The Las Vegas Strip’s Non-Gaming Revenue Remains Strong

Posted on: December 1, 2023, 03:31h.

Last updated on: December 1, 2023, 03:31h.

Nevada casino companies recorded a gross gaming revenue (GGR) of $1.315 billion in October — its highest October on record and the sixth-best month in history. It was the earnings from non-gaming activities that helped Las Vegas Strip operators thrive.

Nevada casinos Las Vegas gaming revenue GGR
The Welcome to Las Vegas sign. Non-gaming revenue can support Strip operators, says an analyst. (Image: Shutterstock)

Las Vegas Strip operators, such as Caesars Entertainment (NASDAQ: CZR), MGM Resorts International (NYSE: MGM), and Wynn Resorts (NASDAQ: WYNN), achieved sales of $714 million in October – a remarkable achievement considering there was one less weekend than in 2022. One of the contributing factors was a surge in revenue per available room (RevPAR).

Strip RevPar growth in Oct came in at +13% YoY, while visitation increased 2% YoY (-1% vs 2019). Based on Las Vegas STR data through Nov. 25, we estimate that Strip RevPar growth could accelerate to ~18% in November, driven by continued lodging strength at the high end (link) and F1 for the weekend of Nov. 17-19,” wrote Macquarie analyst Chad Beynon in a note to clients today.

He’s likely onto something with that assessment as MGM CFO Jonathan Halkyard said at the Bank of America Leveraged Finance Conference earlier this week that the Las Vegas Grand Prix weekend was the highest-grossing weekend in the history of the operator’s Strip venues.

Las Vegas Strip October Vibrancy Could Lead to Q4 Beats

Operators such as Caesars, MGM, and Wynn offer a variety of revenue-generating amenities beyond gaming, making them potentially well-positioned to maintain strong revenue growth even if gaming revenue experiences a modest decline. This also dispels the notion that Las Vegas casino companies derive the bulk of their sales from gaming. In reality, food and beverage and entertainment contribute more revenue than gaming.

Food and beverage and entertainment can help smooth out the potentially volatile nature of gaming revenue, providing a boost for Strip operators.

“Assuming similar market share for MGM, CZR and WYNN and minimal cyberattack disruptions, we expect MGM and CZR to beat expectations in 4Q for their Las Vegas segments,” adds Beynon. “Given the continued resiliency in Vegas, we are increasing our 4Q Strip GGR forecast to -1% YoY (from -3% YoY). We now expect +4% GGR growth in 2023.”

Individual Stock Ideas

Caesars, MGM, and Wynn are the three largest publicly traded Strip operators. Beynon has “outperform” ratings on the first two with price targets implying upside of 45% and 47%, respectively, from current levels. The analyst has a “neutral” rating on Wynn, though his price forecast on that stock implies appreciation potential of 36%.

Of those three, Wynn is the least levered to the Strip as Las Vegas accounts for 23% of its revenue. Macau is the biggest driver of that company’s earnings and sales.

The Strip accounts for 47% of MGM’s sales and 45% of Caesars’ revenue, according to Macquarie data.

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