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Arnold M. Knightly

GLOBAL GAMING REPORT: Casino revenue forecast to increase

22 June 2007

LAS VEGAS, Nevada -- New hotel rooms and emerging technologies are projected to boost Nevada's gaming revenue at a 7.5 percent averaged annual rate during the next five years, according to a global gaming report released Thursday by PricewaterhouseCoopers.

However, some gaming analysts call the projections too soft, considering the number of rooms scheduled to open during that time.

Casino revenue in the state is projected to increase to $18.2 billion by 2011, according to the "Global Entertainment and Media Outlook" for 2007-2011, a report that provides analysis and five-year market forecasts on various segments of different industries.

The report projected an 11.6 percent increase in this year with a 9.6 percent increase in 2008, driven by the openings of the 3,000-room Palazzo by Las Vegas Sands Corp. this year and the 2,000-room Encore by Wynn Resorts Ltd. in 2008.

The openings of MGM Mirage's CityCenter in 2009 and Boyd Gaming Corp.'s Echelon in 2010 would bring 10,000 more rooms.

Bill Lerner, gaming analyst for Deutsche Bank, said that if the numbers prove to be accurate there will be some concerned casino developers, considering current plans call to add 44,000 rooms to existing inventory by 2012.

"That kind of growth rate suggests a disappointment somewhere along the chain scale given the amount of supply that is in the growth pipeline," Lerner said. "It maybe some of the lower-end guys losing."

Jeremy Aguero, a principal at Applied Analysis, said the new rooms in the pipeline would suggest a more robust growth in revenue.

"Over the next five years gaming growth will need to exceed that (7.5) percentage to maintain the status quo," Aguero said. "That would be somewhat of a disappointing performance."

PricewaterhouseCoopers could not be reached for comment.

Slot machine technologies will continue to lure new players, growing revenue 6.9 percent to $11.6 billion during the next five years.

The ability of companies to control slot technology from a centralized location -- instantly changing the game based on popularity, altering the size of the minimum bet based on traffic -- will drive the revenue growth.

The new technology could offer incentives to nongaming activities or distribute bonuses to surrounding players if a single player wins.

While Macau has continued to make gains in revenue, the Strip generated close to $7 billion in revenue in 2006.

The city is still well-positioned as a domestic, international and convention destination, luring 38.9 million to the area.

The report said the declining value of the U.S. dollar contributed to the Strip's growth in international tourism offering not only gaming but entertainment options, luxury accommodations and amenities such as nightclubs, restaurants and spas.

Gaming revenue in the United States is expected to grow to $79.6 billion from $57.5 billion, a 6.7 percent increase, in 2011.

Growth in Asia Pacific is projected to increase to $30.3 billion from $14.6 billion on an average increase of 15.9 percent per year.

Revenues worldwide are expected to increase to $144 billion by 2011, pushed by new markets, new properties in existing markets and upgrades at existing properties.