Las Vegas may not be immune to economy

LOS ANGELES (Reuters) - Las Vegas Strip casinos, largely immune to past U.S. recessions, may need more than luck to avoid succumbing to the latest round of economic weakness.

"It's hard to ignore a lot of the bad news that's out there. Clearly the consumer is a little bit stressed," Dan D'Arrigo, chief financial officer at casino operator MGM Mirage (MGM.N), said this week at the Reuters Travel and Leisure Summit in Los Angeles.

Deutsche Bank analyst Bill Lerner said weakness is already being felt at "high-frequency" gambling venues like regional riverboats and Vegas casinos that cater to local residents.

"There are some risks on the casino side that are starting to rear their heads right now," Lerner said.

The U.S. gambling market actually grew during past recessions, most of which coincided with major increases in gambling capacity. In the early 1980s, New Jersey's 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 its different," he said, citing the consumer confidence crisis, strains of the war in Iraq and the fact that no new casino markets 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.

Las Vegas is often said to be resistant to a slower economy because "so much of our business is booked far in advance," Steve Wynn, chief executive at Wynn Resorts (WYNN.O) said during a conference call with investors on Tuesday.

However, "it would be unsophisticated to think that Las Vegas is somehow a magical island unto itself, immune or isolated ...," he said.

Weidner said the Las Vegas Strip, where Sands recently opened the 3,000-suite Palazzo resort adjacent to its Venetian hotel-casino, still offers "a real bargain," compared to some other travel options.

He and other travel executives said domestic vacation destinations often are more appealing to Americans than overseas travel, with its unfavorable foreign exchange rates and cumbersome document needs.

Weidner said his company experienced "almost no" impact from the slower U.S. economy 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 in its meetings business.

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/)

(Reporting by Deena Beasley; editing by Carol Bishopric)