Casino profits plunge

Profits for Nevada casinos fell 69 percent in the last fiscal year that ended June 30, according to a report Friday from the Nevada Gaming Control Board.

Frank Streshley, the agency's chief research analyst, said the total net income of $721.2 million generated by 266 casinos that grossed $1 million or more in gaming revenues was the lowest total since fiscal 2002, when casinos lost $33.5 million.

The figures from the Gaming Abstract Report take into account the total revenues spent by casino patrons on gaming, rooms, food and beverage and other amenities. Profit or net income is the amount retained after expenses have been paid but prior to deducting federal income taxes and other expenses.

"In simple terms, the expense of doing business has gone up," Streshley said.

The total revenues generated by casinos in fiscal 2008 were $25 billion, which included $12 billion from gaming, or 48.2 percent of the overall figure. Hotel rooms accounted for the second highest revenue source, generating more than $5.1 billion.

The total revenue mark was off 1 percent for the fiscal year while gaming revenues fell 3.5 percent in the same time period.

The 266 casinos within the abstract, four fewer than in fiscal 2007, paid $913.2 million in gaming taxes and fees during the fiscal year, which equated to 7.6 percent of their gaming revenue.

Streshley said different expenses increased during the fiscal year, one of the largest being interest expenses, which was $2.1 billion, a jump of 26 percent.

"The cost of borrowing money went up. That sent expenses up," he said.

Casinos on the Strip reported a net income of $709.4 million, a decline of 57.3 percent, and the lowest figure since Strip casinos reported a net loss of $245 million in fiscal 2002.

The Strip's total revenues of $15.8 billion was a 0.2 percent decrease from a year ago while gaming revenues of $6.3 billion were off 3.5 percent compared with fiscal 2007.

On the day the report was released, Jefferies & Co. gaming analyst Larry Klatzkin lowered his estimates for MGM Mirage and Wynn Resorts because of lower margins associated with lower room rates.

"Lower room rates and added expenses to get people in the door reduce bottom line margins," Klatzkin wrote in a note to investors. "We have also gotten indications that many companies in the industry are charging off as much as they can in the fourth quarter."

Downtown casinos reported a net income of $30.8 million in the fiscal year, off 52.4 percent, while the area listed as balance of Clark County showed a net loss of $146.1 million, based on total revenues of $2.7 billion.

The Boulder Strip, which includes some casinos in Henderson, had a net loss of $6.1 million in the fiscal year, the first time the area had ever shown a net loss. The Nevada Palace casino closed on Feb. 29 to make way for Eastside Cannery, which didn't open until the end of August.

Casinos in South Lake Tahoe recorded their first net loss in 22 years.

The 2002 fiscal year was affected by the terrorist attacks of Sept. 11, 2001, which hurt tourism for several months. Fiscal year 2008 includes the first six months of the year, when the national economy began to slide. Gaming revenues showed a year-over-year decline each month, including a 15.2 percent drop in May.

Streshley said during the first five months of the 2009 fiscal year, gaming revenues declined almost 13 percent in July, dropped a record 23.3 percent in October and fell 14.8 percent in November.

"People debate when the economic downturn started," Streshley said. "The most severe revenue declines have taken place in the last half of the (calendar) year."

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