15 April 2008

Las Vegas - a good proxy for the US market

Las Vegas has been taking its knocks recently. The market is down. Over the last 4 months gaming revenues have fallen in 3 of them:

November -16.3%
December +4.1%(
January -4.1%
February -4.0%

February masks a probably worse number as it was a leap year so you should add 3.6% for the extra day.

Wall Street seems to agree - marking down several stocks. Major Las Vegas casino operators have seen their stock prices tumble in recent months. Boyd Gaming Corporation is down nearly 68%, the Las Vegas Sands Corporation is down 46%, Wynn Resorts Ltd. has fallen 38% and MGM Mirage stock is down 46%; all from records highs in 2007. Harrah's is running for the hills and changing its name to Caesars ( the second company to adopt the brand name!).

There is an ill here. All the recent development in LV has been at the ultra high end while the loss of rooms is at the low end. Sooner or later that model comes unstuck. I think we are there already. In 2002 the average Las Vegas room was in the $50s and $60s range. Now that number just 6 years later is doubled. This is unsustainable. What Vegas really needs - as in many cases is good value propositions. A value brand for the bulk business. Otherwise what usually happens in Vegas wont be happening at all.

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