Las Vegas Sands Casino Operation had a profit increase and lower user decrease due to recession-frightened gamblers and a saturation in the market.
Las Vegas Sands casino operation witnessed profits from its operations in the U.S. reached $508 million in the first nine month in 2014. This result was only slightly higher than last year. Since last November, Nevada saw a slight increase of .4%. Although the state made $876 million, Vegas Strip decreased by 4% following an 8% drop in table game figures. Though slot figures were up 2% on the strip, wagering was down 2.5%. Despite any trends, this decrease shouldn’t be any surprise to anyone.
Since 2007, overall casino revenues have fallen by over $300 million.
The financial crisis caused a spawn of new gambling resorts in many U.S. states had to do something to create revenue. Places such as Pennsylvania, Massachusetts, Maryland and New York have resorted to casino gambling for financial relief. In fact, 39 states have casino gambling, sports betting or internet gambling in the U.S.
A Saturated Market Plus Skittish Gamblers Account for Profit Decline
The gambling industry is taking a hit that comes from a combination of an over-saturated market combined with lack of consumer confidence caused by the last recession. William Thompson, professor at University of Nevada at Las Vegas who studies the gambling industry said “They (the industry) have saturation problems. We have a wave of new casinos coming.”
Four of the of the main Midwestern gambling states, Indiana, Illinois, Michigan and Missouri have fallen revenue for over 6 months straight since late 2012. Last year, Harrah’s Casino had to shut down in Tunica, Mississippi. A resort that once earned $1.2 billion in 2006, had their revenue reduced to slightly over $730 million. Atlantic City closed down four of their eight major casinos last year.
As the industry decline is rampant among U.S. gambling news, becoming part of the growing competition is cheaper than ever before. In 2011, Massachusetts legislators approved the first casinos. Now Wynn Resorts, holders of the most 5-star resorts awarded by Forbes, has been approved to erect a $1.8 billion gambling complex just outside of Boston. In New York, voters just approved the building of seven resorts last year.
There also exists a decline by more stable gamblers throughout the industry. Ameet Patel, general manager of the Hollywood Casino in Columbus, Ohio has experienced this firsthand. The $400 million dollar property had to remove 5000 slot machines because of the lack of players. He has noticed that women older than 50 who normally bet $50 to 75$ a visit were his key demographic. Yet that is gone. The main gambling venues of Las Vegas and Atlantic City normally had foreign visitors to rely on for tourism. The giant growth of Asian Casinos has given many Asian gamblers a reason not to travel.
Vegas Sands Table Games Figures Likely to Go Up
At Las Vegas Operating properties, this year’s table games figures increased to $2.25 billion in 2013. The money wagered increased to $633 million from 16% in the first nine months of 2014. Despite the increase, domestic table games contribute less than 1% to the stock of Vegas Sand’s parent company. In the U.S., 400 table games are offered by Las Vegas Sands. These include blackjack, baccarat, craps and roulette. The casinos earn their revenue from the amount of money wagered at these tables.
Joel Simkins, a Credit Suisse analyst, says that “gaming can skew a little more blue-collar and middle-income and if you look at the national economic statistics, that’s a subset that remains challenged.” Las Vegas Sands has forecasted that the amounts wagered will increase as they are driven by the recovery of the U.S. economy. “We need a much more robust economic climate for some of these markets to de better”, says Simkins.
The U.S. per capita disposable income is expected to grow to $43,312 in 2020 (from $37,352 currently), according to a report by IBISWorld. The global business intelligence company sees an increase in spending on leisure. This includes gaming and entertainment of all sorts (including mobile casino gambling).
Las Vegas Sands’ domestic table games revenues are expected to continue growth upwards to a level of $1 billion by the end of Forbes magazine’s forecast period. An earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of $170 million will be translated from 17% and will represent 2% of the overall company EBITDA by 2021.
Slot Gaming at Vegas Sands Expects Steady Growth
Slot Machine wagers are a staple to the U.S. casino industry. Las Vegas Sands has more than 5,000 slot machines in the U.S. Slots machines have been described the bread and butter of everyday casino activity. Forbes magazine says “It must be noted that the slot machine wagering largely reflects the health of gaming on the Strip.”
- Las Vegas Sands Casino Company profits are slightly up
- Gambling on Las Vegas Strip down
- Number of casinos saturated gambling market
- Forbes predicts steady growth for Las Vegas Sands
Although they are an important part of casino gambling, slot machines contribute less than 1% to Las Vegas Sands’ stock value. Domestic slot revenues increased to $465 million in the first nine months in 2014 from $339 million in 2013. Forbes magazine expects this activity to continue. Although the economic recovery is a factor, this rise is the result of an increase in the company’s slot hold percentage. The amount of money held on the player’s wage has increased to 8.7% in 2013 from 6% in 2007.
As the World economy stabilizes and per capita disposable income increases, the slots, like the table games, are expected to rise in the future. As the play on slots increase so will the higher slot wins per day increase. Higher slot wins will translate to more interest and consumer confidence. Hopefully this will also reflect on the more recent methods of gambling and sports betting such as online casinos and mobile betting.
Forbes magazine expects the Las Vegas Sands will continue to see and increase in U.S. slot revenues to an amount of more than $700 million by the end of their forecast period. The EBITDA will result in $140 million from an EBITDA margin of 19%. This represents 1 % of the overall company EBITDA by 2021.