You know how I thought May’s visitation numbers representing Las Vegas finally finding bottom in a visitation decline? Never mind. June was down 1%, mainly driven (pardon the pun) by fewer drive-in visits from California. Fortuitously for the casinos, 
luck was on their side last month and most jurisdictions reported revenue-positive results. Room rates in Las Vegas, however, dipped 1.5% to an average of $126, with revenue per available room of $115. The numbers would have been worse without the Infocomm and American Water Works Association conventions, which brought 58,000 attendees to Sin City. Even so, midweek occupancy was down 3% for a monthly average of 90.5%.
Nevertheless, Caesars Entertainment reported “strong operating results” in 2Q18, according JP Morgan analyst Daniel Politzer. Cash flow came in at $623 million, well ahead of Wall Street consensus prediction of $591 million. Caesars achieved this despite trimming $34 million from its marketing budget. Vegas cash flow way overshot expectations, hitting $383 million, whereas Morgan had anticipated $327 million. That more than made up for the hit the company is taking for a work stoppage that shut down Caesars Windsor (not exactly the crown jewel in the Roman Empire). Unlike other Strip companies, Caesars’ room rates were up 5% and gaming revenues climbed 11%, driven by good luck at the baccarat tables, proving that it’s sometimes better to be lucky than good.
That being said, Politzer called Caesars’ third-quarter outlook “weaker than expected.” The company anticipates flat room 
revenues “citing pricing pressure and challenging LV Strip trends in July and August.” And yet, Caesars was sufficiently bold as to predict as much as 6% room revenue for the year, “implying aggressive/dare-we-say hard to believe 4Q RevPAR growth of ~11% (~15% on our math) to get to the low end of guidance.” That’s pretty harsh language for an investor note. I mean, you can’t come out on Wall Street and say “Caesars is tripping” but that’s the essence of Politzer’s note.
Politzer also cited “fear that we could be entering a period of pricing pressure on the Strip (with the leisure segment particularly susceptible) that could be specific to CZR and/or the LV Strip.” Even so, at a price target of $13/share, Caesars shares are one of the bargain buys on the Street.
Over at Deutsche Bank, analyst Carlo Santarelli alluded to (but did not mention by name) Caesars when forecasting of this afternoon’s MGM Resorts International report that although “2Q18 results were broadly in-line, owing to strength on the 
gaming side and at the high end, namely Bellagio, we believe the 2H18 outlook and another reduction of full year guidance will be the story today.” He called the Vegas market “episodic” and plagued by “limited visibility.” Unlike Caesars, MGM is guiding room revenues to be down by “low single digits.” The lion beat the Street’s cash-flow forecast by $6 million, which “was entirely driven by Bellagio, as every other property, with the exception of Mandalay was below our estimate.”
We think Santarelli is burying the lead there, as Mandalay Bay is finally shedding its post-October 1 stigma. A cash flow shortfall at Borgata was partially redeemed by overperformance at MGM National Harbor and MGM Grand Detroit, two of the company’s other category-killers. Additional rescue is coming in the form of MGM Springfield, definitely set to open August 24.
Overseas, MGM is merely getting killed in Macao. Wall Street anticipated $163 million in cash flow from MGM’s two China casinos and got $120 million. Five-sixths of that comes from veteran MGM Macau, strongly suggesting that MGM Cotai has laid a multi-billion-dollar egg. At this pace, MGM is going to be waiting a long time to see a return on investment. As for MGM’s new partnership with the NBA and WNBA, Sports Illustrated puts it in a wider context. Writes legal analyst Michael McCann, “Although the NBA-MGM deal is relatively ‘small dollars,’ it could prove far more consequential from a conceptual standpoint.”
“Tough sledding” was Santarelli’s summating of Wynn Resorts‘ second quarter, calling the Macao results “worse than feared, missing our property level forecast by ~$30 mm.” He wrote, “we think one has to believe that Macau remains healthy and WYNN gains share via the continued mass ramp at Wynn Palace, additional junket capacity, refurbishments at Wynn Macau (Encore room remodel), and additional amenities at each of the two properties.” On the plus side, July trends were encouraging, on pace for $396 million in cash flow for the third quarter.
Cryptic “wage increases related to tip sharing” hampered Wynn’s Las Vegas performance. “Management noted that group was 
strong in the period and demand remains stable, though it expects 3Q18 trends to be challenging given the absence of certain events and the calendar (religious holidays).” Darn those religious holidays! In other Wynn news, fugly Wynn Palace will be augmented with a seven-acre entertainment plaza — or is it 11 acres? Analysts disagree — while Encore Boston Harbor is both on schedule and on budget. Now there’s some refreshing news. Wynn Resorts missed Deutsche Bank’s cash-flow prediction by $45.5 million, with Wynn Macau coming up $10 million short and Wynn Palace missing by $20 million.
Some of that is reflexive of a more-competitive VIP environment, with Melco Resorts & Entertainment and Sands China wading back into high-roller waters. On a positive note, Wynn’s 
Macao market share is at an all-time apex of 17%. Greff sees lean times ahead, trimming cash flow projections through 2019 by 5% in Macao and 9% on the Las Vegas Strip. There, net revenues narrowly missed Greff’s projection ($441.5 million vs. $448 million) and cash flow was 11% down. The company wrote off $3 million in bad debt — dishonored markers? — which clearly didn’t help. Table games were steady with last year but poor slot performance dragged gross gaming revenue down 2.5%. But room rates were up 5% despite 88% occupancy.
Santarelli called it right on the demise of Wynn Paradise Park, on which he went out on a limb several months ago. Quoth 
Greff: “management noted that the focus has changed to more luxury resort experience than a theme park focus …” So long ziplines, fireworks and animatronic King Kong. It’s business as usual for all other Wynn projects in development, with Wynn West (probably due for a renaming) reposing quietly on the back burner.
* Nevada‘s casino economy should be just fine this year. That surefire barometer, Wendover, was up 10% last month.
* In case you’re wondering what it’s like to lose a loved one in a mass shooting and then be sued for it, ask the family of Noah Pozner, who are currently going through that experience.
