Las Vegas Strip's non-gaming revenue strong, analysts say
Nevada Casino Corporation's October gross gaming revenue (GGR) was $1.315 billion, the best October on record and the sixth-best month ever. But contributions from non-gaming sites have given the Las Vegas Strip operator a boost.
Casino operators including Caesars Entertainment Inc. (NASDAQ: CZR ), MGM Resorts International (NYSE: MGM ) and Wynn Resorts (NASDAQ: WYNN ) reported October Revenue was $714 million, which is impressive considering there will be one less weekend in 2022. This includes revenue per available room (RevPAR) growth.
In October, Las Vegas Strip revenue per room increased 13% year over year, while attendance increased 2% year over year (-1% compared to 2019). Based on Las Vegas STR data as of November 25, we expect that the Las Vegas Strip’s per-unit Housing income growth may accelerate to around 18%. Macquarie analyst Chad Beynon wrote in a note to clients on Friday.
He may be right in his assessment, as MGM CFO Jonathan Hackyard said at the Bank of America Leveraged Finance Conference earlier this week that the Las Vegas Grand Prix weekend is The busiest weekend in the history of the Vegas Strip. The operator's premises are .
Las Vegas Strip energy in October could lead to fourth-quarter growth
One potential advantage for operators such as Caesars, MGM and Wynn is that they offer guests many revenue-generating facilities in addition to gambling. This is critical when GGR appears to reach a temporary peak.
This means that even with a slight decline in gaming revenue, Las Vegas Strip operators can continue to see solid revenue growth and prove resilient. That resilience also refutes the idea that Las Vegas casino companies derive most of their revenue from gambling. In fact, dining and entertainment generate more revenue than gaming.
This is important because gaming revenue can fluctuate, but other sources can also provide relief to casino operators.
"Assuming similar market share for MGM, CZR and WYNN, and minimal disruption from the cyberattack, we expect MGM and CZR's fourth-quarter Las Vegas operations to exceed expectations," Beynon added. "Given "Given Las Vegas' continued resilience, we are raising our fourth-quarter GGR guidance to -1% from -3% year-over-year. We now expect 2023 GGR to grow +4%."
Stock Idea
Caesars, MGM and Wynn are the three largest publicly traded strip operators. Beynon "outperforms" valuation on both of the first two metrics, with price targets of 45% and 47% upside, respectively, from current levels. The analyst has a Neutral rating on Wynn, although his price forecast for the stock implies a 36% upside potential.
Of the three, Wynn is least dependent on the Las Vegas Strip, which accounts for 23% of its revenue. Macau is the company's biggest driver of profits and sales.
The Strip accounts for 47% of MGM sales and 45% of Caesars sales, according to Macquarie.
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Source: www.casino.org
