On Wednesday, the Nevada Gaming Control Board (NGCB) noted Clark County’s gross gaming revenue (GGR) surged 7.5% year-over-year to a record $1.208 billion in July with the Las Vegas Strip contributing $835 million of that tally. At least one analyst expects the torrid pace will continue in the US casino center.
In a new report to clients, Macquarie analyst Chad Beynon highlighted, among other topics, vibrancy in non-gaming sources, including revenue per available room (RevPar). That’s material to operators such as Caesars Entertainment (NASDAQ: CZR), MGM Resorts International (NYSE: MGM), and Wynn Resorts (NASDAQ: WYNN), which have expansive hotel footprints on the Strip.
On the non-gaming side, Strip RevPar was +4% in July while Aug STR data suggests it will be another strong month on the Strip, setting operators up for mid-single digit RevPar growth in 3Q,” observed the analyst. “This is consistent with July’s record month for passengers at Las Vegas’ airport including the most international passengers since Jan 2020.”
All three of those names are coming off brutal August performances, but analysts believe each has rebound potential into year-end.
Caesars, MGM Favored at Macquarie
MGM and Caesars are the two largest operators on the Strip and as such, both are highly levered to trends such as rising GGR and increasing revenue from non-gaming sources.
Macquarie’s Beynon is bullish on the two kings of the Strip, rating both “outperform.” He assigned a price target of $70 to Caesars, implying upside of 26.6% from today’s close. The analyst has a $60 price forecast on MGM, implying upside of 36.3% from today’s closing print.
With a compelling event calendar over the next several months, the stars could be aligning for more revenue upside for Strip operators, including Caesars and MGM.
“We think the return of conventions and a strong sports/event calendar over the next couple of years (e.g., NCAA men’s Division I basketball tournament games, Formula 1, LV Raiders and Golden Knights games, 2024 Super Bowl and others) should provide some level of support/growth for Strip GGR and non-gaming revenues,” added Beynon.
Other Data Points Bode Well for Caesars
With the Strip being Nevada’s marquee gaming market, it represented the eye-catching data set in July’s GGR report. However, there were contributions across the board, including Las Vegas locals and downtown.
“July’s GGR result was also strong throughout Nevada, with Las Vegas Locals GGR +6% YoY, Downtown +9%, and Reno/Laughlin were +7%/+9%,” observed Beynon.
While neither Caesars nor MGM operate downtown venues and the Bellagio operator doesn’t have a footprint in Reno/Lake Tahoe or Laughlin, Caesars does. The Reno/Lake Tahoe and Laughlin markets are pertinent to the Harrah’s operator because it runs a trio of casino hotels in Reno, another pair in Lake Tahoe and two in Laughlin.
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