Nevada casino profits reported to be down

Thursday, Feb. 15, 2001 | 11:52 a.m.

Highlights

Here are area-by-area details from the state Gaming Control Board's report on fiscal 2000 gross and net profits for 243 Nevada major casinos:

$496.8 million net, or 2.8 percent of $17.56 billion gross.

Clubs grossed $10.2 billion and netted $185.5 million.

Resorts grossed $1.1 billion and reported net profits of $29.2 million.

Clubs had a gross of $858.7 million and netted $53.1 million.

Clubs grossed $801.4 million and reported a net income of $50 million.

Resorts in other areas of Clark County grossed $1.49 billion and reported a net profit of $9 million.

Major clubs grossed $1.76 billion and netted $62.6 million.

Resorts grossed $220.3 million and netted $24.8 million.

Clubs grossed $533 million and netted $45 million.

Casinos grossed $325 million and netted $16.2 million.

Clubs grossed $129.4 million and netted $7.3 million.

Source: Associated Press

CARSON CITY --- While Nevada casinos are raking in more money, their profits have fallen to their lowest level in at least 16 years.

And for the first time since 1984, the profit rate in downtown Las Vegas casinos outpaced the Strip casinos.

The state Gaming Control Board reported Wednesday the 243 major casinos in Nevada registered $496.8 million in net income before federal taxes and extraordinary items in 2000, a decline of 43.3 percent from the prior fiscal year. That's a 2.8 percent return on revenue, the smallest return since 1984 when the board started keeping records.

These casinos account for more than 95 percent of the gaming revenue in Nevada.

Bill Bible, president of the Nevada Resort Association, said the report shows the "tough economic times" facing the casino industry. Bible, who was former state budget director and chairman of the control board, said this is the first time in his memory that the casinos had a smaller net income than the amount of taxes paid to the state.

In fiscal 2000, the casino industry paid $592.3 million in taxes to the state, about $95 million more than they recorded on net income.

And these net revenues, Bible said are before paying federal income taxes.

Part of the reason for the statewide decline in net income was that general and administrative expenses rose by 26.7 percent during the year. One big increase in this category was interest expenses, apparently being paid on the new hotels that opened along the Las Vegas Strip in fiscal 1999. That rose 51.9 percent.

Frank Streshley, senior research analyst for the board, said the report is compiled from unaudited figures submitted by the casinos. They show total revenue in 2000 reached $17.5 billion, or an increase of 14.1 percent. Of that, 53 percent came from the casinos; 18 percent from rooms; 12.8 percent from food; 5 percent from drinks and 11 percent from other categories.

The report shows the gambling itself is contributing a smaller share to the overall business. For instance in fiscal 1999, the casinos contributed 54.7 percent to total revenue. In 1990, the games and slot machines amounted to 61.3 percent of the total.

The report also confirms a study by the gaming association concluding that other industries in Nevada make "a lot greater profits" than the gaming business.

Bible also said that state policy makers should consider the report "very carefully" before imposing more taxes on the casinos. There are not many people paying more in taxes than they earn in net income, he said.

A big reason for the statewide decline was the Las Vegas Strip where profits dropped from $538.3 million or a 6.3 percent return in 1999 to $185.4 million or a 1.8 percent rate of return. The net revenue fell by 65.1 percent.

This was the fifth straight year the profit levels have fallen on the Strip. In 1999, the return was 6.3 percent and in the three prior years, it was all at the double digit profit levels.

General and administrative expenses at the 37 casinos on the Strip climbed 39.6 percent to $3.9 billion. Total revenue was $10.1 million. For the second straight year, casino revenue accounted for less than 50 percent of the total take. Streshley said gaming contributed 45.9 percent to the revenue. It was 48 percent in 1999. He said the declining contribution is due to the big increase in hotel rooms.

Room occupancy on the Strip was at 93 percent.

A breakdown shows the small or medium sized casinos posted a combined loss of $129.4 million, or a 15 percent loss on revenue. These are the 15 casinos that report less than $72 million in revenue. In contrast, the 22 larger hotel-casinos registered $314.9 million in net income or a 3.4 percent return on revenue.

Downtown Las Vegas was a brighter picture in 2000. Total revenues reached $1.1 billion, an increase of 0.1 percent. But profits rose to $29.2 million, up 256.6 percent from the prior year. The rate of return was 2.7 percent, compared to 0.7 percent in the prior year. The 18 downtown clubs reported a decline of 4.1 percent in their expenses.

Gambling in "Glitter Gulch" accounted for 61.1 percent of the total revenues, an increase from 60.9 percent of the prior year.

The board said casinos in Laughlin reported total revenues of $858.6 million, an increase of 8.7 percent. They posted $53.1 million in net revenue, a 35.4 percent increase from the prior year. That was a 6.2 percent return compared with 5 percent in 1999.

Clubs along the Boulder Strip recorded $801.3 million in revenues, up 7.3 percent. But their profits increased by 12.7 percent to $50 million. Their return on revenue was 6.2 percent compared to 5 percent in the prior year.

The report said Washoe County casinos had $1.9 billion in total revenue, up 10.3 percent. Their profits reached $87.4 million, up 13.7 percent or a 4.4 percent return on revenue.

South Lake Tahoe clubs posted a net income of $45 million, up 41.7 percent. They had an 8.5 percent return on revenue, the best in the state. Total revenues reached $533 million during the year ,up 2.4 percent.

The board said Elko County casinos reported $16.2 million in net income or a drop of 55.6 percent. Their rate of return was 5 percent. Carson Valley clubs registered $7.3 million in profits, up 18.6 percent for a return of 5.7 percent on revenue.

Streshley said that in the past, parent corporations that owned several casinos would not always report all of their interest expenses and other overhead costs. They would report only the expenses and interest directly attributed to each property.

In 1999, Board Chairman Steve DuCharme sent a letter to these corporations telling them to report all costs. That led to an increase in the expense and interest figures -- lowering Nevada casino profits, at least on paper.