December wasn’t a great month for gaming stocks, but it capped a pretty good year.
By the close of 2009, the Applied Analysis Gaming Index (AAGI) posted a composite value of 286.18, which represented a modest 1.7-percent decline from the preceding month (November 2009), but a 24.4-percent increase during the past 12 months.
By comparison, the broader markets moved in an opposite direction during December, as the S&P 500 (when computed on a similar basis) posted a 2.1-percent increase from November. Compared to the same period of the prior year, the broader market was up a comparable 26.5 percent.
The AAGI remained within a relatively tight range during the past 3 months as valuations for casino operators and equipment manufacturers were affected by cautious investor expectations related to the timing of broader economic recovery.
With the flood of new hotel rooms, supply concerns in Las Vegas persisted through the close of 2009 as MGM MIRAGE’s CityCenter debuted in December, as well as a few hundred rooms at new towers at the Hard Rock and Planet Hollywood.
At the same time, several lower-tier properties opted to close hotel rooms and towers to avoid further operating losses as room rate depression persisted into the final month of the year.
Properties of note that recently opted out of their hotel operations included Binion’s in the downtown market and Sahara Hotel on the northern end of the Las Vegas Strip.
During the past 45 days, the hotel openings expanded total inventory by approximately 7,200 units, or 5.1 percent, bringing total hotel inventory in the city beyond 148,000 rooms. The additions included expansions at the Golden Nugget (500 rooms), Hard Rock (375 rooms), Planet Hollywood (480 timeshares) and the completion of CityCenter (5,891 hotel and hotel-condominium units).
These additions exclude the nearly 900 private residences (condominiums) wrapping up construction at CityCenter, including Mandarin Oriental (227) and Veer Towers (670).
In addition to the under-construction Cosmopolitan (2,998 units), room capacity challenges are expected to persist into 2010 and beyond as a number of units are ready to complete construction when market and financial conditions allow them.