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May. 15, 2008
Copyright © Las Vegas Review-Journal

GAMING: Economic woes hurt U.S. casinos

Lobbyist: 2008 could be most challenging year

By HOWARD STUTZ
REVIEW-JOURNAL
Commerical Gaming in U.S.

 Gaming Revenues
1998 -- $19.7 billion
2007 -- $34.13 billion
Increase: 73 percent

Gaming Taxes
1998 -- $2.50 billion
2007 -- $5.79 billion
Increase: 130 percent

Employment
1998 -- 325,432 workers
2007 -- 360,818 workers
Increase: 10.8 percent

Source: American Gaming Association

In the 10 years that the American Gaming Association has been tracking the facts and figures produced by the nation's commercial casino industry, gaming revenues have climbed more than 73 percent.

The Washington, D.C.-based lobbying group's leader acknowledged Wednesday, however, that 2008 might be the industry's most challenging year. With the nation's economy in a tailspin and spending and confidence levels of consumers reaching all-time lows, the nation's casino companies are feeling squeezed.

"People used to say that gaming was recession proof. I liked to say we were recession resistant," said American Gaming Association President Frank Fahrenkopf Jr. on a conference call to release findings of the organization's annual State of the States report. It covered commercial casinos and has a separate section for states with racetrack casinos. Figures from states with Indian casinos were not included in the report.

"There is no question the economy is having an impact on our industry," Fahrenkopf said. "Airlines are cutting service and gasoline prices are impacting markets dependent on drive-in traffic."

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    • Still, the report noted that gaming remains popular, with Americans spending more on gambling than on movie tickets or candy in 2007.

    The survey showed that U.S. commercial casino revenues were up 5.3 percent to $34.1 billion in 2007. Citing numbers from the National Confectioners Association and the Motion Picture Association of America, the survey said Americans spent $29 billion on candy and $9.6 billion on movie tickets in 2007.

    In Nevada produced gaming revenues of $12.85 billion in 2007 -- 37.6 percent of the $34.13 billion in total gaming revenues produced nationally by casinos in 12 states. But gambling win in the Silver State has declined 3.4 percent in the first three months of 2008.

    In New Jersey, Atlantic City gaming revenues, which fell almost 6 percent in 2007, are down almost 7 percent in the first four months of this year.

    Fahrenkopf tried to put a positive spin on things; he said in six of the 12 commercial casino states, gaming revenues are up in the first three months of the year. He said casino companies nationwide are investing more than $53 billion in expansions and capital improvements over the next few years in an effort to jump-start revenues in the slowing economy. According to the report, roughly $39 billion of the expansion efforts are in Las Vegas.

    Fahrenkopf said the investments will inject billions of dollars into gaming jurisdictions in the form of jobs, tax revenue and wages.

    "Notably, a great deal of this investment will come in the form of nongaming amenities," Fahrenkopf said. "These projects not only mean immediate jobs in construction but long-term, good-paying jobs on the horizon."

    The number of workers employed by casinos has grown almost 11 percent in the past 10 years, but the number of jobs fell 2.3 percent from 2006 to 2007. In Nevada, casino jobs declined 6.1 percent. Recently, MGM Mirage cut more than 400 middle management positions and Station Casinos reduced its corporate work force by more than 50 employees. Fahrenkopf, however, said there have been "no wholesale layoffs" while Las Vegas Sands hired more workers for the Palazzo and Wynn Resorts has said it will not eliminate jobs.

    Fahrenkopf said there were positive signs for the industry in 2007 heading into 2008. Revived Gulf Coast casinos in Mississippi, shuttered for more than a year after Hurricane Katrina hit the region in August 2005, helped the state increase revenues 12.5 percent in 2007. Small gaming markets, like Iowa, posted heathy gains.

    Wages paid by casinos totaled more than $13.8 billion, a 3.8 percent increase compared to 2006. Gaming taxes paid to state and local governments were $5.79 billion, 11.3 percent more than were paid in 2006.

    Pennsylvania became the 12th state with commercial casinos in 2007 and its six casinos produced more than $1 billion in gaming revenues.

    However, Pennsylvania's success may have been to the detriment of Atlantic City, Fahrenkopf said, as casinos in the Keystone State have siphoned off customers from the Boardwalk.

    Fahrenkopf hopes the lean economic times won't mean states will look to generate money by raising taxes on the gaming industry.

    "It can get to a point where some jurisdictions set such a high tax rate, it discourages some companies from investing," Fahrenkopf said.

    Contact reporter Howard Stutz at hstutz@ reviewjournal.com or 702-477-3871. The Associated Press contributed to this report.

    COMMERCIAL CASINO STATE GAMING REVENUE
    State 2007 2006 Percent Change
    Nevada $12.85 billion $12.62 billion +1.8 percent
    New Jersey $4.92 billion $5.21 billion -5.7 percent
    Mississippi $2.89 billion $2.57 billion +12.5 percent  
    Indiana $2.62 billion $2.57 billion +1.8 percent
    Louisiana $2.56 billion $2.56 billion 0.0 percent
    Illinois $1.98 billion $1.92 billion +3.1 percent
    Missouri $1.59 billion $1.59 billion 0.0 percent
    Iowa $1.36 billion $1.17 billion +16.2 percent
    Michigan $1.33 billion $1.30 billion +2.4 percent
    Pennsylvania $1.09 billion ** N/A
    Colorado $816.1 million $782.1 million +4.4 percent
    South Dakota $98.2 million $89.8 million +9.3 percent

    ** Gaming began in Pennsylvania in 2007
    Source: American Gaming Association and State Gaming Regulatory Agencies


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    scott wrote on May 17, 2008 02:35 AM: The economy is not in a tailspin, we have had two quarters of slow growth (.6%) as journalists you are much more effective if you are accurate. Also making the economy sound worse than it is could weaken it further adding to the suffering that is already occuring.


    Free Nevada wrote on May 16, 2008 12:46 AM: chris, not only are you right, but this has all happened before --twice. the overbuilding here when Atlantic City opened led to $7/night room rates at places like the Aladdin. this time around Dubai World will wind up owning everything and that is no joke.


    ron wrote on May 15, 2008 05:45 PM: chris, You are wrong. A 3% decline in gambling revenue is not a big deal. Any government that relies on taxes from this revenue should be able to cut their spending by 3%, or they should have set aside money. We don't need additional businesses brought here to increase our sprawl and cause us to become like every other big city in the country. I like our unique status as the casino capital.
    Dave, if business slows, any sensible employer will lay off workers until the situation changes. Station scores well on employee satisfaction surveys. Hmmm, you wouldn't be a labor union organizer who is bitter that those employees haven't voted to join your union and pay dues to you...?


    Dave wrote on May 15, 2008 12:45 PM: MGM Mirage cut more than 400 middle management positions and Station Casinos reduced its corporate work force by more than 50 employees. Fahrenkopf, however, said there have been "no wholesale layoffs"

    Excuse me? Is this another Stations spin to appear user friendly when, in fact, they have been cutting jobs and employee benefits to the hilt.


    roper wrote on May 15, 2008 10:39 AM: Chris is 100% correct. But here's the problems 1)real estate is too expensive here, corporations are taken back by the high prices for both personal and commercial properties. Ok, I know prices have gone down recently but the window has passed, the economy and housing market has all but eliminated corporate relocations. 2) cost of living too high here, executives and employees would literally take a step back in terms of quality of life by coming here. 3) lack of amenities 4) poor school system for both incoming families and as a talent poor for potential employees. These were all confirmed by the Leids institute in an article that ran in the LVRJ maybe 6 months ago. The warning signs were obvious, but as Chris stated good ole LV roared ahead full speed without batting an eye.


    cb3dale wrote on May 15, 2008 09:23 AM: We must have faith. We have the the greatest minds at our disposal. The most honest straight foward thinktank ever in the history of Las Vegas and the world.
    Rossi Ralenkotter - President & CEO
    E. James Gans - Sr. VP of Operations
    Terry Jicinsky - Sr. VP of Marketing
    Vince Alberta - VP of Public Affairs
    John Bischoff - VP of International Brand Strategy
    Mark Haley - VP of Facilities
    Chris Meyer - VP of Convention Sales
    Mark Olson - VP of Human Resources
    Luke Puschnig - Legal Counsel
    Brenda Siddall - VP of Finance
    Cathy Tull - VP of Strategic Planning


    chris wrote on May 15, 2008 08:42 AM: This is so rediculous. This state has nothing else as far as industry is concerned, and relies only on gambling. What do the idiots running this business think is going to happen in a weak economy ?? That people will just come and gamble like no tomorrow ?? This town is not a necessity to anyone other than those that live here and work for the gaming places. My suggestion, lobby strong and hard to get other industries in here so that no one is relying solely on tourism. But that seems to be too much for these tiny brains in Clark County to handle. Wallstreet said early '09 before a recovery starts to show. And Nevada just marches on as if everything is honky dorey !!! This whole state needs to get its head out of the desert sand......


    snowflake wrote on May 15, 2008 08:30 AM: The new owners and operators of Nevada gaming have taken a business that was recession proof and made it vulnerable to a recession. They did this by changing the business from gambling to tourism.

    Years ago, the boys who ran things understood that they were going to get all of the tourist's money by giving them things like comps, cheap rooms and food and whatever else they could give away.

    It wouldn't surprise me if the corporations that now run these casinos started charging for drinks, which would further drive the nail into the coffin.


    John wrote on May 15, 2008 03:26 AM: Casino's WERE recession proof say...20 years ago, or so. and that is because casino action was basically limited, no it is widespread. also, casinos USED to be "casinos". a $20 room, a $3 buffet or a 99 cent breakfast and good ol fashioned slot machines, people could still afford to spend like that and have high hopes of making $$$ on the slots or video poker. that is why it was a recession proof business. but no more, Gaming, as they call it now has become more reliant on the retail end of the business ignoring the fact that even the wealthy look for value during rough seas. so, in the end, and until the economy picks up steam, I would strongly suggest that big operators lower the price point and drive in the business, thats not to say places like Wynn or Bellagio should cheapen themselves but add some dollar value to the business for the time being.