Vegas Doom, Asia Boom

Posted: October 25, 2010 in Uncategorized

WHY IS LAS VEGAS GAME-OVER?

25th Oct 2010 Mon  

Contributed by:  James Bertha

The situation in my home town Nevada is becoming from bad to worse. Many of my friends lost their job and stuck in the middle of nowhere (or rather, in the middle of dessert).  Unemployment rate for Las Vegas reached 14.7% high. Suddenly all the regular customers to Vegas have disappeared. Home foreclosure has reached the highest cases among US states.

This sounds like a doom’s Day message but it is for real…

Gaming operators in the US brace themselves for the toughest “business winter” ever happend in Las Vegas history.  The next round of Quantitative Easing by US government will only make things worse. Borrowing of capital becomes so cheap that the hot money just flow into Asian markets instead of into the hands of businesses and family. Job market recovery remains weak, very weak indeed.

So we think that Las Vegas will be left behind in this storm… with many casualties, for both the casino operators and innocent employees. Property prices are dropping… people are leaving town for other options.

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Editor’s Notes:

In contrast, casino industry in Asia are getting all the blessing they could ever hope for.  Macau and Singapore casinos continue to bring in hot cash for investors. 

However, a word of caution here. The current economic situation in Asia may lead to the following nasty surprises for casino stock investors. 

*  For Macau, margins of most casinos are thining out still, under great pressure by Junket syndicated groups. Gap between VIP and Mass gaming continue to widen. 

*  Chinese government may execute another round of surprise control measure for travelling to Macau, in view of currently overheating economic environment.

*  Macau casino operators such as City of Dreams, Galaxy Entertainment, MGM Grand and those who rely heavily on junket syndicated network to feed their business will face tough challenge in diminishing margins.  Sands and Wynn are in safe territory but for LV Sands, the group’s overall revenue may not meet targets due to poor business in the US. In the case of Macau Studio City the law suit is the mark of show-stopper; this project may never open at all. Galaxy Resort (Cotai) seems lacking the confident again under changing economic environment.  The project may not get their “feet-wet” in 2011; likely to delay into 2012 or at best partial opening without any net impact to their market share or profit and yet with an overall higher operating costs for the group.

*  On the Singapore integrated resort front, Round 1 has been awarded to Genting RWS for sure, with the Malaysian “old horse” galloping away with almost 80% of available Malaysian market. Marina Bay Sands seems to continue their round in the bushes, fails to understand the Southeast Asian markets. 

*  Performance of Genting RWS in the 3rd quarter may surprise many in view of volatility of VIP gaming, coupled with tighter control measure imposed on domestic market by the authority.  

Expect more control measures coming on stream for its domestic market

 

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