Company Press Release
February 11, 2000
LAS VEGAS, NV -- The emergence of Native American casinos in California should slow revenue growth in a number
of gaming markets in neighboring Nevada, according to a new report released by Bear, Stearns & Co. Inc. The
report was released Thursday at the American Gaming, Lodging & Leisure Summit in Las Vegas. According to Bear
Stearns senior managing director and gaming, lodging and leisure analyst, Jason Ader, a portion of the revenue
that Nevada generates from Californians could be in jeopardy. California voters are expected to approve the creation
of Native American casinos when they go to the polls in March. ``California is a major feeder market for Nevada
casinos. If people in California get the option to gamble in their own back yard, it is less likely they will be
willing to cross state lines to go to a casino,'' commented Ader. It is estimated that California provides 35%
of gaming revenues to Nevada.
The Strip is Relatively Safe, but Other Parts of Vegas May Suffer
While Native American casinos will attract customers that normally would have traveled to Nevada, it is doubtful
they will be able to fully compete with the atmosphere-rich, highly themed, mega-resorts on the Las Vegas Strip.
As a result, Bear Stearns believes the Vegas Strip will see revenue growth shaved by less than 1%. ``The Las Vegas
Strip is a destination spot,'' commented Marc Falcone, Bear Stearns gaming analyst, who contributed to the report.
``Most people come as much for the atmosphere as they do to gamble.''
Downtown Las Vegas and North Las Vegas, however, may not be as lucky. These two areas could see their revenue growth
decline by about 23 % and 10 % respectively, according to Bear Stearns estimates. The Boulder Strip in Las Vegas,
which caters mostly to ``locals'', is estimated to lose only 5 % of its revenue growth.
Other Parts of the State Could Be Hard Hit
Over the next two to three year period, the analysts predict, several parts of the state should encounter a reduction
in profit. One area that could see a dramatic decrease in revenue growth is Reno/Sparks. Its lack of must-see facilities,
its location and the quality of its casinos will make it vulnerable to competition from Native American casinos
in California. According to Bear Stearns research, Reno/Sparks could lose nearly $232 million, or 22% of its revenue
growth, by 2004.
Laughlin, Nevada will also be hit hard by the proximity of the California casinos. Bear Stearns estimates 16% of
Laughlin's gaming revenues will be diverted. In addition, the Lake Tahoe region will also see revenue growth stunted
by more than 15% thanks to Native American casinos in California. ``Casino gaming in California could prove to
be a real challenge for many casinos in Nevada. It will be interesting to see what strategies these casinos develop
to try to hang onto their customer base,'' said Ader.
Estimated Decline in Revenue Growth by 2004
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-- Las Vegas Market (-3.6%)
-- Las Vegas Strip (-.6%)
-- Downtown Las Vegas (-23.4%)
-- North Las Vegas (-10.4%)
-- Boulder Strip (-5.5%)
-- Reno/Sparks (-21.6%)
-- Laughlin (-15.8%)
-- Lake Tahoe (-15.4%)
Which Companies Will Suffer?
Companies with a high degree of exposure to Reno/Sparks, Laughlin and Downtown Las Vegas could feel the most competitive
pressures from Native American casinos in California. According to the analysts, Boyd Gaming and Mandalay Resort
Group, and, to a lesser extent, Harrah's and Aztar, have the most exposure to these gambling markets.
Founded in 1923, Bear, Stearns & Co. Inc. is a leading worldwide investment banking and securities trading
and brokerage firm, and the major subsidiary of The Bear Stearns Companies Inc. (NYSE:BSC - news). With approximately
$22.2 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide.
The company's business includes corporate finance and mergers and acquisitions, institutional equities and fixed
income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and
trading, asset management and custody services. Through Bear, Stearns Securities Corp., it offers professional
and correspondent clearing, including securities lending. Headquartered in New York City, the company has over
10,000 employees located in domestic offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, Puerto Rico and
San Francisco; and an international presence in Beijing, Buenos Aires, Dublin, Hong Kong, London, Lugano, Sao Paulo,
Shanghai, Singapore and Tokyo. For additional information about Bear Stearns, please visit our Web site at www.bearstearns.com
Any recommendation contained in this report may not be suitable for all investors. Moreover, although the information
contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be
guaranteed. Bear Stearns may make markets and effect transactions, including transactions contrary to any recommendations
herein, or have positions in the securities mentioned herein (or options with respect thereto) and may also have
performed investment banking services for the issuers of such securities. In addition, employees of Bear Stearns
may have positions and effect transactions in the securities or options of the issuers mentioned herein and may
serve as directors of such issuers. Copyright (c) 2000. All rights reserved by Bear, Stearns & Co. Inc.
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Contact:
Press Contact: Russell Sherman
Bear, Stearns & Co. Inc.
(212) 272-5219