Gaming revenues fall 22.3 percent in October

It just went from bad to worse.

Nevada gaming revenues tumbled 22.3 percent in October, the single largest monthly drop in state history and the 10th straight month gaming revenues have fallen in the Silver State. For the year, gaming revenues are down 8.3 percent statewide.

Casinos statewide won just under $905 million during October, compared with $1.165 billion in October 2007, according to figures released Wednesday by the Gaming Control Board. The figure was the lowest statewide one-month total since April 2005.

Compounding the matter was the comparison with the statewide gaming win total from a year ago. The October 2007 figure was the single-largest monthly win in state history.

On the Strip, gaming revenues were $475 million, a drop of 25.8 percent compared with $639.9 million a year ago. Analysts looking at the figures said gamblers wagered less but won at an above average percentage rate.

“As expected, October was another difficult month for the Las Vegas Strip as the credit crisis took hold and paralyzed consumers,” Jacob Oberman, director of gaming research and analysis for CB Richard Ellis, said in an e-mail to clients and investors. “More importantly, housing markets across the nation continue to weaken, which will continue to pressure Las Vegas going forward.”

The Strip’s $475 million revenue figure in October was the lowest number produced by casinos since June 2006. Gaming revenues are off 8.7 percent for the year on the Strip.

“In October, we saw huge declines in the stock market, unemployment began spiking up and consumer confidence and spending were at all-time lows,” said Frank Streshley, senior research analyst for the Gaming Control Board. “It was just a bad month all around.”

Deutsche Bank gaming analyst Andrew Zarnett told investors the October numbers were not a surprise. Southern Nevada is suffering from increased unemployment, a high number of home foreclosures, a cutback in airline capacity and lower visitation from Southern Californians.

The news out of Nevada didn’t reverberate much on Wall Street. Many major publicly traded Nevada-based casino operators and slot machine manufacturers have seen their stock prices plummet anywhere from 75 percent to 95 percent over the past year.

On Wednesday, Wynn Resorts was up $2.60 or 6.24 percent on Nasdaq National Market, to close at $44.30. On the New York Stock Exchange, Las Vegas Sands Corp., fell 22 cents or 3.98 percent to close at $5.31; MGM Mirage was down 3 cents or 0.27 percent to close at $11.05; and Bally Technologies finished the day up 38 cents or 2.02 percent to close at $19.16.

Most gaming analysts have said gaming company stock prices already reflect a loss of perceived value by investors.

The revenue decline also played havoc with gaming tax collections. Based on October’s revenues, Nevada collected $56.4 million in gaming taxes, a 21.5 percent decline compared with $71.9 million collected a year ago. For the first five months of the fiscal year, gaming tax collections are down 13.2 percent compared with a year ago.

Gov. Jim Gibbons called the October results worriesome because of the size of the drop. He said the figure won’t affect budget planning because the state looks at the final revenue total at the end of the year.

“It’s disheartening because we have learned the gaming industry is not recession-proof,” Gibbons said. “Consumers are not spending and we are in a national economic slowdown. Lower gaming revenues are not a surprise.”

The gaming revenue results were no better throughout Clark County. Casinos in North Las Vegas saw revenues decline almost 35 percent, downtown casino revenues fell almost 20 percent, gaming revenues were off 28 percent on the Boulder Highway and casinos in Laughlin saw revenues decline nearly 21 percent.

“When you compare this month to a year ago, it shows you how far we’ve fallen,” Streshley said.

October eclipsed the 15.2 percent drop gaming revenues recorded in May, which had been the largest decrease since Nevada began keeping monthly gaming revenue totals in 1984.

JP Morgan gaming analyst Joe Greff told investors the gaming industry as a whole is suffering. The October results on the Strip were impacted by “A deteriorating macroeconomic environment and the overly tough comparison with October 2007.” Statewide, gamblers wagered $10.1 billion on slot machines, down 13.7 percent from a year ago, and $2.3 billion on table games, a 17.9 percent drop. On the Strip, slot machine wagering was down 17.6 percent and table game wagering was off 20.5 percent.

Hold percentages, the amount of money casinos kept versus the money wagered by gamblers, were down anywhere from 1 percentage point to 4 percentage points based on the game.

“The figures stood out like I’ve never seen before,” Streshley said. “Only two games had any sort of revenue increases, keno and sports wagering.”

The Strip was also hurt by baccarat play. Revenues from baccarat fell 63 percent during October while wagering was down 35.8 percent. The hold percentage for baccarat was 8.2 percent during the month when the normal hold percentage is 12 percent. October 2007 was an exceptional month for baccarat, Streshley said, because a Chinese Golden Week attracted high end play from the Far East.

Southern Nevada was not alone in its woes. Washoe County suffered its 16th straight monthly gaming revenue decline while every reporting section of the state, except Carson Valley, had a down month.

If there is a silver lining of sorts, Streshley said, it’s that October 2007 was the last big month for gaming revenues.

November 2007 had a 14 percent decline while December 2007 saw a 3 percent increase before 2008 and steady decreases.

He said this month’s figures, which will be released in February, could be spurred by the opening Dec. 22 of the $2.3 billion Encore by Wynn Resorts.

“It’s opening during a difficult time period, but these type of major additions often give the market a lift,” Streshley said.

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