LOCALS LESS BAD

Locals Las Vegas gaming revenues declined 6% YoY in December. This is the second straight sequential improvement following a 25% YoY decline in October. North Las Vegas was the standout, driven by the opening of Station Casinos’ Aliante. Excluding North Las Vegas, the remainder of the locals market still declined only 9%. December 2008 was held back by 1 fewer Saturday.

The locals Las Vegas market could be an interesting one for a variety of reasons. This was the growth market in the country for years until housing crashed 2007, and now is one of worst markets.

• Las Vegas housing prices fell earlier and harder than most of the country which could drive an earlier turn around. Moreover, the Vegas housing market is among the Nation’s most efficient, since regulatory hurdles (permitting, environmental, etc.) are limited. Prices correct faster.
• Largest operator likely to go into bankruptcy – Station Casinos is already attempting to restructure through a pre-packaged bankruptcy. Capital and promotional spending in the market is likely to be constrained for quite some time.
• Population still growing – Here is one of the major differentiators. Unlike most gaming markets, a desired climate, no state income tax, and a low cost of living are still driving population growth.
• Huge retiree population – Las Vegas has a larger retiree population than any other gaming market. Retirees have more time and money to spend on gambling. A rising interest environment directly boosts gaming revenues as well.

The near term will still be challenging but I think 2010 will be a growth year as outlined in our 2/5/09 post “THE LAS VEGAS LOCALS MODEL”. If interest rates rise, it could be a very good year.

Sequential pick up in revenues