Heavy discounting is the reason Las Vegas was able to fill its rooms. The flow through on negative room rates is around 90%. Gaming revenues should be significantly lower, assuming normal hold, due to a lower end average customer and lower table revenues. From a profitability standpoint, this past New Year’s will not be viewed as a success.
However, with such bearishness surrounding the beaten down gaming sector heading into 2009, any superficially positive data point can have an impact. We pointed out as much in our bullish 12/26/08 post “A TALE OF TWO YEARS” which called for a January rally. The January Effect is indeed alive and well in this sector but keeping a short leash on this long trade probably makes sense.