New York (AP) — Shares of companies that operate casinos sank to new lows Tuesday on reports that the industry is suffering in the wake of the nation’s economic downturn.
Thomas Weisel Partners analyst Jake Fuller, in a note citing several factors for cutting his price target and earnings estimates for Las Vegas Sands Corp., noted his own survey work found the company’s Venetian Las Vegas „discounting heavily in the June-July timeframe.“
Rate quotes for the luxury hotel are down about 25 percent for summer visits, he said. He said Wynn Resorts Ltd.’s Las Vegas hotel is cutting rates 10 percent to 12 percent for June and July, and the Bellagio, operated by MGM Mirage, has reduced rates by 20 percent.
„Achieved rates may be better than the online quotes that we see, but the trend is troubling given the scale of discounts,“ Fuller wrote. „Our biggest concern is not so much the potential hit to room revenue as it is LVS‘s ability to maintain occupancy as that is critical to driving midweek casino, restaurant and retail traffic,“ he said, using Las Vegas Sands‘ New York Stock Exchange ticker symbol.
Representatives from Las Vegas Sands and MGM did not immediately return calls for comment. Jennifer Dunne of Wynn noted that the city typically attracts more leisure travelers during the summer, and the business shifts a bit to attract those customers by offering more deals and packages, like combining rooms with golf course or spa visits. „The average daily rate may flux slightly because of the types of offers that are out there,“ she said, adding the economic downturn is having an effect. „I think we’ve all been probably a little more aggressive this year as opposed to past years.“
Fuller’s note, released late Monday, preceded a report in Tuesday’s Wall Street Journal that detailed a gambling slowdown the newspaper said is defying the belief that casinos are recession proof, and appear to actually be „highly vulnerable to the economic downturn.“
Smaller casino companies are suffering from setbacks related to Midwest flooding and an apparent trend showing reduced revenues in other cities, according to a note Monday from Oppenheimer analyst David Katz, who also said, „we believe the environment remains challenging and uncertain on the Las Vegas Strip.“
Leading the decline for casino stocks was Isle of Capri Casinos Inc., which has properties in Biloxi, Miss., and other Southern cities, Davenport, Iowa, and other Midwestern locations, slipped 40 cents, or 8.4 percent, to USD 4.39, and hit a nine-year low of USD 4.37 earlier.
Boyd Gaming Inc., which operates in Las Vegas, Atlantic City, N.J., and in Midwestern and Southern cities. Shares fell USD 1, or 8 percent, to USD 11.56, after hitting a five-year low of USD 11.20 earlier in the session.
MGM Mirage dropped USD 2.20, or 6.5 percent, to USD 31.66, and earlier fell to USD 30.54, its lowest point since late 2004.
Las Vegas Sands lost USD 3.08, or 6.5 percent, to USD 44.34, and touched a more than two-year low of USD 42.54 earlier.
Wynn Resorts shares traded as low as USD 77.12, their lowest point since November 2006, before recovering a bit to trade down USD 1.34 to USD 79.98.