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Las Vegas Room Revenues Improving

LAS VEGAS -- For the first time since the Sept. 11, 2001, terrorist attacks, the odds are improving for the gaming industry in Las Vegas.

"On a comparative basis with the U.S. lodging industry, the data are showing the gaming industry has achieved a full recovery," said Deutsche Bank Securities analyst Andrew Zarnett.

Revenue per available room at Las Vegas resorts, a key measure of demand, was up almost 10 percent in September compared with the year before and compared with an improvement of just more than 9 percent for the lodging industry nationwide.

"Las Vegas from the beginning of the year had trailed the U.S (lodging industry) really until September. That was the first month of real growth," Zarnett said.

Las Vegas was hit nearly twice as hard as the lodging industry nationwide, with revenues down almost 25 percent in January 2002 compared with the year before. The U.S. lodging industry, by comparison, dropped 13 percent in the same 12 months.

Generally, Las Vegas was hit harder because it is more than twice as dependent on leisure travel as the average American city, Zarnett said.

It was also particularly hard hit by a drop in convention business.

"Look at Comdex," he said. "It had (ticket sales of) 200,000 two years ago, but there may have been as few as 75,000 (registered attendees) this year."

Nationwide, overall lodging industry revenue per available room at the beginning of November was down more that 25 percent compared with 2000 and up only 4 percent compared with 2001, according to a Deutsche Bank analysis.

Revenue per available room statistics are not available for the gaming industry in Las Vegas before January 2001.

The performance of Las Vegas resorts improved steadily in seven of the subsequent nine months, but its improvement trailed the lodging industry nationwide until September.

The only anomaly was March, which was caused by strong convention and entertainment calendars.

"It's a great trend, very solid, not bouncing all over," Zarnett said.

"The downturn caused both by the events of 9-11 and the economy. Leisure traffic was impacted much more by the terrorist attacks and the concerns they generated," he said. "Business travel was hit both by that and the slowing economy.

Revenue per available room as part of a larger overall analysis helps to determine the strength of and demand for room product which is one of the cash registers generating cash for casino operators, he said.

Zarnett said it is important to realize the lodging industry nationwide is still weak and underperforming expectations set before Sept. 11.

"Clearly, there has been weakness in the Las Vegas market and customers have been taking advantage of lower rate offerings," he said.

"But I expect that we'll see stronger and stronger rate growth in 2003 because of recovery in the economy and the fact consumer confidence has bottomed," Zarnett said.

Total revenue projections for major operators in Las Vegas also indicate they are passing pre-Sept. 11 levels, according to data from independent Wall Street broker Fulcrum Global Partners.

Boyd Gaming, Harrah's Entertainment, Mandalay Bay Group and MGM Mirage all are projected to be nicely ahead of 2000 in 2002 and again in 2003. Only Park Place Entertainment Corp. and Station Casinos are projected still to be lagging.

For 2003, only Park Place is projected also to be lagging 2002.

Projections for 2003 range from a high of 9 percent growth for MGM Grand to a low of minus 1 percent for Park Place.

Fulcrum ranks Station, Mandalay and MGM Mirage its top picks for investors.

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