It’s SRO for STN’s new Calif. casino!

Jun 10, 2003 9:40 PM

Station Casinos Inc. (STN) chose the unlikely time of Monday morning to open their newest venture in the gaming business ”” Thunder Valley Casino near Sacramento, California ”” and it’s a good thing they did.

"There were thousands of people lined up waiting for the 10 a.m. announced opening," said an onlooker who was caught in the crowd. "In fact, there were so many people that they opened the doors at 9:10 a.m., some 50 minutes early."

Newsmen covering the opening of northern California’s first Vegas-like casino described the gathering as "swarms of people." Most had never seen anything like it. But, for the Station Casinos’ executives it must have looked like déjà vu all over again. They created similar scenes with the openings of Las Vegas properties such as Green Valley Ranch and Boulder Station casinos in recent years.

In describing the scene, police said the backup of cars trying to make their way along Interstate 80 to get to Highway 65 "was miles long" causing some cars to take more than an hour to get off the highway and make their way into the area surrounding the casino. The property’s parking lot accommodating 3,000 cars was filled before the casino doors were open.

The Thunder Valley Casino, owned by the United Auburn Indian Community, will be a big moneymaker, according to all gaming experts, but the question remained just how successful it would be and just what impact the operation will have on the Reno, Nev., casinos that had relied on the Sacramento area market.

Bill Eadington, director of the Study for the Center of Gambling and Commercial Gaming at the University of Reno, is on record as estimating that the play per slot machine will be $300. In a story by Steve Wiegand in the Sacramento Bee, Eadington is referred to as using a formula based on the number of adult gamblers in an area divided by the number of available slot machines. Revenues from slot machines, according to Eadington, generally represent about 75% of a casino’s take.

However, some Wall Street gaming analysts, have suggested that Eadington’s numbers are conservative. One went so far as to suggest that the $300 per slot machines per day may represent only 75% of the total that he believes could top $400 per day.

Extrapolating the estimates, Thunder Valley is projected to take in more than $300 million in gaming revenues. Since Station Casinos’ contract calls for the company to receive 24% of the total revenue, the project is expected to be a major contributor to the company’s balance sheet.

One of the reasons for the Monday morning response to the property’s opening could be the company’s pre-opening marketing. Station’s set up kiosks at area shopping centers offering to sign up prospective customers in the "Boarding Pass" program that has been so successful in their Las Vegas casinos. Thousands of area residents signed up to become program participants.

That reflects one of the reasons Station Casinos was chosen by the United Auburn Indians to be the casino’s operator. They liked the way Station Casinos operated in Las Vegas as a "locals" casino.

That effort was underscored by Scott Nielson, Station’s general counsel, who noted that "our emphasis will be in the Sacramento Valley Area." This, he said, would be the property’s "bread and butter."

Declines in Windsor

With tightening of border security and the impact of the Iraqi war, business at Casino Windsor, the casino across the river from Detroit, Mich., declined during the fiscal fourth quarter that ended on March 31.

Officials reported daily attendance dropped by some 2,000 people representing a decline of 12%. As for its revenues, the casino, owned by the Province of Ontario but operated by Park Place Entertainment Corp. (PPE), fell 8% to $145.6 million Canadian. However, when translated into American dollars, the drop was actually 2% to $105.6 million.

Despite few guests and lower revenues, Casino Windsor still was the most successful casino in the Detroit market area. It topped Mandalay Resort Group’s MotorCity Casino by more than $5 million in revenue.

Illinois taxes

Grousing riverboat casino operators in Illinois have been studying their operations in hopes of offsetting the state tax recently imposed by the legislature. Most tax rates were adjusted upward by at least 2% while the maximum shot up to 70%.

Peter M. Carlino, chairman and CEO of Penn National Gaming, the company that paid $630 million to acquire the Hollywood Casino in Aurora, Ill., said he has placed planned improvement projects on hold. He called the increased taxes "insane" and wrote to Gov. Rod Blagojevich, architect of the tax increases that "no company could rationally invest another dime in the casino business in Illinois."

Some operators, such as Argosy Gaming Inc. (AGY) has suggested they may start reducing operating hours and increasing admission fees to counter the tax jump.

But, one analyst, looking at a worse case scenario, said he expected that some, if not all riverboats, would tighten their slot machines.

Harrah’s rating

For the second time, Harrah’s Entertainment Inc. (HET) has been rated the top gaming company by Barron’s Weekly.

Used to grade the companies, Barron’s 500 measures the stock market return relative to the Standard & Poor’s 500; checks the median cash-flow return on investment for the past three years; reviews the forecast change in cash flow return on investment for this year, and evaluates the revenue growth over the past year.

The Barron’s 500 rankings compare the 500 largest U.S. and Canadian companies measured by sales. Central to the evaluation, the publication said, were "proprietary measure of cash flow return on investment, and the company’s capital, stripped of the effects of inflation and accounting procedures that might distort earnings."

Trending downward

Washoe County hotel/motel room occupancy continued its downward pattern in April, according to figures released by the Reno-Sparks Convention & Visitors Authority.

For the period, occupancy fell to 66.4%, down from 71.3% in April 2002.

And the percentages may have been distorted by the "comped rooms" number since the actual paid rooms percentage fell by 11.5%, the Authority reported.

Occupancy figures are broken down into five categories with hotel rooms, numbering 342,769, comprising the large majority. The Authority said that of this number, the April occupancy rate this year was 72.1%, down from last year’s 78.6%.

Beginning this week, the area is expected to feel more competition as the Indian-owned casino, to be operated by Station Casinos Inc. (STN), is opened near Sacramento, Calif., always considered part of the Reno marketing area.

The Insider

A change in the tax rate in Illinois caused shares in Penn National Gaming Inc. (PENN) to drop 12.4% last week, making it the ninth worse weekly performer for stocks that sell for more than $5.

Another stock affected by the Illinois tax rate increase, Argosy Gaming Inc. (AGY) had its rating elevated by Prudential analysts. They raised the shares from a "sell" to a "hold."

International Game Technology has announced a 4-1 stock split and a cash dividend. The shares will split at the close of business on June 18.

The Iraqi War caused a slowdown in tourism in Nevada during the month of April resulting in a decrease of 6.9% in gaming revenues. The first decline in nine months for Nevada casinos also was caused by poor weather in the northern part of the state. Total revenue for the month was $744.6 million.

The U.S. District Court in Nevada has ruled that American Wagering Inc. (BETM.OB) has to pay interest on a judgment only since the court decision was announced. A successful litigant had wanted $1.5 million in interest on a judgment of $2.3 million but the courts said that was disallowed by the court. The company has accrued $328,624 in interest.

Live dog racing at Lincoln Greyhound Park in Rhode Island may end if the state’s lawmakers eliminate a 5.5% share of the video lottery terminal revenue that is targeted for racing purses.

Troubled Aristocrat Technologies Inc., the U.S. division of the Australian gaming machine manufacturer, announced that the N.J. Casino Control Commission has approved its slot machine platform for ticket in/ticket out functionality.

May turned into a record performance for Youbet.com Inc. (UBET). Total amount wagered during the period came to $27.6 million, easily topping the previous high of $20.9 million.

GTECH Holdings Corporation (GTK) has entered into a three-year contract extension with the Michigan Bureau of State Lottery.