Isle of Capri Casinos (NASDAQ: ISLE) owns casinos catering to a middle-class clientèle. Its 14 casinos are located in Missouri, Mississippi, Louisiana, Florida, Colorado, and Iowa. The company's casinos feature over 14,500 slot machines and over 350 table games (including approximately 95 poker tables) over 3,000 hotel rooms and more than three dozen restaurants. The company also operates a harness racing track at its casino in Florida. The company earned $1 billion in revenue but incurred a net loss of $3 million in 2009.
As a luxury entertainment provider, Isle is especially vulnerable to fluctuations in the US economy. During sluggish economic times, consumers are spending less money, especially on luxury items and activities. As a result, fewer people visit casinos and Isle's revenue suffers. In 2009, the company's net revenue fell by 10% due to fewer people visiting their casinos.
Isle of Capri owns 14 casinos in the United States. The majority of Isle's revenue (85%) comes from its casino operations, with the rest of its revenue coming from its hotel earnings (11% food and beverage, 4% rooms).
People tend to participate in luxury activities such as gambling only when they feel they have enough disposable income. In a sluggish economy with high unemployment and high Oil prices, consumers are less like to spend money, especially on luxury activities. The slow economic environment caused by the Subprime lending crisis and fall of the U.S. Housing Market has caused consumer confidence to fall. This trend iss harmful to Isle's business, as its casino revenue depends on consumer spending. As a result of the sluggish economy, the company's casino revenue fell by 4% in 2009.
Casino/resort operators such as Isle of Capri depend heavily on overall economic strength for its revenue, as people tend to travel only when they feel they have enough disposable income to afford such vacations. As a result of these increasing fuel costs, ticket prices have increased over the years. Pricier flights could lead consumers to not fly at all, meaning that fewer people would visit Isle's casinos. Additionally, more expensive plane tickets mean that customers will cut back spending in other areas, like food/drink and even hotel costs. Isle stands to lose revenue as people cut back on spending. In 2009, room revenues decreased by 7.3% due to fewer decreased occupancy.
In January 2008, the Colorado state government enacted a new law prohibiting smoking in state casinos. This new piece of regulation had disastrous effects on the business of state casinos. Because Isle of Capri obtains almost 13% of its revenue from its operations in the state of Colorado, it is heavily affected by this trend.
Several of Isle of Capri's properties are located in regions that are prone to inclement weather, including dockside and houseboat properties. Its Biloxi and Lake Charles properties were both shut down in September and October of 2005 as a result of Hurricanes Katrina and Rita.
Isle of Capri caters primarily to middle-class customers, as opposed to companies like MGM MIRAGE (MGM) that aim to attract high-end tourists in popular vacation hotspots like Las Vegas. As such, Isle primarily competes with casino/resort companies that operate in the same markets as it does. These companies include: