US slump deals bad hand to gambling
JAMES PACKERS publicly listed gambling company, Crown, and the poker machine maker Aristocrat are bracing for the impact of the strong economic headwinds undermining US casino earnings.
In the past fortnight, the owner of the iconic Tropicana casino in Las Vegas has filed for bankruptcy and four of the USs largest gambling companies have reported earnings slumps.
Most market observers said the falls illustrated that the industry was not as recession-proof as it liked to think.
But some believe Crowns interests in US casinos could be protected from the worst of the downturn because they target local gamblers rather than top-drawer visitors from out of town.
One analyst predicted gamblers would choose to play at their local casinos rather than fly to Las Vegas, a move which would be good for Crowns racetrack-casino in Pittsburgh, Pennsylvania. Crown also caters for local gamblers at its three casinos on the outskirts of Las Vegas.
Boyd Gaming, which mainly runs casinos catering to Las Vegas residents, said earnings at these casinos fell 11 per cent.
Crown paid $2 billion for the Las Vegas and Pittsburgh properties in December, and has since spent a further $414 million to buy stakes in the giant privately owned Harrahs Entertainment and Stations Casino Group.
Aristocrat Leisure has already warned that a declining US economy has reduced gamblers appetites, and sales to its biggest market this year will be more than 20 per cent below expectations.
The company has started a cost-cutting and efficiency drive, a move mirrored by the US giant MGM Mirage, which operates the Bellagio, Mandalay Bay and Circus Circus resorts in Las Vegas, after it saw first-quarter profits fall 30 per cent.
Wynn Resorts saw first-quarter earnings at its Las Vegas casinos fall by nearly 40 per cent, while Las Vegas Sands blamed lower tourist numbers for its poor results.
However, gambling companies with casinos in Macau are somewhat protected, with earnings in the Chinese enclave still strong.
Las Vegas Sands, with 19 per cent of the Macau market, saw first-quarter revenue at its Sands Macau casino fall 23 per cent, but this was mainly due to the opening of the rival MGM Grand Macau in December.
Wynns Macau casino saw revenue growth of 61 per cent and gained market share in April to give it 18 per cent of the Macau market - equal to Crown.
Macau revenues this month are expected to have been boosted by "golden week" public holidays in China over the first week of May.
2008-05-27
