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Howard Stutz

Nevada gaming revenue at 2004 level

12 August 2009

LAS VEGAS, Nevada –- Nevada's monthly gaming revenues have sunk to levels not seen since 2004.

And analysts said there's no telling how low the bar will fall.

"We're still hearing from the casino operators that weekends are doing well, but filling rooms during the middle of the week is an issue," Frank Streshley, chief of the Gaming Control Board's tax and license division, said Tuesday after the agency released gaming revenues for June. "People are coming, but they are just not spending."

Nevada casinos collected $818.2 million from customers during June, a 13.8 percent decline from $949.3 million collected the same month a year ago.

The total was the lowest monthly figure since July 2004, when casinos won $813 million from gamblers. June was the 18th straight monthly decline as the gaming industry continued to be hampered by the sagging economy.

On the Strip, gaming revenues fell 14.8 percent in June to $414.5 million, compared with $486.4 million last year.

For the first six months of the year, gaming revenues are down statewide almost 13.5 percent, while the money won from gamblers on the Strip is off 14.7 percent.

June marked the end of fiscal year 2008-09 and gaming revenues for the 12 months were almost $10.8 billion statewide, a 13.7 percent decline from $12.5 billion in 2007-08. On the Strip for the fiscal year, gaming revenues declined 15.3 percent to $5.65 billion, compared with $6.67 billion in the previous fiscal year.

In a report to investors last month following a visit to Las Vegas, Macquarie Securities gaming analyst Joel Simkins said regional casino markets would recover sooner than gambling destinations like Las Vegas or Atlantic City. On Monday, Atlantic City said gaming revenues in July declined 12.7 percent while two regional markets, Indiana and Missouri, showed increases during the month of 4.2 percent and 4 percent, respectively.

He said the regional markets will benefit from an improvement in any unemployment trends.

"Eventually Las Vegas will have a steady, measured recovery," Simkins said. "However, with a more staggered wave of supply in future years we think competitive pressures on room pricing and gaming volumes will remain high. It could be many years before we see 2006-2007 level operating metrics."

Streshley said June is traditionally a light month for gaming revenues. The double-digit decline, however, was the result of gamblers not spending as much money as they have in the past.

The amount wagered on slot machines was $9.1 billion, off 10.7 percent. Meanwhile, gamblers bet $1.8 billion on table games, a decline of 12.7 percent. Streshley said the table games handle was the lowest single-month total since November 2003.

Brent Pirosch, who analyzes the gaming industry for the Las Vegas office of CB Richard Ellis, said if the decline in home prices continues to slow, that could signal a turnaround for the locals gaming market.

"If home prices do continue to stabilize, we expect to return to more traditional metrics to gauge gaming revenue," he said.

The state collected $45.7 million in gaming taxes based on the June gaming revenues, a 13.5 percent decrease from $52.8 million collected during the same period last year.

There was one bright spot on the Strip. High-end play increased for the second straight month despite the absence of special events that normally correlate with a boost in baccarat volume.

Gamblers wagered $367 million on baccarat, an increase of 13.3 percent from a year ago. Casinos won $47.7 million from the game, an increase of 6.5 percent.

Susquehanna Financial Group gaming analyst Robert LaFleur said gaming revenues on the Strip would have been off more than 18 percent if it wasn't for the increase in baccarat play.

"This is consistent with commentary from Las Vegas operators during second quarter conference calls that reported higher-end play is holding up better than the rest of the market," LaFleur told investors.