Gaming & Lodging Industry Update
The Pennsylvania Gaming Control Board announced that it will continue to fine Foxwoods Casino in Philadelphia for the company's failure to meet deadlines, until updated information including financing, design and opening timelines are submitted, by the April 29 deadline. Analysts at Oppenheimer believe that "WYNN's decision to serve as manager and general partner of the Philadelphia casino is bullish for the shares, given that the company stands to benefit from additional revenue sources from the endeavor.”
Alabama legislators voted 18-6 against a bill that would have legalized 10 Class II slot parlors in the state. State Senator Bedford requested a public vote on the issue during the November 2 general election. However, many Republican lawmakers in the state are against the bill. Senator Paul Sanford is also planning to introduce a new bill that will legalize slot machines. “Overall, we view this as negative for slot suppliers, IGT and BYI, as the companies have machines that remain idle in the state,” the analysts add.
The Florida legislature and Seminole Nation are close to a compact agreement which would give the Seminoles monopoly over table games for five years, in exchange for $150 million per year. “We view the development as a strong positive for ISLE, which would benefit from the lower taxes. We estimate that the tax reduction should generate an additional $20 million of incremental EBITDA,” analysts mention.
US RevPAR was down 2.3% for the week ending February 27, 2010. ADR declined 4.7%, while occupancy was up 250 bps. “We expect the urban markets to outperform the average during a recovery. As the second month of 1Q2010 comes to a close, we are starting to see some new trends develop in various segments,” Oppenheimer adds. Luxury has outperformed the group thus far, on a solid occupancy rebound, offset by discounting and therefore rate weakness. Meanwhile, the two midscale segments and economy hotels have underperformed the group, driven by a mix of occupancy and rate declines. “We expect these types of trends to persist as luxury continues to lap easier comps in 2009 and discounting continues to drive demand. Overall, the results do not alter our conservative view of the hotel stocks at present given the historically high valuation with limited operating visibility,” analysts say.
