ShareThisLAS VEGAS - As a real-time indicator of how confident American consumers feel about spending their money, earnings of the big casino operators on the Las Vegas Strip haven't inspired much confidence lately.
In recent weeks, the four largest Strip operators reported third-quarter profits that were lower than those in the second quarter and were even less than what they generated a year earlier, which included a month when the stock market and several investment banks collapsed.
And yet, a growing number of industry executives and analysts believes the market has bottomed and are forecasting a modest rebound in 2010, in part based on evidence that convention groups are more confident about booking rooms next year and signs that year-over-year gambling revenue declines have leveled off on the Strip.
These tentative conclusions come at an especially sensitive time for Las Vegas and the Strip, when CityCenter, the largest and most expensive resort complex in city history, opens next month. CityCenter will add more than 6,000 rooms to the market, further testing the theory that new mega-resorts create additional demand for Las Vegas rather than simply stealing business from neighbors.
Indeed, some believe the next few months will be better on the Strip, if only because the beginning of the year is a traditionally strong period for conventions and because CityCenter will spark additional traffic to town.
Many analysts believe CityCenter will complicate the Strip's recovery by capturing some of the business its resorts would have earned in an improving economy. Real estate broker and casino consultant CB Richard Ellis last week issued a mixed forecast for the Strip: Though hotel revenue will increase by 3 percent to 7 percent next year, from 70 percent to 90 percent of CityCenter's revenue will be earned at the expense of other properties.
The report said Strip revenue likely would have grown from 2 percent to 4 percent without CityCenter, though, based on stabilizing home prices nationwide and evidence, from the firm's own survey of meeting planners across the country, that conventions are more likely to book rooms next year.
Executives with MGM Mirage and Las Vegas Sands have recently said their companies are booking more rooms in 2010 for convention groups on the heels of a record bad year for convention business.
The convention business could return to pre-recession levels by the second half of 2010 or 2011, which would allow MGM Mirage to significantly boost room rates and company profits, the company said.
On the housing front, CB Richard Ellis casino consultant Jacob Oberman believes that more than 4 percent of Strip revenue during the boom came from people tapping home equity, with an indeterminate amount of additional revenue earned from consumers who felt wealthier and spent more because of inflated home values. Oberman estimates that as much as 10 percent of the Strip's revenue decline can be attributed to the declining housing market -- a trend that, beyond Las Vegas, is playing itself out.
Industry consultant Bill Lerner of Union Gaming Group has a similarly bullish outlook based on an expected 5 percent increase in visitors to Las Vegas atop a 4 percent increase in available hotel rooms -- an estimate that assumes that certain rooms won't be available for rent until later in the year.
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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