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Nevada Casinos post 5th year of losses according to report

Discussion in 'Casino Industry & Development' started by Funkhouser, Jan 10, 2014.

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  1. Funkhouser

    Funkhouser In Charge of the Big Door

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    The RJ had an article today outlining that NV casinos showed a 5th straight year of losses when factoring in revenues vs expenditures. Interesting note was that gaming revenues were up 1% higher over 2012.

    Also I wonder how the strip closures of hotels that were imploded to make room for new development that did not happen, and the impact of new higher expenditure non profit generating properties like Cosmo and City Center play into these numbers.

    Good read. You can find the full article at:
    http://www.reviewjournal.com/business/nevada-casinos-post-fifth-straight-fiscal-year-net-loss
     
  2. smartone

    smartone VIP Whale

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  3. hammie

    hammie VIP Whale

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    This quote was from the RJ article, but the abstract said the losses were before federal taxes and extraordinary expenses. The fiscal year ended in June 30, 2013.

    Here's a link to the 240 page report for the 70% of folks who take their tablet into the WC. http://gaming.nv.gov/modules/showdocument.aspx?documentid=8566

    Beverage gross margins are 80%, maybe this is why some folks have a pre game cocktail or three in their hotel room?
     
  4. tringlomane

    tringlomane STP Addicted Beer Snob

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    Possibly. I just game the comp drink system usually. The quantity of comped drinks is close to those purchased. I say close because a comp drink is roughly valued at only 50% of retail. Still amazing on how many ppl don't know drinks are free or rather pay $7 a beer than to play a game that costs less than the price of that drink.
     
  5. vegasqc

    vegasqc VIP Whale

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    37% guess thats why we see the casino floor getting smaller and smaller and the clubs/restaurants lounge taking more space than ever
     
    Last edited: Jan 12, 2014
  6. Busyman

    Busyman VIP Whale

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    It's probably because they are at a bar enjoying themselves vs wanting to sit at a slot.

    That's my guess.

    Personally, I buy room liquor and leave out of my room with a beer and/or drink....every time, and don't pay for $7 beer.

    Seriously tho', the folks paying that for liquor/beer are enjoying themselves too much to be concerned about penny pinching. I even get like that on occasion. I mostly pregame.
     
  7. Busyman

    Busyman VIP Whale

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    Chicken or the egg.

    Are less people gambling therefore casinos shrink the space and have worse rules or are less people gambling because the casinos shrunk the space and have worse rules.

    I bet it's the former.
     
  8. chitownjohn

    chitownjohn High-Roller

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    "The net loss came after the casinos paid expenses. The loss does not take into account deduction for federal income taxes and accounting for extraordinary expenses. Most of the losses statewide were on paper, reflecting expenses taken for financial restructurings in 2012."

    Kinda funny that the mob got scrutinized for skimming off the top but with today's corporate tax laws they can legally avoid taxes with "corporate restructuring".

    Get rid of the corporations and bring back the mob.:thumbsup:
     
  9. Kickin

    Kickin Flea

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    I think there is something wrong with this figure and I just emailed the gaming board asking if they can clarify their accounting.

    If you look at the report hammie posted (where the 37% number comes from) they are double counting about $1.5 billion in complimentary expense from the casino as revenue to other departments. The revenue figures for each department include revenue from comps which is already accounted for in total casino revenue.

    Its like you giving me $20 and then me giving $10 of it to my brother and saying together we received $30 from you.

    Their % of revenue numbers for the LV Strip are as follows:

    • 37.0% Gaming
    • 25.3% Rooms
    • 15.5% Food
    • 7.7% Beverage
    • 14.5% Other

    But if I adjust by deducting complimentary revenue net each departments own complimentary expense I get the following:

    • 40.7% Gaming
    • 23.3% Rooms
    • 14.5% Food
    • 6.0% Beverage
    • 15.4% Other

    This reconciles with the rest of the numbers and should be accurate, but I'll let you know what response I get from the gaming board. I know the difference isn't huge for the purposes of the argument that gaming is losing importance. Nonetheless it is still the revenue juggernaut for these companies. Especially when you consider R/F/B are not completely discretionary expenses, they have some baseline number per visitor. Unlike gaming which is purely discretionary.
     
  10. Funkhouser

    Funkhouser In Charge of the Big Door

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    Yup Gaming as a single revenue item can push the ledger in the red or black any given quarter. Hence why I still think the bean counters and financial analysts who loan the companies money would like to continue to see gaming revenue shrink as percentage. Given the competition and exposure it makes sense to cut risk except where there are high value proposition customers (whales). In English that means worse odds and lower comps.
     
  11. chitownjohn

    chitownjohn High-Roller

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    The bean counters like revenue diversity to offset exposure and economic downturns, but what they really want is revenue growth across the board and it all starts with the gaming segment. That actually might mean more comps to the right people, and less comps to the undeserving. I think the marketing departments might be working OT to get the gamblers back in town.
     
  12. Funkhouser

    Funkhouser In Charge of the Big Door

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  13. MikeOPensacola

    MikeOPensacola VIP Whale

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    Thanks for the post Funkhouser. I've always wondered, tax wise, do the casinos get to write off comps at the cost to the casino or what they would have cost a patron had they sold them.
     
    Annual Summer Bliss in the Land of Milk and Honey!!!
  14. Funkhouser

    Funkhouser In Charge of the Big Door

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    No write off's there, and in fact certain ones are taxed by state. There was a big lawsuit a couple of years ago over meal / room comps and taxation.

    If the comps result in losses however, the casinos do get to write operational losses on their business taxes.
     
  15. sco5123

    sco5123 VIP Whale

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    If the whole industry is losing, why do we feel bad when we lose?
     
  16. MikeOPensacola

    MikeOPensacola VIP Whale

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    Thanks for the scoop Funk. I don't doubt you at all but I'm surprised that casinos don't get to write off comps as a cost of business. I guess this might be one of the reasons why a lot of casinos have tightened up their comps. :peace: :beer:
     
    Annual Summer Bliss in the Land of Milk and Honey!!!
  17. Kickin

    Kickin Flea

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    What do you mean by "write offs" in this case? There is no direct tax write-off but the cost of providing comps is an expense and thereby lowers net income and any tax liability.

    What's odd is there is no standard accounting they use. For instance MGM deducts comps at retail value from casino revenue and adds them back in to individual department revenue who in turn deduct the cost of those comps as they do for any of their other revenue. But CET adds and deducts retail value of comps from overall gross revenue and then deducts the cost of those comps from casino revenue as a casino expense. The cost of comps is roughly 60% of the retail value.

    It works out to the same thing in terms of net income, but it shifts things around differently in terms of top-line revenue for each department. MGM's method is much cleaner but I can think of some reasons CET does it their way especially considering all the cross-property comps they deal with.
     
  18. MikeOPensacola

    MikeOPensacola VIP Whale

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    What do you mean by "write offs" in this case? There is no direct tax write-off but the cost of providing comps is an expense and thereby lowers net income and any tax liability.

    Yeah, that's what I meant by write offs. I just always assumed that casinos were able to reduce their tax liability by adjusting their revenues by offsetting the comps they provide. Thanks for clarifying this. :peace: :beer:
     
    Annual Summer Bliss in the Land of Milk and Honey!!!
  19. Busyman

    Busyman VIP Whale

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