A Bank of America Global Research analyst said Monday ESPN Bets appears to be growing the nation’s sports-betting market by attracting more women. He also touted the newly opened Durango Casino & Resort in southwest Las Vegas that’s attracting 25,000 visitors a day.
Shaun Kelley reported that state data released last week indicate a strong share for ESPN Bet and that its reach is “proving to be bigger than anticipated.”
Beyond helping ESPN Bet, Kelley surmised that the new platform was attracting more women.
In the states that have reported November data, handle is up about 15% month over month compared to about 2% month over month last year, Kelley said.
“It’s our sense ESPN Bet could be growing the market through more casual and female bettors compared to other sportsbooks,” Kelley wrote in a note to investors. “In November, ESPN’s share came from DraftKings, BetMGM, and Caesars, while FanDuel gained one point of share, which we think is driven by NBA seasonality and increased marketing.”
ESPN Bet garnered about 6% handle share in just half a month, which implies a run rate of about 10%, Kelley said. That’s higher than their 6% to 7% estimate.
The key initial takeaway shows that although it’s early, the metrics are better than their and other investor and operator expectations. “A 10% run-rate share was achieved with limited integrations or marketing, leaving room for growth from here,” Kelley said.
Promotion offers are rational and the market-gain shares are similar in new and mature states, Kelley said, and noted that integrations could help ESPN Bet avoid a “pop and fade,” as investors are focused on where it will go from here.
“We think ‘Bet Mode’ in the ESPN Media app will launch before the Super Bowl and could support further adoption and stickiness to ESPN Bet,” Kelley said. “Bears are concerned ESPN Bet achieved their market share through promotions, but in Maryland and Kansas, ESPN Bet’s promo is 35% of handle, in line with offers for the launch in Kentucky. That said, given the strong initial uptake, absolute promotional dollars will be high and we’re increasing our loss estimate for the fourth quarter from $130 million to $185 million.”
B of A is tweaking its DraftKings model to reflect industry hold rates of just 6% in November, but Kelley said they “have high conviction in DraftKings’s growth story, despite increased competition.”
Also in the B of A note, Kelly commented on Red Rock Resort’s Durango casino opened on Dec. 5; their data indicate strong initial visitation at an average of about 25,000 visitors per day. “This daily visitation is two times the daily average to Red Rock Resort’s other prominent Las Vegas locals property, Red Rock Casino, and about 10% higher than opening week visitation to Wynn’s Encore Boston Harbor.”
Based on maturation at Encore, B of A believes Durango’s visitation could stabilize at about 10,000 a day, lower than Red Rock at about 13,000 a day. The bank estimates this visitation could translate to $159 million in annual EBITDA on a stabilized basis.
As for the risk of cannibalizing Red Rock, Durango’s customers are split between its geographic market and that of the Orleans, owned by Boyd Gaming, Kelley said.
“Despite the overlap and concerns of Durango cannibalizing demand at Red Rock, visitation to both Red Rock and Orleans was actually up year over year in the first week of Durango’s opening, which could be driven by the NBA in-season tournament,” Kelley said. “While there aren’t signs of cannibalization yet, we will continue to monitor and model Red Rock locals’ revenue down about 4% year-over-year in 2024 to reflect the new competition. We stay underperform-rated based solely on relative valuation.”
Red Rock executives have said the opening of Durango will take some customers from Red Rock at first, but that they would return over time.
