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Howard Stutz

Nevada economy edging closer to stability

8 May 2009

LAS VEGAS, Nevada -- If you're looking for some positive news within March's 11.6 percent decline in Nevada gaming revenues, we have some.

The drop was the 15th straight month gaming revenues have tumbled in Nevada and the sixth consecutive month of double-digit declines. However, the percentage drop was the lowest during the past six months and the smallest monthly percentage decrease since September, when revenues fell 5.4 percent.

The total gaming win of $918.2 million, compared to $1.038 billion in March 2008, was the largest single-month total since September's $1 billion.

Gaming revenues fell 9.8 percent in all of Clark County but North Las Vegas had $31.9 million in gaming revenues, a 9.7 percent jump that was attributed to the November opening of the $675 million Aliante Station.

"The percent decline this month is a sequential improvement from recent months, which is consistent with recent commentary from Las Vegas operators that the market may have begun to stabilize," Susquehanna Financial Group gaming analyst Robert LaFleur told investors Thursday after the Gaming Control Board released the monthly totals.

On the Strip, casino revenues fell 12.3 percent to $456.1 million, compared with $519.8 million reported a year ago. The Strip numbers reflect the December opening of the $2.3 billion Encore.

Frank Streshley, chief of the control board's tax and license division, said the feedback he has heard from casino operators is that signs are pointing toward stability in the local market. He said the March statewide decline was below the average monthly decline for the previous five months.

Meeting and convention cancellations have slowed and advance hotel room bookings have increased, an indication that potential customers are considering trips to Nevada.

"We're still reporting 2004 gaming revenue-type numbers, so we have a ways to make up," Streshley said. "Going forward we're going to be comparing numbers where gaming revenues declined in the double-digit range every month. So, it seems we're getting close to the bottom, or very, very close."

Analysts are debating different signs of market stabilization. Jacob Oberman, director of gaming research for the Global Gaming Group of CB Richard Ellis, said in a note to customers that several factors need to be reached before he's ready to say the Las Vegas gaming market has stabilized.

"The answer to that question depends on the definition of stabilize," Oberman said. "If the definition is that year-over-year comparisons have dropped the most they are going to drop, the answer is probably yes. If the definition is revenues improving on a seasonally adjusted basis in the rest of 2009 compared to first quarter of 2009, the answer is maybe."

Oberman called the March results "a pretty decent month for Strip gaming revenue."

For the first three months of the year, gaming revenues compared to a year ago are down more than 14.7 statewide and almost 17 percent on the Strip.

Gamblers wagered $10 billion on slot machines in March, a decline of 13 percent from a year ago, and $2.2 billion on table games, a drop of 7.8 percent. Together, the total amount wagered was off 12.1 percent.

Baccarat wagering was up 28.6 percent during the month, although, the hold percentage was just 7.2 percent, 3 percentage points below the normal hold percentage, meaning the baccarat win of $33.5 million was down 4.5 percent.

"The casinos essentially played unlucky as players won more than they normally do," LaFleur said.

March didn't include many special events, other than the annual NASCAR race and the March 1 opening of the $1 billion M Resort.

The new casino is located in Henderson and its revenues are figured into the Boulder Strip category, which includes the Boulder Highway casinos and Henderson. For the month, Boulder Strip reported gaming revenues of $79.4 million, a 4 percent decline which was the second-lowest decline in Clark County numbers.

Washoe County recorded its 21st straight month of declining gaming revenues. Overall, the Northern Nevada county was down 23.3 percent while casinos in Reno were off 26 percent.

Gaming taxes based on March revenues declined 8.7 percent from a year ago. The state collected $74.7 million in gaming taxes, compared with $81.8 million in the same month last year. For the fiscal year, gaming tax collections are off more than 15 percent.