Published on: January 2, 2025, 04:50h.
Last reviewed on: January 2, 2025, 04:50h.
Shares of casino operators heavily involved in the Las Vegas locals market saw mixed performance in 2024, and the trend is expected to continue in the upcoming year as the sector is projected to see modest growth.
This assessment comes from Deutsche Bank analyst Carlo Santarelli, who referred to 2024 as “an interesting year” for the Las Vegas locals space. The performance of Boyd Gaming (NYSE: BYD) and Golden Entertainment (NASDAQ: GDEN) in 2024 was heavily influenced by the entry of Red Rock Resorts’ (NASDAQ: RRR) Durango Casino & Resort in Southwest Las Vegas.
Durango, which opened in December 2023, is believed to have attracted customers from Boyd, Golden, and even Red Rock’s main casino while also stimulating increased promotional activity among smaller independent local casinos.
While Durango experienced rapid success, Santarelli noted that in 2024, Las Vegas locals operators likely saw lower earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) along with a slight increase in operating costs. This led to declines in shares of Golden and Red Rock, with Boyd being the only one to see an increase in 2024.
Boyd, Red Rock Prospects for 2025
Santarelli suggested that stronger-than-expected revenue growth could boost the performance of Boyd and Red Rock in the coming year.
We believe a positive and growing gaming revenue trend in 2025 would significantly benefit both Red Rock and Boyd. However, without market growth, we anticipate that consensus forecasts may be overly optimistic,” the analyst commented.
He also mentioned that the significant expansion planned for Durango this year does not pose a threat to gaming venues in the Boulder Strip and North Las Vegas areas, where Boyd and other Red Rock casinos are located. He forecasted another year of notable revenue growth for Durango in 2025.
“Given its superior margin compared to the rest of the portfolio, we estimate that Durango’s annual net revenue for 2024 will be around $340 million,” Santarelli stated. “Assuming similar revenue splits at the property compared to the overall portfolio, we project annual net casino revenue of approximately $225 million, with annual gross gaming revenue reaching around $260 million.”
Las Vegas Locals Employment Trends
Examining workforce trends in the Las Vegas locals market could provide valuable insights for investors, as employees of one operator often bring their gaming business to other venues operated by their employer or competitors.
Santarelli highlighted that between 2014 and 2019, job growth at Las Vegas locals properties closely mirrored the 3% compound annual growth rate (CAGR) in revenue from those properties. However, since 2019, revenue CAGR has increased to 5.1% while job growth only rose by 0.9%.
“We do not view the above-average gaming revenue growth as concerning, but we are somewhat cautious about workforce growth trends compared to the revenue growth trajectory for 2025,” Santarelli concluded. “This concern arises from the slowing job growth and the challenging comparison in 2025, as gaming revenue per employee has increased by 4.2% over the past 12 months, driven primarily by the impact of Durango.”