A Wall Street analyst said there’s no sign of a slowdown when it comes to demand for Las Vegas Strip rooms this spring, which is a good sign for Caesars Entertainment and MGM Resorts International.
According to Barry Jonas, managing director at Truist Securities, Truist’s first-quarter Strip room-rate survey shows a solid performance against a difficult Super Bowl February 2024 comparison. April is up year-over-year, which bodes well.
“While recession fears have risen in the past few weeks, our survey is not yet showing any fundamental change,” Jonas said. “This suggests to us that recent underperformance of Buy-rated MGM stock at 2.5-year low and Caesars stock at a five-year low may be overdone – though we are monitoring for any meaningful consumer shifts.”
The survey during the first quarter showed rates were higher despite the Super Bowl comparison, Jonas said. MGM was up 3%, Caesars up 6% overall, bolstered by strong weekdays up 15% and 21%, respectively. Weekends were down 7% for each with the Super Bowl comparison.
The first-quarter strength was in January with a strong CES, followed by a softer February and re-acceleration in March, Jonas said. February rates were down 10% for MGM and 5% for Caesars. Most of the February softness was evident on the weekends, with MGM down 20% and Caesars down 5%.
March data shows rates rebounding: MGM up 6% and Caesars 8% higher. The biggest reason is weekday convention business with rates 15% higher for MGM and 36% higher for Caesars.
“We note that on our post fourth-quarter follow-up call with Caesars’ CEO Tom Reeg noted that our room survey directionally aligned with what he is seeing as well,” Jonas said.
That momentum is continuing into April. Rates are up 11% at MGM and 1% at Caesars. Weekends are up 4% at MGM and 10% at Caesars. Weekdays are 12% higher at MGM, while Caesars are down 2%.
From a week-over-week perspective, April rates were up for both MGM and Caesars, “suggesting stable fundamentals amidst increasing recession fears and stock market volatility,” Jonas said.
