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Las Vegas casino shares tumbling as coronavirus fears grip markets

Updated March 5, 2020 - 9:56 pm

Las Vegas-based casino operators’ shares tumbled Thursday with other stocks as financial markets reacted to the rapid spread of the coronavirus.

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Local casino operators saw shares fall as much as 14 percent at close. The Dow Jones Industrial Average dropped 3.6 percent, erasing much of the Wednesday’s gains. Meanwhile, a new report showed near-term Strip room rates are continuing to fall.

As of Thursday, there were 12 COVID-19 deaths in the U.S. and more than 200 infections across 18 states, including Nevada. The Southern Nevada Health District on Thursday confirmed the first case of COVID-19 in Southern Nevada.

Conventions and other business events are starting to change or cancel events amid the outbreak. Jefferies analyst David Katz said that, among other factors, is prompting casinos’ stocks to sink.

Katz said tourism and gaming numbers in Las Vegas probably will take a hit in the near-term, but it’s too early to say what sort of long-term effects the virus will have on operators, if any.

“There is concern about how long this will last and the degree it impacts economic activities,” he said. “My view is it is more episodic or temporary than something that will impair the business for an extended period of time.”

While recent earnings calls from casino operators suggested the virus has yet to impact U.S. operations, new research is starting to show otherwise.

On Tuesday, the U.S. Travel Association reported international travel to the U.S. is set to fall 6 percent over the next three months, the largest decline since the Great Recession.

A report from investment company SunTrust Robinson Humphrey published Thursday suggested room rates across the Strip are falling amid the outbreak. The report updates data published Sunday and shows an even bigger price drop.

The report looked at MGM Resort International’s Las Vegas room rates as a proxy for the greater Strip market and found room rates dropped 27 percent the week of March 13 compared with rates collected on Feb. 27.

Additional research found that Caesars Entertainment Corp. Strip room rates are down 16 percent the week of March 13, Wynn Resorts Ltd. properties are down 22 percent and Las Vegas Sands Corp. rates are down 29 percent.

Prices are largely unaffected in April and May, according to the study.

“Our room rate analysis and recent news flow suggest some impact may be imminent,” SunTrust Robinson Humphrey analyst Barry Jonas said in the report. “Near-in rate contractions have accelerated, while far-out bookings could be seeing weakness.”

Even so, Jonas said discussions during recent earnings calls suggest the outbreak hasn’t impacted gaming trends “just yet.”

“Our discussions with operators and manufacturers even suggest Strip gaming volumes remain stable to slightly up in face of declining forward room rate pricing,” he said.

Red Rock Resort shares closed down 13.9 percent to $16.53 on Thursday. MGM closed down 11.6 percent to $20.60. Sands closed down 4 percent to $54.94. Boyd Gaming Corp. shares closed down 9.3 percent to $22.45, and Wynn shares closed down 9.5 percent to $95.58. Caesars Entertainment Corp. shares closed down 5.82 percent to $11.25.

Spokespeople for all six companies declined to comment.

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.

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