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Wall Street Analysts See More Challenges on Horizon for Las Vegas Turnaround

By Howard Stutz, Las Vegas Review-JournalMcClatchy-Tribune Regional News

Oct. 4, 2009--Travel to Las Vegas is down 6 percent this year. Wall Street analysts, however, are doing their part to boost visitation figures.

Researchers from several firms have spent time in Las Vegas to see for themselves how far the market has collapsed. They also have participated in meetings with management from the major casino operators and slot machine manufacturers to appraise future prospects.

Everyone came away with different causes for concern.

"Business conditions could best be described as grinding along a bottom or the formation of a new base," Deutsche Bank gaming analyst Andrew Zarnett said in early September. He expects that high unemployment and growing consumer debt will hinder Las Vegas' economic rebound.

"If perhaps, double-digit unemployment is here to stay, we believe the road back will be longer and more painful for all," Zarnett said.

Janney Montgomery Scott gaming analyst Brian McGill also wasn't optimistic.

"The city still has challenging times ahead of it with weak demand and growing supply," McGill told investors after a late September visit.

The focus, he said, is on MGM Mirage's $8.5 billion CityCenter, which opens in December. The project has more than 6,000 hotel rooms spread over three properties. Filling those rooms is an issue because airline flights into Las Vegas have declined.

McGill said MGM Mirage executives told him CityCenter will grow the market in 2010.

The competition isn't so sure. Representatives from Las Vegas-based regional casino companies without major Strip resorts expressed a negative outlook for the city.

"Many management teams believed CityCenter would cannibalize existing supply," McGill said. "Airline capacity was a major issue as the new hotel supply comes online."

Morgan Joseph gaming analyst Justin Sebastiano said the third quarter's close might bring some good news for regional operators. Strip casinos, however, were still being challenged.

"We were told Nevada posted surprisingly poor numbers in August and September trends have not really improved," he said.

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Here is some disparity in numbers. Supporters of a November referendum who want to see Ohio add four Las Vegas-style casinos rolled out a University of Cincinnati economic impact report showing the gambling halls would create 34,000 total jobs.

Opponents, however, touted their own study. They said a Hiram College research report concluded the casinos proposed for four cities -- Columbus, Toledo, Cincinnati and Cleveland -- would result in a net loss of jobs, although they didn't cite any figures.

The truth is likely somewhere in the middle.

Howard Stutz's Inside Gaming column appears Sundays. E-mail him at hstutz@reviewjournal.com or call 702-477-3871. He blogs at lvrj.com/blogs/stutz.

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To see more of the Review-Journal or to subscribe to the newspaper, go to http://www.lvrj.com.

Copyright (c) 2009, Las Vegas Review-Journal

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