SARS nicks gaming stocks

The outbreak of a mysterious strain of pneumonia known as Severe Acute Respiratory Syndrome in Asia has wreaked havoc on tourism in that part of the world as airlines scale back flights in Asia, hotel chains report cancellations and visitors hold off on trips over fears of infection.

The virus has registered on the radar screen at Las Vegas Strip casino giants, which receive a significant amount of revenue from Asian high-rollers. Still, concerns about terrorism and the war in Iraq appear to be overshadowing the potential affect that SARS might have on tourism, they say.

"I think the issue of international tourism right now is far more tied to concerns about international travel due to the geopolitical situation than it is about SARS," Park Place Entertainment Corp. spokesman Robert Stewart said.

"I would think that the impact based on where we are today going forward would be minimal, but it's too early to tell," said MGM MIRAGE spokesman Alan Feldman. "I suspect it would present (a larger) problem for U.S. airlines with a base of operations there than it would for us."

Japan Airlines, citing lack of demand, today said three of its April round trip flights between Tokyo and Las Vegas have been canceled.

Carol Anderson, a spokeswoman for the airline, cited weak demand for flights on April 18, 20 and 22 as the reason for the cancellation. She said large groups that had been packaged on those flights canceled their plans. She said she did not know the reason for those cancellations and would not speculate on whether war jitters or the SARS scare played a role in them.

"The lack of demand on those flights warranted capacity adjustments and passengers booked on those flights have been rerouted to Las Vegas on flights through Los Angeles," Anderson said.

Japan Airlines has three round trips a week between Tokyo and Las Vegas. Anderson said the airline is monitoring loads on its trans-Pacific flights daily.

"The loads look good on some days, but on some days, they're questionable," Anderson said.

Besides the JAL cancellations, other evidence has emerged that links casino fortunes to virus fears.

The stock prices of some Las Vegas casino operators fell from 3 percent to 5 percent Tuesday in part due to concern that SARS might potentially affect Asian travel to Las Vegas, said a report issued today by Lehman Brothers casino analyst Joyce Minor.

But casino stocks surged upward today with the broader market, bouyed by an aggressive U.S. military advance in Iraq.

MGM MIRAGE jumped 5.7 percent ot $29.48, Mandalay Resort Group rose 3.7 percent to $27.68 and Park Place rose 3.76 percent to $7.17 before noon trading today.

Minor dispelled SARS concerns in her report, saying that Asian high roller travel to Las Vegas is mostly concentrated during three periods of the year: the Chinese New Year holiday in late January and early February, the Christmas and Western New Year holiday during the last two weeks of December and in August, a popular vacation month.

"Asian high roller visitation during March and April, for example, is minimal," she said.

"While we understand that the fear of SARS could dissuade some Asian travelers from flying in the near term, unless SARS becomes a much more widespread concern for travel generally, we certainly don't believe it warrants yesterday's 3 to 5 percent stock declines."

"Even so, we remain somewhat cautious on Las Vegas in the near term as recent results have not been robust and heightened geo-political concerns can't be helping," she said.

Asian visitors probably contribute less than 10 percent of total revenue for MGM MIRAGE, which likely receives most of the city's international Asian travelers, she said. Probably 25 to 50 percent of that revenue comes during peak periods.

Minor maintains an "overweight" rating on MGM MIRAGE, an "equal weight" rating on Park Place and an "underweight" rating on Mandalay Resort Group.

"Overweight" indicates an expectation that the stock will outperform peers, while "underweight" indicates the opposite.

Representatives for Mandalay Resort Group could not be reached by press time today.

While small in number, Asian travelers account for a significant percentage of casino revenues at some of the most expensive hotels on the Strip.

Their numbers declined sharply after the Sept. 11 terrorist attacks and have been slow to recover compared to domestic travelers, companies say. Casinos have since implemented more aggressive marketing programs to court Asian tourists or are turning to other sources of revenue.

Major airlines and hotel companies with operations in Asia have been hard hit by SARS, which has kept tourists from traveling to that part of the world as well as limited travel among Asians in the region.

The World Health Organization has issued a travel advisory warning travelers about visiting Hong Kong as well as Guangdong province in China, though the virus has surfaced on a limited basis throughout Asia and other parts of the world.