November 3, 2015 - 1:56 pm
Downtown Las Vegas is outshining the Strip.
Through September, downtown casinos have seen gaming revenue increase almost 6 percent compared to 2014. During those same nine months, the Strip is down 1.5 percent.
Boyd Gaming Corp., the only downtown casino operator that publicly reports financial results, said last month its casino-hotels produced three consecutive quarters of revenue growth and five straight quarters of cash flow increases.
“Each our three downtown properties (Main Street Station, Fremont and California Club) generated (cash flow) gains of 20 percent or more,” said Boyd Gaming CEO Keith Smith.
Wells Fargo Securities gaming analyst Cameron McKnight told investors downtown Las Vegas “is one of the fastest growing (casino) markets in the U.S. this year.”
Downtown gaming revenue has increased in eight consecutive months, including September’s 9 percent jump. The market has shown upticks in 12 of the last 14 months.
McKnight recently spent time touring downtown, but he didn’t just hang out underneath the Fremont Street Experience canopy west of Las Vegas Boulevard.
He visited the East Fremont area, which he believes is helping fuel downtown’s revival by attracting both tourists and local residents to new restaurants, “hip” retail venues in Container Park, and special events. McKnight credited the Downtown Project, which was tasked with developing new business ventures in the area.
“In our view, these exciting developments have largely passed under Wall Street’s radar despite out-sized growth for Boyd’s three downtown assets in the third quarter,” McKnight said.
The analyst met with executives from some of the Fremont Street casinos who offered their take on why downtown is growing.
In 2014, downtown casinos collected 52 percent of their revenue from gaming. McKnight expects the nongaming revenue slice of the pie to surpass the casino total as resorts operators mirror some of the restaurant, beverage and retail additions being offered on the east side.
For example, Boyd Gaming added California Noodle House, an Asian-themed eatery, to the California in January. The Filament Bar opened in July at the Fremont.
“Both those projects generated strong cash business and successfully attracted new customers,” Smith said.
Online retail giant Zappos moved its corporate headquarters to downtown Las Vegas in 2013, which helped attract a younger demographic.
“These new visitors frequent local bars, restaurants and lounges in the area, but generally do not gamble much,” McKnight said.
On the Strip, development of retail, dining and entertainment plazas — such as Caesars Entertainment Corp.’s Linq and MGM Resorts International’s The Park — have over-shadowed casino projects. Downtown properties have also begun offering additional nongaming attractions.
“Doing this without alienating the current core slots customer is a tricky balancing act,” McKnight said. “We believe there is certainly an opportunity for downtown to improve revenues from both gaming and nongaming streams this year.”
Boyd Gaming’s three downtown casinos rely heavily on the company’s Hawaiian charter service to bring guests from the islands. Redeveloped resorts, such as the D Las Vegas, Golden Gate, El Cortez, Plaza, Golden Nugget and Downtown Grand, have helped attract a mix of locals along with the tourist base.
The recent purchase of the shuttered Las Vegas Club by D Las Vegas-Golden Gate owner Derek Stevens could add a revived casino property to the corner of Fremont Street and Main Street.
McKnight said special events, including September’s “Life is Beautiful” festival, free concerts on stages along Fremont Street, and major entertainers — such as “Imagine Dragons” — using downtown as backdrop for music videos, all play a part in bringing customers downtown and away from the Strip.
“Downtown Las Vegas has a growing nightlife scene that is preferred by some locals and tourists given it’s more affordable and geared towards traditional bars versus velvet-roped nightclubs,” McKnight said.
The analyst offered another theory on why locals are visiting downtown: the emergence of ride-hailing companies Uber and Lyft to Southern Nevada. Although it is still “hard to quantify” their contributions, the services make the trip easier for suburban residents in Summerlin and Henderson, who often found it challenging to lure traditional taxi drivers away from the Strip.
“For sustained, longer-term visitation to downtown, discussions continue on connecting the Las Vegas Monorail with the McCarran International Airport, downtown, and Mandalay Bay,” McKnight said.
Howard Stutz’s Inside Gaming column appears Wednesdays and Sundays. He can be reached at firstname.lastname@example.org or 702-477-3871. Find on Twitter: @howardstutz