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Land Casinos at an All Time Low


by Hillary LaClair, Senior Editor

                With the economy in its current state, Wall Street has turned its back to the gaming industry. Major land casinos owners have watched as their stock prices declined considerably this year, showing historic lows. There has been little effect on internet casinos whose operators have seen a substantial growth in revenue.

MGM Mirage, Las Vegas Sands Corp. and International Gaming Technology have felt the effects of the economic crisis, as the stocks which were once the most expensive in the sector are now sold in the teens. The strongest blows were dealt to Ameristar Casinos Inc., Pinnacle Entertainment Inc. and Boyd Gaming Corp., the stocks of which can be traded for mere pocket change. Because shares in online casinos cannot be traded in the U.S. market, experts are advising stock traders to forget the gaming sector.

“The stocks of casino operators have been taken to the woodshed in 2008 after a multiyear bull run in the sector driven by cheap debt, mergers and acquisitions and consolidation,” says Joel Simkins, Macquarie Capital analyst. “Year to date, the eight casino operators in our coverage universe have declined 61 percent on average.”

Gaming revenues have plummeted all over the nation. Reports show that Nevada saw a 7 percent decrease in winnings this year from the year before; Atlantic City felt a 5 percent decrease, Illinois 18 percent, Colorado 10 percent, Mississippi 3 percent and finally 1 percent in Indiana. The trends are not cited in just the U.S. however, as Macau gaming revenues fell 3 percent in just September; this is the third time in history that the Chinese gambling market saw a monthly drop in revenue. Many of the gaming facilities in Macau are owned by U.S. companies like MGM Mirage, Wynn Resorts and Las Vegas Sands Corp.

As the economy and unemployment rates worsen, so does the consumer base in strip casinos. “We expect a very difficult third-quarter performance from both operators as well poor guidance,” added Simkins.

Is the economic crisis the only element responsible for the current state of land casinos? Many feel that the birth of the internet casino gambling industry will directly lead to the demise of its concrete counterpart. Internet gambling is experiencing an all time high in both revenue and demographic. With the recent smoking bans, restrictions on slots machines and tax increases many casino-goers, particularly bingo fanatics, are turning to internet gaming.

Gigi Levy of 888.com has said, “People are cutting back on leisure, but they are staying home and spending only in the low tens of pounds a month with the chance of winning some extra cash. They beauty of it is there are very low costs and a huge number of players… it is very profitable.”

It is estimated that the internet gambling market will continue to rise from $345 billion in 2007 to $433 billion in 2012. The Global Betting and Gaming Consultants reports say this is due to the need to conserve fuel, among other things.

According to GBGC Chief Executive Warwick Bartlett, “People are leaving their cars in the garage, playing online bingo or watching a match on TV and placing a bet from the comfort of an armchair. The land based businesses are going to find it hard to compete with the value on the internet and with as much as 30 percent of gambling revenue now leaving the UK and going offshore the government should take note.”