No. Las Vegas gaming drop of 23.3% concerns analyst

January 15, 2002 7:51 AM
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Baccarat was the culprit in the decrease in gaming revenues reported by Las Vegas Strip casinos during the month of November. For the period, gaming win for the entire state of Nevada was $721,492,771 or 7.45% less than the comparable November of 2000.

But on the Strip, revenues fell 11.90% from last year’s $398,668.045 with a good portion of the decline attributed to an 81.2% reduction in baccarat revenue. Evaluating the reported revenues, Frank Streshley, who crunches the numbers for the Nevada Gaming Control Board noted that if the baccarat revenues were excluded from the totals, the state’s decline in revenues would have been closer to 2%.

But Bill Schmitt, gaming analyst for CIBC World Markets, said he was more concerned with the “softness in the North Las Vegas and Boulder Strip markets.” These, he said, comprise the bulk of the Las Vegas “locals” market.

“Gaming win in North Las Vegas was down 23.3% versus November, 2000,” Schmitt wrote in his recent equity research paper. “On the Boulder Strip, revenue declined 9.3%”¦ We believe some of these declines are due to casino patrons testing the recently opened Palms, as well as marketing to Las Vegas locals by the Strip operators to recoup some business lost because of the Sept. 11 terrorist attacks.” There still remained a concern that other reasons, not so obvious, were involved.

Schmitt said he believed the decline in Strip revenues were “relatively benign given the economy and travel concerns.”

The analyst said he also was concerned with the 7.2% decline in slot win, “driven by a 9.7% decline in the amount wagered, offset by a 20 basis point increase in hold percentage.” In addition, he said, there was a decline of 15.1% in the number of slot machines, “further constraining slot revenue.”

Growth continues

December proved to be a big revenue month for Ameristar Gaming Inc. (ASCA), according to gaming reports issued by the states of Missouri and Iowa.

Leading the pack in Missouri was the Maryland Heights casino operated by Harrah’s Entertainment Inc. (HET) that reported revenue of $23.09 million, an increase of 17% over the corresponding December.

Following Harrah’s, however, was the Ameristar Kansas City facility with $16.23 million, a jump of 19% over last year. Also, Ameristar’s St. Charles gaming center took in $13 million, an increase of 40% over the same period a year ago.

Officials in Iowa reported that casinos in that state won $472 million during the six-months period beginning in July. Ameristar Casino & Hotel in Council Bluffs had revenues of $65.8 million, an increase of 22% over last year and enough to put the facility just behind the Prairie Meadows Racetrack and Casino that reported revenues of $71.4 million.

A track official said he felt the increase was due partly because “with all tragedy going on around us, the value of getting out of the house and doing something entertaining is still very, very important to people.”

Mandalay’s reaction

The courts may have decided that Detroit didn’t have the right to give preference to certain casino applicants but that shouldn’t affect the future of MotorCity Casino, in which Mandalay Resort Group (MBG) has a 53.5% interest.

“MotorCity Casino followed the procedures set forth by the State of Michigan and the City of Detroit and was selected to develop a casino facility. In reliance on the legality of this process, MotorCity invested over $150 million in constructing a facility and employing and training over 3,000 people. In announcing the selection, the mayor of Detroit unequivocally stated that MotorCity was selected without regard to any preference set forth in the ordinance.”

Partners in MotorCity are members of the Atwater family who joined with the original owners of the Greektown Casino in getting the legislation passed. That referendum was responsible for establishing three casino licensees for the city of Detroit.

Employee raises

Rather than finding themselves without jobs due to downsizing, employees of Mohegan Sun Resort and Casino in Connecticut will enjoy salary increases of 4%.

Yet, former Las Vegas casino executive Bill Velardo, president and CEO of Mohegan Sun, apologized to the employees because the raises were less than what they have received in the past.

“For the last four years,” Velardo wrote in a newsletter to the employees, “we have been able to grant annual pay increase of 5 percent. Unfortunately, this calendar year, due to the receding economy, pay rates are scheduled to increase just 4 percent.”

But, Velardo noted, that was better than the experience of casino workers in other states where downsizing has been utilized because of declining revenues.

The Insider

Park Place Entertainment Corp. (PPE) has developed a program to assist former workers at the Flamingo Reno Hotel/Casino. Those showing financial need will be eligible for an additional $500 in assistance.

Once again, Indiana lawmakers will be considering permitting the state’s riverboats to remain berthed in order to ease the flow of patrons. A bill will be given a hearing before the powerful Commerce and Consumer Affairs Committee.

Among the riverboats that showed increased revenues during the month of December in Illinois was the Par-A-Dice Casino, operated by Boyd Gaming Inc. (BYD). The property’s revenues were up 35.6% over last year.

Quarterly fiscal reports will be given on the following dates: Station Casinos Inc. (STN) on Tuesday, Jan. 29, at 10 a.m.(PT); MGM MIRAGE Inc. (MGG) on Thursday, Jan. 31, and Boyd Gaming Corp. (BYD) on Thursday, Feb. 7 at 1 p.m. (PT).

Aladdin Hotel/Casino told the bankruptcy court that it had posted positive cash flow of $700,000 in December compared to a projected cash flow loss of $3.5 million.

The American Stock Exchange has launched trading in options of Nasdaq Stock Market listed stock of Ameristar Casinos Inc. (ASCA). The option symbol is UWT.

GTECH Corporation (GTK) has awarded a $3.5 million contract to Kinetrix Solutions, Inc., to develop and support the online video lottery system for the Rhode Island State Lottery.

International Lottery & Systems Inc. (ITSI) reported net income of $1.3 million for the second quarter of fiscal 2002 that ended on Oct. 31. This compared to a net loss of $1.8 million last year.

Paul-Son Gaming Corporation (PSON) had a net loss of $329,000 or $0.10 a share for the second quarter of its fiscal year ended on Nov. 30. This compared with last year’s net loss of $466,000 or $0.14 a share.

Florida Gaming Corporation (BETS) says it has an agreement with Autotote Enterprises to simulcast the Miami Jai-Alai signal throughout the state of Connecticut.

Lady Luck Hotel/Casino in Downtown Las Vegas is considering converting part of that property to timeshares.