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Was Las Vegas a Winner for 2011? Panel of Experts Picks the Casino
Resort Market Winners and Losers of 2011

By Dave Berns, Las Vegas SunMcClatchy-Tribune Regional News

Dec. 15, 2011--The Las Vegas gaming market rebounded this year with a jump in visitor volume nearing the record total of 39.6 million in 2007. Room occupancy rates and gaming revenue are up from the depressed levels of recent years, while visitors have shifted their spending patterns, focusing an ever-larger percentage of their cash on special events and clubs rather than casino floors. So, can you brand Las Vegas a winner in 2011 despite the region's continued battle with double-digit unemployment, record home foreclosure rates, the ever-present sense of economic uncertainty, and the continued domestic and international expansion of the casino industry?

"I think it's a winner in that it recovered. It did start to bounce back," said one casino industry analyst who requested anonymity, not wanting to risk stating an opinion that would rankle any of his clients. "We're still in uncertain times, but the Strip is looking back. Now, we need to see more workers hired with others moving from part- to full-time employment."

What about the health of the local gaming market? The prospects for online wagering? Political and social machinations over the expansion of the Las Vegas gambling experience to Massachusetts, South Florida, Spain and Eastern Europe?

"This was a pivotal year for the transformation of gaming in the U.S. and internationally," the analyst said. "There's a great deal to be resolved over the next couple of years, but there were clearly winners and losers this year."

So who's up, who's down and who's out of the game?

To find out, the Sun asked an informal panel of casino executives, financial analysts, academics and journalists to identify the casino industry's winners and losers for 2011.

The panelists were surprisingly consistent in their choice of winners: Steve Wynn and Sheldon Adelson, with their investments in Asian gaming properties; the newly opened casino market of Pennsylvania, another jurisdiction where Adelson operates; and Las Vegas -- specifically downtown Las Vegas.

Some spoke on the record, while others -- especially financial analysts and casino executives -- requested to speak on background to avoid jeopardizing their relationships with their clients and employers.

"I would say downtown is a winner because they had a couple of good revenue months; the Plaza's generating a bit of the buzz, El Cortez and its new hotel rooms, the Golden Nugget with the hotel tower they completed last year," said David G. Schwartz, director of the UNLV Center for Gaming Research. "There's next year's opening of the Smith Center for the Performing Arts and Zappos Chief Executive Officer Tony Hsieh, who's generating a lot of buzz. I think downtown is a winner from all aspects, not just gaming."

The panel's losers included the troubled Atlantic City gaming market, debt-laden operators largely owned by investment-wary hedge funds, and anyone who five years ago failed to grasp the wisdom of investing in Macau and Singapore.


The casino floors of Macau and Singapore have come to dwarf the revenue-generating ability of the Las Vegas Strip, all within eight years of ramping up their operations. The Chinese enclave of Macau recorded November gaming revenue of $2.9 billion, or about half of what the Strip will record for all of 2011. Singapore is expected this year to surpass Las Vegas as the world's No. 2 gaming market in terms of casino-revenue generation.

Adelson is in both markets and controls much of the land in Macau, where Wynn and MGM Resorts International have lucrative holdings. Adelson generates more than 80 percent of his corporate revenue from Asia. On the verge of what appeared to be financial collapse during the depths of the recession, Adelson invested a reported $1 billion of his own money to boost his stock price, and now his Las Vegas Sands Corp. is considered among the industry's healthiest operators.

Wynn has been openly critical of the political and economic policies of the Obama administration while speaking in flattering terms of the hybridized authoritarian-communist-capitalist economic system of China. He's openly mused about moving overseas but now has his balance sheet turned toward the potential windfall that could come from opening gaming properties in suburban Boston and South Florida, a market that Adelson is also eyeing along with Malaysia-based Genting USA. Both men lack the Strip exposure of MGM Resorts and Caesars Entertainment, insulating them from the volatility of the Las Vegas market.

"If you hear Wynn talk, Vegas sounds like an afterthought, but he has done better than most in Vegas. I think that's because he's so compact," said Anthony Curtis, publisher of the Huntington Press and the Las Vegas Advisor newsletter. "It's Wynn and Encore. He's not spread around, and he can focus on his core business. It's self-contained, smaller. You could say the same for (Adelson's) Venetian-Palazzo. The majority of their revenue is coming from other places, but they can concentrate on what they do best."

Other winners include Penn National Gaming and Caesars Entertainment, which pushed for ballot measures that are expected to lead to the opening of gaming properties in Ohio cities Cincinnati, Cleveland, Toledo and Columbus.

Cantor Gaming, the casino industry arm of Wall Street investment firm Cantor Fitzgerald, has expanded its hold on mobile betting devices with its recent agreement to remodel and operate the Palms sports book. The company operates sports books at M Resort, Hard Rock, Tropicana and Cosmopolitan. England-based sports book operator William Hill this year announced an $18 million deal to purchase American Wagering Inc., operator of the Leroy's chain of Las Vegas sports books. The Cantor and William Hill strategy could prompt an increasing number of gaming companies to outsource their sports betting operations, providing a lucrative niche for Cantor and William Hill while reducing the cost structure of Las Vegas companies, particularly when and if online sports wagering is legalized in the United States.

"Gaming companies are looking at the cost structure of operating the books and they think, 'Why bother with it? It's more of an amenity,'" Schwartz said.


The U.S. Justice Department issued multiple indictments against foreign Internet gaming operators, arguing that they had violated a federal law designed to prohibit online wagering. The companies were among the leaders of the Internet betting world: Full Tilt Poker, Poker Stars, Absolute Poker, Ultimate Bet and Charges included operating illegal gambling businesses, conspiracy to commit bank and wire fraud, money laundering and violation of the Unlawful Internet Gambling Enforcement Act of 2006, which prohibits businesses from knowingly accepting payments for online wagers. An estimated 10 million online poker players in the United States wagered on the sites, generating as much as $5 billion in annual revenue. The companies reportedly had made hundreds of thousands of dollars in campaign contributions to U.S. lawmakers, including Senate Majority Leader Harry Reid of Nevada, and had developed business alliances with top casino operators, including Wynn Resorts, The New York Times reported.

The move muddied, at least temporarily, the future of online betting, which major Las Vegas casino operators, particularly Caesars Entertainment, have long positioned themselves to tap into once it's legalized, as many observers say will someday happen. Skeptics say the indictments cleared the path for U.S. gamers to eventually gain online betting dominance from foreign companies, which have driven the market over the past decade. Yet the move has also slowed momentum, at least temporarily, toward the legalization of Internet betting.

"Internet poker, the existing companies that are the renegades -- the Full Tilts, Ultimate Bet, Poker Stars -- they got run out of the United States. That was their biggest market," Curtis said, "and also a negative development for all of the tens of thousands of Internet players, but I think it's a short-term negative."

The expansion or potential growth of casino gaming to major eastern states -- including Pennsylvania, Ohio and Massachusetts -- and the expansion of Florida's gaming footprint could divert a significant percentage of tourists who would travel to Southern Nevada, exacerbating the economic challenges faced by this region during the past four years. The top executive of Genting USA, which is seeking to build a Las Vegas-style resort on a waterfront site in Miami, has estimated that South Florida gaming could cut into the Strip gaming market by as much as $2 billion annually.

Tribal casino operators and the developers of potential tribal casinos also had a rough year with the expansion of commercial gaming in states throughout the Northeast. Emerging nontribal markets, including a 2,500-game casino at the 117-year-old Aqueduct Raceway in New York City, are expected to take a significant bite out of the troubled fortunes of the once-dominant Mohegan Sun and Foxwoods casinos in nearby Connecticut. Both are attempting to refinance debt owed to lenders.

The expansion of nontribal gaming has made commercial and investment banks unwilling to lend money to developers of proposed tribal gaming projects in the region, which just five years ago were the beneficiaries of billion-dollar lines of credit.

Potential lenders are also concerned that the sovereign-nation status of Native American tribes makes it harder for them to take over or manage tribal gaming properties when they default on loans, a practice that has become all-too-familiar in Southern Nevada amid the four-year recession.

"Banks that loan money to tribes are potential losers," a key player in the nation's casino industry said. "There's no way to actually enforce the laws and collect your money."


(c)2011 the Las Vegas Sun (Las Vegas, Nev.)

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