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Vegas slump hits Station Casinos

With operations concentrated here, its fate closely tied to local economy

Tuesday, May 13, 2008 | 2 a.m.

Station Casinos has historically reaped impressive gains by putting most of its eggs in one basket.

The risky strategy has paid off previously for Station, which bought up most available casino sites in Las Vegas, where neighborhood casinos are limited by state law, and benefits from population and job growth.

But the housing slump, which has disproportionately affected Las Vegas, appears to be hurting Station more than companies that own casinos outside of Las Vegas, such as Harrah’s Entertainment.

On Monday, Station reported that first-quarter operating profit fell 11 percent on revenue of $352 million, which declined 5 percent from a year ago and a drop-off that has widened since the fourth quarter of last year, when Station began reporting slower business.

Station executives say the hurt is temporary and the company’s performance and market position will improve.

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After 9/11, some regional casinos around the country fared better than those in Las Vegas as customers, reluctant to travel, stuck closer to home.

Now one analyst wonders whether the weakening economy is an opportunity for regional casinos, which have spent billions upgrading their properties, to capture market share from Las Vegas and Atlantic City as budget-conscious travelers forgo big trips in favor of nearby joints.

This trend could prove a wash for companies such as Harrah’s Entertainment, which benefits by pitching Las Vegas vacations to customers it cultivates at casinos in smaller markets nationwide.

In Las Vegas, the company’s casino revenue fell 4 percent and operating profit fell 8 percent in the first quarter while other regions, such as Atlantic City and the Gulf Coast, reported increases in profit driven in part by upgrades.

One possible example of this trend is the opening of the company’s racetrack casino in Chester, Pa.

The new casino and the partial opening of a new hotel tower at Harrah’s in Atlantic City led to profit gains in the company’s northeast region, though profit was lower than it might have been as revenue shifted from Atlantic City properties to Pennsylvania, where gaming is taxed at a higher rate, Harrah’s Chief Executive Gary Loveman said Friday.

Boyd Gaming Corp. revenue fell 6 percent and operating profit fell 11 percent in the Las Vegas locals market. Those figures were worse for the entire company (down 9 percent and 18 percent, respectively) in part because of the company’s Blue Chip casino in Michigan City, Ind., where business has been disrupted while it undergoes a major expansion. Excluding Blue Chip, revenue in Boyd’s Midwest and South region would have been about the same as a year ago — some evidence that business, for some regional casinos, isn’t all that bad.

“Even when the economy improves, travelers might decide that the fancy place closer to home is a fine substitute for the traditional gambling meccas,” said Keith Foley, vice president of Moody’s Investor Service.

It’s unclear whether Las Vegas and Atlantic City have been more negatively affected by the slowdown than smaller casino markets, where gaming revenue has also declined, however, he said.

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As other companies wonder where they are going to raise billions for their next casino resort or worry about paying high interest rates, MGM Mirage recently held a meeting in Dubai with banks to discuss financing the remainder of the company’s ownership in CityCenter, a task the company expects to wrap up by the end of June.

MGM Mirage President and Chief Operating Officer Jim Murren said last week that banks appreciate the company’s strong credit position and welcome the opportunity to work with MGM Mirage’s wealthy partner, Dubai World.

While executives are bullish that they can raise cheap capital for CityCenter during these tough economic times, some analysts say the company could save even more money by borrowing its own cash to finish CityCenter rather than financing through a third party.

Discussion: 4 comments so far…

By rittergirl44

5/13/08 at 12:04 p.m.

Suggest removal

I played at Palace Station since 1985. Then Boulder Station when I moved in 1995. Then you could have a nice enjoyable 4 or more hour entertainment for yourself with $40.00. Now with the greediness of the brothers, I can't go with less than $500. to stay for 2 hours. It used to be the only place in town that gave you some play for your money. Instead of all these huge jackpots and promotions, why can't they just let everyone sit for a while and occasionally hit a royal. I have spent less money there now than ever because I resent the fact that it is typically legal robbery. If they went back to their original way of allowing people to feel good after a night out even if they lose, instead of insulting us by making us run out of money in less time than it took to get from the car into the building, maybe then people would come back. But it wont be done. Why? Because of their greed.
By azsk8fan

5/14/08 at 11:21 a.m.

Suggest removal

I agree with rittergirl44 - I won't even go to a Stations Casino anymore - they have really tightened up their slots. In 7 yrs. I've hit a royal everywhere BUT a Station Casino - and stay away from those 'guaranteed play' machines - take some time, do the math, and you'll come to understand what a rip-off they REALLY are!
By formerstationplayer

5/14/08 at 3:07 p.m.

Suggest removal

Stations touts itself as the best company to work for. How hippocritical. They do everything to cheat their employees on benefits and wages. They serve leftover dried out foods in the employee dining room and then they scam the players by having promotions that eliminate comps, prod the player into playing until his money runs out and have the audacity to have a marketing campaign that asks 'why would you play anywhere else?' The LVRJ reader polls are a scam as Stations stuffs the ballot box by encouraging employees to vote for Stations. How can Stations have the audacity of saying they have the best player rewards card? They don't even come close to Coast Cassinos.
By VegasResident

12/1/08 at 12:39 p.m.

Suggest removal

Basically put Station Casinos has become a ripoff. In theri quest to expand and pay debt they have done everything to drive away the locals. They took away the JumboJackpot by saying a better one was coming (still not around). You hardly ever see anyone win on any machine (as compared to the SouthPoint) and now it does not matter if you even have a Gold Card, you will probably not get any multipliers or free cash play anymore. Their customer service people told me the managment "reworked" the formulas and they do not even know any more what it takes it get the claendar of offers. so bottom line folks, let Stations take the fall until they realize what it takes for locals to come and play and it is not losing $20 in 4 minutes in a penny machines. Or playing $50 in a dollar machine without a single payout, or making the calendar of offers a mystery thing. I will not go back to Stations until they improve. At least at the SouthPoint people win, you get good incentives and you know how to get them.