Las Vegas Casino Companies Discuss Waning Demand in 2018

Las Vegas Strip Demand Declines

All four companies continues to have strong reveneus, but executives spoke of a relative decline in visitors year-to-year.

Shares of Las Vegas’s largest casino companies took a hit this week, as each warned shareholders of waning demand in casino gaming. Caesars Entertainment, Las Vegas Sands, MGM Resorts, and Wynn Resorts all dealt with declining year-to-year numbers on their Q2 financial reports.

The main explanation for the decline appeared to be lack of big events on the Las Vegas Strip in the 2nd Quarter of 2018, along with a slacking convention economy.

Gaming revenues continue to decline, as casinos struggle to lure millennial gamblers and foreign tourists.

That led to pressure on room rates for Vegas Strip resorts. The big events decline came down to fewer boxing and UFC events of note in 2018, which are beyond the casinos’ ability to affect.

Caesars Entertainment Statement

More competition from rival gambling destinations had some effect, too. Atlantic City has had some resurgance. The second quarter saw two Atlantic City casinos, Ocean Resorts Casino and Hard Rock Atlantic City, have grand openings.

Mark Frissora, CEO of Caesars Entertainment, said of the drop in revenues, “The main issue that we saw in the third quarter was really in the first two months of the quarter. We don’t see that occurring in the fourth quarter and the programming for the city appears to be much stronger.”

16% EPS Decline in Q2

MGM Resorts International’s second-quarter EPS declined 16% after Jim Murren was the latest Las Vegas casino executive to state demand was done. In a press release, Jim Murren said, “Our Las Vegas Strip resorts benefited in the prior year third quarter from a stronger citywide convention base, two major boxing events and a higher-than-normal table games hold.”

“The difficult comparison in citywide convention attendees has resulted in a more negative than anticipated hotel mix shift creating short-term competitive rate pressure in the current-year third quarter.”

MGM Resorts expects its Q3 revenues to be down 8%-10%, while its overall 2018 revenues might decline. Those numbers are expected to be in the low percentage points.

Regional Casino Stocks

Regional gambling stocks appear to be strong at the moment. Boyd Gaming, a Nevada casino company with resorts in several other US states, saw shares climb 1.9%.

Penn National Gaming, the Pennsylvania firm that bought Pinnacle Entertainment earlier this year, climbed by 0.6%. Churchill Downs, which owns racetracks and gaming units in several states, rallied by 0.4%.

Steve Wiecznynski, the managing director Stifel, said the MGM Resorts numbers were an indication of the difficult operating environment in Las Vegas at the moment. Wieczynski said, “It is consistent with what we have heard from other operators in the past 24 hours, the 3Q18 period is shaping up to be incredibly soft along the Strip, an observation that was further confirmed by MGM.”

MGM Resorts’ Sports Betting

Jim Murren focused on the positives in MGM Resorts’ future. Sports betting appears to be a big part of the casino company’s future plans, as it signed strategic partnerships involving sports betting with GVC Holdings and the NBA in the past two weeks.

While sportsbooks do not generate massive cash themselves, they lure sports bettors and sports fans into the casinos. Once inside, a certain number try other casino games.

MGM Resorts’ National Prospects

MGM Resorts has strong revenue sources outside of Las Vegas. MGM National Harbor continues to set records in Baltimore, while the MGM Springfield is set for a grand opening later this year.

Borgata is the number one sportsbook in Atlantic City after a month in operation, while MGM’s Beau Rivage Casino in Biloxi and its Golden Strike Casino in Tunica just opened sportsbooks.

MGM Resorts also plans to compete for one of three Japanese casino licenses. The licensing process begins late in 2018, though a decision will not be rendered until 2019. The competion will be fierce, as Caesars Entertainment and Las Vegas Sands are interested. So are Chinese casino companies like Melco Resorts and Galaxy Entertainment.