State casino win up modestly; LV locals market strong

Cy Ryan and David Strow

Tuesday, Dec. 12, 2000 | 11:23 a.m.

Nevada casinos showed modest gains in October, as winnings rose 1.98 percent to $811.2 million, the state Gaming Control Board reported today.

Though growth was not nearly as strong as has been seen in recent months, the uptick reversed a 3.79 percent decline posted by Nevada casinos in September. The September decline had sent ripples of concern through Wall Street, as some analysts grew concerned that the drop was a signal Las Vegas was finally slowing down -- and feared the impact an October downturn could have had on gaming stocks.

In the key Las Vegas Strip market, win rose 2.65 percent to $400.5 million.

Growth numbers would have been higher in October, had football bettors not cleaned up on sports books. And revenues were down in all games except baccarat.

Frank Streshley, senior research analyst for the board, said one reason for the sluggish performance was there was one less Saturday in the month compared to October 1999.

Casino winnings from football bets fell by 94.5 percent or $23.5 million. Streshley said casinos in October 1999 "held" 10.6 percent, but that number dropped to 0.72 percent this October, indicating the bettors were winning a lot more. The traditional hold in football is about 4 percent, Streshley said.

If sports betting was excluded from the statewide report, the industry gain would have been 5.6 percent instead of the 1.9 percent.

"Investors need to take that into consideration and adjust for that," said David Anders, gaming analyst with Merrill Lynch.

Gross revenue is computed before taxes and business expenses.

Though the report reversed the September decline, the numbers did little to shake gaming industry bulls and bears from their outlook on the industry.

"We're entering a modest growth environment, and given the lack of new supply, modest growth is fine," Anders said. "A lot of people were panicking over the September numbers, but this is a volatile business. This indicates to me that Las Vegas continues to chug along."

"With one less weekend, Nevada eked out growth, and that really shows underlying strength," added Adam Steinberg, gaming analyst with CIBC World Markets. "Rather than the beginning of a trend, it shows that last month (September) might have been just a hiccup."

But Southcoast Capital gaming analyst Daniel Davila turned bearish on gaming's growth prospects several months ago, arguing that the Strip's historic highs in room rates couldn't possibly be sustained. And the October numbers didn't change his mind.

"Nevada and the Strip were up enough to satisfy the nay-sayers for the near-term," Davila said. "But the real story is what happens next year, not what happens between now and New Year's.

"In the grand scheme of things, October doesn't have any bearing on what will happen next year, which is where the real story is. Pricing is at record levels in Las Vegas, and rate structures are at risk. Next year, returns will be anemic because of it."

Davila also wasn't as quick to discount the effect poor hold in sports books had on win.

"Unfortunately, you can't take the sports book out of it, because that's a product they offer," Davila said. "That would be like an oil company saying, 'Don't look at oil prices, we're doing pretty good anyway."'

Winnings from slot machines statewide rose 6.4 percent, or $32.7 million, but revenue from table games fell 5.9 percent or $16.5 million. Streshley said the only table game to show an increase was baccarat, where revenues rose 70.1 percent. The amount wagered on baccarat fell by 15.5 percent but the casino "held" 19.9 percent compared with 9.6 percent of a year ago.

The board reported blackjack fell 6.7 percent, craps was down 6.3 percent and roulette dropped 0.8 percent. Streshley said one less weekend day affects table games more than it does slot machines.

Casinos along the Las Vegas Strip, after a decline of 9.3 percent in September, reported winnings of $400.5 million, up 2.65 percent. Slot win rose 7.1 percent or $13.9 million but table games fell by 1.8 percent or $3.3 million. Baccarat rose 77.4 percent or $14.7 million but that did not offset the downturn in the other games.

Revenue from blackjack games on the Strip fell by 5.5 percent, craps dropped 10 percent and roulette showed an increase of 0.3 percent.

For the second straight month, downtown Las Vegas casinos recorded a drop in gross win compared to the same month of a year ago. The board said the clubs reported $60.6 million in winnings, down 0.6 percent. The last two months came after seven straight months of increased revenue.

Slot win in the downtown fell 1 percent and game and table win was off 5.1 percent.

North Las Vegas casinos reported winnings of $18.4 million, up 6.1 percent. Slot win rose 15.5 percent but table revenue was off 36.2 percent.

Boulder Strip clubs rebounded from a 3.2 percent decrease in revenues in September to report a gain of 14 percent. The casinos won $53.3 million or $6.6 million higher than a year ago. Slot revenues rose 22.3 percent but game winnings fell 24 percent.

The numbers from North Las Vegas and the Boulder Strip should be particularly encouraging for investors in Station Casinos Inc., Steinberg said.

"The local market remains very strong, and that's really good for Station and Coast (Resorts Inc.)," Steinberg said.

Coast is privately held, though its debt trades publicly.

After 24 months of growth, Laughlin casinos reported a drop of 3.3 percent in revenues to $45.6 million. Streshley said slot revenue was off.9 percent and games fell 16.3 percent.

The board said Washoe County casinos won $95.3 million, off 4.4 percent from a year ago. Slot machine play was off 2.9 percent and table win fell 9 percent.

The casinos on the South Shore of Lake Tahoe recorded winnings of $24.6 million, a drop of 13.7 percent. Winnings from slot machines were off 9 percent and table revenue fell 23.1 percent.

Elko County reported revenues of $20.2 million, off 4.8 percent. The board said slot win fell 1.9 percent and table games were off 15 percent.

Carson Valley casinos recorded $7.9 million in winnings, down 2.1 percent. Slot machine win inched up 0.9 percent but table revenues declined by 26.4 percent.