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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Strip's best April since '08 helps reverse statewide gaming slide

1 June 2015

The Strip’s best April in seven years helped reverse a two-month gaming revenue slide in Nevada.

Casinos statewide collected $897.9 million from gamblers during April, a 5.39 increase compared to the same month in 2014. On the Strip, gaming revenue increased almost 7.8 percent to $498.8 million.

The Gaming Control Board reported the results Friday.

Analysts said the numbers for the month offered an positive sign for the market.

“The April results have the second quarter of 2015 off to an encouraging start for Strip operators,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said. “Furthermore, they support our constructive thesis on the Las Vegas Strip recovery story.”

Wieczynski said that a return to the Strip’s “pre-recession cash flows” was likely to be a “protracted multi-year process.”

Strip casinos have become less reliant on gaming revenue in favor of nongaming attractions, which accounted for almost 64 percent of the resorts’ overall revenue in fiscal 2014.

Several analysts cited positive figures in nongaming areas as a sign of recovery, including an improved convention market, increased airline capacity and growth in revenue per available room, a nontraditional measure used to gauge profitability.

For the first four months of 2015, gaming revenue is up 2 percent statewide and is up 1.7 percent on the Strip.

Control Board Senior Research Analyst Michael Lawton said every reporting market in the state — except North Lake Tahoe — saw gaming revenue increases in the first four months of the year.

In the first 10 months of the fiscal year, which ends June 30, statewide gaming revenue is down 1.4 percent and the Strip is down 3.7 percent. The state has seen just four gaming revenue increases in the last 10 months. The Strip has seen just three revenue increases in that same time period.

Macquarie Securities gaming analyst Chad Beynon pointed out that gaming revenue totals from April have historically accounted for just 7.6 percent of the Strip’s annual revenue figures since 2007.

“We note that April is one of the least-important months for Las Vegas,” Beynon said. “But the strong data is a definite positive for the region.”

April reversed slight downturns in February and March and comes ahead of May’s gaming numbers, which many predict could be a large month fueled by the May 2 fight at the MGM Grand Las Vegas between Floyd Mayweather Jr. and Manny Pacquiao.

However, May 2014 will be tough to beat. Gaming revenue that month grew 8.2 percent statewide and 17.3 percent on the Strip, fueled largely by an 85.5 increase in baccarat revenue.

Baccarat helped fuel the Strip’s increase in April. Baccarat wagering increased 14 percent during the month with $724.1 million bet on the game. The month marked the second consecutive increase in baccarat volume following six straight monthly declines.

Revenue from baccarat grew 5.3 percent to $95.2 million. The hold percentage — the amount casinos kept from gamblers — was 12.86 percent compared to 13.93 percent a year ago.

JP Morgan gaming analyst Joe Greff cautioned investors about the Strip’s baccarat results going forward.

“The market will (and) should continue to experience volatility in baccarat play given a likely slowdown in Chinese players,” Greff wrote in a research note. “That said, April baccarat numbers were encouraging.”

Total table game revenue on the Strip increased 4.4 percent to $232 million. Without baccarat, table game revenue would still have been up 3.8 percent.

Slot machine revenue on the Strip increased 11 percent to $262 million. The money gamblers wagered on slot machines increased 1 percent in April.

“Slot volumes are a key indicator of the mass market, so continued — though no acceleration in — growth is a positive,” said Wells Fargo Securities gaming analyst Cameron McKnight.

Downtown Las Vegas saw gaming revenue increase 12.6 percent, which was the only Clark County reporting area with a double-digit monthly increase. The Las Vegas locals gaming market experienced a combined revenue decrease of less than 1 percent, primarily due to an 8.3 percent decline along the Boulder Strip.

Casinos in South Lake Tahoe saw gaming revenue jump 60 percent during April, primarily due to the opening of the Horizon casino that was re-branded as the Hard Rock Hotel and Casino Lake Tahoe. The casino was closed a year ago.

Gaming taxes collected in May, which were based on April gaming revenue total, increased almost 11.6 percent to $53.4 million. For the first 11 months of the fiscal year, gaming tax collections are up almost 1 percent.
Strip's best April since '08 helps reverse statewide gaming slide is republished from CasinoVendors.com.