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How much growth is left in the Vegas gaming market?

After several years of steady earnings, gaming win and visitation growth in the post-pandemic Las Vegas gaming and hospitality market, analysts have been eagerly watching indicators to see how long the positive trends can continue.

Wall Street has been closely watching Vegas’ publicly traded gaming companies to gauge how much growth is left in the region. While some argue the market may have hit its earnings peak, others say the region is prepared to take advantage of favorable demographic shifts, new developments and continued attention on the market.

Mixed sentiment on Las Vegas market

First quarter earnings results provided a mixed view on the Las Vegas-area gaming market to Wall Street analysts. Some operators reported weak or negative declines in revenue, net income and adjusted earnings when compared to 2023. For instance, locals and downtown operator Boyd Gaming’s 10.1 percent decrease in adjusted earnings caught investors by surprise. Caesars Entertainment, one of the most dominant Strip operators, also reported a 4.7 percent earnings decline in Las Vegas, compared to the previous first quarter.

Boyd and other Strip operators cited, in part, softness in the economy that impacted lower-tier players.

The uncertainty around near-term growth showed in research notes after first quarter calls. In an April 30 note to investors about Caesars’ report, Deutsche Bank analyst Carlo Santarelli said downside investment risk existed regarding fundamental trends in gaming “and where they bottom” while things looked more favorable long-term.

“We expect the near term to remain challenged, until more clarity on the outlook for the sector, a better path for interest rate reductions, or (Caesars) showing it can in fact deliver on its growth objectives,” Santarelli wrote.

Others reported more favorable results. MGM Resorts International, for instance, reported a 4 percent increase in net revenue for the Las Vegas segment, attributing the growth to rising daily room rates. Adjusted earnings at Wynn Resorts’ Las Vegas location were up 6 percent year over year, attributed to February’s Super Bowl and Chinese New Year.

Despite some earnings declines, other data points suggest continued strength. Operators pointed to forward-looking reservations and additional large-scale events like the Formula One Grand Prix in the second half of the year.

April’s gaming win and tourism indicators seemed to temper concerns about a slowdown in the first quarter among the investment community. Clark County reported an 8.5 percent increase in win to $666 million – welcome news after the state’s gaming wins and other indicators dropped in March. Visitor volume and convention attendance were both up in April compared to the previous year, 3.8 percent and 36.3 percent, respectively.

Looking ahead

Some Wall Street observers are looking past the first quarter earnings results for indication of potential growth. A May 30 report from Jefferies Equity Research analyst David Katz suggests there is still room for short and long-term growth in Las Vegas.

“We disagree with the view that Las Vegas earnings have peaked with balanced, complex comps near term and substantial investment increasing visitation and growth longer term,” Katz wrote.

He pointed to the valley’s population growth and a pipeline of development projects – The Mirage’s transition to Hard Rock Las Vegas, a high-speed rail between Southern California and the region by Brightline West, potential new Station Casinos projects, to name a few – and the growing sports and events calendar as key factors. Near-term growth is muddled by factors like increased labor and operating costs.

Josh Swissman, founding partner and managing director of Las Vegas-based GMA Consulting, said Wall Street’s takeaways are often hinged on the tone set during earnings calls.

“I think people read too much into the sentiment a bit too much,” Swissman said. “There was always going to be a bit of a softening of results in Vegas and on the Strip. But then April’s (gaming win) results were actually quite strong and that’s on the heels of having a weaker than March’s numbers.”

Jefferies analysts expect MGM and Red Rock Resorts, the parent company of Station Casinos, to support their position. Red Rock has six possible sites that the company has said it wants to develop between now and 2030. MGM’s partnership with Marriott International is “a more productive and cost-efficient channel than online travel agencies,” according to the report.

Swissman’s biggest takeaway so far this year, he said, is while the near-term hot streak has cooled, overall trends point to the positive.

“Gone are the days of meteoric, double-digit percentage growth month after month after month,” Swissman said. “Now, there’s general growth in the market and growth in the industry. That does mean that from time to time, you’re going to see months, or dare I even say, quarters where they may be tough-to-beat prior-year periods.”

Contact McKenna Ross at mross@reviewjournal.com. Follow @mckenna_ross_ on X.

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