Gaming revenues suffer sharpest drop in state history

It’s official; 2008 was the worst year on record for declining gaming revenues in Nevada.
The question now is will the trend continue into 2009.

Casinos statewide won $11.6 billion from customers during the year, a drop of 9.7 percent when compared with the $12.8 billion won from gamblers in 2007, the sharpest decline in state history, according to figures released Wednesday by the Gaming Control Board. The 2008 gaming revenue figure was the lowest statewide total since 2005, when casinos also won $11.6 billion from gamblers.

On the Strip, casinos won $6.1 billion in 2008, a decline of 10.6 percent compared with the $6.8 billion won in 2007.

The control board has been collecting and reporting monthly gaming revenue figures since 1984, but senior research analyst Frank Streshley said the statewide 2008 decline was only the third time in 53 years that annual gaming revenues fell.

In 2001, gaming revenues declined 1.3 percent compared with 2000, which had been the largest ever year-over-year drop. A year later, gaming revenues fell 0.3 percent. The Strip’s gaming win decline in 2008 was the largest since 2001, when casino revenues fell 2.1 percent.

“Obviously, the 2001 numbers were impacted by 9-11,” Streshley said. “The economy has had a much more devastating impact than anything we’ve ever experienced.”

Several analysts don’t believe Nevada and the Strip will fare any better over the first part of 2009.

“The challenging macroeconomic factors will continue to take their toll on the Las Vegas Strip due to the detrimental impact that the slowing national economy is having on consumer discretionary spending,” Deutsche Bank gaming analyst Andrew Zarnett told investors Wednesday.

Jacob Oberman, an analyst for CB Richard Ellis’s Global Gaming Group in Las Vegas, said the casino industry won’t recover until the prices of homes nationwide stabilize. Consumers want to feel comfortable in their personal lives before they get out and travel.

“2009 will continue to be difficult, particularly until the 2009 American Recovery and Reinvestment Act begins to trickle through the economy,” Oberman wrote in a report. “With home prices that will remain substantially weaker in 2009 than in 2008, especially during the first several months of the year, leisure demand and spending will be significantly weaker.”

On Tuesday, the Las Vegas Convention and Visitors Authority said visitation to Las Vegas fell 4.4 percent in 2008 and was off 11 percent in December, the fourth straight month of double-digit declines.

JP Morgan gaming analyst Joe Greff said the Strip’s gaming revenue and visitor volume declines came “despite significant hotel room discounting.”

Greff said the gaming revenue results are actually worse than they appear “given the accounting method used for slot revenue recognition that counted slot win from Nov. 29 and Nov. 30 in the December results.”

In December gaming revenues statewide fell 18.9 percent, Nevada’s 12th straight monthly decline and the 13th month out of the last 14 that gaming revenues fell. The state’s $888 million in revenues during December was the second lowest monthly take this year.

On the Strip during December, gaming revenues fell 23.2 percent to $474.2 million.

“We have been constantly pointing out the negative impact of key macroeconomic data points (unemployment, highest number of foreclosures, cutbacks in airline capacity and lower visitations from Southern California) on Las Vegas gaming revenues,” Zarnett said.

Gaming revenues statewide declined 5.4 percent in the first six months of 2008 and 14 percent over the last half of the year. In the fourth quarter (October, November and December), gaming revenues statewide fell 18.9 percent.
On the Strip, gaming revenues fell 5.2 percent from January to June and 15 percent from July through December.

“By far, the fourth quarter was the most challenging the gaming industry has ever faced,” Streshley said.

The declining revenues in December impacted statewide gaming taxes for the month. The state collected $35.8 million, a decline of 22.7 percent compared with $46.3 million collected for the same time period a year ago. So far in the fiscal year, gaming tax collections are off almost 16.2 percent.

According to the state, the economy kept gamblers from spending like they had in the past. Customers wagered $125.5 billion on slot machines statewide in 2008, 8.8 percent less than in 2007. Almost $29.8 billion was wagered on table games, 5.8 percent less than a year ago. Strip casinos saw table game betting decline by 5.2 percent and slot machine wagering fell 10.1 percent.

In Clark County, gaming revenues fell 9.9 percent in the year. Downtown Las Vegas gaming revenues were off 8.1 percent, the third decrease over the last four years. Meanwhile, the area known as the balance of Clark County (down 7.2 percent) and the Boulder Strip (off 10.5 percent) suffered their first annual gaming revenue declines ever.

Washoe County gaming revenues feel 11.4 percent to $930.1 million, the first time the northern Nevada community saw revenues drop below $1 billion since 1997.

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