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First Quarter Tough for Casinos

LAS VEGAS --Volatile Strip room rates and shortened booking windows made operations difficult in the first quarter, but growth in room-rate revenue will still likely top expectations, Wall Street data show.

For the first quarter as a whole, the average midweek room rate increased 5 percent from last year and 2 percent from 2001, said Joe Greff, gaming analyst for Fulcrum Global Partners, an independent Wall Street investment research firm. Average weekend room rates increased 7 percent compared with 2002, but fell 2 percent from 2001.

"First-quarter results benefited from very easy comparisons and strong convention activity. First-quarter (room rate) results are in line to slightly above our expectations," Greff said.

Room rates in the first week of March, driven by Sunday's NASCAR race, were strong, Greff said. The beginning of the NCAA men's basketball tournament, college students' spring break and convention business will drive rates during the last week of the month.

For the week of March 24, the average midweek room rate on the Strip increased to $144, up 50 percent from the year before and up 10 percent from 2001, according to data from Fulcrum. The average weekend rate increased to $219, up 30 percent from the year before and up 10 percent compared with 2001, the data showed.

There are 13 events scheduled for the week with an expected 118,600 attendees compared with three events with 9,100 attendees last year.

But in mid-March, room rates are proving very soft because of weak convention business - even with the opening of the new Mandalay Convention Center - compared with last year.

The main reason for weaker results in the week of March 17 was "the absence of several large events that took place in the comparable year-over-year period, most notably Conexpo, which had 109,000 attendees, and continued concerns over a possible war in Iraq," Greff said.

For the week of March 17, the average midweek room rate on the Strip tumbled to $117, down 46 percent from 2002 and down 45 percent from 2001.

The average weekend rate for the same week fell to $248, down 6 percent from the year before, but up 14 percent from 2001.

There are 14 large-scale events in Las Vegas this period with a total of 71,300 expected delegates, compared with nine events in the same period last year with 180,100 delegates.

"Convention business has been key in keeping rates at or near where they were last year," said Brian Gordon, spokesman for Applied Analysis, a Las Vegas-based financial consulting company. "The real question will be whether the gaming revenues are also there. Convention business can distort expectations with higher room rates but less casino business."

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