Apr 25

Pros and Cons

Nevada may soon regulate Internet gambling and allow land-based casinos like Caesar’s Palace and MGM Grand to operate online casinosWhat can players expect when gambling at Nevada-regulated Internet casinos and how will these casinos be different from existing unregulated, offshore Web casinos?

Let’s look at a few of the possible pros and cons of gambling at an Internet casino regulated the Nevada government.

Pro – Cash transactions will be secure and payouts assured.

Con – Winnings may be taxable and reported to the IRS.

Pro – Casino software will be strictly tested to assure randomness and fairness.

Con – Players may be required to jump through hoops to verify their age and location before they playThis could involve faxing your driver’s license to the casino or even attaching a Global Positioning System (GPS) to your computer.

Pro – Minors will be effectively screened out.

Pro – Casinos may be required to meet a minimum payout on slot machines.

Pro – Players will earn loyalty points they can use on their next trip to Las Vegas.

In the end, most players will appreciate the security and trustworthiness of Nevada-regulated Internet casinos, but the taxation policy and onerous sign-up procedures may force some players to seek unregulated, offshore gambling action.

Mar 28

Investors punish gaming

Investor jitters over the Las Vegas gambling industry’s prospects in 2001 continued after the state Gaming Control Board reported Wednesday that Nevada’s gaming win fell 3.2 percent in November, its second decline in three months.

Gaming investors reacted continuing their sell-off of the city’s largest casino operatorsOn Wednesday, Mandalay Resort Group dropped 94 cents to $20, Park Place Entertainment Corpfell 44 cents to $10.06, Harrah’s Entertainment Incretreated 81 cents to $23.88 and MGM MIRAGE lost 38 cents to close at $28.56.

But to gaming analysts, who have largely turned bearish on gaming’s prospects in 2001, the numbers were met with a shrugThey’re not interested in what happened in November 2000 — rather, they’re interested in where Las Vegas is going in the first months of 2001.

“Its effect on the stock prices is more psychological than anything,” said Daniel Davila, gaming analyst with Hibernia Southcoast Capital“I would caution people from putting a whole lot of importance on what happened in NovemberWhat happened two months ago has already been factored into the price of the stock.”

Declines aren’t surprising, Davila said, because Las Vegas room rates had reached record highs, and the city’s gaming industry had been enjoying a boom in visitation.

David Anders, gaming analyst for Merrill Lynch, noted that investors were already concerned reports last week that Park Place, Aztar Corpand Isle of Capri Casinos Incwould all miss fourth-quarter earnings estimatesAnd Boyd Gaming Corpsaid it would post a loss.

“(The November report) is obviously not positive, and we’re still concerned bout the impact of a slowing economy on Las Vegas in the first and second quarters of 2001,” Anders said“But I don’t know if you can assume a direct correlation between the Las Vegas numbers (in November) and that outlook.”

On the Strip, gaming win fell 7.7 percent to $398.6 million, compared to a staggering 35.8 percent increase in win in November 1999That breath-taking pace of a year ago was difficult to maintain, analysts said.

Moreover, Anders said it is likely tough comparisons will continueIn the first quarter of 2000, Strip gaming win was up 13.3 percent; in the second quarter, it was up 10.5 percent.

These tough comparisons follow the city’s recent history, which saw growth level off after a rapid period of new casino openings ends, said Andrew Zarnett, gaming analyst with Deutsche Banc AlexBrownOther factors placing pressure on Las Vegas include the bankruptcy of National Airlines, the effect of increased competition for California Indian casinos and the possibility for heavy electric bill hikes to millions of Californians.

“We believe the market will have difficulty (in comparing to) the prior year … growth in 2001 may be anemic,” Zarnett said“Overall, those operators with triple-A locations will continue to benefit from stronger resultsThose away from the Flamingo-Las Vegas Boulevard intersections, such as Mandalay Bay, will experience (room rate) pressure.”

Still, Zarnett doesn’t see much confirmation of the downturn in NovemberHe noted that high-end play, measured baccarat win, declined more than 20 percent.

“If you back out the high-end play, you’ll find that the Las Vegas Strip was basically down only slightly versus the previous year, which was a very strong comparison,” Zarnett said.

Though lacking confidence in 2001 growth, analysts noted that the November numbers probably aren’t a signal that December will also be weakMost companies, at least Strip operators, have indicated December was a very strong month — in a meeting of the state Gaming Control Board Wednesday, Mandalay President and Chief Financial Officer Glenn Schaeffer indicated the company enjoyed a very strong New Year’s weekend, surpassing company expectations.

“The room rate surveys indicate December was a reasonably good month for them, and they were one company that really suffered from mismarketing of the millennium weekend last year,” Anders said, which should result in favorable comparisons in December 2000.

“Many operators are saying that the fourth quarter shaped up reasonably well for them, which tells me December must be have been a fairly strong month (in light of November weakness).”