Las Vegas edges up, while Atlantic City and Illinois continue their declines

Everyone knows that 2009 was a brutal year for gaming revenues. The news wasn't good from Atlantic City to the Las Vegas Strip and beyond. International venues saw similar declines and more taxes. The first half of the year for Macau was bad, but a relaxation of visa restrictions in July sent revenues soaring once again.

So what was the over assessment of a year that most executives in the gaming industry would like to forget? We're beginning to get the picture.

Cautious optimism reigns supreme as Nevada's gaming win numbers indicated a small-but meaningful-increase in November. The 4.4 percent jump over November 2008 is reason to smile after almost two years of decreases. Because Nevada reports revenue nearly a month behind other jurisdictions, no conclusions can be reached on one month with a modest increase.

The state's casinos reported a total win of $873.2 million in November from $836.8 million in November 2008. Gaming win on the Las Vegas Strip rose 8 percent over the previous year. North Las Vegas and the Boulder Strip also saw increases. Meanwhile, South Lake Tahoe's gaming win dropped almost 27 percent, and Downtown Las Vegas saw a slight decrease of 1.7 percent.

"For the first time since December 2007, statewide and Strip gaming revenues were positive," J.P. Morgan analyst Joe Greff wrote, according to MarketWatch. "We think November's relative strength has been well understood by investors, but is encouraging nonetheless. After all, we note that the November calendar was unfavorable with eight weekend days in 2009 compared with nine in 2008, though the comparison was a relatively easy negative 14.8 percent."

The MGM Grand benefitted from the November 14 boxing match between Manny Pacquiao and Miguel Cotto, and after the gaming win numbers were released, Goldman Sachs upgraded MGM to buy from neutral, indicating that Las Vegas casinos may become more favorable investment options in the new year.

Gaming win this fiscal year is down by 7.9 percent overall, but December numbers are expected to spike due to the opening of CityCenter at the end of the year. Early January saw the Consumer Electronics Show, which could lead to strong January numbers as well.

"On the heels of a strong New Year's in Las Vegas, the Consumer Electronics Show in Las Vegas looks to have drawn about 6 percent more attendees than in 2009," Union Gaming Group analyst Bill Lerner told MarketWatch. "Multiple restaurateurs that we have spoken with are experiencing growth in key metrics such as covers and average checks. We are more confident that 2010 will represent the positive inflection in Las Vegas."

Casinos in other states did not fare as well in November. Several gaming jurisdictions, including Atlantic City, Illinois and Mississippi, reported decreases in November.

In Atlantic City, casino revenues were down for the third year in a row, with a 13.2 percent year-over-year decline-the first time the city has posted double-digit losses on an annual basis.

That said, the numbers for December could be viewed as encouraging-or at least, less discouraging. In the dead of winter, typically a sluggish time for the seashore resort, the city's 11 casinos were down just 9.8 percent over 2008. It was one of the few months in 2009 that had only a single-digit decline, according to the state Casino Control Commission. Slot revenue for the month fell 12.5 percent, but table game winnings were off just 4.3 percent.

In all, the city's 11 casinos won $3.9 billion in 2009, a 13.2 percent decline compared with 2008. Slot winnings were down 13.1 percent to $2.7 billion, and the table game win dropped 13.5 percent to $1.2 billion. The yearly decline-the worst since 1997-continued a trend that began in late 2006, when Pennsylvania opened its first slot parlor, Mohegan Sun at Pocono Downs.

All 11 casino hotels reported lower revenue in 2009. Borgata Hotel Casino & Spa and Trump Taj Mahal had the best numbers: single-digit losses in both cases. Bringing up the rear were the Atlantic City Hilton and Trump Plaza, which both posted a 22.9 percent revenue drop. The Harrah's properties-including Harrah's Resort, Showboat, Bally's and Caesars-accounted for 52 percent of the total revenue, according to the Philadelphia Inquirer.

Don Marrandino, newly appointed president of Harrah's Entertainment's Eastern Division, acknowledged that 2009 was "a tough year, a hell of a tough year" for the city. But, he added, "I'm encouraged. We had an encouraging December"-despite a record snowstorm that effectively shut down the city during one weekend.

Gaming analysts forecast no rebound for 2010 due to the ongoing recession and increased competition from Pennsylvania and Delaware slot parlors. Both states will be adding Atlantic City-style table games this year in a major expansion of their gaming industries.

"Anybody who thinks that 2010 will not be at least as challenging as 2009 is out of their mind," said Israel Posner, executive director of the Institute for Gaming Management at Richard Stockton College.

Full-fledged casinos in Pennsylvania "will definitely add another thorn in the side of a shrinking Atlantic City market," wrote gaming analyst Joel H. Simkins of Macquarie Securities in a note to investors. "With regards to Atlantic City, we continue to believe that not all of the 11 properties will be able to survive following the passing of table games in Pennsylvania."

Posner told the Atlantic City Press that the $2 billion Revel casino, slated to open on the city's Boardwalk in 2011, is "the sunshine peeking through the clouds."

Atlantic City gaming revenue has been in freefall since peaking at $5.22 billion in 2006. Revenue dropped 5.7 percent to $4.92 billion in 2007 and was down 7.6 percent to $4.55 billion in 2008.

And with some casinos-Trump Marina and the Atlantic City Hilton in particular-hitting historic lows for gaming revenues, there are serious predictions of complete collapse for some properties. Isle of Capri Chairman James Perry, a former Atlantic City casino executive, has predicted that in five years only six casinos will be operating in the Boardwalk town.

Illinois is not in much better shape, even tough overall, the regional casinos have fared better during this recession. State casino revenues declined for a third straight year in 2009.  Statewide casinos revenues went from $1.6 billion to $1.4 billion.

For example, the Empress Casino's revenue for the year was $120 million, compared to $184 million the year before. Harrah's Joliet Casino & Hotel saw its revenues go from $298 million to $279 million in the same period.  The Empress in Joliet, a Penn National property, which has maintained a fourth place in ranking of casinos in the state, also saw its ranking fall to fifth place. Jon Johnson, general manager of the Empress blamed unusually lucky players and big winners for the steep decline. But he also blamed the generally bad economy.

Johnson said he believes that next year will be a repeat of 2009, especially if the general economy doesn't improve, especially unemployment and housing.

When the decline began three years ago the casinos initially blamed the smoking ban that was adopted for all public places, and which included the casinos.

By Staff