Analyst feels ‘pretty good’ about Las Vegas casino market in 2024

Chad Beynon, a senior analyst at Macquarie Capital, said the once-extremely cyclical Las Vegas casino sector has stabilized over the last decade, and recent market movements may reflect outdated investment concerns from the global financial crisis more than the current state of affairs.

“I feel pretty good about where valuations are for the sector,” Beynon told the Las Vegas Review-Journal. “We still have a number of buy ratings out there, and we think the consumer (spend), particularly the mid-to-high-end, will continue.”

Gambling stocks with direct ties to Las Vegas casinos tumbled on Monday, along with the rest of the domestic financial markets, as the investment community reacted to a weak July jobs report. The markets rallied Tuesday and Wednesday, before experiencing some reversion on Thursday.

Beynon said that the gaming and hospitality industries are subject to several market factors that influence their performance, most notably consumer behavior. Casinos and travel fall into discretionary spending categories for most people and are among the first cutbacks when larger economic factors, such as inflation and high interest rates, start affecting their everyday spending habits.

“I do think you’re having some people pull back,” Beynon said, noting that second-quarter earnings reports from most of the major Las Vegas casino-related companies suggest the slowdown in spending is not coming from the casinos’ target customer. “So it feels like (spending is) lightly softening, but I think the core customers, the mid-to-high-end customers, are still feeling pretty good.”

In June, Nevada casinos reported the highest monthly gambling win total — $15.8 billion — in state history. Visitation to Las Vegas increased nearly 2 percent in June 2024 over the same month last year.

Nongaming spending, such as entertainment, hotels and dining, is likely to be reined in by Las Vegas visitors before gambling budgets, he said.

“The Strip, in terms of gaming revenue in the second quarter, was up 5 percent year over year,” said Beynon. “So there was not really a slowdown in terms of of gaming spend. I would say it comes a little bit more on the on the nongaming side first.”

If there are any concerns, it may be from looking ahead, Beynon said.

Summers in Las Vegas are typically slower due to the weather. This summer’s record-setting heat is likely to impact third-quarter results, as some travelers may have been spooked by temperatures exceeding 115 degrees for extended periods in July.

“It’s always tough to really analyze the summer periods (in Las Vegas),” he said.

Recent remarks from Las Vegas casino executives about fourth-quarter projections were also on Beynon’s radar.

Bill Hornbuckle, president and chief executive officer of MGM Resorts International, said hotel bookings and ticket sales for this year’s Formula One race in November “felt soft,” during an earnings call at the end of July. Tom Reeg, chief executive officer of Caesars Entertainment, said the success of this year’s Las Vegas Grand Prix race for Strip operators will depend on pricing, which he and others have acknowledged was very high in 2023.

“There are questions around fourth-quarter comparables because of F1,” Beynon said. “And I think MGM somewhat, put a heightened alert in investors’ heads that the fourth quarter could be difficult.”

Beynon remains optimistic about growth prospects for Las Vegas casino operators in 2024 and into 2025.

“Caesars and Wynn (Resorts) are expecting some slight growth (in the back half of the year). MGM is expecting growth in the third quarter,” he said. “I feel pretty good about all that. Everything else portends well for how we feel about the (Las Vegas) market.”

Contact David Danzis at ddanzis@reviewjournal.com. Follow @AC_Danzis on X.