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ECONOMIC DOWNTURN IMPACTS GAMBLING

Analysts take a pessimistic view in the short term

Reports from the Las Vegas Gaming Wire and mainstream business news outlets are suggesting that times are already tough, and could become tougher, in the gambling industry due to weakening economic conditions.

The LVGJ reports that gaming revenues on the Las Vegas Strip fell 3 percent in February, with the sinking economy, high gasoline prices, airline troubles and other downbeat financial news causing casino customers to stay at home or hang on to discretionary income.

Deutsche Bank gaming analyst Andrew Zarnett painted a bleak picture for investors should Las Vegas visitation and gaming spending continue to suffer, when he opined: "Looking specifically to an individual property on the Strip, we believe a 10 percent decline in revenues, linear across the board, including room rates as well as casino play, will likely lead to an approximate 20 percent reduction in EBITDA."

Las Vegas casino operators, Zarnett said, have reduced labour hours. What follows will be a reduction in staffing levels to reduce costs, and this has already manifested itself in the 440 lay-offs announced by MGM Mirage this week (see previous InfoPowa report)

Investment firms downgraded gaming stocks recently. Quarterly earnings for the period ended March 31 are forthcoming, but analysts, are not predicting good news. "We see both regional trends and destination markets like Las Vegas and Macau below previous estimates," Wachovia analyst Brian McGill said.

Goldman Sachs gaming analyst Steven Kent said stock prices are weak and operating results over the next few quarters will be challenged.

In Connecticut, the Connecticut Day newspaper reported: "Slot revenues continued to decline at both the state's casinos during the month of March, but while the losses at Foxwoods Resort Casino continued to grow, Mohegan Sun experienced its smallest decline in recent months.

Foxwoods saw their revenues slip 12 percent from March 2007 to $60.8 million, while Mohegan Sun's numbers dropped 1.4 percent to $76.8 million compared to last year.

Both casinos continue to blame the economy for declines in slot revenues and pointed out that casinos in other markets, like Atlantic City, are also struggling with sliding revenues.

Due to the decline in slot revenues, the state of Connecticut will also see lower contributions this year as compared to last year.

Mohegan Sun sent $19.2 million to state coffers, about $264,000 less than last year, and Foxwoods sent $15.2 million to the state, about $2 million less than in March 2007.

Patrons at Foxwoods appear to have cut back on their spending at the casino as the amount of money they spent at the slots, or handle, decreased by 12 percent to $694 million.