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Howard Stutz

Nevada gaming revenues decline 8 percent in July, Las Vegas Strip down 14 percent

3 September 2013

LAS VEGAS -- At a glance, the Nevada gaming revenue figure for July looked promising.

However, baccarat results and a comparison to just the state’s second billion-dollar month in four years drove down the overall picture.

The Gaming Control Board said Friday casinos in Nevada collected $925.7 million from gamblers during July, a decline of 7.9 percent compared with $1.005 billion a year ago.

As for the Strip, gaming revenues fell 14.4 percent to $511.4 million, compared with revenues of $597.4 million in July 2012.

The July 2013 statewide raw number – $925.7 million – was the second largest single-month total this year. February’s figure of $1.073 billion was higher. The revenue figure for July 2012 was only the state’s second billion-dollar month since September 2008 and was fueled by exceptional baccarat wagering activity.

“We knew coming in that July was going to have a tough comparison,” said Control Board Senior Research Analyst Michael Lawton.

Analysts were quick to write off the revenue report.

“July’s softness on the Strip may come as a slight surprise, although we believe the majority of the weakness was caused by a difficult comparison,” Macquarie Securities gaming analyst Chad Beynon told investors. “We expect Strip revenues to accelerate in the upcoming months given comparisons, visitation trends and upcoming events.”

Baccarat wagering a year ago included the fourth-highest revenue figure ever for the state and the single-largest wagering total for the month of July. In addition, the hold percentage in July 2012 – the amount of wagers kept by casinos versus the money won by customers – was an unusually high figure.

For the record, baccarat revenue on the Strip in July 2013 was $115 million, a decline of 39.4 percent. The amount wagered by gamblers was $992.5 million, a drop of 16 percent. The hold percentage was 11.59 percent, compared with 16.1 percent a year ago. Analysts the casinos’ average hold percentage for baccarat is around 12 percent.

The $74 million year-over-year loss in baccarat revenue accounted almost all of the $86 million year-over-year loss on the Strip. Revenues from slot machines declined 5.5 percent on the Strip in July, which accounted for another portion of the decrease.

“July 2013 is yet another data point validating the thesis that Nevada gaming is increasingly living and dying on baccarat play,” David G. Schwartz, the director of UNLV’s Center for Gaming research told his followers on Twitter Friday morning.

Susquehanna International Group gaming analyst Rachael Rothman said shareholders of the major Strip gaming companies, such as Las Vegas Sands Corp., MGM Resorts International, Caesars Entertainment Corp. and Wynn Resorts Ltd., have gotten used to the up and down results stemming from baccarat.

Baccarat wagering could see a boost in September with the planned championship fight at the MGM Grand on Sept. 14 between Floyd Mayweather Jr. and Canelo Alvarez.

“Since baccarat trends are volatile and can turn on a dime and core comparisons ease up in August/September, we expect investors will overlook the weak gaming data as long as (revenue per available hotel room) trends continue to move in the right direction,” Rothman said.

For the first seven months of 2013, gaming revenues in Nevada are down 0.7 percent compared to 2012. Strip revenues are down 0.2 percent.

“There is no change to our expectation for a continued, but uneven, gradual recovery on the Las Vegas Strip,” JP Morgan gaming analyst Joe Greff told investors.

Lawton said July was the last “challenging month-to-month-comparison” Nevada casinos will face for the rest of 2013.

Clark County as a whole saw gaming revenues decline more than 9.6 percent during July, as increases from the Boulder Strip, Laughlin and the balance of the county helped diminish the dip.

The state collected almost $61.2 million in gaming taxes through Aug. 26, based on the July revenues figures, a decline of 9.4 percent. For the first two months of the fiscal year, gaming tax collections are down 1.2 percent.