Persisting room demand on Las Vegas Strip remains unabated, according to analyst assessment.
Phoning it in on the Vegas Strip (Casinos) (Analysts) (Economy) (Hotels) (Las Vegas) Buck Wargo, our friendly neighborhood insider
Spread this scoop A Wall Street analyst reckons the demand for Las Vegas Strip hotel rooms this spring is still goin' strong, which is a great sign for Caesars Entertainment and MGM Resorts International.
Barry Jonas, managing director at Truist Securities, says their first-quarter Strip room-rate survey shows a decent performance, even with a tough Super Bowl February 2024 comparison. April's lookin' up year-over-year, and that's a promising sign.
"While recession fears have been buzzin' these past few weeks, our survey ain't showing no major change just yet," Jonas said. "This hints to us that recent struggles in MGM stock at 2.5-year lows and Caesars stock at a five-year low might be a tad overblown - but we're keepin' an eye out for any shifts in consumer behavior."
During the first quarter, rates went up despite the Super Bowl comparison, Jonas said. MGM saw a 3% boost, Caesars a 6% overall increase, supported by solid weekdays jumping 15% and 21%, respectively. Weekends were down 7% for both with the Super Bowl comparison.
The first-quarter strength was predominantly in January with a powerful CES, followed by a softer February and a rebound in March, Jonas said. February rates dropped 10% for MGM and 5% for Caesars. Most of February's softness was evident on weekends, with MGM plummeting 20% and Caesars falling 5%.
March data shows rates bouncing back: MGM up 6% and Caesars 8% higher. The key culprit? Weekday convention business with rates 15% higher for MGM and a whopping 36% higher for Caesars.
"We note that on our post fourth-quarter follow-up call with Caesars' CEO Tom Reeg, he agreed that our room survey generally mirrored what he's seein'," Jonas said.
That momentum's carryin' on into April. Rates are up 11% at MGM and 1% at Caesars. Weekends are up 4% at MGM and 10% at Caesars. Weekdays are 12% higher at MGM, while Caesars are down 2%.
From a week-over-week perspective, April rates were up for both MGM and Caesars, "suggestin' stable fundamentals amidst raised recession fears and stock market volatility," Jonas said.
You might be thinkin': "What's happenin' with Caesars, though?" Well, while specific Q2 2024 forecasts for Caesars ain't directly discussed, MGM's outlook remains rosy among analysts, with 14 outta 18 rated it a "Strong Buy" and a mean price target of $47.83 (+68.1% upside)[1].
Leisure demand dynamics are shaping up to be a hot topic in the hospitality industry. Hyattβs Q1 2025 results indicate weaker U.S. leisure demand compared to international markets, though business transient bookings in luxury/upper-upscale segments remain strong[3]. Wyndham reports stable lead times and rising summer demand expectations, with nearly half of Americans planin' vacays[5].
MGM's Sphere venue is hailed as a major growth driver, with analysts suggesting an 84% upside potential for its parent company due to the appeal of immersive entertainment[2]. This could help MGM weather softer leisure trends in other markets.
In terms of operational resilience, Apple Hospitality REIT's Q1 2025 comparable RevPAR growth (+0.3% YoY) reflects moderate demand stability in top markets[4], a trend that's probably mirrored in Las Vegas given its convention- and event-driven economy.
So, while MGM seems to have the analysts' thumbs up, it's likely that Caesars will follow suit due to its strong position in the Vegas market. Just remember, it never hurts to keep a close watch on the economy- and Sin City isn't always immune to its ups and downs.
- Despite recession fears, the survey data in Las Vegas suggests that the demand for hotel rooms remains steady, potentially indicating that the recent struggles in MGM and Caesars stock might be overblown.
- The first-quarter strength was predominantly in January, followed by a softer February and a rebound in March, with rates bouncing back in March, particularly on weekday convention business.
- Rates are up in April, with weekends showing a modest increase at MGM and Caesars, while weekdays are seeing a more significant hike at MGM, although there's a slight decrease at Caesars.
- MGM's Sphere venue is seen as a major growth driver, with analysts suggesting an 84% upside potential for its parent company due to the appeal of immersive entertainment.
- The trend of moderate demand stability in top markets, as reflected in Apple Hospitality REIT's Q1 2025 comparable RevPAR growth, is likely mirrored in Las Vegas given its convention- and event-driven economy, suggesting that Caesars, with its strong position in the Vegas market, might also see positive trends.
