The U.S. gaming market experienced several blockbuster deals in 2017.
The SLS Las Vegas, Alon project and Pinnacle Entertainment were all scooped up by competitors.
But 2018 might hold even more mergers in store for the industry as a strong economy, low borrowing costs, lack of new licenses, and the use of real estate investment trusts drive further consolidation, according to Deutsche Bank in a 2018 Gaming Outlook report.
The acquisition frenzy is helping drive up prices for regional properties, which is preventing some deals from closing, the bank said in its report. Tropicana Entertainment, the regional casino operator owned by Carl Icahn, has seen its valuation double to $1.3 billion this year.
“Despite the high valuations (of gaming companies), we believe that 2018 is primed to be another year of record activity, given the excess of smaller operators who could potentially benefit from scale,” said Deutsche Bank analysts Andrew Zarnett and Ricardo Chinchilla.
Tropicana Entertainment, which owns eight casinos, including the Tropicana Atlantic City and Tropicana Laughlin, could be a target, the analysts said. Diane Spiers, a spokeswoman for Tropicana Entertainment, declined to comment.
Reno-based Eldorado Resorts could sell some of its 20 properties, including in Lake Charles, Louisiana, and Vicksburg, Mississippi, the analysts said in their report.
Eldorado has also seen its valuation nearly double this year to $2.5 billion. Eldorado spokesman Joe Jaffoni could not be reached for comment Thursday.
Over the past four years, casino operators began using real estate investment trusts to help finance acquisitions. The operators first buy a property, then sell it to a REIT and lease it back. The companies avoid taking on excessive debt, though the rent increases their annual costs.
MGM Resorts International sold National Harbor to its REIT MGM Growth Properties this year while Caesars used REIT VICI to buy two casinos in Indiana. Overall, Deutsche Bank reported there were 15 gaming industry deals in 2017, including property sales to REITs, totaling roughly $9 billion.
The bank expects U.S. regional gross gaming to grow about 3.5 percent next year amid new casino openings and as faster economic growth, rising interest rates and tax reform leave more money in consumer pockets.
The bank forecasts Las Vegas gross gaming revenue and revenue per available room to grow in the low to mid- single digits thanks to strong convention trends and limited new room supply.
Deutsche Bank list of potential takeovers:
— Sands Bethlehem
— The Cosmopolitan of Las Vegas
— Tropicana Entertainment
— Wild Rose Casinos