A strong May for gaming revenue on the Las Vegas Strip bodes well for casino operators when they report their second-quarter earnings in late July and early August, according to a Wall Street analyst.
Nevada set a May record with $1.32 billion in gaming revenue, led by the Strip and casinos that serve local residents. The Strip accounted for 84% of the year-over-year increase, while locals casinos have generated a 10% gain in revenue during the second quarter.
The strength won’t stop with the second quarter.
Las Vegas is expected to have a big start to the third quarter when more than 330,000 are expected to visit around the Fourth of July holiday, according to the Las Vegas Convention and Visitors Authority. That’s a 3.1% increase over 2023, a five-day weekend compared to this year’s four-day. Even then, the visitors are projected to spend nearly $420 million, up from $372 million a year ago.
Barry Jonas, an analyst with Truist Securities, pointed out in a note to investors that May Strip gaming revenue rose 4% year over year despite baccarat win being down about 7% from May 2023 and slot accounting headwinds, “demonstrating strong underlying demand.” In a normalized setting and excluding baccarat, gaming revenue was up 10%. Visitation increased by 5%, while Strip revenue per available room was up 11%, he noted.
“Strip operators are well positioned heading into the second-quarter earnings, which is also supported by our most recent room survey,” Jonas said. “Locals gaming revenue was up 5% in May and 10% quarter to date, though we think this is mostly driven by Red Rock Resorts’s Durango (Casino & Resort). Still, with street expectations for same-store locals properties to be soft, quarter-to-date locals gross gaming revenue results are minimally in-line.”
Jonas said they still suspect some cannibalization of the locals market from Durango, as well as some aggressive promotional responses from competitors.
Joseph Greff, an analyst with J.P. Morgan, said that during the second quarter to date, spending per visitor improved from the first quarter, including for regional operators.
As for the Strip, he said they remain encouraged by the year-over-year growth in handle, as the market continues to post positive growth, absent significant changes in hold.
There’s a “backdrop of resilient spending at least for the high-end consumer” and improving visitation, Greff said.
“Based on year-to-date results through May across the Strip and the average historical seasonality since 2017, we think the balance of the year can result in flattish gross gaming revenue growth.”
The Las Vegas locals properties continue to perform well relative to regional markets across the country and Greff said the May results should be viewed positively. “We think the balance of the year can result in high-single-digit gross gaming revenue growth.”
At regional properties, Greff expects gaming revenue to be “modestly positive in aggregate.” Monthly state results are impacted by the number of weekend days compared to the same month of the previous year, so April’s soft results are largely explained by an unfavorable calendar of eight weekend days versus nine in April 2023.
“May is better from a favorable calendar comparison and June has a neutral comparison,” Greff said. “Based on year-to-date results through April across a basket of mature markets and the average historical seasonality since 2017, we think the balance of the year can result in low-single-digit gaming revenue growth.”
In his note to investors, Deutsche Bank analyst Carlo Santarelli said Strip gaming revenue is up 5.1% year over year for the second quarter from better-than-expected slot handle, “as well as stronger than forecast, and stronger than recent trends, table volumes.”
Casino-industry consultant Brendan Bussmann, managing partner of B Global, said the numbers are great, but added that people should exercise caution in the face of economic and geopolitical forces that “continue to plague the country” during an election year.
“We have to see what June looks like. The first two months of the quarter look good, but we have to see how that looks across everything else,” Bussmann said. “We will have more insight when the earnings report comes out in the next couple of weeks of where the overall summer sits, but it’s a great kick off to the summer.”
