Global gambling sector rolls snake eyes in '08
Revenue at the Great Canadian Gaming Corp. fell in the final three months of 2008, a further sign that even sin is having a tough time in the current economy.
Richmond, B.C.-based Great Canadian Gaming this week said cash coming into 17 casinos and other gambling facilities dropped by four per cent in the October to December period to $96.7 million, down from $100.7 million for the same quarter the previous year.
The company blamed heavy B.C. snowfall, which crimped gaming revenue in the province by 18 per cent in December versus December 2007, as a major factor that turned an overall corporate $13-million profit in 2007 into a $1.7-million loss in 2008.
"Great Canadian's revenues and EBITDA [earnings before interest, taxes, depreciation and amortization] for the fourth quarter of 2008 reflect the impact of a difficult December," said Ross McLeod, the company's chair and chief executive officer.
The revenue slippage, in fact, is symptomatic of a sector and lifestyle holding a poor hand as the economy fades.
Take Las Vegas, for instance.
The self-styled "Entertainment Capital of the World" is proving to be just another hot desert city as rising unemployment in the United States and Canada made getting there more problematic for consumers.
Measured from January to December, the number of people walking along Vegas's downtown sidewalks fell by 4.4 per cent, to 37.5 million, compared to one year earlier. The cash these men and women spent fell by an even larger percentage, 9.9 per cent in the year.
Worse still, taking the final month of the year as a signpost for recession sentiment, gambling fell out of bed.
In December, 2.7 million people visited Las Vegas, down 9.9 per cent, versus the previous December. Tourism revenue slumped by an even greater amount, 18.4 per cent for the month, a drop of $174 million US.
"It has been decades since we've seen all these things happening at once," said Kevin Bagger, research director for the Las Vegas Convention and Visitors Authority board of directors, when he presented the numbers to his board earlier this year.
"They all reflect the impact of the economy. We saw challenges in every sector."
Macau — a well-known gambling haven in China located west of Hong Kong — has experienced a similar downturn in vacationers interested in losing their pennies in the slot machines and card tables of the island's many casinos.
Macau's tourism drain simply has not been as severe as the drop felt in Las Vegas.
In January, the total number of visitors to Macau rose marginally, 0.77 per cent, to 1.9 million, versus January 2008.
That growth rate, however, was far slower than the 11.8 per cent the island posted for the January to December 2008 period, and a whopping 16 per cent rise in January 2008 compared to the same month one year earlier.
Government revenue is also suffering.
The Nova Scotia Gaming Corporation, the agency responsible for regulating the province's gambling establishments, said it now expects total gaming revenue to drop by $1.7 billion in the current fiscal year, although casino cash is predicted to rise marginally.
And gaming stocks are a gamble all on their own in the current environment.
The share price of Las Vegas Sands Corp., which owns establishments in both Nevada and Macau, is off more than 95 per cent in the past year.
MGM Mirage, which owes $2.2 billion in bonds by the end of 2010, has appointed an adviser to help the company restructure its cost structure.
Wynn Resorts Ltd.'s balance sheet is groaning under a $4-billion debt load.
"The gaming industry is likely to continue to struggle along with the economy," said Glenn Curtis, an investment expert who writes for Investopedia, an online investment service.