In a surprising turn, Nevada’s gross gaming revenue (GGR) for July reported a significant downturn, sparking concerns about a potential pullback in gaming-related spending. Nevada casinos and gaming bars accrued $1.3 billion in the seventh month of the year, marking a 7% decrease from the same period last year. Particularly troubling was the 15% decline in GGR on the Las Vegas Strip, the US casino epicenter, marking its first month-over-month drop in four months. This has led some analysts to adopt a more conservative outlook regarding domestic leisure travel demand.
Macquarie analyst Chad Beynon highlighted the challenging comparison for Strip operators in July 2024 owing to fewer weekend days compared to the previous year. Additionally, revenue per available room (RevPAR), a significant non-gaming metric for casino operators, saw a 4% dip last month. Beynon remains optimistic about the non-gaming sector in Las Vegas owing to robust group travel and an active events calendar. However, he cautioned against the slowing pace of leisure travel, which could create a more competitive promotional landscape and squeeze Vegas margins.
Despite these concerns, Beynon maintained “outperform” ratings on two of the largest Strip operators, MGM Resorts International and Caesars Entertainment, with price targets of $52 for both. He noted that the 4% RevPAR drop in July was mainly due to underperformance at lower-end Strip properties. This suggests a dual reality where affluent visitors continue to frequent Las Vegas, but many middle-income consumers, who usually opt for mid-tier integrated resorts operated by companies like Caesars and MGM, might be curbing their gaming-related spending and travel.
Both MGM and Caesars, while owning luxury properties on the Strip, also operate more budget-friendly venues such as MGM’s Excalibur and Luxor, and Caesars’ Flamingo and Harrah’s. A potential reduction in spending by middle-class consumers could adversely affect these establishments. Nonetheless, Beynon expressed optimism for a rebound in table and slot volumes by August and projected that 2024 would see a -2% GGR on the Strip, with tougher comparisons expected in the latter half of the year.
Over recent years, the US economy has endured its highest inflation rates in four decades, leading to the steepest interest rates in over 20 years. Yet, consumers have shown unwavering dedication to casinos, particularly in Las Vegas. With inflation slowing, there is hope within the industry for continued resilience. Despite this, signs of strain in the land-based gaming industry are evident, with some operators reporting weakness in certain regional markets this year, primarily due to lower-rated players cutting back on spending.
