CBRE adjusts second and third quarter earnings for Las Vegas Strip, anticipating growth by fourth quarter of 2021 and 2026
Las Vegas Casinos Face Cautious Outlook Amid Summer Slowdown and Weak International Visitation
Las Vegas' commercial casinos are bracing for a temperate outlook in the second and third quarters of 2022, according to a recent analysis by DeCree. The seasonal slowdown in summer leisure travel and incomplete international rebound have contributed to more conservative expectations for revenue growth and margin pressures.
Summer Slowdown and International Visitation Trends Impacting Revenue
Traditionally, Las Vegas experiences a seasonal slowdown in the summer months as domestic leisure travel dips due to the hot weather, impacting casino visitation and spending patterns. In 2022, international visitor numbers had not fully recovered to pre-pandemic levels, which usually provide an important revenue boost to Las Vegas casinos. This has led to cautious management expectations and margin pressures.
Industry reports around that time showed margin pressure stemming from lower U.S. jackpot activity and increased operational costs. For example, International Game Technology PLC reported a decrease in operating profit partly due to these factors, with volatile jackpot revenues evident in reduced multi-state lottery sales.
Broader Commercial Gaming Context
Despite the challenges faced by Las Vegas, slot and table game revenues at the national level continued to grow modestly, driven more by other expanding markets. While Las Vegas showed a slight revenue decline in May 2024 (-3.4%), this presumably reflected ongoing challenges tracing back to the prior years’ trends in visitation and gaming activity.
DeCree's Analysis of Golden Entertainment and Wynn Resorts
In the midst of this challenging environment, DeCree has downgraded Golden's rating from Buy to Hold. DeCree considers Golden one of their top calls since 2016, when the market cap was less than $200 million. However, DeCree expects Golden's shares to remain range-bound due to a lack of a tangible growth catalyst. DeCree maintains a price target of $33 for Golden.
DeCree expects incremental upside in Golden's shares from a visitation/occupancy recovery on the Strip or external growth opportunities. Management of Golden has executed on all fronts, creating value for shareholders through M&A, balance sheet fortification, and capital return.
On the other hand, DeCree sees less risk to Wynn due to the company's unique premium positioning and long-term value creation from Wynn Al Marjan Island opening early 2027. DeCree maintains a Buy rating on the shares of Wynn and raises the price target to $135 from $125.
In summary, the commercial casinos in Las Vegas faced a temperate outlook in Q2 and Q3 of 2022, shaped by seasonal demand patterns and incomplete international rebound, leading to cautious management expectations and margin pressures despite pockets of operational cash flow resilience.
Casino games in Las Vegas, such as slot and table games, have faced margin pressures due to lower jackpot activity during the summer slowdown. International visitor numbers have also not fully recovered to pre-pandemic levels, impacting the revenue growth of Las Vegas casinos, as mentioned in a recent analysis by DeCree.
