Las Vegas may not be immune to economy
LOS ANGELES (Reuters) - Las Vegas Strip casinos, largely immune to past U.S. recessions, may be more susceptible to the latest round of weak consumer sentiment, according to executives and an industry analyst.
"It's hard to ignore a lot of the bad news that's out there. Clearly the consumer is a little bit stressed," said Dan D'Arrigo, chief financial officer at casino operator MGM Mirage (MGM.N).
"There are some risks on the casino side that are starting to rear their heads right now," Deutsche Bank analyst Bill Lerner said this week at the Reuters Travel and Leisure Summit in Los Angeles.
He said weakness is already being felt at "high-frequency" gambling venues like regional riverboats and Vegas casinos that cater to local residents.
The U.S. gambling market actually grew during past recessions, most of which coincided with major increases in gambling capacity. In the early 1980s Atlantic City was starting to build out, and in the early 1990s the riverboat casinos of the Midwest and U.S. Gulf Coast were opening.
The recession early in the current decade was unique because of the attacks of September 11, 2001, after which consumers made a relatively quick comeback to Vegas, Lerner said.
"This time, maybe it's different," the Deutsche Bank analyst said, citing the consumer confidence crisis, strains of the war in Iraq and the fact that no new casinos are slated to open in the near term.
The Las Vegas gambling industry, while not immune to recession, is "recession resistant," said William Weidner, chief operating officer of casino operator Las Vegas Sands Corp (LVS.N).
"One of the last things people want to do is stop enjoying themselves," he said.
Steve Wynn, chief executive at Wynn Resorts (WYNN.O) said during a conference call with investors on Tuesday that his company had yet to feel the impact of the U.S. economic slowdown, but cautioned: "I don't think we are immune from such things."
Las Vegas Sands Corp's Weidner said the Las Vegas Strip, where Sands recently opened the Palazzo resort adjacent to its Venetian hotel-casino, still offers "a real bargain" compared to some other travel options.
Domestic vacation destinations in general are more appealing to Americans given unfavorable foreign exchange rates and gambling has always been "attractive," Weidner said.
Weidner said Sands experienced "almost no" impact from the slower U.S. economy through last year, but said that in the first quarter of this year "we feel a bit of it."
MGM's D'Arrigo said the operator of Strip resorts like the Mirage and Circus Circus was seeing weakness in low-end "value" properties and the meeting business.
He also said Las Vegas was relatively resilient to a weak economy but not immune from recession.
"There is a little bit of softness in some of the value properties" in Las Vegas, the MGM executive said.
D'Arrigo told Reuters that MGM's full-year 2008 "revenue per available room" could trend down a bit, given the strong growth that has been posted in recent years, although it is too early to tell for certain.
Sands' Weidner said his company still expects positive room revenue growth this year.
D'Arrigo said MGM's high-end business, driven in large part by international gamblers, continues to perform very well, and that is balancing some of the weakness at lower-end properties.
He said that that the convention and meeting business, which accounts for about 20 percent of the company's Las Vegas hotel business, is slowing. Meeting lengths are being shortened and companies are sending fewer conventioneers, although gatherings are not being canceled, he added.
(For summit blog: summitnotebook.reuters.com/)
(Editing by Gary Hill)
