- As can be seen in the first chart, Atlantic City market RevPAR fell 6% in Q2. Harrah’s and Borgata fared even worse, suffering cannibalization to the tune of down 7% and 16%, respectively. Q3 looks even worse considering both towers opened after the 2nd quarter mid-point. On the gaming side, the market gained nothing from almost 1,800 new rooms. Contrary to the commonly held wisdom that new rooms bring new visitors, market gaming revenue fell 7%. I understand that AC continues to battle new competition from Pennsylvania, but the June/July decline was more severe than the YTD drop.
- If Borgata is benefiting from the new tower, it is hard to see it in the numbers. The huge RevPAR decline and flattish June/July gaming revenues do not bode well for an acceptable ROI, despite the quality of the facility. On the other hand, Harrah’s posted a solid 20% gain in July gaming revenues following only a 5% June increase. For its 4 properties combined, however, gaming revenue actually fell 1%, once again bringing cannibalization into consideration. The guys at TRMP have to be sweating a bit following this weekend’s opening of their 782 room Chairman Tower.
DPZ’s CEO, David Brandon, stated on its last earnings call, “As it relates to the Olympics, any time people are sitting in front of a television set, glued to things that are happening, that's good for our business. It's good for pizza delivery and it's good for Domino's. So as it relates to the Olympics, without going any further in terms of any of our plans and programs during that timeframe, I can tell you we're looking forward to it because usually that's a great opportunity for us.”
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BTW: Subbarao was a Humphrey Fellow at MIT. The Humphrey Fellowship is a US state dept. funded program for foreign students of economics. The fellowship is named for Hubert Humphrey, the Vice President during the Johnson administration who helped to craft the “great society” platform of heavy government spending on social programs intended to eliminate poverty that resulted in inflation and increased debt (which, combined with the unpopular Vietnam war, cost Humphrey the presidency when he ran against Nixon in 68).
Currencies are not always a leading indicator of economic health. However, in this case, you can see quite clearly that the Won has previewed weakness in the KOSPI Index most recently (see chart).
The abrupt slowdown in Asian growth remains misunderstood.
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