The resorts and casinos industry is comprised of companies operating standalone resorts, casinos, or combination casino/resorts.
The majority of casino operators run combined casino/hotel facilities, although there are stand-alone casinos as well. The U.S. casino industry took in $34.13 billion in 2007, a 5.3% increase from the $32.42 billion it took in in 2006. According to American Gaming, the Las Vegas Strip was the most profitable region in the United States, taking in $6.75 billion in 2007, while Nevada as a whole took in $11.80 billion in casino revenues.
In 2007, the hotel industry took in $139.4 billion in revenue, a 4.5% increase from the year before ($133 billion). However, analysts at Hotels Magazine believe that rising oil prices and an otherwise struggling U.S. economy will hurt the hotel industry in 2008, with many hotel companies already feeling such negative effects in 2007.
This group consists of companies that offer lodging services in facilities such as hotels and ski resorts. Many of the hotels in this segment obtain business through the practice of franchising, in which one company (such as Marriott International (MAR)) allows another (such as Lodgian (LGN)) to use its trademarks. This group also receives revenue from the hotel or resort portions of casino facilities throughout the United States.
This group consists of revenue obtained from net gaming win in casino operations around the world. As such, the companies involved in this segment include both stand-alone casinos and more popular casino/hotel facilities.
Casino/resort operators depend heavily on overall economic strength for their revenue, as people tend to travel only when they have enough disposable income. In the first half of 2008, however, the price of crude oil rose to $98.66/barrel, up 76.8% from the year before. With this increase came the obvious increase in the price of jet fuel, as prices rose from $850/metric ton at the beginning of 2008 to $1300/ton by June. The increasing fuel costs caused increasing airline prices, which in turn lowered the number of tourists who came to casinos in 2008. For example, MGM MIRAGE, which depends mostly on tourism for its revenue, saw a decrease in revenue growth in 2007, from 17% in 2006 to a mere 7% in 2007.
In 2008, domestic disposable income suffered from factors such as the previously mentioned all-time highs in oil prices, and a struggling U.S. housing market. These factors have contributed to shaky consumer confidence in the casino industry, sending the Applied Analysis Gaming Index, which includes casino operators and gaming machine manufacturers, down by 15.7 percent in January 2008. While increasing oil prices have affected casino revenue from out-of-state travelers, decreasing disposable income has had an equal effect on in-state customers, as gambling is a luxury activity. As an example, same-property revenue for Isle of Capri Casinos (ISLE), which depends mostly on in-state customers for business in its U.S. casinos, fell by 13.6% in 2007.
Tourists are more likely to travel during seasons with better weather conditions, and as a result, tend to go on vacations during spring and summer (Q2 and Q3 of a fiscal year) instead of winter or fall (Q1 and Q4). Because the majority of hotel customers are tourists, this seasonality greatly affects the hotel business. For example, Wyndham, a company with a 2007 revenue of $4.36 billion, obtained $2.32 billion in combined Q2 and Q3 revenue, a 13.3% increase from the $2.04 billion in combined Q1 and Q4 revenue.
As of January 2007, no one hotel brand commanded more than 12% of overall market share, with Wyndham leading the way at about 11.5%. In all, six hotel brands commanded at least 4% of the overall U.S. hotel market.
The U.S. casino industry took in $34.13 billion in 2007, a 5.3% increase from the $32.42 billion it took in in 2006. Nevada is the state with the highest revenue from casino operations, with an estimated aggregate $11.8 billion in revenue in fiscal 2007, good for 34.57% of the overall U.S. casino market. MGM does not separate its casino revenue by geographic location, so its $2 billion in Nevada casino revenue is an estimate based on the fact that 68% of its available casino floorspace is in Nevada and its overall casino revenue for 2007 was $3.24 billion. This would place its approximate market share at 15-20% of the overall Nevada gaming market. Wynn's market share is an estimate based on taking the percentage of casino revenue on its total revenue (73%) and multiplying it by Wynn's net revenue from its Nevada operations.