Weak traffic on I-15 (So Cal to Vegas) cutting into business in Primm. Stocks affected: MGG and MBG:
lvrj.com
Sunday, April 15, 2001
Copyright © Las Vegas Review-Journal
BUSINESS BEYOND LAS VEGAS: Southern Exposure
Casinos in Primm and Jean face formidable new competitor: California tribal gambling
By JEFF SIMPSON
lasvegas.com GAMING WIRE
Interstate 15, the twin concrete strips connecting Southern California and Las Vegas, has handled less traffic over the past two months.
That's not good for Southern Nevada casinos, but it's downright scary for the company-town gambling complexes in Primm and Jean.
Both depend on drive-in traffic from California, but industry experts believe the rapid expansion of tribal casinos in the Golden State will have its most significant impact in Primm and Jean.
Higher gasoline prices and rising energy costs will also hurt the five casinos near the state line dividing California and Nevada, said Robin Farley, UBS Warburg gambling industry analyst.
"These markets are drive-in markets, and we expect to see first-quarter weakness in Southern Nevada outside of Las Vegas," Farley said Thursday.
"It's hard to separate how much of the slowdown in (I-15) vehicle traffic is due to higher energy costs and their effect on Californians' discretionary spending or due to the ramping up of Native American gaming," she explained.
California's Yarno I-15 vehicle inspection station, which measures southbound Interstate traffic, recorded a 4.3 percent drop in automobile traffic during the first two months of the year compared with January and February 2000.
February's vehicle count was down 6.1 percent.
"Interstate 15 is the key to our Jean properties," said John Marz, Mandalay Resort Group's senior vice president of marketing and public relations.
Mandalay Resort operates the Gold Strike and Nevada Landing in Jean, 12 miles north of the California state line and about 23 miles south of Las Vegas.
Marz said most Jean casino customers come from smaller California cities north and east of Los Angeles: Barstow, Victorville, Riverside, San Bernadino and Bakersfield.
Many of the customers arrive with California charter tour groups, while others stop on their way to Las Vegas or California.
"We're getting the same share of customers (relative to the three Primm casinos)," Marz said. "What we're seeing is that our customers may make one less trip per year."
MGM Mirage owns the three Primm properties located immediately north of the state line: Whiskey Pete's, Buffalo Bill's and the Primm Valley Casino Hotel.
Most of the employees at the five state line-area casinos live in Las Vegas and commute to work.
MGM Mirage provides modular, prefabricated housing units in Primm to more than 400 of its 3,000 full- and part-time Primm employees. The company also subsidizes a bus service to bring Las Vegas-based employees to and from work.
Marz said almost all of the Jean casinos' employees commute from Las Vegas.
Whiskey Pete's was the first state line-area casino, opening in 1977. The Primm Valley Casino Hotel opened in 1990, with Buffalo Bill's following in 1994.
The three MGM Mirage properties have 2,643 rooms, 100 table games and about 4,200 slot machines.
Bear, Stearns & Co. industry analyst Marc Falcone said the new tribal casinos opening in Southern California pose a threat to the casinos in Jean and Primm.
"The new Pala casino in northern San Diego County is phenomenal, and it's right near I-15," Falcone said. "Jean and Primm are most exposed to the California gaming expansion, and we believe they'll feel an impact. We expect their numbers to be down significantly."
Falcone said the casinos' gambling action by their regular customers has been steady, but noted that the properties have recently seen a meaningful drop-off in the nontracked gambling play of motorists making a quick stop on their way to or from Las Vegas.
MGM Mirage's Primm casinos reported an 11 percent decline in operating cash flow and a 2.4 percent drop in revenue during the fourth quarter.
Operating cash flow is a widely used gauge of casino profitability.
The Primm properties produced net revenue for the quarter of $53.1 million and cash flow of $14.6 million. This compares with net revenue of $54.4 million and cash flow of $16.4 million during the 1999 fourth quarter.
Mandalay Resort Group includes its Railroad Pass property in Henderson in a group with the two Jean casinos in its annual report.
The three properties reported a 17.8 percent increase in operating cash flow in 2000, jumping to $22.6 million from $19.2 million.
George Boyer, president and chief operating officer of MGM Mirage's Primm Valley Resorts subsidiary, said the Primm properties understand their customers.
"We are a main street casino, and we cater to mom and pop. Our visitors want a relaxed environment as opposed to the hustle and bustle of the Strip," Boyer said.
The Primm properties offer hotel rates ranging from $20 to $65 per night, and plan to open a new 15-dispenser filling station Labor Day weekend.
The MGM Mirage properties also plan to use their nearby Primm Valley Golf Club's two 18-hole courses, the adjacent 100-plus store Fashion Outlet Mall and Buffalo Bill's roller coaster, Turbo Drop and log flume rides to attract business.
Mandalay Resort's Marz said tribal casinos has caused the drop-off in California business at the Jean properties.
"It's not fuel prices or blackouts," Marz said. "It's slot machines in Californians' backyards,"
The Jean casinos plan a two-pronged approach to make up for the lost business.
"We've gotten a lot more aggressive with our direct-mail database marketing," Marz explained. "We may give them a second night free, or make a free food or coin offer."
The properties also plan increased advertising on I-15, using their tongue-in-cheek "In-Jean-ious" billboard campaign.
"Interstate 15 is a market unto itself," Marz said. |
