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Howard Stutz

Strip gaming revenue sees very slight decline in July

13 September 2010

LAS VEGAS, Nevada -- You could surmise that one hand of baccarat allowed Strip casinos to report a positive month in July.

Roughly $12,000 is all that separated the Strip's gaming revenue comparison between July 2010 and July 2009.

"I'd say that would be a smaller wager on baccarat," said Michael Lawton, the Gaming Control Board's senior research analyst.

Nevada gaming revenues fell 4.9 percent in July, the state's fifth consecutive monthly decline. The control board Friday said casinos statewide won $829.7 million from customers in July, compared with $872.7 million in July 2009.

Year-over-year, Nevada gaming revenues have now declined in six of the seven months that have been reported in 2010 and are down 1.7 percent.

However, on the Strip, which accounts for more than half of the Nevada's gaming revenue totals, casinos collected $461,348,781 in July and $461,336,799 a year ago -- a difference of $11,982.

Baccarat once again factored into the Strip's bottom line.

Casinos won $73.5 million from the game, an increase of 9 percent compared with a year ago. Gamblers wagered $736.7 million, which was an increase of 39.6 percent.

The hold percentage -- the amount casinos won versus what was wagered -- was slightly under 10 percent, compared with about 12 percent last year. Lawton said the hold percentage was much better than June's 3.51 percent figure, which sent the Strip to a gaming revenue decline of 6 percent.

Analysts said the Strip gaming revenues, coupled with a 4.7 percent increase in visitation during the month, was a somewhat positive sign.

"While the trends are modestly bullish, they are less than 50 percent of the revenue generated by Strip properties," said Jefferies & Co. gaming analyst David Katz. He added that revenue per available room, a nontraditional measurement, is a larger driver of profitability than casino revenue.

Lawton said that if there are some positive takeaways from July, it's that the overall declines are smaller and not the double digit drops experienced in 2009. Three of the seven months reporting from Strip have been positive, including a nearly 33 percent jump in February.

For the first seven months of the year, Strip gaming revenues are up 2.2 percent.

Revenues from table games statewide was $291.4 million, up 3.5 percent, while slot machine revenues were $525.5 million, down 9.1 percent.

"The average customer plays slots," Lawton said. "The coin in has been in single digit decreases in 2010, and July was the smallest decrease we've seen this year."

With July ending on a weekend, Lawton estimated that about $28 million in some slot machine revenue reports will fall into August. He said the statewide decline would have been just 1.7 percent if the funds had been counted in July.

The biggest challenge, analysts said, are the Las Vegas locals markets.

Clark County casinos on a whole collected $693.4 million in gaming revenues during the month, 5 percent less than a year ago.

Downtown casinos saw gaming revenues decline 19 percent, casinos in North Las Vegas suffered a 23.6 percent decline, gaming revenues from Boulder Strip casinos were off 16.9 percent and the casinos in the Balance of Clark County suffered a 12.7 percent revenue decline.

Wells Fargo Securities gaming analyst Dennis Farrell Jr. said Las Vegas residents continue to deal with elevated unemployment levels and depressed household wealth, which has affected their spending habits.

Katz, in a report to Jefferies' clients, said the results in markets outside the Strip were not encouraging.

"These markets' performance support our view that the locals markets continue to search for a bottom and are not indicating recovery in the near term," Katz said.

Nevada gaming taxes collected in August based on the July revenues was $49.9 million, a decline of almost 13 percent compared with $57.3 million a year ago. For the first two months of the fiscal year, gaming tax collections are down 9.8 percent.