Older Strip resorts taking a hit

Gary Thompson

Wednesday, June 16, 1999 | 11:01 a.m.

Strip gaming revenues rose 6.1 percent in April, but apparently only the rich got richer.

In fact, revenues at older and smaller Strip resorts may have dropped as much as 15 percent from April 1998 as visitors migrated toward the spectacular new properties that have opened recently.

That's the conclusion drawn by Brian Egger of Donaldson, Lufkin & Jenrette in an analysis of the latest monthly report from the State Gaming Control Board.

"I'm not surprised to see a deceleration from the first quarter's robust revenue growth, but the latest numbers suggest a percentage decline for the lower-tier operators that was larger than we expected," Egger said.

"It's probably a little too early to say this is the beginning of a major deceleration, but the results were surprising because the large companies told us April wasn't that much different from the first quarter," he said.

In the first three months of 1999, Strip gaming win jumped 20 percent. But Egger's analysis indicated that if the estimated results from Bellagio and Mandalay Bay were excluded and the April numbers were adjusted for a normal hold percentage, same-store revenues for existing Strip properties fell 9 percent in April.

"When we spoke to the large companies" -- Mirage Resorts, Circus Circus Enterprises and Park Place Entertainment, which combined generate about 50 percent of Strip revenues -- "we found April drop was about flat with a year ago," Egger said.

"If the large properties were flat, then somebody obviously got hurt. The rest of the market might have been down as much as 15 percent.

"Some say there was bad luck involved, but the Strip played unluckier in April 1998," Egger said.

The larger Strip casino operators have told Egger May and June appear to be stronger than April. But growth in another key economic indicator -- revenue per available room (RevPar) -- is also likely to slow from the estimated 12 percent gains of the first quarter, Egger said.

Offering a somewhat different view was Jason Ader of Bear Stearns & Co., who said the deceleration of casino revenue growth is significant to Mirage, Circus, MGM Grand, Harrah's Entertainment and Park Place.

"Baccarat appears to be the primary reason for the slower growth in April as revenues decreased 21 percent, to $24.2 million, as a result of a 28.7 percent decrease in drop," Ader said.

"Meanwhile, the hold percentage increased to 13.8 percent from 12.4 percent last year. Both numbers are below the theoretical average hold percentage of close to 18 percent."

Ader said slot play was the "primary driver" of April's revenue gain, as drop rose 14.8 percent with no change in hold percentage.

"We remain optimistic about May's gaming revenue numbers due to the continued strength of room rates, the impact from the openings of Bellagio, Mandalay Bay and the Venetian and the growth of average daily airline seat capacity to Las Vegas."