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Casino profits slip in fiscal '08

Jan 20, 2009 5:10 PM
by David Stratton |

Profits for Nevada casinos declined 68 percent for the fiscal year ending June 30, even though casinos generated more money from non-gaming activities, according to the Nevada Gaming Control Board.

Casino profits as reported in the state’s annual Gaming Abstract released Friday take into account all sources of income as well as general and administrative expenses.

For fiscal year 2008, Nevada casinos reported a net income of $721 million, a 68 percent drop-off from the $2.29 billion reported the previous fiscal year.

Total casino revenues, which include all gaming and non-gaming sources, reached $25 billion, just 1 percent less than in the previous fiscal year.

Non-gaming sources, such as hotel rooms, restaurants, spas, entertainment and night clubs, actually generated more revenue – $12.95 billion versus $12.78 billion in fiscal 2007.

Casino revenue was down only 3.5 percent for the fiscal year.

The problem for Nevada casinos was a sharp increase in operating expenses, which increased 16 percent in the fiscal year.

The biggest spikes occurred with the amount of interest casinos pay for borrowed money, and casinos’ general and administrative costs.

Interest expenses for casinos jumped 26 percent to $2.1 billion for the fiscal year. General and administrative costs increased by 27 percent to $1.9 billion.

Expenses that actually declined for casinos were the amount they spent on advertising and promotions, and the amount allotted to comps for players. Combined, those costs were down about 2.5 percent.

The state’s income report also revealed that more and more casinos are relying on non-gaming sources, especially on the Las Vegas Strip, which accounts for more than half the state’s gaming revenue.

Statewide, revenues from non-gaming sources accounted for 51.8 percent of all revenues, up from 50.6 percent the previous fiscal year.

The trend is even more dramatic on the Las Vegas Strip, where 60.3 percent of all revenue came from non-gaming activities, up from 59 percent the previous fiscal year.

It was the first time non-gaming revenues accounted for more than 60 percent of all revenue.

The differential between gaming and non-gaming revenues on the Strip is in stark contrast to "locals" oriented casinos, which rely more heavily on gamblers’ play.

When you move beyond the Strip, casinos in Clark County reported that only 34.7 percent of their revenues came from non-gambling sources, and on the Boulder Strip casinos reported only 26.5 percent came from non-gambling.

Note that the state’s Gaming Abstract only covers the first six months of 2008. In the last half of the year, casino revenues declined substantially, about 10 percent with December’s results yet to come.

That probably doesn’t bode well for the current fiscal year, which ends June 30, 2009.