Visitation on the Strip picked up in March in what bodes well for the second quarter and the rest of 2022, while credit-card tracking shows Las Vegas residents are poised to keep spending at locals casinos despite elevated gas prices and inflation, according to Wall Street analysts.
The latest reports from Jefferies Equities Research and J.P. Morgan are good news for Nevada, as it goes for its 13th consecutive month of gaming revenue in excess of $1 billion. The March gaming numbers will be released during the last week of April.
The positive trend for Las Vegas is also occurring in the rest of the nation. David Katz, an analyst with Jefferies, said the index of national casino foot traffic in March rose 5.2% over February as the omicron wave of COVID-19 waned. However, it’s still 29% below March 2019 prior to the pandemic, he said.
“We expect trends to improve through 2022, though broader macro headwinds may drive an uneven recovery,” Katz said. “Nonetheless, the month-over-month increase bodes well for quarterly performance in casino visits.”
In March, foot traffic on the Las Vegas Strip was 6% higher than February and “operators indicated expectations of continued momentum through the month,” Katz said.
Foot traffic on the Strip, however, remained down 27.5% compared to 2019. In addition, TSA checkpoint numbers at Harry Reid International Airport showed a 12.4% decline compared to 2019, but an improvement from February’s 15% decline versus 2019.
“We continue to believe international travel will be more supportive of visits on the Strip, as [those] regulations ease,” Katz said.
The demand for casino-resort stays on the Strip remains strong, as reflected by higher room rates. J.P. Morgan reported that midweek room rates for the first week of May are 146% higher than the same period in 2021 in a continuing sign of return of conventions. The rates for Kentucky Derby weekend, May 6-7, are 54% higher compared to 2021.
As for locals foot traffic, Katz reported volume was down 6.8% month over month and 40% compared to 2019.
Downtown Las Vegas generated foot traffic that was up 7.9% compared to 2019, though it was 1.4% lower than February.
J.P. Morgan analyst Joseph Greff reported they analyzed proprietary Chase credit-card data to gain insights into the Las Vegas locals’ market spending “amidst a mixed consumer backdrop with resilient employment and wage growth, though higher gas prices, inflation and a potentially fading wealth effect (not to mention geopolitical issues that can impact consumer behavior).”
Based on January- and February-reported gaming revenue for locals casinos and Nevadans discretionary credit-card spending in March, Greff said they’re comfortable with a first-quarter net-revenue projection of $413 million for Red Rock Resorts, which generates 100% of its revenue from this market. Boyd Gaming will benefit as well, he said.
“We look at the credit-card spending data as supportive, given the high correlation between Nevada discretionary card spending and Las Vegas locals casino activity of a still-sustainable demand picture near-term with no noticeable consumer fallout, at least yet amid higher-end patron strength,” Greff said. “We like the Las Vegas locals’ market, given a favorable supply-demand dynamic supported by population growth/migration from California and a finite number of operators that remain rational (with promotional spending). There’s less gaming capacity today versus pre-pandemic, which is good for margin sustainability.”
Greff said their analysis of March gaming revenue for the locals’ market projects to be $255.4 million, some 23% above March 2019 and 15% higher than February 2022. For the first quarter, Greff said, they project gross gaming revenue of $715.5 million, 17% above the first quarter of 2019 prior to the pandemic.
“We note that January/February were 9%/19% above 2019 levels, respectively, and the sequential growth assumed in March at 15% month-over-month is slightly ahead of the historical pace,” Greff said. “2017, 2018, and 2019 were up 13% month-over-month on average. This is consistent with commentary from our conference last month, with management yet to see any fallout from inflation and higher gas prices.”
As for foot traffic in other markets across the country in March, Katz said Detroit was up 5.4% month-over-month, though it was 36% lower than 2019, consistent with February’s data.
In Kentucky, several openings skewed performance relative to 2019, although foot traffic was up 9.9% month-over-month, Katz said.
In New Orleans where Caesars Entertainment is investing $300 million to expand its property, the market saw volume 60% below 2019 levels. Volumes increased 10% month-over-month, potentially attributed to Mardi Gras and the removal of the mask and vaccination mandates and March Madness, Katz said. New Orleans will benefit from the Final Four in early April.
In Black Hawk, Colorado, where the $100 bet limit was removed on May 1 of last year and Monarch Casino & Resort invested in a significant addition of lodging and gaming capacity, traffic volume in March was down 33.4% from 2019 and up 1.7% from February, Katz said.
Katz said they observed a spike in Pennsylvania attendance toward the end of the month, which they believe would be attributed to the ramp-up at newer casinos, namely Morgantown and York, as well as visitation around sporting events.
In Reno, March volumes were 20.7% lower than 2019 levels, though 5.3% higher month-over-month. Laughlin experienced a 28.7% decline from 2019, though sustained month-over-month improvement, with a 26.2% increase from February. Lake Tahoe experienced a 19% decline compared to 2019 and was 5.6% lower than February, Katz said.
