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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Casino revenue in Nevada, on the Strip retreats slightly in 2014

2 February 2015

LAS VEGAS -- Casino totals in Nevada and along the Strip took a slight step back in 2014.

Gaming revenue collected by casinos ended a four-year upswing last year as the state's largest industry continued its recovery from the recession.

Casinos statewide collected just more than $11 billion from gamblers in 2014, the Gaming Control Board said Friday.

The figure was a 1.1 percent decline from 2013. A year earlier, Nevada's $11.1 billion in gaming revenue marked for the first time state casinos cracked the $11 billion mark since 2008.

The Strip's decline was more pronounced.

Gaming revenue fell 2.1 percent to $6.37 billion, which also ended four straight years of annual increases.

Analysts were quick to point out that gaming revenue doesn't tell the entire story of the Nevada's economic recovery, especially on the Strip. Gaming revenue growth continues to be outpaced by customer spending in nongaming areas, such as hotel rooms, dining, retail and other entertainment.

The recently released Gaming Abstract showed Strip casinos increasing total revenue in the last fiscal year by 5 percent and with nongaming spending accounting for 63.3 percent of the overall figure.

"Strip revenues were down. More importantly, the nongaming outlook in Las Vegas remains positive," Wells Fargo Securities gaming analyst Cameron McKnight told investors.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said a spike in convention and meeting business at the end of 2014 was expected to carry into 2015, a good sign for companies such as MGM Resorts International, which operates some of the Strip's largest resorts.

J.P. Morgan gaming analyst Joe Greff said despite the gaming revenue decline, he maintained a positive outlook for the Strip.

"The overall room rate and visitation driven recovery will continue throughout 2015," Greff said.

However, analysts also said the year-end report drove down the stock prices of several Nevada gaming operators.

Shares of MGM Resorts were off 70 cents or 3.47 percent to close at $19.48. Las Vegas Sands Corp. was down $1.08 or 1.95 percent to close at $54.37 while Caesars Entertainment Corporation was off 82 cents or 7 percent to close at $10.89. Wynn Resorts, Limited declined $5.02 or 3.28 percent to close at $147.95.

There were bright spots in the state in 2014, including Clark County. Downtown casinos collected $511.4 million in gaming revenue, 2.1 percent more than in 2013. North Las Vegas casinos grew gaming revenue 1.9 percent to $263.9 million.

Reno casinos saw a gaming revenue increase of less than 1 percent to $552.1 million.

In December, gaming revenue fell 8 percent in Nevada as a whole to $950.7 million and was down 16.4 percent on the Strip to $555.2 million. On the Strip, gaming revenue fell for the fifth straight month, while statewide, the number has been off four of the past five months.

Analysts knew December was going to be a challenging month for Strip casinos. In December 2013, the Strip collected $664.2 million from gamblers, the market’s second-highest single-month revenue total on record.

Baccarat also told the story for the Strip in 2014.

In December, revenue totals from baccarat declined 39.3 percent to $148.1 million. The amount wagered on the game fell 14.5 percent to $1.3 billion. The hold percentage on the game during the month — what the casinos kept based on what players wagered — was 10.99 percent, compared with 15.4 percent in December 2013.

Deutsche Bank gaming Carlo Santarelli said the Strip's single month decline in December would have been just 3 percent if baccarat was removed from the picture.

"Given a difficult December baccarat hold comparison, and volatility around New Years Eve, we do not find the result to be overly surprising," Santarelli said.

For all of 2014, Nevada collected $1.5 billion from baccarat, which was a decline of 5.9 percent compared to 2013, which marked a single-year record. The year also ended five consecutive years the state has increases in baccarat revenue. Baccarat wagering in 2014 grew 1.9 percent to $12.1 billion.

Union Gaming Group analyst Chris Jones said Strip casino operators with exposure in Macau have experienced diminished baccarat play.

"We expect other Strip operators to feel the pinch of a slowing Asian gaming business," Jones said.

One bright spot in Nevada in 2014 was sports wagering.

Revenue of $227 million was an increase of 11.8 percent over 2013 and an all-time single year record. Gamblers wagered $3.9 billion on sports during the year, an increase of 7.7 percent. The amount bet on sports by Nevada casino customers has increased annually in each of the five previous years.

Analysts credit technology, such as mobile sports wagering applications for smart phones and tablet computers, and in-game wagering, which allows customers to bet on games that are in progress.

In December, gamblers placed $427.3 million in wagers on sports, which was a record for that particular month. In November, gamblers wagered a single-month record $535 million on sports.

"Sports betting is one of our better growth stories," said Nevada State Gaming Control Board Senior Research Analyst Michael Lawton.

In January, the state collected $43.7 million in gaming taxes based on December's gaming revenue totals, an increase of almost 23 percent over a year ago. For the first seven months of the fiscal year, gaming tax collections are up 1.9 percent.
Casino revenue in Nevada, on the Strip retreats slightly in 2014 is republished from Online.CasinoCity.com.