We’re not referring to the weather (although that too). Las Vegas Strip casinos were up 4% in June and 23% hotter than they were in the early summer of 2019. They grossed $758.5 million, fueled in part by tight baccarat hold (wagering was 4% down, though). Casinos played luckily at table games, winning 19% more than last year (for $335 million) on 10% higher betting. Their luck ran out at the slots, down 3% to $382 million despite 42% greater coin-in. A 2% uptick in visitation helped drive the numbers as well.
Locals revenue, up 6%, was deceptive as June 29-30 fell on a weekend, meaning that slot winnings from those days will be rolled into July’s numbers. Even so, the haul was impressive, especially as it was a 29% vault over 2019. All jurisdictions in Southern Nevada were revenue-positive but two: Laughlin was flat with $37.5 million and North Las Vegas dipped a point to $23 million. Downtown cruised with $66 million (6%), while the Boulder Strip was up 2% to $73 million and miscellaneous Clark County soared 9.5% to $147 million, undoubtedly propelled by Durango Resort. Utah-facing Mesquite was up 3.5% to $14 million, while similar Wendover gained 6.5% to $22 million. The northern tier of the Silver State didn’t fare nearly so well. Reno dropped 7% to $64 million, Sparks sputtered -13% to $13.5 million and Lake Tahoe was drained 12% to $19 million. The Vegas boomlet, you should know, was accomplished with 3% less tourism than in 2019. Room occupancy ran 85% (91% on weekends) in a diluted inventory and room rates were up 6%.
Cash flow generated by MGM Resorts International came out marginally ahead of where Wall Street had it. However, such outperformance was put in the shade by losses from BetMGM, #3 in the U.S. but still limping along. “All in all, a nice beat,” wrote J.P. Morgan analyst Joseph Greff, who observed that “MGM likely delivered what will be the only 2Q24 Macau upside results from any of the U.S. listed operators.” Bravo! Other cause for good news from MGM included the Marriott International partnership, which has now logged 410K room nights booked. Marriott-derived customers are spending $50 more per day than the online-travel-agency customers they’re displacing and generating $100 more per night in ADRs. Said MGM execs, “looking ahead at our pace, room rates on the books in Las Vegas are up year-over-year for every month in the third quarter, and group rooms on the books are pacing up mid-single digits for the rest of 2024 and 2025.”
Now for the bad news. The Las Vegas Grand Prix ain’t looking so hot. After an “incredibly strong” 2023, this year’s race is betraying softness in ticket sales, which is depressing hotel rates in turn. Aria, Bellagio and The Cosmopolitan of Las Vegas are suffering most. Greff thought this was a wake-up call to F1 to sell more tickets, although $30 million less cash flow is no joking matter. “We see the soft F1 outlook plus a lot more commentary on BetMGM’s 2H24 investment and share of EBITDA losses without direct support from MGM as reasons why the stock isn’t reacting to a good quarter and net overall outlook,” wrote Greff. Even so, he raised his cash-flow forecast for MGM’s Las Vegas Strip assets to $3.2 billion, up from $3.1 billion. However, he pushed his $57/share price target back a full year, to the end of 2025.
As for BetMGM, it’s looking at another ROI loss, this time $38 million. That’s a downpayment, as it were, on an expected $250 million in negative ROI by year’s end. Noted the analyst, “BetMGM’s results reflect the heavy customer acquisition period around the North Carolina launch in March, unlike other operators’ 2Q24 reports.” At least the MGM regional casinos were said to be stable, and the effects of the MGM Grand Detroit strike, as well as the September 2023 cyber-debacle have abated.
Like Greff, Deutsche Bank stock boffin Carlo Santarelli stuck by a $57/share target, albeit with a “Buy” rating. Less than fazed, he called the 2Q24 results “encouraging.” He did allow that BetMGM “remains perplexing.” Still, he admitted that the Formula One comparisons with 2023 would be challenging and wrote, “While we do not believe the F-1 commentary should be the takeaway from the call, it admittedly is likely to be just that, despite the fact that management noted the swing factor between a good F-1 and a less than stellar event, is about $30 mm.” He also felt that this was a welcome dose of reality for The Street, which was overestimating MGM’s 4Q24 results in advance. Santarelli also noted, not in so many words, that the F1 softness also reflected sky-high 2023 hotel rates that were now coming back to earth.
“Pertaining to the regional segment, management noted that the middle to high end customer segment is still pretty strong, while the lower end of the database has seen some softening,” Santarelli chronicled, which certainly jibes with what we’re hearing from all points of the compass. Falling somewhere between Santarelli and Greff, Truist Securities analyst Barry Jonas deemed the quarter “solid,” allowing for the ominous F1 color. He also had a “Buy” rating on MGM with a $58 target. “Success continues to be driven by high-end properties, responsible for the ‘vast majority’ of topline growth. MGM continues to invest here, with 75% of 2024 domestic capex targeted on these properties,” Jonas observed. Room rates on the Strip climb every month, helped along with a refreshed convention center at Mandalay Bay. In Macao, MGM is growing revenues and maintaining a disproportionate, 16% market share without significant increases in capital spending.
But BetMGM could not be swept entirely under the rug. On the upside, live-dealer content is now being streamed from MGM’s signature properties in Las Vegas, contributing at a 22% share of national iGaming play. Strength in iGaming is somewhat making up for a pummeling MGM has taken in sports betting. Jonas noted that MGM leadership has pushed its projection of $500 million ROI back from 2026 to “in the coming years.” That’s a lot of margin for error.
Citing “record results at the Kentucky Derby, strength in land-based gaming and ramp upside of Terre Haute following its opening,” Jefferies Equity Research analyst David Katz made the bullish case for Churchill Downs. The company’s $891 million in 2Q24 bested The Street’s $862 million forecast, while cash flow came in at $445 million, up from the expected $410 million. In addition to its controversial slot parlor in Virginia‘s Henrico County, CHDN is focusing on a slot parlor in Oak Grove, Kentucky, as well as its The Rose casino in the Cavalier State. Jonas agreed that these were “strong results with more growth ahead.”
Jottings: Boyd Gaming is going half-in on Henderson‘s growth spurt. It’s investing an unspecified amount to tear down Jokers Wild Casino and replace it with Cadence Crossing. But Boyd is stopping short of a full demolition of its strategically located complex in the area … The Mirage, now closed, is donating two signs to the Neon Museum. Alas, the museum also has to take the creepy, 17-foot-tall statue of Siegfried & Roy that used to haunt pedestrians on the Las Vegas Strip … Fresh from a sports debacle in Arizona, the Sahara‘s owner, Alex Meruelo, is talking up minor-league hockey in Reno. The projected team would play in a 10,000-seat arena to be built near Meruelo’s Grand Sierra Resort. Thankfully, the arena does not appear to be being built with public funds … It looks like $405 million Ho-Chunk Beloit (above) is finally going to be built, with a massive casino and hotel. Somewhat in the manner of the cart before the horse, the casino will precede the requisite parking garage … On a more modest scale, the Muscogee Nation in Oklahoma is planning $100 million Coweta Casino Hotel. The hotel will only boast 46 rooms, while the casino will be confined to 750 slot machines … Also in progress is Saracen Casino Resort in Arkansas. The temporary casino will soon be superseded with a new facility and a 323-room hotel … Rep. Dina Titus (D) continues to campaign in the House of Representatives for repeal of the federal excise tax on sports wagering. (You go, Prof. Titus!) Now Sens. Catherine Cortez Masto (D) and Cindy Hyde-Smith (R) are executing the other half of a pincer movement in the upper house. Their bill is called the Withdrawing Arduous Gaming Excise Rates Act. WAGER, geddit? Clever, huh?