LOS ANGELES – The planned purchase of the storied Golden Nugget casino in Las Vegas by Landry's Restaurants Inc. (LNY) is further evidence of how gambling has become mainstream entertainment, analysts said Friday.
Outside businesses are looking favorably on the casino industry, which is known for generally strong cash flows.
"Gaming has become more acceptable as an entertainment source similar to going to the movies or out to dinner," said Marc Falcone, a stock analyst at Deutsche Bank.
Today, gaming revenue accounts for just over half of a casino operator's bottom line, compared with 70 percent 10 years ago, said Frank Fahrenkopf, chief executive of the American Gaming Association (search).
"The dynamic has changed," he said, noting that more money is now made on hotel rooms, food, and things like golf course fees.
The business is certainly booming, as publicly-traded casino operators report record earnings and casinos run by Indian tribes continue to multiply.
Last year, 26 percent of U.S. adults gambled at a casino, up from 20 percent five years ago, according to study commissioned by casino operator Harrah's Entertainment Inc. (HET).
Houston-based Landry's, operator of chains like Rainforest Cafe and Joe's Crab Shack, agreed to pay $295 million in cash and debt for the Golden Nugget, considered the premier property in downtown Los Vegas.
"This is definitely showing that private investors continue to pay-up for gaming assets," said Larry Klatzkin, a stock analyst at Jefferies & Co.
Another non-gaming company, real estate investment trust Colony Capital, has been picking up casino properties — mainly those spun off from the upcoming merger of gaming giants Harrah's and Caesars Entertainment Inc.
In June, Colony bought the Las Vegas Hilton from Caesars for about $280 million.
In September, Planet Hollywood investors took over the Aladdin casino, after winning a bankruptcy sale of the megaresort on the Las Vegas Strip with a bid of $635 million.
Investors including Planet Hollywood International CEO Robert Earl, Bay Harbour Management and Starwood Hotels & Resorts Worldwide which will rebrand the hotel operations as a Sheraton, aim to keep the property open during renovations that will last until early 2006.
At that point the Middle Eastern fairy tale-themed casino, which originally cost $1 billion to build, will reopen as a movie-themed Planet Hollywood Resort and Casino, including a Sheraton hotel.
"It's a cash cow business and its becoming more socially acceptable," Klatzkin said.
MGM Mirage (MGG) owner of the Bellagio and MGM Grand casinos in Las Vegas, on Tuesday reported record fourth-quarter earnings, citing the highest gaming volumes in several years.
Harrah's on Wednesday said its quarterly profit doubled amid booming business in Las Vegas.
And, whether they know it or not, many Americans own stock in casino operators through mutual funds, said David Schwartz, head of the Gaming Studies Research Center at the University of Nevada in Las Vegas.
"Fifty years ago that would have been shocking — it was viewed as an evil business," he said. "Today it's a business like any other."
He dates the acknowledgment of gambling as a form of entertainment to the 16th century when games of chance in which the house had the advantage first emerged.
"Now, most people know the odds," Schwartz said.
The fact that the gaming industry employs about half a million people has also demystified it, the academic said.
"The state of Nevada gets nearly all its revenue from gambling and tourism — it's the same in Atlantic City. If you ask someone on the street they will say gambling is a good thing," Schwartz said.
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