Truist Securities analyst Barry Jonas returned from meeting top casino executives last week with a mixed view of Las Vegas’ prospects. The Las Vegas Strip, he wrote, “remains resilient,” while “locals trends remain shakier, between higher promos and a softer low-end customer.”
Jonas huddled with leadership from MGM Resorts International, Caesars Entertainment, Station Casinos, Boyd Gaming, Golden Entertainment, Wynn Resorts, the Venetian, and the Rio, the last two privately held.
The Las Vegas Grand Prix and the Super Bowl having passed, Jonas sensed normalization coming into Sin City’s second-quarter results. While he didn’t discern strong trends, he felt that high-end business would carry the quarter.
Given the impending closing of the Mirage and the shuttering of the Tropicana, the Strip hotel market will be 4,500 rooms smaller. Jonas offered that MGM and Caesars will be the prime beneficiaries and were reporting minimal impact from the new Fontainebleau.
He called the 2023 Grand Prix “largely mixed,” with casino operators intent on improving this year’s race.
“Some improvements for 2025 we heard include: making the event more accessible to mid-tier players (room rates, breaking up ticket packages, etc.); optimizing where to place grandstands; and less roadwork disruption to the city in the months leading up,” Jonas wrote.
The analyst also encountered growing doubts about the prospects for a baseball stadium on the Tropicana site, citing “murky” financing and a “tight construction site [that] has operators raising questions on viability of the property.” Should the stadium not arise, Jonas believed Bally’s Corp. was well protected and, if it does, Bally’s would be well positioned to monetize the opportunity.
Locally, softness from low-end players continued to be a hobgoblin, with the new Durango Resort promoting a promotional war among the Rio, Palms, Rampart, South Point, and Silverton. Choosing to remain on the sidelines were Station, Boyd, and Golden, although Boyd admitted being hurt by the marketing escalation. Jonas also toured the revamped Rio and thought “management has a chance to enhance over time.”
Of New York’s requests for proposals, Jonas noted, “Questions persist around the downstate [New York process] with operator frustration mounting.” MGM remained optimistic that Empire City Yonkers would be tapped for megaresort expansion, while Wynn Resorts was “hopeful.” Genting Group was believed to be juiced in for a license now that it has vowed to pay $1 billion per year in guarantees, the highest ante to date.
Among the operators, the confident included Caesars, which expected a larger contribution from its non-gaming aspects, given an anticipated tapering in gambling receipts. Caesars New Orleans is on pace to open by Labor Day and receive a boost from the 2025 Super Bowl. Management also expects conventioneers displaced by an extensive Venetian renovation to flock to Caesars Palace instead.
Deriving as much as 80 percent of its cash flow from high-end players, MGM believed in the future, despite “modest weakness” at its bargain properties. It continued to expect a comeback in baccarat play. Execs were also keen on their Marriott partnership, which continued to outpace projections for 2024.
Boyd reported “steady” business from its core customers and waxed cautious on low-end trade. Top brass allowed that soft business in Boyd’s regional casinos should have been seen as an indicator of troubles to follow in Las Vegas. In the Midwest and South, “Management thinks results have flat-lined and next year should provide a base for stronger growth.” That would include the remade Treasure Chest in Kenner, Louisiana, on track for a June debut.
Jonas remained impressed by Durango on a second property tour, reporting that business remained well ahead of expectation. He also was afforded a peek at Station’s Phase II plans for Durango, starting with a parking garage. As for the new casino’s cannibalization of Red Rock Resort, it was “within expectations.”
Station also had big plans for Sunset Station, where a lengthy rolling renovation is in progress, as well as for Green Valley Ranch, also tapped for a refit. While saying they were “just dipping their toe in the water” and not going up against Golden, Station execs revealed seven new taverns. The goal is to capture younger gamblers more attracted to sports betting.
Golden itself was pessimistic. “Management is seeing some cracks in the mid- and lower-tier consumers, believing a higher cost of living for longer is beginning to have a negative impact on discretionary spend,” Jonas chronicled. Company brass also complained of compressed margins in the tavern business. “Management is working to slow the erosion before another minimum-wage increase in July and noted tougher comps lapse heading into Q3, given the first minimum-wage increase happened last July.”
The analyst found that Golden “remains frustrated” with its stock valuation, “believing that it receives credit for underlying real estate with no value for its operations.” In response, the company intends to exhaust the $91 million remaining in its share-buyback fund. Further asset sales are off the table, with execs believing “if it sells any piece of its current portfolio, it will become too small” and that selling the company as a whole makes more sense.
