Analyst: Record-setting hotel rates for Super Bowl

January 28, 2024 6:13 PM
Photo: Fontainebleau Las Vegas (courtesy)
  • Buck Wargo, CDC Gaming Reports
January 28, 2024 6:13 PM
  • Buck Wargo, CDC Gaming Reports

Hotel rates for the Super Bowl in Las Vegas could set a record, which bodes well for earnings, especially if gaming hold is favorable, according to a Wall Street analyst.

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In his report, Barry Jonas of Truist Securities said room rates are holding steady since the Fontainebleau Las Vegas opened in mid-December and it isn’t “pressuring the market yet.” He also singled out MGM Resorts International for raising resort fees that will “drive upside” for earnings and expects Caesars Entertainment and others to follow suit.

Comparisons for room rates between the first quarters of 2023 and 2024 are tough, but the Super Bowl is driving strength this year. Strip rates during February are up 43%, Jonas said.

average rates for Super Bowl weekend are exceeding $800 at Caesars and MGM compared to $300 in 2023 when the game was in Arizona, according to a Jonas chart.

“The Super Bowl is shaping up to become a material event,” Jonas said. “Room-survey data suggests a significant average-daily-room rate uplift across properties for both MGM and Caesars over the Super Bowl weekend. Our survey suggests room-rate compression could be significant across most properties in both companies’ portfolios, with most premium Strip rooms long sold out on internet channels. As during the F1 event, higher-end properties appear to be benefiting strongly, although unlike F1 where the benefits were primarily captured by the high-end, medium-tier properties are also commanding higher rates year over year for the Super Bowl.”

January rates trended down 17% at MGM and 6% at Caesars. March showed rates down 28% year over year at MGM and 34% at Caesars because of the absence of the Conexpo-Con/Agg construction trade show. “We expect the Super Bowl’s impact on the Strip to potentially offset the lack of a CON/AGG event this year.”

Overall, first-quarter rates are showing 1% year-over-year growth, with weekends down 4%, Jonas said. Preliminary April data shows MGM is down 17%, while Caesars is down 3% year over year. By contrast, Wynn Resorts is up 20% in April and up each month in the first quarter.

CES 2024 in January was also down across the MGM footprint, with room rates lower by 25% year over year, while Caesars rates were up 36% over the event period. Rates at both MGM and Caesars were down from 2020 highs, declines of 27% and 12% respectively, Jonas said. “Conceptually, Caesars’s outperformance makes sense to us, given their ramping convention center.”

Jonas highlighted MGM’s recently announced resort-fee increases that “could drive significant EBITDA accretion.” On Jan. 18, MGM raised resort and parking fees at all its Strip properties, with increases ranging from $2 to $6 a night or between 1% and 2% of 2023 revenue per available room.

“We estimate the increase could immediately drive about $25 million in annualized EBITDA (not all room nights will immediately see the increases), before ramping to about $50 million,” Jonas said.

Despite that increase, Jonas noted the risks around resort fees. President Joe Biden spoke about cracking down on them and providing transparency. The Federal Trade Commission is seeking feedback through Feb. 7 on a proposed rule to ban hidden fees.

As for the Fontainebleau, Jonas said the new supply is “not materially impacting room rates” of other Strip operators. “While overall Strip rates are trending down in March, we think this is driven primarily from the absence of Con/AGG this year, though demand for the Super Bowl in February could largely offset this impact.

“Fontainebleau rates are trending close to Bellagio’s and for now appear to be holding better than the Resorts World launch in June 2021, which had some early strength before falling materially.”