The Las Vegas casino industry seems to have some fight left in it. Following a seemingly endless run of negative months, gambling revenues on the Vegas Strip jumped 33% in February to $568 million from $427.4 million a year ago, according to Nevada's Gaming Control Board.
Casino operators like Sheldon Adelson, Steve Wynn and Jim Murren have their Chinese patrons to thank for the most recent, highly dramatic turn of good fortune. Due, in part, to boom times on the Mainland, Chinese customers flew to Vegas to celebrate their New Year in mid-February and proceeded to gamble it up.
The Chinese New Year is a boon for casino business every year [in 2009, it hit in January], says Rich Moriarty, an analyst with Union Gaming Group in Las Vegas. However, this year's influx of Chinese gamblers came as a pleasant surprise for casino operators: "International inbound volume and luck for the casinos contributed to the month-over-month growth," he says.
Casino wins at the game of baccarat -- a game that is hugely popular in China -- are largely credited with February's revenue increase. "Bacc volume has been as good as we've seen it," says Moriarty. And the winning streak may continue. "The revenue side of gaming is very good. It is offsetting the problems with room rates." Room rates, he explains, have fallen due to a lack of convention business in Vegas and probably won't move higher until the end of the year.
The New Year celebrations seemed to have spread throughout the state of Nevada, which saw gambling revenue spike 14% year-over-year in February. That provides hope that the Las Vegas gaming business's dog days may finally be over. However, that doesn't mean Nevada will be able to outmuscle the steroidal casinos in China's Macau.
"Year-over-year Macau has been going up dramatically; it's in a part of the world where you have millions and millions of people moving to the middle class," says Mike Cintolo, editor of The Cabot Market Letter. "Macau is the main train. For companies based in Las Vegas, a huge part of the revenue is coming from Macau and so is the growth."
Closer to home, there is the belief that MGM Mirage's newly opened CityCenter will contribute to fuel Vegas's acceleration through 2010. "It's incredibly important to have America's largest privately-funded product on the Las Vegas Strip," says Moriarty.
Perhaps inspired by the bump, analysts from JP Morgan and Goldman Sachs have expressed bullishness on the future of Las Vegas. Steven Kent, of Goldman, raised his 12-month price target on MGM's shares from $14.50 to $17.50 and gave the stock a buy rating. JP Morgan's Joe Greff raised his price target on the Las Vegas Sands from $23 to $29, citing the opening the casino operator's $5.5-billion Singaporean casino/resort in June, among other factors. Greff also raised his target price on Wynn Resorts to $88 from $72 based on a combination of Vegas's promised rebound and Macau's continuing sizzle.
Investors seem to concur with the analysts. Over the last 30 days, Las Vegas's big boys have risen dramatically. MGM Mirage (MGM) is up 22.30%, Wynn Resorts (WYNN) is up 16.82%, and Las Vegas Sands (LVS) is up 17.44%. During a recent conference, the irascible and embattled Adelson (the CEO of the Sands, which owns the Venetian among other casinos) made clear that he's not frowning over recent results. No doubt, his facial expression remains on the upside.
This story was updated on April 19, 2010.
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