Baccarat bails out Las Vegas

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Apr. 11, 2007 Copyright © Las Vegas Review-Journal

High-end play during February makes up for All-Star betting blight

By HOWARD STUTZ REVIEW-JOURNAL

February's hosting of the NBA All-Star Game brought to the Strip marquee athletes and big-name celebrities, as well as large crowds of visitors and volumes of national and international attention -- both good and bad.

What the festivities didn't bring was gamblers.

Nevada's gaming win for February was $1.055 billion, a 2.9 percent increase from $1.026 billion a year ago, according to figures released Tuesday by the Gaming Control Board. Analysts said the increase was attributable almost exclusively to large wagering by baccarat players, enticed to the Strip's high-end casinos for the 10-day Chinese New Year celebration. A year ago, the gaming win statewide jumped 12.8 percent compared to February 2005.

On the Strip, gaming revenues were $574.7 million in February, up 4.3 percent compared with $551 million a year ago. During the month, customers wagered $1 billion on baccarat, 54.3 percent more than was bet in February 2006. The casinos' total win from baccarat was $116.4 million, up $37 million or 46.9 percent from a year ago.

"Without baccarat, the total Strip win would have been down 2.9 percent," said Frank Streshley, senior research analyst for the gaming control board. "Baccarat was totally reflective of Chinese New Year, and that obviously helped the month. We had comments that the town was busy, but it just didn't escalate in the gaming win."

Gaming sources said the crowds of basketball fans associated with the NBA All-Star Game, it appeared, weren't interested in the casinos' slot machines or table games.

"Despite modest February revenue numbers on the Strip, we remain encouraged by the relative strength of the high-end market," Deutsche Bank gaming analyst Bill Lerner said in a note to investors. "We believe the softness in table games (excluding baccarat) and slot volumes might not only be a function of Chinese New Year, but could also have been negatively impacted by crowds in town for the NBA All-Star Game."

The NBA's four-day event, which included several lead-up games, a player-skills competition and a well-attended fan festival, was held in Las Vegas, the first time ever a non-NBA city hosted the event.

The game and surrounding activities fell on the same weekend as the start of Chinese New Year and the three-day Presidents Day holiday. Working in conjunction, the three events brought too many visitors to the city, analysts said.

"We kind of knew going in that it would create a problem, having so much happening on one weekend," Streshley said. "There is only so much capacity. If the events had all taken place on separate weekends, it would have been a banner month."

Casino operators, talking on the condition of anonymity, said fans attending the NBA All-Star Game frequented casinos' tony restaurants and trendy nightclubs, but otherwise shunned gambling activity.

Gaming win was off in most areas of the state during February. The total win from slot machines statewide was $634.1 million, down 2.1 percent from February 2006, while the win from table games was $408.4 million, up 11.5 percent which was attributed to baccarat. In total, customers wagered more than $14 billion statewide in February.

Gaming analyst Dennis Forst of KeyBanc Capital Markets said he wants to see how 2007 progresses.

"Of concern are two consecutive declines in Strip slot handle," Forst said in an investors note. "We have not seen that phenomena since 9-11. We want to monitor March's numbers. Also, table play other than baccarat has been lackluster the past two months, in our opinion."

Streshley said slot machine revenue has been soft the past three to four months, while table games have seen an increase from high-end play.

Gaming analyst Justin Sebastiano of Nollenberger Capital Partners said in an investors note that the baccarat numbers were a good sign for some casino operators.

"MGM Mirage generates about 80 percent of its revenue and (cash flow) from the Las Vegas Strip," Sebastiano said. "The strong baccarat numbers bode well for MGM in our opinion, given that the company caters to high-end customers, which typically sit at the baccarat tables."

Clark County reported gaming revenues of $901.8 million, a 3.7 percent increase from $870.1 million a year ago. However, other than the Strip, casinos in Mesquite (up 26.8 percent) and the balance of the county (up 14.7 percent), were the only other places reporting increases.

"The Las Vegas locals market results suggest that the new supply continues to be absorbed," Sebastiano said of the year-old Red Rock Resort in Summerlin and the 16-month-old South Point, which are included in the balance of the county results.

"Although concerns about market weakness related to overcapacity, market share shifts, and heavy promotional and marketing expenses are still present, we believe these results should help alleviate some investor trepidation," Sebastiano said.

Casinos in downtown Las Vegas posted a revenue drop for the ninth straight month. They won $50.7 million in February, off 6.2 percent from $54 million a year ago.