Published on: December 16, 2024, 03:16h.
Last updated on: December 16, 2024, 03:16h.
Investors are anticipating a year of weaker revenue growth in 2025 for Las Vegas Strip casino hotels, with non-gaming sales playing a significant role in this outlook.
In a recent report to clients, Deutsche Bank analyst Carlo Santarelli highlighted the challenges facing Las Vegas Strip operators in 2025, with tough comparisons and a projected decline in net revenue due to attrition in non-gaming sales.
Santarelli noted, “While Las Vegas rarely lacks a robust event calendar, the 1Q24 Super Bowl will be difficult from a comparable perspective and is likely to put the market in a hole to begin the year.”
MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ: CZR) are the two largest operators on the Strip, with their stocks reflecting the anticipated challenges ahead.
Expectations for Slot Growth in 2024
As Las Vegas casino operators prepare to report fourth-quarter results in early 2025, market observers are forecasting the performance of different gaming segments for the year.
Santarelli predicted modest year-over-year growth in slot GGR, while non-baccarat table games revenue is expected to see a slight decrease. Baccarat revenue is forecasted to decline by a low double-digit percentage.
“Given a healthy slot handle exit rate, we believe the slot segment is set up reasonably well for 2025, with a forecasted modest contraction due to challenging comps around the Super Bowl and in the second half of the year,” Santarelli added.
Santarelli also mentioned a stable trend in non-baccarat table games hold in recent months, with expectations for a small year-over-year decline in the coming year.
Anticipated RevPAR Compression
For operators like Caesars and MGM, revenue per available room (RevPAR) is a critical metric. Santarelli warned investors to expect declines in this metric in the current quarter and into 2025.
“The rate of growth has decelerated over the course of the year, and we expect 4Q24 same-store RevPAR to contract for the first time in years. As a result, and impacted partly by the tough comparisons with the Super Bowl in 1Q25, we anticipate RevPAR for larger operators to decrease in the low to mid-single digit range in 2025,” the analyst stated.
Regarding overall Strip capacity, the closures of Mirage and Tropicana earlier this year, along with planned room renovations at MGM Grand next year, are not expected to significantly affect supply and demand dynamics on the Strip.