June has proven to be the cruelest month for the casino industry on a number of economic fronts.
A combination of
factors, including rising gas prices and skyrocketing airfares has hurt the Las Vegas tourist trade.
Airline passenger arrivals are down 1.8 percent for the year and visitation
from California has dropped 4.8 percent,
leading to a Las Vegas
room price decline of 4 percent from 2007 numbers, according to the Associated
Press. Las Vegas
convention business attendance is also down by at least 7 percent, according to
Vegas residents are feeling the pinch of declining
real estate values and rising food costs, and are apparently responding by
curtailing their visits to locals casinos. Overall, Las Vegas gambling revenues are reportedly
down 3.7 percent for the year.
In addition to gambling less, Las Vegas residents and visitors appear to be
spending less on dining, shopping and going to shows, a major concern to casino
resort operators who now earn upwards of 60 percent of their revenue from
“This is the toughest [economic] environment we’ve
faced,” Gary Loveman, CEO of Harrah's Entertainment told The
Wall Street Journal. Indeed, the economic situation has proven
too tough for some, with two casino resort operators - Tropicana Entertainment
and Greektown Holdings - filing for Chapter 11 bankruptcy protection this
would seem to concur with Loveman’s assessment, as evidenced by the way they
are dropping out of casino-related stocks. According to the Las Vegas Review Journal, citing
information from the Applied Analysis Gaming Index, nine of 10 publicly traded
gambling company stocks lost value in June. Las Vegas Sands fell 19.2 percent
in June to an average price of $57.38 compared with May. MGM Mirage was down
15.4 percent for the month with an average trading price of $42.22. Boyd Gaming
Corp fell 14.6 percent in June to $15.14. Wynn Resorts fell 12.4 percent on the
month to $91.41.
of these stocks, this is their lowest valuation since 2006.
Wall Street investment firms have responded in kind. Key
Banc Capital Markets has downgraded its estimates and buy recommendations for
MGM Mirage, Wynn Resorts and Las Vegas Sands. Moody’s Investors Service has
downgraded 17 casino companies this year.
also fear stock prices could fall even farther, especially if the Las Vegas economic slump
continues beyond this year. Gaming companies reportedly have $41 billion
invested in Las Vegas
resorts currently under construction, which will create an additional 30,000
new rooms by 2012.
Casino stocks dip as slowdown grips gaming
August 1, 2008