Local gambling enthusiasts contribute significantly to Q2's growth, asserts analyst
In the heart of Nevada, Las Vegas locals casinos continue to shine, defying the broader market challenges that have affected other segments. According to analysts, these casinos are on a steady growth trajectory, thanks to their strong local customer bases, strategic expansions, and targeted value offerings.
The Q2 earnings for Red Rock Resorts, a key player in the locals casino market, showed an impressive 8.2% increase in revenue, reaching $526 million. This growth was driven by higher customer play, robust visitation, and strong table games performance. Golden Entertainment's locals casino segment also reported revenue growth of 2.8% and adjusted EBITDA growth of 6.7% in Q2.
The success of newer casinos, such as the Durango location, which added over 108,000 new customers since its December 2023 opening, demonstrates strong momentum in the locals market. The casinos' strategic locations, accessible pricing, and personalized service appeal strongly to local customers and increasingly to out-of-town guests.
Expansion and improvements at properties like Durango Casino & Resort, Green Valley Ranch, and Sunset Station contribute to sustained growth and customer attraction. The locals market is less sensitive to tourism fluctuations compared to the Strip, showing stability even as overall tourism numbers declined.
Financial analysts rate companies in this segment positively, with bond ratings pointing to strong market fundamentals and efficient operations. Additional factors such as favorable local tax policies and increased discretionary income (from factors like the abolition of tip tax and tax credits) are expected to further support local casino revenue growth.
Analysts like Truist Securities' Barry Jonas predict a stable and solid performance for Las Vegas locals casinos in the second-quarter earnings. Jonas has upgraded Station Casinos to a Buy rating and expects a strong Q2 performance. He also predicts that Station and Boyd Gaming will beat their cash-flow targets by 5% and 4%, respectively.
Despite the positive outlook, soft low-end business continues to be a concern for Las Vegas operators, extending into the third trimester due to seasonality and a lack of convention trade. The recent $2.7 billion asset sale by Bally's to Intralot is expected to improve its credit worthiness.
In the broader gaming industry, real estate investment trusts (REITs) like Vici and GLPI continue to demonstrate creativity, but are facing challenges in the merger-and-acquisition climate. Digital sports betting has shown improvement, but is facing rising tax rates, more legislative noise, and prediction market uncertainty.
Consumer softness and tariff stress are largely in the past, according to Jonas. However, digital sports betting faces new challenges, including rising tax rates, legislative noise, and prediction market uncertainty. Despite these challenges, Jonas predicts aggressive share repurchases for Golden Entertainment instead of asset sales due to current interest rates.
Pennsylvania is expected to remove promotional deductibility, following the trend of other states like Illinois, New Jersey, and Louisiana. This move could potentially boost the revenue for local casinos in these states.
In summary, Las Vegas locals casinos maintain stability and a solid earnings outlook due to their strong local customer bases, strategic expansions, targeted value offerings, and resilience to tourism downturns. This segment is outperforming others amid challenging broader market conditions in Q2 2025.
- Despite facing challenges in the merger-and-acquisition climate, real estate investment trusts (REITs) like Vici and GLPI continue to demonstrate creativity in the finance sector, especially in the digital sports betting industry, a sector also contending with rising tax rates, more legislative noise, and prediction market uncertainty.
- In the second-quarter earnings, financial analysts like Truist Securities' Barry Jonas predict a stable and solid performance for Las Vegas locals casinos, with companies such as Station Casinos and Boyd Gaming expected to beat their cash-flow targets by 5% and 4%, respectively, due to their strong local customer bases, strategic expansions, and targeted value offerings, making them resilient to tourism downturns and outperforming others amid challenging broader market conditions.
