Delayed numbers show big drop in gaming win

Cy Ryan and David Strow

Wednesday, Dec. 12, 2001 | 10:50 a.m.

Nevada casinos experienced their second-worst month in the last three years in October, and the hardest hit was the Las Vegas Strip.

It was the fallout from the Sept. 11 terrorist attack. Many conventions were canceled, high rollers generally stayed away and there was one less Sunday in the month.

Gov. Kenny Guinn backed down on his previous order to delay releasing to the public gaming tax information for the month and the state Gaming Control Board reported late Tuesday casinos won $769.7 million before taxes and business expenses. That's $41.5 million less than October 2000.

Casinos on the Las Vegas Strip reported winnings of $358.2 million, down 10.5 percent.

It was the biggest decline in at least three years, except for last February when win fell 7.7 percent statewide and 12.6 percent on the Strip.

Frank Streshley, senior research analyst for the board, said however the February figures were skewed because Chinese New Year's, one of the big gaming months in Las Vegas, fell in January this year instead of February.

This month was also a reversal of roles, said Streshley. Usually the Strip carries the state but October saw the clubs down on their luck. Excluding the Strip, gaming win would have increased 0.19 percent in the month.

Wall Street, however, gave a collective yawn to the report. Ancient history, many analysts said, given that most large Strip operators have already given some guidance on what to expect in October and the fourth quarter.

"What I saw didn't surprise me at all ... baccarat down a lot, table games a lot, slots a little," said Dennis Forst of McDonald Investments. "That's what you would expect with less people flying to Las Vegas ... and lesser quality players than before. The only surprise was that it wasn't worse."

Guinn had ordered the delay of the release of the gaming numbers until he had another report on sales tax receipts so he could see the affects of the economic slowdown on the state budget.

Guinn said he wanted a chance to analyze the whole picture, rather than giving piecemeal reports.

Guinn's Chief of Staff Marybel Batjer, asked about the governor's change of direction, said, "We had many inquiries asking us to release the figures. We wanted to apply additional analysis along with the sales tax revenues. However we realized there was great interest in the gaming number, so the governor decided to release the numbers and do the analysis when all the tax figures are available."

For Guinn, the report wasn't good news. The state has collected $225.9 million in gaming percentage fee taxes in the five months of this fiscal year, down 3.3 percent. The Economic Forum, upon which the state budget is built, forecast a 4.5 percent increase this fiscal year in gaming taxes. So that equates to a 7.8 percent shortfall so far.

The gaming report said revenue on table games fell 12.7 percent or $33 million, with baccarat was down 28.5 percent or $9.7 million.

Streshley said winnings from blackjack fell 20.5 percent or $18.9 million statewide; craps was down 4.7 percent and roulette dropped 28.8 percent. But gross revenue from slot machines fell just 1.5 percent.

Many analysts said slot win was actually better than expected during a month. Jason Ader, an analyst with Bear Stearns, suggested an increase in slot hold on the Strip could be evidence that operators are tightening their slots during the tourism downturn.

The board reported gross revenue from baccarat on the Strip fell 28.1 percent and blackjack was down 30.8 percent. Slot win dropped 3.1 percent.

Better than expected, Ader wrote -- but he warned investors this morning not to expect much strength in November or December. And he warned investors to be cautious about investing in big Strip operators at the present time, especially with recent run-ups in their stock prices.

"Even with several recent positive signs from the Strip, we believe valuations have become somewhat rich for the Vegas-centric operators, particularly in light of the recession, the seasonally-slower fourth quarter, the decline in air service and convention business and the continued discounting of room rates," Ader wrote in a research note.

Away from the Strip, downtown Las Vegas clubs suffered their first negative performance in 11 months. The board reported the casinos on Glitter Gulch had $58.9 million in revenue, down 2.6 percent.

The report shows that clubs on the Boulder Strip are almost overtaking downtown Las Vegas. They reported gross revenue for October of $56.2 million, up 5.3 percent.

After six straight months of declining revenues, casinos in North Las Vegas reported winnings of $19.6 million, a gain of 6.5 percent from a year ago.

The strength of the locals markets was another surprise for analysts.

"Logically, you would expect people would have pulled in their horns with the layoffs, but that wasn't the case," Forst said. "The local player continues to spend, and continues to go out. I guess the people who spend $10-$50 haven't changed their habits. It's the people who spend thousands of dollars."