Las Vegas Growth Drying Up; Where Should You Place Your Bets?

Slowing growth in developed markets is hardly a new story, and the gambling industry is no exception. In October, Las Vegas gambling revenue dipped slightly, after a period of recovery following the recession. MGM (NYSE: MGM), Wynn (NASDAQ: WYNN) and Caesars (NASDAQ: CZR) all felt the pinch.

While gambling revenue in Las Vegas seems fairly dependent on the consumer spending environment, Macao is growing regardless of what's going on in macro-economic terms. As such, major casino operators may be best off focusing their efforts on Macao or at least branching out from Las Vegas.


Strip slowing
October wasn't a particularly strong month for casino operators. Overall, Nevada's gambling revenue was down 2.6% for the month. The decline was led by the Strip, which saw revenue drop 5% year-over-year to $551 million. Downtown Las Vegas casinos reported a 3% drop, while Reno, Nev.'s casinos did a little better with a 1% decline.

The decline followed fairly strong showings in August and September, making the comparison a little more difficult. August statewide wins increased by 11.1%, and for September posted a 7.4% rise. According to one analyst, the comparison was made even more difficult due to some of September's wins being rolled over to October last year. Still, Nevada and Las Vegas are up for the year.

Perhaps because of slowing growth in Nevada, several US casino operators are looking to branch out. Twenty three states now have legalized commercial casinos, which may provide companies like Wynn Resorts and MGM Resorts with opportunities for growth.

According to the American Gaming Association, overall revenue from commercial casinos rose 4.8% last year. The Northeast seems to be the hot-spot at the moment, with operators bidding for locations in Maryland and New York.

Operators are also looking toward online gambling as a means to sustain growth. Three states have now legalized online gambling, New Jersey being the most recent one to join. Being the most populous state to have legalized virtual casinos, the industry is buzzing with speculation as to how this will affect brick-and-mortar casinos.

Steve Wynn, for one, seems rather uninterested in the whole idea. MGM CEO Jim Murren, on the other hand, has been pursuing the opportunity quite aggressively, partnering up with online gambling giant Bwin.

Macao growing
While many US casino operators are looking for domestic growth opportunities, the real money seems to be in Macao, which is still growing like a weed. Wynn still makes most of its revenue from its US operations, but Macao is growing considerably faster with a 9.6% increase in net revenue for the third quarter. Las Vegas operations grew by only 1.1%. Adjusted property earnings before interest, taxes, depreciation, and amortization in Macao increased by a healthy 12.6%.

MGM China is growing even faster. The company posted a 22% increase in net revenue for the third quarter, with adjusted EBITDA up an impressive 25%. Now working on a new hotel, MGM China hopes to complete its MGM Cotai resort by 2016. Excluding capitalized interest and land, the project is expected to cost around $2.6 billion. The investment seems like a good indication of the company's solid position in China at the moment.

Caesars Entertainment is the only major casino operator without activities in Macao, and it shows as the company is clearly suffering. Third-quarter results were fairly grim, with casino revenue down 7.1%. For the quarter, the company lost around $760 million, down from the roughly $500 million loss in the same quarter last year. The company faced another setback recently, with a partnership for a Massachusetts casino breaking down due to regulatory concerns.

The bottom line
With growth slowing on the strip, casino operators are looking for new ways to make money. Domestically, there are several opportunities, with a fair number of states now having legalized gambling. Also, online gambling may provide opportunities for the companies that can get into it on time. However, the real money seems to be in Macao, where companies are still growing the top and bottom lines at a rapid pace.

Tired of watching your stocks creep up year after year at a glacial pace?
Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, WITH YOU! It's a special 100% FREE report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.

The article Las Vegas Growth Drying Up; Where Should You Place Your Bets? originally appeared on Fool.com.

Daniel James has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

1 Comment

Filter by:
ARNIE WEXLER

NEW JERSEY gambling addicts now being able to place bets without even getting out of their pajamas.

ARNIE WEXLER IS squirming at the thought of gambling addicts now being able to place bets without even getting out of their pajamas. The temptations will be even harder for gambling addicts to resist now that internet gambling in New Jersey launches this month.Arnie Wexler, former head of New Jersey's Council on Compulsive Gambling, told WCBS 880's Monica Miller, "You don't have to go no place. You wake up in the middle of the night, you have an urge to gamble, you're in your birthday suit and you get on the Internet and you gamble
"COMPULSIVE GAMBLING IS A IMPULSIVE ADDICTION AND THE ADDICTED GAMBLER CANT RESIST THE URGE TO GAMBLE AND CHASE LOSSES OR WINS HOW DO WE PROTECT THE UNDERAGE PERSON FROM GAMBLING ON THE INTERNET IN THE HEAT OF THE GAMBLING WHEN AN ADDICTED GAMBLER NEEDS TO KEEP GAMBLING I WOULD THINK IT WOULD BE A SMART THING FOR THE STATE TO HAVE A REG. THAT SAIS IF THE GAMBLER GOES THRU ALL THE $ IN THE ACCOUNT. THEY HAVE TO WAIT 24 HRS BEFORE THEY CAN ADD MORE $ (RELOAD) TO YOUR INTERNET GAMBLING ACCT
All hope is not lost for addicts who want to overcome gambling addictions, however.New Jersey already allows people to add themselves to a self-exclusion list that prohibits them from entering all of Atlantic City's 12 casinos, reported NJ.com. Now, New Jersey is extending this list to include online betting. According to the state Gaming Enforcement Division, people who are already on the exclusion list for the 12 casinos do not have to do anything to be included on the online list, but people can also sign up for an online gambling ban only.But Wexler, along with other experts, fears the list will not stop an addicted gambler"I know many people that were in recovery or put their name on the exclusion list that are in casinos gambling today," he told Miller.People can ban themselves for one-year or five-year terms. If they sneak into a casino or find a way to place an online bet and win within that time frame, their winnings are subject to forfeiture, said NJ.com.People who believe they may have a gambling problem and wish to include themselves on the exclusion list can sign up online or in person at any of the offices of the New Jersey Division of Gaming Enforcement located across the state. People can call and get more information about the addiction and potential solutions to overcome it.
Or call 888 LAST BET ARNIE WEXLER CCGC
ASWEXLER@AOLCOM
WWW.ASWEXLER.COM
561 2490922 CELL 954 5015270



Arnie Wexler
Arnie & Sheila Wexler Associates
Lake Worth, FL
561-249-0922 CELL 954 5015270

December 08 2013 at 8:24 AM Report abuse rate up rate down Reply