Wall Street and other analysts are growing cautious about the prospects of Las Vegas through the end of the year and the start of 2025, given the Strip’s three consecutive months of year-over-year declines. The last time the Strip decreased in three consecutive months occurred in March through May 2019.
For the year, Strip revenue is down 0.2% in what could be the end of a run since the pandemic.
Chad Beynon, senior Gaming, Lodging & Theatres analyst at Macquarie, told investors not to fret over Strip revenue falling nearly 2% in September, citing one fewer weekend day compared to September 2023 and baccarat revenues falling 40% year over year due to drop and hold. Drop fell 22%, while hold was 17% in September compared to 22% in September 2023.
The positive news was slot revenue on the Strip, which grew 11%, with 3% handle growth and slot hold of 8.8%.
“Based on third-quarter market data, we expect an in-line quarter for Vegas segments versus current consensus,” Beynon said. “With Vegas consensus coming down about 2% over the last month, we now expect Vegas segments to meet consensus. We remain positive on the non-gaming outlook in Vegas, given the strong group travel and events calendar, but we’re becoming more cautious on slowing leisure-travel demand, which could lead to a more competitive promotional environment and hurt Vegas margins. In addition, comps in the fourth quarter and first quarter are becoming increasingly difficult as we lap F1 and Super Bowl, respectively.”
In September, Las Vegas locals gaming revenue was up 15% year over year. Beynon said Boyd Gaming beat third-quarter EBITDAR consensus by 7%, with locals missing, but every other segment beating expectations. That was led by online, while downtown Las Vegas and its Midwest and South segment both came in 3% above consensus.
“We view the Las Vegas locals results as a positive readthrough for Red Rock Resorts and, to a lesser extent, Golden Entertainment,” Beynon said.
Barry Jonas, an analyst with Truist Securities, noted that Las Vegas visitation was up 1.6%, though Strip revenue per room was down. He also cited drive-in customers rising 3% in September, with traffic along the Nevada and California border also up 3%.
“We had expected continued softness following July/August (15% and 4% year-over-year declines), coupled with consistent room-survey data of third-quarter softness continuing into the fourth quarter,” Jonas said. “However, at this point, we think the main issue is tough comps rather than anything structural. We’ll have more following Caesars and MGM earnings.”
Jonas said they continue to monitor the potential impact of Durango Casino & Resort.
Red Rock management noted that the Durango property continues to ramp with increased visitation/customer signups. The operator announced a second-phase expansion adding gaming positions and parking spaces.
“We still suspect that some cannibalization from Durango has mixed with some aggressive competitive promotional responses,” Jonas said.
Brendan Bussmann, managing partner of B Global, said the latest numbers show signs of slowing. He isn’t panicked over it, but called out passenger numbers for Harry Reid International Airport being down about 1% when it’s been going up month over month by a few percentage points. “When you’ve been experiencing 3% to 4% growth, that’s a five-point swing. It’s something to watch.”
Bussmann said a lot of economic and political forces at work have “everybody in a wait-and-see mode” in terms of the presidential election and economy. People are focused on inflation and taxes and other factors.
“We’ll know more in the next two weeks,” Bussmann said. “If we know a week from Tuesday, I’ll be very surprised.”
