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LAS VEGAS-Landry’s Restaurants chief executive Tilman J. Fertitta pulled no punches in discussing the state of its gaming unit, which consists solely of the Golden Nugget resort-casinos in Downtown Las Vegas and Laughlin. Gaming revenue in the second quarter was down approximately 15% from the same 2008 period, while the average daily room rate fell 23%.

Fertitta told analysts that the larger luxury and upscale operators on the Las Vegas Strip are continuing to buy business, offering $150 rates with $150 in freebies to go with it. On certain days, he says, you can get a room at Wynn Resorts’ new Encore tower for $99, which puts heavy downward pressure competitors like the Golden Nugget that have made a living by being the value proposition.

“What that does to us is a stranglehold…[because] if we don’t drop rates we won’t have any occupancy and the incremental cost of selling a room doesn’t change just because the room rate changes,” Fertitta said. “Last year we were renting them for ninety dollars and this year it’s sixty; that’s twenty-five dollars of one-hundred percent profit [that's now missing] and that is where we are just being murdered trying to compete with MGM and Bellagio.”

Fertitta says there has been no improvement in the situation through July, he says, and he’s not seeing any strength in advance bookings. “In fact, Strip room offers dropped even further this week,” he says. Adding insult to injury, company officials say the discounted room rates appear to have attracted clientele who are spending less on gaming and other amenities.

Second quarter revenues from the Golden Nugget casinos declined 15.1% to $56.5 million from $66.5 million in the same 2008 period. Adjusted EBITDA from the gaming division for the 2009 second quarter declined 28.1%, or $4.8 million, to $12.2 million versus $17 million in the second quarter of 2008.

Through the first half of the year, Golden Nugget revenues fell 17.5% to $112.5 million from $136.3 million for the same 2008 period. Gaming adjusted EBITDA for the first half of 2009 fell 30% to $24.7 million from $35.3 million in the same 2008 period.

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