According to the Nevada Gaming Control Board, the gaming revenues for the state dropped in March 2012, breaking a streak of rising revenues of five consecutive months. The gambling revenue in the month of March fell by 11 percent to $854.6 million as compared to corresponding numbers for March 2010.
The Market Vectors Gaming ETF profile (BJK) has fallen over eight percent in the second week of May 2012. BJK tracks the S-Network Global Gaming Index, which provides exposure to publicly traded companies deriving more than 50 percent of their revenues from the global gaming industry. Recent times have also witnessed a fall in casino stocks. This fall is despite the growth of gambling in Macau, the only region in China where gambling in casinos is considered legal. Gambling tourism constitutes the biggest source of revenue in Macau, with many large casinos from Las Vegas and Australia introducing various western-style casino games for Chinese nationals and visitors from Hong Kong and other parts of the world.
Casinos in Nevada might also have to face competition from online poker, with Nevada setting to become the first state to license the same. The competition in this arena is expected to be intense with social media conglomerates and native American Tribes competing with top casinos for a license. The other states contemplating licensing of online poker are California, New Jersey, Iowa, Massachusetts, and Delaware.
Nevada’s latest numbers corroborate this drop. The number of gamblers in casinos in Vegas in March was much less than other months. Also, more gamblers than normal were successful in beating the house. Vegas proved to be lucky for many gamblers in March.
Yet, the state of Nevada is asking people not to take these numbers at face value. There have been certain other factors at play here which have resulted in these trends. In March 2011, the state was host to a big convention; the number for last year therefore cannot be taken as benchmark.
Nevada is one of the most popular states for hosting conventions. Businesses have discovered that when they are holding their conventions in Las Vegas or Walt Disney World in Orlando, Florida, there are more people who attend. Las Vegas is the perfect venue for adults-only conferences. Disney World is great for conferences attended by business people along with their families.
Yet, being a big convention destination comes with its downsides. In the instance of a slowdown in the economy, there are fewer companies holding big conventions or sponsoring business travel. This affects a part of the casino business as well. With the economy recovering, this trend might reverse and big conventions and bigger crowds might come back to Nevada and Las Vegas, boosting the casino figures up.
With casino stocks bearing the brunt of the economic slowdown and a sluggish level of consumer activity in different sectors, what does this imply for investors? Despite all the negativity, some of the well-known casino operators are showing healthy financial prospects. Investors could do well by putting their stakes on the solid firms in the business. According to experts, some of these players would be able to weather the current economic slowdown with their firm financial base and geographically diverse revenue streams.