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http://www.nytimes.com/2007/12/27/business/27gambling.html?_r=1&hp&oref=slogin
The New York Times
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December 27, 2007
Las Vegas Wins Big
By GARY RIVLIN
The sparkling gambling palaces that line the Las Vegas Strip are intended to disconnect visitors from the realities of ordinary life.
But nowadays Las Vegas is even managing to sever itself from a jittery economy causing conniptions among retailers, restaurateurs and other consumer-oriented businesses — including the rest of the casino industry.
Gambling revenues on the Strip are up this year — way up in recent weeks. Despite higher energy prices, a volatile stock market, a slumping housing market and fears the economy may be heading into a recession, some of the city’s largest casinos are on pace for a record-setting year. In October alone, gambling revenues on the Las Vegas Strip were up 19.8 percent over the same month last year.
By contrast, casinos elsewhere are not proving so resilient. From the riverboats of the Midwest and tribal casinos scattered across the country to gambling halls in less exotic parts of Nevada, operators are reporting slowing growth rates in recent months. In a number of places, revenues are actually down, sometimes by 5 percent or more.
The differences reflect a wider disparity within the economy. Businesses in a variety of sectors that attract the most affluent customers and take advantage of foreigners from countries with strong currencies who are drawn to the glitter of Las Vegas and Manhattan are doing very well, while those dependent largely on middle-class buyers are having a harder time.
In Las Vegas, one extra factor has been a booming Chinese economy, as wealthy Asian players are risking — and losing — money in record numbers inside the city’s most exclusive V.I.P. lounges.
And the whole industry enjoys one advantage over its counterparts among discretionary spending activities: the propensity of people to gamble despite harder times, or perhaps because of them. But even there, Las Vegas appears to be the big winner, perhaps because many gamblers prefer an occasional big splurge in the city where “what happens here, stays here,” to a routine evening of playing the slots.
“We’re seeing slowing growth in many markets across the country,” said Joseph R. Greff, a gambling industry analyst for Bear Stearns. “But I’d still say gaming is in far better shape than retail, restaurants or other discretionary consumer spending areas.”
Some of the softening can be attributed to factors beyond anxiety over Wall Street gyrations, a precarious housing market and the like. Gambling revenues in Atlantic City have fallen more than 5 percent through the first 11 months of the year; the fall has been even steeper in the most recent months. That decline, though, can be attributed largely to increased competition from the slot parlors that have opened in eastern Pennsylvania and New York over the last year.
Across the country casino operators point to consumer worries, along with higher gas prices, as factors explaining a drop-off in revenues.
The two major Indian casinos in eastern Connecticut, for instance, the Mohegan Sun and Foxwoods, were both down in slot-machine play for October and November. Slot revenues at Mohegan were down 3 percent during those months and fell 7 percent at Foxwoods.
“What we’re seeing is with consumer confidence down and people feeling not so good about their own net worth, people are spending less,” said Mitchell Etess, chief executive of the Mohegan Tribal Gaming Authority. “Declines are somewhat unprecedented for us.”
In the Upper Peninsula of Michigan, where the Sault Ste. Marie Tribe of Chippewa Indians operate five small casinos, revenues have mirrored the price of gas: when prices have risen, profits have fallen, Michelle Bouschor, a spokeswoman, said.
“Gasoline prices are having an impact on a lot of the drive-to markets, especially in the more remote areas,” said Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno.
But even some commercial casinos on the edge of urban area are feeling the pinch. Admissions were down at the St. Louis area’s three Missouri casinos in November, for instance, when compared with the same month last year, as were revenues.
“Instead of the steady growth we’ve been used to seeing, you’re seeing a lot of choppiness,” said Adam Steinberg, a gambling analyst with Morgan Joseph, an investment banking firm. “One month revenues will be up, the next they’re down.”
That is prompting casino companies to pay more attention to the broader economy.
“We’re closely watching consumer confidence,” said Pauline Yoshihashi, a spokeswoman for Pinnacle Entertainment. She described the performance of Pinnacle’s six casinos, all of which are located outside Las Vegas, as a “really mixed bag.”
Keith Foley, who follows the gambling industry for Moody’s, says that the unusual declines at some casinos are “definitely something for us to keep an eye on.” But he cautions that “so far we’ve only got a couple of months worth of data to look at.”
And then there is Las Vegas, which just goes to show how much it continues to defy its prophets of doom.
“Our numbers are up, up, up,” said William P. Weidner, the president of Las Vegas Sands, the parent company of the Venetian. With 4,000 rooms, the Venetian ranks as the one of the world’s largest hotels, yet it has been operating at an occupancy rate of 98.6 percent, he said.
The Venetian is set to add 3,200 suites in mid-January, with the formal opening of its Palazzo tower. Despite the big expansion, Mr. Weidner is confident his property will continue to operate at or near capacity.
“Much of our gambling revenues are driven by very high-end foreigners, especially out of Asia,” Mr. Weidner said. “And the Asian economy has not really been affected by the fallout from subprime mortgages. We’re doing a lot of outreach to areas around the world that are economically healthy.”
That trend is most evident at the baccarat tables at the Venetian and other large properties in Las Vegas. Baccarat, the preferred game among many Asian players, produced four times more revenues for Strip casinos in October than in the same month last year, and it now competes with blackjack as the top table game.
International tourism is also crucial to the MGM’s success, said James J. Murren, the president of the MGM Mirage, which operates 10 large properties on the Strip, including the Bellagio.
“We feel the impact of a stressed consumer and concerns over everything from housing to oil to discretionary income falling,” Mr. Murren said. “On the other hand, we’re able to take advantage of a weak dollar. America is on sale, and so international tourism is up.”
Robert
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