Downtown gaming revenues see biggest gain in two years

The last time casinos in downtown Las Vegas reported a double-digit increase in their monthly gaming revenues was June 2008 -- which was also the last time gaming revenues actually increased in the troubled market.

So when Nevada gaming regulators released October's gaming figures Thursday, downtown's 10.3 percent increase, the area's first monthly jump in 27 months, was a surprise.

Statewide, gaming revenues grew 11 percent during October, Nevada's third straight monthly increase.

On the Strip, gaming revenues grew 16 percent, the sixth time in the last 10 months that casinos along Las Vegas Boulevard increased what they collected from gamblers compared with 2009.

For the first 10 months of 2009, gaming revenues are up 1 percent statewide while Strip gaming revenues are up 5.4 percent.

"We get the sense the path to a broader Las Vegas recovery is well under way," Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors. "While we're encouraged by today's results, it remains too early to tell how long it will take for conditions to return to pre-recession levels."

The Gaming Control Board said casinos statewide collected gaming revenues of almost $888.6 million, which compared with almost $800.4 million collected in October 2009. Strip casinos collected $494.8 million from gamblers during October, compared with almost $426.3 million in the same month a year ago.

Independent gaming analyst Jonathan Galaviz told clients there has been significant optimism for the state's prospects since the summer.

"In our view, these results indicate a statewide stabilization of Nevada's casino gaming industry," Galaviz said. "Stabilization does not mean every month will be up; there will be some down months. However, the long-term trajectory of both casino revenue and tourism visitation should be positive for Nevada into 2011."

Mike Lawton, the control board's senior research analyst, said two points stand out when looking at October's results.

The statewide increase would have taken place without results from baccarat, which has driven the casino industry in Las Vegas much of the past year. Also, slot machine wagering statewide increased for the first time in 35 months.

Revenues from baccarat on the Strip were $91.4 million, an increase of 41.2 percent. The amount wagered on the game was $492.4 million, a decline of 29.2 percent. However, the hold percentage was 18.57 percent, well above the game's normal hold percentage of 11.23 percent.

"It shows how volatile the game can be," Lawton said. In June, the Strip's baccarat hold percentage was 3.5 percent and gaming revenues fell almost 7 percent that month.

Meanwhile, when the baccarat numbers were backed out of the overall figures, gaming revenues statewide would have increased almost 8.5 percent, the second time this year that has happened. The number would have been the largest statewide increase without baccarat since September 2007.

The amount wagered on slot machines statewide was $9.28 billion, an increase of 0.3 percent and the first time there has been a monthly increase in coin-in since October 2007. The amount wagered on slot machines increased in 10 of the state's 16 reporting regions.

"That shows the mass market appeal that we have been hoping to see," Lawton said.

October's double-digit gaming revenue increases statewide and on the Strip didn't take analysts by surprise. Executives from Strip casino giant MGM Resorts International had been guiding investors that October was a solid month for the company's 10 Strip resorts.

"This data continues to suggest we've moved beyond stabilization in Las Vegas and have entered the early stages of recovery," Union Gaming Group Principal Bill Lerner said. "Room rates should follow in our view."

But the results downtown and in the Las Vegas locals markets had analysts buzzing.

Las Vegas Mayor Oscar Goodman, downtown's biggest proponent, touted the revenue hike, which followed Wednesday's announcement that the closed Lady Luck would be redeveloped and the previously announced move by online retailer Zappos from Henderson to the Las Vegas City Hall building in 2012.

The mayor believes downtown is growing its tourism market.

"I'm a big anecdotal guy and I believe there is a general feeling of confidence," Goodman said. "People are again starting to discover downtown and this news will continue that energy."

Along with downtown's double-digit jump, North Las Vegas casinos were up almost 3.4 percent, Boulder Strip casinos -- which includes Henderson -- had a nearly 3 percent increase and casinos in the balance of the county were up almost 9.4 percent. Clark County as whole reported a 12.5 percent gaming revenue hike.

Wells Fargo Securities gaming analyst Carlo Santarelli estimated the locals market generated $169.4 million in gross gaming revenues, which was especially positive for Boyd Gaming Corp., which operates casinos in the locals market and is the dominant player downtown.

"The Las Vegas locals market (was) up 6.2 percent year over year," Santarelli told investors. "We think this bodes well for Boyd's fourth quarter."

Jefferies & Co. gaming analyst David Katz attributed the downtown increase to 25 percent higher table game revenue and a nearly 6 percent increase in slot machine revenues.

Katz told investors stock prices will most likely reflect recovery for Strip casinos rather than downtown properties at the present time.

"Overall, we view the October casino revenue results positively and believe that the year-over-year gain could indicate the continuation of a market improvement, particularly given that the downtown and locals markets also showed solid year-over-year growth," Katz told investors.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.