other complimentaries, such as dinners and shows.
Dealers and other casino workers were rewarded with Uncle Steve’s tokes.
Sometimes Uncle Steve walked away a winner. Sometimes he didn’t. But as long as Uncle Steve tossed the dice, the cycle continued.
Up until last year, Las Vegas was full of Uncle Steves, the bottom tier of high-end gamblers whose discretionary spending habits fueled the Strip and Nevada’s economy.
But Uncle Steve’s interest in a weekend Las Vegas sojourn has waned. Spending money on gambling, he said, just isn’t in the cards until the economy recovers.
It’s a trend that worries Wall Street and the financial community. Recreational gamblers are staying home, reducing their spending and, subsequently, the casinos’ winnings. On the Strip, gaming revenues are off 8.7 percent through October.
Last month, Moody’s Investors Service issued a lengthy report detailing its negative outlook toward the U.S. gaming industry over the next 12 to 18 months. Moody’s cited nine reasons why casinos will struggle.
Declining visitation trends, Moody’s said, will continue to impact gaming revenues.
"This is a harsh reminder that despite its rapidly growing popularity … gaming is not an essential service," Moody’s Senior Vice President Keith Foley wrote in the report. "It is clearly just another leisure activity that depends on discretionary spending. No matter how protected a particular gaming jurisdiction may be in terms of competition, there is no hedge against a nationwide economic downturn."
Wall Street was pleased with the appointment of Pat Cavanaugh as the chief financial officer of International Game Technology, filling a job that was vacant for 18 months.
Even the slot machine maker’s harshest critics had positive comments.
"Cavanaugh’s appointment will prove successful due to his extensive knowledge of the company and key relationships with the gaming and investment community," Stifel Nicolaus gaming analyst Steven Wieczynski said.
Howard Stutz’s Inside Gaming column appears Sundays. E-mail him at email@example.com or call 702-477-3871.