Casino rebound stalls

Cy Ryan and David Strow

Thursday, May 9, 2002 | 11:06 a.m.

Gamblers' losses declined nearly 6 percent in Nevada casinos in March, marking the sixth time in the last seven months that casinos' monthly gaming win has fallen in the state.

The state Gaming Control Board reported this morning that Nevada's casinos won $807.1 million in March, a decline of 5.7 percent. On the Strip, gaming win fell 9 percent to $395.2 million. In both instances, a big factor was a sharp decline in high-end play on the Strip.

The numbers were viewed through two prisms. One was the perspective of the gaming investors and analysts, who have been bidding up gaming stocks to historic highs following a stronger-than-expected recovery.

The general opinion of Wall Street analysts -- the March report is largely irrelevant, since virtually every gaming company has already reported first quarter earnings.

"From a Wall Street perspective, it's in the past," said Bear Stearns gaming analyst Jason Ader. "For the most part, it's already in the stock prices."

But there's a second backdrop as well -- the looming deadline in contract negotiations between Strip casino operators and the Culinary Union. One of the key arguments Culinary officials have been using during the growing tensions is that Strip casinos have bounced back strongly from Sept. 11. This morning's report could provide the casinos with ammunition to combat that argument.

Bill Bible, president of the Nevada Resort Association, said the report provided evidence that the Strip has not recovered. Bible said at the same time the revenues are declining, expenses are going up in such areas as utilities.

"It is very difficult, if not impossible, to approve the wage increase being sought by the unions," Bible said, who said such demands didn't jive "with economic reality."

"These (March gaming win) are disappointing numbers," Bible said.

Initially, the report appears to be a setback for casinos. In February, the gaming industry posted its first growth since Sept. 11, with state gaming win rising 7.8 percent. On the Strip, win increased 7.4 percent in February.

But February's numbers were skewed by a calendar fluke. The Super Bowl fell in February this year, as did Chinese New Year. By comparison, both high-roller holidays fell in January in 2001.

Take January and February together, and gaming win was down about 10 percent.

"Vegas is coming back, it's improving, but it's not back yet," said Larry Klatzkin, gaming analyst with Jefferies & Co. "I expect full recovery by year-end."

One less Sunday during March 2002 also hurt results, Klatzkin said.

One of the biggest factors in the down month was a 52.1 percent decline in baccarat -- the game of choice for Las Vegas high rollers. Frank Streshley, senior research analyst for the board, said the total amount wagered on baccarat was $102.5 million, the lowest since February 1993.

"You had a lot of pent-up demand (from high-rollers), and a lot of that demand came for Chinese New Year or the Super Bowl," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown. "That pulled demand ... that could have occurred later on. You're getting very lumpy periods of play, which will take the better part of the year to settle out."

Still, other casino games also showed declines as well. Slot win, for example, dropped 3.4 percent to $537.3 million.

Winnings from blackjack were down 2.6 percent; craps fell 1.5 percent; roulette was off 10.6 percent; sports pool revenue dropped 33.1 percent and basketball win was off 14.4 percent, despite "March Madness."

On the Strip, where most baccarat play in the state occurs, baccarat win fell 52.9 percent.

Casinos along the Strip reported blackjack revenue fell 5.7 percent; craps rose 0.5 percent; roulette fell 13 percent; and slot machine win dropped 4.2 percent.

Streshley said March started strong in Las Vegas with the NASCAR races and play during the NCAA's basketball championship tournament. But it fell off at the end of the month during Easter week, which he called one of the slowest weeks of the year.

Still, the general consensus from analysts was that Las Vegas would continue recovering. Zarnett noted that executives from several companies have said April was a stronger month than March. Recovery to pre-Sept. 11 levels should occur by the summer, Zarnett predicted.

"We're almost there," Zarnett said.

"April and May will be more meaningful," Ader said. "The numbers look like they should pick up a bit. They'll still be down, but in the low single digits."

Downtown Las Vegas casinos reported gross revenue at $59.8 million, down 4.4 percent. Slot win declined 6.2 percent but game revenue rose 0.7 percent.

North Las Vegas clubs reported $16.4 million in revenue during March, a drop of 23 percent from a year ago. Slot win fell 25.1 percent and game revenue was off 9 percent.

For the first time in the last four months, Laughlin clubs reported an increase. They grossed $57.3 million, up 4.9 percent from a year ago. Slot win rose 5.7 percent and table revenue was up 1.1 percent.

The Boulder Strip casinos registered $52.3 million in gross win, up 5 percent. This is the fourth straight month of positive growth, Streshley said. Slot win rose 2.6 percent and table win jumped 20.3 percent.

Casinos in Mesquite recorded their fifth straight month of double-digit growth, reporting winnings of $11.4 million, up 19 percent. Slot win was up 12.4 percent and game and table revenue jumped 54.8 percent.

Casinos in the balance of Clark County registered $63.2 million in gross win, down 1.9 percent. Slot win fell 1.6 percent and game revenue was off 2.1 percent.