Las Vegas tourism is on fire and Wall Street analysts don’t see that slowing down through 2025. Thanks to gaming revenue reports and second-quarter earnings statements by the biggest players on the Las Vegas Strip, analysts harbor high expectations for the foreseeable future.
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Through the first six months of the year, gaming revenue for the Las Vegas Strip and the balance of Clark County are up $251.2 million or 4.9%. For the year, visitor volume is up 3.8%.
In a note to investors this week, Chad Beynon, senior gaming analyst at Macquarie, highlighted the positive developments. “Given consistently solid results in Vegas, we’re increasing our Strip gross gaming revenue forecast for both third and fourth quarters and now expect Strip gaming revenue to be flat year over year.”
Macquarie singled out Caesars reporting a 3% EBITDAR beat in the second quarter, led by its Las Vegas properties.
“Caesars continues to share a strong Vegas outlook, digital momentum, and regional improvement in the fourth quarter,” Beynon said.
John DeCree, director of equity research at CBRE, said Las Vegas is one of the “key value drivers” that helped Caesars beat expectations. That’s after what he said were “two rocky” quarters impacted by bad luck and labor accruals.
Under the header of return to growth, DeCree said that despite about $20 million of higher labor expenses, Caesars grew same-store adjusted property EBITDAR in Las Vegas 1.2% to $514 million, topping consensus of $486 million.
DeCree noted that Caesars management called out some potential benefits from the closure of the Mirage. Additionally, the company is seeing an uplift from recent renovations at the Colosseum at Caesars Palace and Versailles Towers at Paris Las Vegas, the latter of which has been particularly strong, yielding average-daily-rate increases of $65, up 60% versus the prior year.
In discussing Caesars, Barry Jonas, an analyst with Trust Securities, called Las Vegas “hot” beyond its weather these days.
“Forward expectations for the Strip are positive, given favorable occupancy and pricing trends, combined with a decrease in supply on the Strip, though management did note the Mirage closure would also reduce some normal Caesars visitation by Mirage guests,” Jonas said. “Management expects both third and fourth quarters to see EBITDA growth year over year. For 2025, management noted that the forward group/convention pace has strengthened.”
DeCree said MGM reported $782 million of EBITDAR in Las Vegas, beating consensus of $760 million. The luxury assets continue to outperform for MGM, generating 80% of the segment’s EBITDAR.
“MGM is leaning into the trend, with 75% of domestic- property capex allocated to luxury assets,” DeCree said. “This includes plans for Bellagio that could consist of experiential, entertainment, retail, and nightlife amenities. Looking forward, Las Vegas has a favorable comparison in the third quarter to last year’s cyberattack, but a tougher comp in the fourth quarter, with management noting F1 average daily room rates are tracking about 50% lower vs. last year.”
DeCree said that while market conditions make it hard to look more than a couple quarters ahead, any bumpiness MGM experiences in the second half of 2024 will be “buoyed by unrelenting demand for Las Vegas, meaningful competitive supply reductions, return on capex, and improving mix through the Marriott partnership.”
According to Jonas, MGM executives haven’t wavered in their view of the long-term prospects of Las Vegas, dismissing suggestions that the city has peaked.
“This year’s F1 race in November is currently running a $30 million headwind across all of its properties, largely driven by lower average daily rates, though management noted there’s still time for that amount to narrow and room to cut some costs out of last year’s inaugural event,” Jonas said. “MGM noted there is a Raiders game that weekend as well, which should benefit the south Strip.”
Joseph Greff with J.P. Morgan said they’re forecasting a full-year Strip-property-level EBITDA of $3.175 billion for MGM, up from $3.11 billion, with $775 million in the third quarter and $790 million in the fourth quarter.
In discussing Las Vegas, Jonas said the city continues to power through any broader macro weakness. Strip gaming revenue outpaced its expectations for the second quarter, as evidenced by Caesars and MGMs earnings.
Carlo Santarelli of Deutsche Bank contends the F1 commentary shouldn’t be the takeaway from the call.
“In our view, given 2023 was the debut for Las Vegas F1, the significant high-end play around the event in 2023, and the favorable table hold for the fourth quarter of 2023, MGM was looking at a challenging fourth-quarter comparison to begin with,” Santarelli said.
“Frankly, we believed, coming into the second quarter of 2024 report, fourth-quarter consensus was too high. While our fourth-quarter Las Vegas Strip estimate is essentially unchanged, we believe the commentary is likely to lower the bar for the fourth quarter and bring consensus to more, what we would call, realistic levels. Further, given the event was effectively reverse yield managed from a room-rate perspective last year, the current comparisons are essentially comparing current rates to what were effectively peak rates for the event, which came down into the event at this time last year.”
