Economist sees more gaming mergers, fewer new resorts

Grace Leong

Friday, April 20, 2001 | 11:20 a.m.

More mergers and acquisitions in the Las Vegas gaming industry are expected as financing for new resort growth becomes more difficult, an economist said Thursday.

That's because investment returns on newer Strip properties have lagged that of older properties so far, Wells Fargo & Co. economist Sung Won Sohn said at the unveiling of the 2001 edition of the reference publication "Las Vegas Perspective."

"Older properties like the MGM Grand have done better on historical returns compared to the newer resorts like the Aladdin. Financing may be getting difficult for new resort growth," the economist said.

While room occupancies in Las Vegas will likely decline should the nation slide into a recession, he noted the growth in Las Vegas room occupancies has continued to outstrip that of room inventories.

Room rate surveys are a key indicator of consumer demand for Las Vegas' gaming industry.

Las Vegas Investment Advisors, an investment firm specializing in gaming stocks, reports room rates have been declining since mid-February -- and were down more than 20 percent as of mid-April.

Gov. Kenny Guinn, also speaking at the event, reiterated a need to "expand Nevada's revenue stream, and reduce our dependency on the gaming industry as gaming revenues are declining.

"California has (as revenue sources) state and corporate income taxes and it is an exporter. But Nevada is just the opposite. We need to become exporters and can only do that with an educated workforce," Guinn said.