The Nevada State Gaming Control Board recently released gaming revenue and profit numbers for September 2009. It’s time to stop saying the sky is falling.
For almost two years, twenty-one months to be exact, Las Vegas has seen gaming revenue and profit dip from the previous year. How is that good news, you might ask. Well, according to the September 2009 Nevada Gaming Revenues and Collections Report released by the Nevada State Gaming Control Board yesterday, things aren’t as bad as some news reporters might have you believe. Comparing September 2008 to September 2009, revenue decreased less than 3.6% for Strip casinos. For the year, revenue is down less than 8% for Strip casinos.
And for the first time since March of this year, total statewide gaming revenues topped $900,000,000.
That’s not bad. The casino business is a high profit enterprise. A monthly drop of less than 3.6% in revenue and a year-to-date drop of less than 8% isn’t that bad in these tough economic times. How many real estate brokers, accountants, lawyers, plumbers, electricians and carpenters would be ecstatic if their revenues were only down 8% for the year?
But the Strip is kind of an anomaly. It’s doing better than the rest of Nevada, which I take as a particularly good sign since tourism on the Strip supports more ancillary businesses than anywhere else. Statewide gaming revenues were off about 9% from last September, which is roughly in line with the year-to-date lag of 10.28%. A 10% drop in business is not good, but is it really adding up to the “death of Vegas” as some news reports have suggested? I don’t think so. I contend that the tourism industry in Las Vegas is not suffering as much as we are sometimes led to believe. If you’ve been to any of the major casinos on the Strip recently, especially on the week-end, you know what I mean. Sure people are spending less. But the days of ten bucks for a cup of coffee and upwards of forty bucks for a buffet never should have existed in the first place.
In case you think I might be looking at this recent economic news through rose colored glasses (or paying too much attention to the Cavs/Magic game on right now) look at some of the stock prices of some of the key players in our town. In early March, shares of Wynn Resorts were trading around $15/share. Today it closed at $66.54. Also in early March, shares of MGM were trading in the $2-3 range and today MGM closed at just under $11. Boyd Gaming, Bally Technologies, Shuffle Master and Global Cash Access (the company that runs most ATM’s in casinos) have enjoyed similar recent multiples in their stock price.
Sure not everything is rosy. Gaming on the Boulder Strip saw an almost 30% decline from September 2008. However, for the year they’re down just over 8.5%. The balance of Clark County excluding downtown was also hard hit in comparative Septembers, but I suspect that has something to do with the Station Casinos bankruptcy. It’s curious that the statewide revenue drop was just under 9% and yet the Nevada’s percentage fee collections (gaming tax) dipped over 14.5%. Either someone’s not paying their bill or there is some fancy accounting going on. However, for the year, State fees are down in proportion to the overall decrease in revenue (~10%) so I’m not going to call in a favor from the local CSI team just yet.
Overall, the belt-tightening certainly continues. But I see reasons to be optimistic. If the guys at the top of the salary food chain tighten their belts in accordance with the decrease in revenue, overall viability of operations shouldn’t change for most of our key businesses in town. It’s when companies saddle themselves with huge executive compensation packages, interest payments on private equity buyouts and unwarranted expansion that their bottom line tanks.
Looking at earnings from operations is the key to running a good business and I suspect it’s those earnings reports that are driving up the stock prices of our key players.
As for the State of Nevada bemoaning the loss in gaming tax, I know where we can save 10%. Stop tearing up our perfectly good roads for unnecessary construction projects! There was nothing wrong with St. Rose Parkway. There was nothing wrong with the Spaghetti Bowl or the 93/95 freeway between Henderson and downtown. There was nothing wrong with the I-15 or 215W either.
So that’s my good casino news for the day. I’m convinced that at least most of the casinos in this town have returned to focusing on their customers and that recent economic data supports the fact that it’s beginning to work. Unfortunately, a 10% decline in revenues still seems to utterly baffle our city and state government officials so that bad news express will probably continue.
At least Vegas is still a thriving tourist destination.
Let’s just hope the Little Darlings Stripper Mobile that debuted out on the Strip this past Monday night made the national news. Sin City needs to recognize what it is and stop trying to use Salt Lake City as a “moral” benchmark. We aren’t Disney World. We’re an oasis in the desert built on the bones of old gambling halls, shiny sequins and unbridled enthusiasm. And our core business, upon closer inspection, seems to be doing just fine.
Now for some bad news. I can’t seem to pick three out of five winners in the NFL. So, this week, I’m going to limit my picks to just three simple games.
WEEK #10 NFL picks:
Broncos -4 at Washington
Steelers/Bengals over 41 1/2
Saints/Rams over 50
Last week: 2-3
Remember to cover your parlays with a straight-up bet or two!