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Casino, Hotel, Airlines Stocks Clobbered as Dow Suffers Record Decline

Casino, hotel and airlines stocks had one of their worst trading days ever Monday when the Dow Jones industrials recorded their biggest ever single-day point drop after last week's market closures prompted by the terrorist attacks on the World Trade Center and Pentagon.

Casino giants Mandalay Resort Group, Park Place Entertainment and MGM Mirage — with an estimated two thirds of the Strip's hotel rooms — saw their stocks sustain a 20 percent to 26 percent decline in value.

Shares of Southwest Airlines, the No. 1 carrier into McCarran International Airport, fell 24 percent to $13 a share. America West Holdings, parent company of the No. 2 carrier into McCarran, saw its stock value fall 65 percent to $3 a share.

"Within the leisure sector, the question was: 'Does the company depend on air travel?' If it does, they were hit hard," said Andrew Zarnett, a Deutsche Banc Alex. Brown casino industry analyst.

The 30-company Dow index fell 684.81, or 7.1 percent, to close at 8,920.70, surpassing the previous one-day point drop of 617.78 set on April 14, 2000.

The Nasdaq composite index fell 115.75, or 6.8 percent, to 1,579.55, a level not seen since Oct. 14, 1998 when it closed at 1,540.97.

The Standard & Poor's 500 index, the broadest measure of Wall Street, declined 53.77, or 4.9 percent, to 1,038.77.

Las Vegas-based Harrah's Entertainment, which last year generated about 60 percent of its casino revenue from regional riverboats, experienced a more modest 14 percent drop in stock price to $24.60, down $4.11 for the day.

Locals casino giant Station Casinos, which draws its business from Las Vegas-area residents, experienced a 10 percent decline in stock price to $10.98. down $1.27 for the day.

"We think this demand shift with nervousness to airline travel is probably going to be with us for three to six months," said Harry Curtis, a Robertson Stephens casino industry analyst. "We will be engaging in a war, which by definition raises questions about airlines security."

Park Place Entertainment announced Monday it will postpone construction of a 29-story hotel tower planned for Caesars Palace because of the slowing economy and the economic uncertainty created by the attacks and the resulting talk of war.

Word also circulated throughout the financial community that Venetian parent company Las Vegas Sands Inc. will postpone construction of a previously announced 1,000-room hotel tower at the megaresort. A Las Vegas Sands spokesman failed to return a phone call seeking comment.

Credit Suisse First Boston financial analyst Brian Egger said he had received questions from investors attempting to gauge which lodging and gaming companies are more dependent on fly-in travelers than others.

An estimated 46 percent of the 250,000 visitors in Las Vegas on any given day arrive through McCarran International Airport. About one third of the visitors drive in from Southern California.

"This is a major event that will change the way people travel and work," Egger noted.

Such expectations saw shares of:

—Mandalay Resort Group fall $4.90, or 26 percent, to $19.

—MGM Mirage fall $6.31, or 22 percent, to $22.

—Park Place Entertainment fall $1.92, or 20 percent, to $8.

The declines came on the heels of a weekend in which some Strip hotels had occupancy rates of as low as 50 percent. Their typical weekend occupancy rate is close to 100 percent.

The trend prompted talk of possible layoffs by the largest casino operators, although representatives of MGM Mirage and Mandalay Resort Group have denied such talk.

MGM Mirage, which operates the MGM Grand, Bellagio and The Mirage, among its holdings, does expect to cut back the number of standby workers called in daily.

Meantime, executives at the Las Vegas Convention and Visitors Authority, the city's marketing arm, is expected to redirect its message to a regional crowd in Southern California and Arizona rather than East Coast and international markets.

Las Vegas draws about 9 percent of its estimated 37 million visitors from the East Coast.

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