Posted on: December 16, 2024, 03:16h.
Last updated on: December 16, 2024, 03:16h.
Investors are bracing for what’s likely to be a weaker year of revenue growth at Las Vegas Strip casino hotels in 2025 with non-gaming sales figuring prominently into that equation.
In a new report to clients, Deutsche Bank analyst Carlo Santarelli said tough comparisons, including the comparing the first quarter of next year to 2024 when Las Vegas hosted the Super Bowl, are on the minds of many gaming investors. The analyst forecast that 2025 gross gaming revenue (GGR) in the US casino center will fall 0.1%, but net revenue will slump 2.4% due to attrition in non-gaming sales.
While Las Vegas rarely lacks a robust event calendar, the 1Q24 Super Bowl will be difficult from a comparable perspective and is likely to put the market in a hole to begin the year,” observed Santarelli.
MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ: CZR) are the two largest Strip operators. Those stocks are off 21% and 22.18%, respectively, year-to-date, indicating investors have, to some extent, priced in the tough comps awaiting those companies.
Modest Slot Growth Likely in 2024
With Las Vegas casino operators slated to deliver fourth-quarter results in the first quarter of 2025, some market participants are attempting to forecast how the various gaming segments will stack up for this year.
Santarelli estimated modest year-over-year slots GGR growth while noting non-baccarat table games revenue likely dipped by a low single-digits percentage. On the basis that the past two months have been challenging for operators, the analyst forecast a low double-digit decline in baccarat revenue.
“Given a healthy slot handle exit rate, we believe the slot segment sets up reasonably well for 2025, though we are forecasting modest contraction, primarily due to the more challenging comp stack the segment will face around the Super Bowl and in the 2H25,” added Santarelli.
He pointed out that in recent months, there’s been stability in terms of non-baccarat table games hold and that should trend should continue into next year. He expects “benign” environment for table games hold with bias toward a small year-over-year decline.
Expect RevPAR Compression
Particularly for operators such as Caesars and MGM, revenue per available room (RevPAR) is a critical metric because it signals to investors how effectively companies are monetizing hotel rooms. Santarelli told investors to brace for some declines on that front in the current quarter and into 2025.
“The rate of growth has decelerated over the course of the year, and we expect 4Q24 same-store RevPAR to contract for the first time in years,” noted the analyst. “Accordingly, and hampered in part by the challenging 1Q25 Y/Y comparison with the Super Bowl, we expect 2025 RevPAR, for the larger operators, to compress in the low to mid-single digit range. As always, and one reason why we don’t put a ton of credence in RevPAR for Las Vegas casinos.”
In terms of overall Strip capacity, the analyst said the closures of the Mirage and Tropicana earlier this year and plans for some rooms to go offline at MGM Grand next year for renovations are unlikely to have an impact on overall supply and demand dynamics on the Strip.
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