Posted: 26 Feb 2010 10:01 AM PST

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NEW YORK (Reuters) - Just four years ago, Atlantic City was on top. It had record revenue, a packed boardwalk and was the undisputed gaming capital of the Eastern Seaboard.

But since then, the city has been dealt a bad hand by the economy and the growing number slot parlors popping up in places like Pennsylvania and Connecticut. Crowds are thinner and the casino floor buzz has waned. The city's casinos pulled in $3.2 billion in revenue last year, a 25 percent drop since 2006.

Now Atlantic City's survival hinges on a complete overhaul of the seaside city's offerings, two casino executives said during the Reuters Travel and Leisure Summit this week.

"If we don't do something to make it better, then it is going to continue to get more painful," Harrah's Entertainment Inc HAMLEH.UL Chief Executive Gary Loveman said. "There is no reason why we should sit by and let that happen."

The latest threat is a planned partnership involving casino magnate Steve Wynn to open a three-story casino in Philadelphia -- a market from which Atlantic City has traditionally drawn lots of business.

"That's the last death blow in Atlantic City," said Michael Leven, chief operating officer of Las Vegas Sands Corp (LVS.N), referring to Wynn's latest move. "I have no idea what they're going to do."

Sands sold its Atlantic City casino to Pinnacle Entertainment (PNK.N) in 2006. Sands has since opened a casino in Bethlehem, Pennsylvania, which competes directly with Atlantic City casinos.

But Atlantic City could rebound with more marketing dollars, better entertainment and an overhaul of the city's safety systems and infrastructure, said Loveman.

"The city of Las Vegas through the Convention & Visitors Bureau spends $300 million or more annually telling you what a great place Las Vegas is," Loveman said. "The comparable Atlantic City number is about $8 million a year."

Harrah's has four casinos in Atlantic City -- the most of any other casino operator -- including Caesars and Bally's. In January, two Harrah's casinos saw an uptick in gaming revenue, while the boardwalk overall saw an 8.5 percent decline.

"We can collectively make the business much more attractive, but we have got a long way to go," Loveman said.

SOME CASINOS COULD CLOSE -ANALYST

Slot machines are Atlantic City's mainstay. Two-thirds of the city's gaming revenue came from slots in January, according to the New Jersey Casino Control Commission.

This source of cash has ebbed in the past few years as casinos in Connecticut, Pennsylvania and New York crop up with their own slot machines that are often just a few minutes' drive from Atlantic City's core customers -- Northeast suburbanites.

If Wynn Resorts Ltd (WYNN.O) builds a Philadelphia casino, it could lure even more tourists away from the city, Leven said. Another source of concern: the legalization of table games in Pennsylvania.

"Why would anybody drive down that highway?" Leven asked. "It's an ugly highway anyway. Why would they drive down there?"

Loveman said he did not believe any of the hotel-casinos would close, but said some could change hands or "limp along."

But other analysts and Atlantic City executives have said some of the weakest casinos could go belly-up as the market weakens. Four of the 11 hotel-casinos there are in some state of distress, according to Real Capital Analytics, which does not account for halted projects or those in construction.

"I'm not sure all of these casinos will find homes," said CreditSights analyst Chris Snow. "I wouldn't be surprised if two of the 11 don't make it at all."

Snow said the weakest hotel-casinos there were the AC Hilton, Resorts and the Trump Marina, which bankrupt casino operator Trump Entertainment Resorts (TRMPQ.PK) had tried to sell last year.

RUMBLE IN ATLANTIC CITY

Besides Harrah's, the next-largest owner of casinos on the boardwalk is Trump Entertainment, which owns three casinos and is in its third bout in bankruptcy court.

Trump Entertainment is at the center of a testy battle between Donald Trump, the founder of the company, and billionaire investor Carl Icahn, who bought another Atlantic City property last year, Tropicana Entertainment.

Icahn's involvement is a signal that he sees a rebound ahead for the city and a chance to make money, CreditSights' Snow said. He added that the market could stabilize in two years.

"We have a new governor who has been very supportive of revitalization of AC," Loveman said. "We need to make the boardwalk a very appealing leisure destination. We need to secure safety and cleanliness issues."

"So there's a lot to do there," he said.

(For summit blog: blogs.reuters.com/summits/)

(Reporting by Deepa Seetharaman, editing by Matthew Lewis)

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Airline bosses agree on same bitter medicine - Reuters

Posted: 26 Feb 2010 06:16 AM PST

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NEW YORK (Reuters) - Sit down with the top U.S. airline bosses as I was able to do this week, and you'll hear a group of executives preaching the same sermon: Control capacity and add new fees.

If you fly a lot, you're not going to like this.

This is a fraternity of born-again penny pinchers, determined to raise fares, cut every unnecessary cost and collect any extra fees their customers are willing to pay. But they're also primed for a bigger overhaul that could take the form of takeovers if the right opportunities arise.

Such a unified view, very apparent from interviews with the chief financial officers of four top airlines at this week's Reuters Travel and Leisure Summit in New York, results from the collective battering the airlines have suffered this decade.

If it hasn't been oil prices, terrorism, or the economic crisis that has hit them, it has been fare wars, government restrictions and the airlines' own mismanagement.

So airlines have shown they can take a beating. Now what? And what will this industry look like in five or 10 years?

Kathryn Mikells of United Airlines parent UAL Corp (UAUA.O) said the key to survival is capacity discipline. United and its rivals slashed the number of seats for sale by canceling services in 2008 to offset record high fuel costs.

Fuel prices later retreated, and the capacity cuts left the industry better positioned to combat a recession that severely eroded travel demand.

Lesson learned, Mikells said on Tuesday.

"The trends are very positive in terms of the industry being more disciplined," she said. "That's exactly what we need in order to take this recovery period and start to translate it into price power and ultimately sustained profitability."

WISHING FOR A MERGER

Mikells repeated UAL's long-held view that the U.S. airline industry is too fragmented. UAL has in recent years been in advanced merger talks with Continental Airlines (CAL.N) and US Airways Group (LCC.N). Those deals didn't pan out, but Mikells said UAL remains open to merging with the right partner.

Perhaps that partner is US Airways Group (LCC.N), whose CFO Derek Kerr, visited Reuters' Time Square offices later the same morning.

US Airways, formed from a 2005 merger with America West Airlines, loudly advocates consolidation despite the high regulatory barriers and tight credit markets.

"We believe it's going to happen over time, I just don't know whether it's this year or next year or when," Kerr said. "Overtime, you will see this industry consolidate."

Both Mikells and Kerr said they were pleased to see the success of the merger of Delta Air Lines (DAL.N) and Northwest, which might seem strange given it created a more formidable competitor until you remember that anything that leads to a cut in capacity is seen as positive for the industry.

Even, Capt. John Prater, president of the Air Line Pilots Association, agrees that consolidation is "inevitable." He told Reuters on Wednesday that the union would support a merger that stabilizes the industry. He said a UAL/Continental tie-up makes sense because they have little overlap on their routes.

FARES AND FEES

The CFOs were reluctant to speak candidly about the scope for fare hikes in 2010. Some reported a rebound in pricing power. Others weren't so sure, noting the failure of some attempted fare hikes so far in 2010.

"It's been a mixed bag. Some fare increases have been successful and others have not. And I think that is reflective of the economy, which I would describe as a mixed bag with mixed signals right now," said Tom Horton CFO at American Airlines parent AMR Corp (AMR.N) on Wednesday.

But if the fare outlook is murky, the outlook for new fees for travel services likes bag checks, meals and entertainment is painfully clear for passengers. Some of those fees may be unpopular, but they are here to stay. Their will be more of them. And they're probably going up.

"We're testing a number of different things right now. We'll continue to test the mix to determine what customers really want," said UAL's Mikells.

"They clearly have a willingness to pay for things they value and that they want," she said.

FUEL: ALWAYS THE WILD CARD

Almost the only area of disagreement among the airlines is how to cope with volatile fuel prices.

In 2008, U.S. airlines were clobbered as fuel costs soared to new heights. So they hedged aggressively, only to see fuel fall and money wasted on out-of-the money hedges.

Carriers may have found their footing a little since then, but they have diverging views on how best to offset that cost.

Kerr said US Airways, which is currently unhedged because the costs outweigh the benefits. That compares with UAL, which is 70 percent hedged in the first quarter of 2010.

AMR's Horton said his carrier sticks to its strategy of layering hedges simply to smooth out price volatility. And Southwest Airlines (LUV.N), whose tradition of aggressive fuel hedging has long been the envy of the industry, lessened its hedge in 2008 when prices came down.

(Reporting by Kyle Peterson)

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Casino execs eye customers for clues to market - Reuters

Posted: 26 Feb 2010 06:16 AM PST

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NEW YORK (Reuters) - To gauge the state of the gambling industry, just look at the customers.

High heels on women are a good sign, casino executives said at the Reuters Travel and Leisure Summit in New York this week. Portable coolers are not.

"I spend a lot of time walking through the other hotels in Vegas, the other casinos," said Las Vegas Sands Corp (LVS.N) Chief Operating Officer Michael Leven. "I love to look at the people, because by looking at the people, you can profile what the customer base is."

The operator of the high-end Palazzo and Venetian resorts bemoaned the fact that competitors had slashed hotel room rates in response to the economic downturn that has crimped consumer and business spending.

"So they brought in a series of customers that don't spend any money," Leven said. "They walk the streets, they look for the free buffets just like the old days.

"It's a weight game, basically," he said. "You can spot them by weight."

But these often well-padded visitors don't go in the more expensive restaurants or even gamble very much, Leven added.

"And some of these slot machines that come out today are too complicated even for those people to figure out."

Such distinctions are more difficult in Macau, the world's largest gambling center.

"You walk into the casino in Macau and you don't know by looking whether that person's a multimillion-dollar player or if that person is a $150 player because they're dressed the same," Leven said.

The customer base in Macau is predominantly male, he said, but that will probably change over time to evolve into a more cosmopolitan group, as in neighboring Hong Kong.

Footwear of customers at New Jersey's Atlantic City shows that market also needs to do more to attract a well-heeled clientele, Harrah's Entertainment HAMLEH.UL Chief Executive Officer Gary Loveman said, although more vibrant night life is already available.

"The ladies that are coming in on the bus at ten in the morning are wearing some pretty low heels," he said. "And the ladies coming in at 11 o'clock at night are wearing a lot higher heels."

(Reporting by Deena Beasley, editing by Lisa Von Ahn)

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Travel and Leisure

Friday, February 26, 2010

“Overhaul crucial to Atlantic City survival - Reuters” plus 2 more

“Overhaul crucial to Atlantic City survival - Reuters” plus 2 more

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