Gamblers cut back and casinos struggle in 3Q

Oct 28, 2009 1:40 AM
Staff & Wire Reports |

Gamblers are wagering less than a year ago, visiting casinos less often and holding back on extras when they do, continuing trends that left the industry struggling in the third quarter.

Industry leader Harrah's Entertainment Inc. (HET) lost $1.6 billion, including a $1.33 billion drop in the value of its assets. Boyd Gaming Corp. (BYD) said its profit fell will wait at least three years before finishing building its $4.8 billion Echelon casino, which looms empty over the Las Vegas Strip. Stocks plunged across the industry.

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At Wynn Resorts Ltd. (WYNN), where lower spending by leisure travelers and businesses pushed down profit for the second quarter in a row, billionaire CEO Steve Wynn said his company won't expand in the U.S. until the business environment improves.

"The landscape in Las Vegas is troubling and it's rife with uncertainty," said Wynn, whose company is based across the Strip from the Echelon. "It's tough to understand what's going on; my 40 years in Las Vegas is not serving me very well at the moment."

Wynn Resorts said its net income fell 33 percent to $34.2 million, or 28 cents per share, for the period that ended Sept. 30. That's down from $51.2 million, or 49 cents per share, a year earlier.

Both Wynn and Harrah's said they struggled to fill beds on midweek nights during the third quarter, though Wynn's room, food and beverage, retail and entertainment revenue rose for the quarter, helped by sales at its $2.3 billion Encore Las Vegas resort, which opened in December.

Harrah's-which operates more than 50 casinos around the world from its headquarters in Las Vegas-said it would have lost $296 million if it hadn't written down its assets. It lost $129.7 million during the third quarter one year ago.

"Lower spending by consumers continued to impact revenues," chief executive Gary Loveman said in a statement.

Harrah's said its revenue fell abroad and in each U.S. market where it operates. Overall revenue dropped 13.7 percent to $2.28 billion from $2.65 billion a year earlier.

In its home market of Las Vegas, Harrah's lost nearly $779 million. The occupancy rate at its rooms there was 90 percent, but rate cuts ate into revenue.

Boyd, also based in Las Vegas, operates casinos in New Jersey, Mississippi, Illinois, Indiana and Louisiana, as well as Nevada.

At the Wynn Las Vegas and sister property Encore, rooms cost $210 per night on average and the occupancy rate was 84 percent.

Gamblers have kept their spending down on table games and slots during the economic downturn, and casinos have been adjusting by cutting their own spending, including by trimming their debt.

Harrah's said it cut its third-quarter operating expenses by $285.7 million, or 14 percent, and it took out a new loan to pay down its existing debt and exchanged debt due next year and in 2011 with new notes due later.

Harrah's did not release a new figure for its long-term debt but reported during the third quarter that it owed $19.3 billion as of June 30.

At Wynn Resorts, which had $4.2 billion in debt and $1.3 billion in cash as of Sept. 30, operating and promotions costs rose from the second quarter. The company said the $53 million increase covered temporary summer staff, headline entertainment, utilities and other expenses.

"Last quarter included Beyonce," said Wynn, who this month lured country star Garth Brooks out of retirement to play solo shows in Las Vegas 15 weeks a year.

Wynn Resorts' stock dropped $6.94, 11 percent, to close at $56.13 Tuesday.

Boyd shares fell $1.90, or 17.8 percent, to close at $8.78.

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