Big Strip gamblers enjoy record profits — downtown slumps

Wednesday, Feb. 5, 1997 | 11:59 a.m.

CARSON CITY -- The big casinos on the Las Vegas Strip are getting richer while the tiny clubs are suffering bigger losses.

And downtown Las Vegas casinos had their worst profit performance in the last five years.

The state Gaming Control Board Tuesday released the "Nevada Gaming Abstract," which shows the 229 casinos in Nevada earned $1.3 billion in net income before federal income taxes and extraordinary expenses. It was a 10.6 percent profit on sales.

But the 19 megaresorts on the Strip posted a 16.2 percent profit on their sales, chalking up a record $981.8 million in net income. That's the highest profit percentage, in at least the last five years for these major resorts. And it compares with a 13.5 percent profit on sales in fiscal 1995 when these clubs registered $778.4 million in profits.

But the eight smaller locations on the Strip lost $21.7 million or a loss of 28 cents on every dollar of sales.

"This is the concept of bigness is more profitable," says gaming consultant Donald McGhie, former chief operating officer of Bally's in Las Vegas in 1986-87. "This shows the big ones are getting all the action. Their room rates are up and so is their occupancy." The report said the room occupancy at these 19 major casinos was 94.7 percent.

"The big casinos are drawing them away," said McGhie of Reno.

Gaming Consultant Ray Koon of Las Vegas said the smaller places do not realize the same benefits from the more than 30 million visitors to Southern Nevada every year. "You've got casinos that are fine tuning their marketing effort and that's coupled with an increase in visitor volume," he said.

The major hotels, which have gross income of more than $72 million a year in gaming, are the "direct beneficiaries," said Koon, who added that the smaller clubs depend mainly on locals.

The mid-sized hotel-casinos on the Strip, which gross between $12 million and $72 million a year in gaming, earned $13.5 million in profits before income tax and extraordinary expenses. That's 1.9 percent. But it's a better performance than a year ago when they lost $5.1 million.

In downtown Las Vegas the 18 casinos registered $20.4 million in profits or a 2 percent on sales. That's down from $78.3 million or 8 percent in fiscal 1995. "That's pretty weak," McGhie said. Room occupancy was 92 percent for the year.

The construction in downtown of the Fremont Street Experience hurt business. And this light show is adding expenses that come off the bottom line. "It was a time of depression," Koon said about the construction period that took up half the year.

Statewide the 10.6 percent profit on sales is "not much difference than other businesses when plotting it on a curve," said McGhie. "In areas where there is no competition or a restricted number of casinos, their earnings are much higher and they tax them more."

Of the 229 casinos included in the report, 64 of them are publicly owned and they grossed 74.9 percent of the revenue.

The report said the 10 casinos in Laughlin rolled up $84.4 million in net income or a 10.6 percent on sales. "Laughlin is holding its own," Koon said. "The gaming revenues may be down but revenues from food, beverage and rooms are holding up." He said the Hilton is building a new major boat dock, the first "construction of any consequence in Laughlin in the last two or three years."

Koon said Laughlin has also started a direct marketing program to bolster its business.

The 20 clubs on the Boulder Strip posted $58.2 million in net income or 12.1 percent on sales. And the 44 clubs in the balance of Clark County reported net income of $31.5 million, or a 3.3 percent margin.

The report said the 45 casinos in Washoe County posted $106.4 million profit or a 6.4 percent return on sales. The casinos at the South Shore of Lake Tahoe in Douglas County had $58.2 million in net income or 11.1 percent on sales.

The 13 casinos in Elko County posted $13.8 million in profits or 4.8 percent on sales. The report said there was $2.1 million in net income in the nine casinos in Carson City, a 2.1 percent on sales.