Analyst says boom is over for gambling destinations
PORTLAND, Ore. — The boom is over for gambling destinations like Las Vegas, according to one Wedbush analyst, and casino hotels are going to be feeling the impact for years to come.
Shares of several key gaming companies fell in trading Thursday following the report.
Gambling destinations like Las Vegas in the U.S. and Macau in China have been hit hard by the decline in convention travel and softer demand for leisure travel as companies and consumers watch their spending, Wedbush analyst Rachael Rothman wrote in a note to investors.
While hotels in Vegas have cut prices to draw enough leisure travelers to keep that component of business steady, the continued growth of higher-end rooms will offset any potential rebound in the economy. Rothman estimates demand would need to increase by 10 percent every year for the next three years to get to the same level of profitability companies doing business there saw in 2008.
Macau also has struggled with more restrictive visa requirements, tighter credit for players and swine flu concerns hurting its business. But longer term, Rothman sees more potential for recovery at this gaming destination but not the explosive growth it has seen in the past.
Rothman's top pick in the industry is Wynn Resorts Ltd. ( WYNN - news - people ), on which she has an "outperform" rating and a $39 price target. She noted the company is better positioned for a recovery than its peers as it doesn't compete squarely for the convention market, it has one of the healthiest balance sheets and is one of the only ones able to repurchase shares should it decide to do so. Wynn shares were down 30 cents at $35.89 in early afternoon trading.
