Las Vegas casinos have seen three consecutive years of revenue growth, following their emergence from the COVID lockdown. But those good times are about to end, according to Deutsche Bank analyst Carlo Santarelli.
In a report published Tuesday morning, Santarelli depicts a “highly bifurcated” Las Vegas Strip, one in which the lower end is lagging even as events like Formula One and the Super Bowl drive high-end results. At the same time, “The lower- to mid-tier properties have largely peaked and begun to decline.”
A bulwark of the Strip has been baccarat, Santarelli notes, carrying the Strip over the long term and resulting in positive comparisons to the pre-COVID period. However, he warned, “We believe this segment has reached a plateau and, despite competition for this customer continuing to heat up, is likely to fade, thereby exposing more clearly the other underlying stagnation that is present in the market today.”
After hitting a $6.8 billion peak in 2007, it took Las Vegas 14 years to fully recover from the Great Recession and the Great Pandemic. Recovery can be said to have taken hold in 2021, when Strip gross gaming revenue reached $2.07 billion.
Strip winnings grew 17 percent in 2022 and seven percent the year after that. As of this past March, the Strip had raced 36 percent ahead of its 2019 pace. Declines, Santarelli said, have been “modest.”
Again, he turned to baccarat. Its apogee was reached in 2014, when handle hit $11.9 billion. This was part of a six-year streak in which baccarat wagers regularly reached $10 billion in volume. Since 2015, however, the biggest year for baccarat bets was 2018, when $9.6 billion was dropped on the green felt.
As for mass-market gambling, that “has reached a plateau,” according to Santarelli. Six months out of the past year evinced negative year-over-year comparisons. Even so, the market is 35 percent ahead of pre-pandemic 2019.
While Santarelli’s news regarding high-end gambling revenue was good, it came with caveats. “In general, we think the competition for the high-end gaming patron is intensifying, which is usually a signal that the market, in this case the baccarat segment, is reaching an apex.”
Santarelli pointed to volatility in baccarat betting across the last nine months, when four of the nine months showed negative comparisons. Even the positive ones in two months were buoyed by the Super Bowl and Las Vegas Grand Prix. Concluded the analyst, “We believe a slowdown in baccarat will likely change the sentiment around the growth outlook for Las Vegas.”
