Inside Gaming: Casinos Could be Outpricing Themselves

Sticker shock. Gaming analysts say Las Vegas hotel-casinos are likely to start running into storms of price resistance early next year, if they haven't already. The problem seems to be that hotel and cruise prices have increased a modest 8 percent to 10 percent since the 9-11 terrorist attacks. By comparison, Las Vegas room rates are up 30 percent from their previous peaks. Bargain-hungry vacation shoppers may shift their sights away from Las Vegas. Alternatively, Las Vegas may create a pricing umbrella so hospitality operators can raise rates.

Gaming industry chieftains Gary Loveman and Terry Lanni each admitted on "Nevada Week in Review" with Mitch Fox on Nov. 25 that recent gasoline price spikes in California had taken a noticeable and negative toll on their drive-in business. Loveman, chairman of Harrah's Entertainment, said it was a lifestyle choice in the wake of major national problems, such as the Gulf Coast hurricanes. Lanni, chairman of MGM Mirage, said it could recur if prices spike again. The comments followed months of denial by casino industry public relations flaks.

Wall Streeters say housing prices in Las Vegas are likely to keep climbing, despite slowing down last summer. Limited land, increasing population and attractive prices compared with markets such as Southern California will keep demand robust and pump more air into the bubble. Moreover, the real estate appreciation should generate a "wealth effect," making people think they can spend more, to fuel the growth of locals casinos. Analysts say it's all good news for Boyd Gaming Corp. and Station Casinos.

Meanwhile, some industry sources say Boyd Gaming is in talks with possible joint-venture partners for mixed-use and residential developments that will be part of its soon-to-be-announced Stardust redevelopment. It's also possible Boyd, now the world's third-largest gaming company, will sell some of the 63-acre site to facilitate financing, although insiders say it's unlikely. Given the powerhouse nature of the project, however, watch for Boyd to go it alone on the main hotel-casino.

The BetCRIS Poker site has been running a survey to see which world leader is most wanted at poker tables. Of more than 14,000 responding, 27 percent have picked President Bush. He's trailed by Fidel Castro (20 percent), Queen Elizabeth II (11 percent) and British Prime Minister Tony Blair (11 percent). Trailing the pack is the pope (8 percent), presumably because divine guidance might clue him in to what's going on. Bush is seen as easy to bluff.

Gaming Wire Editor Rod Smith can be reached by e-mail at rsmith@reviewjournal. com or by phone at 477-3893.