Las Vegas poised for best gaming growth in 2024 despite challenges

Las Vegas poised for best gaming growth in 2024 despite challenges

Las Vegas, the entertainment capital of the world, is on track to achieve its best gaming growth in 2024, according to a Wall Street analyst. The city’s casinos are expected to benefit from a strong event calendar, group recovery, and sports betting expansion, despite facing headwinds from higher costs and tough comparisons.

Eventful year ahead for Las Vegas

One of the main drivers of Las Vegas gaming growth in 2024 is the impressive lineup of events that will attract visitors from across the country and around the world. The city will host Super Bowl LVIII, several CONMEBOL Copa America soccer games, and the Las Vegas Grand Prix, a Formula One race that will debut in November. In addition, the city will welcome back major conventions and trade shows, such as CES, NAB, and G2E, which will boost the demand for hotel rooms and casino amenities.

David Katz of Jefferies Equities Research said in a note to investors that the Strip and locals markets are the most attractive for casino operators, driven by these factors. He said that Caesars Entertainment and MGM Resorts International, which have the largest presence on the Strip, will benefit from the improved fundamentals. He also said that Red Rock Resorts, which operates several locals casinos, is positioned to deliver growth with the opening of its Durango Casino & Resort in December 2023, which is outperforming expectations.

Cost pressures and tough comps pose challenges

However, not everything is rosy for Las Vegas gaming operators in 2024. Katz said that the city’s casinos will face challenges from increased operating costs, such as labor, utilities, and insurance, which will erode their profit margins. He said that the casinos will also struggle to outperform the strong results of 2023, which was a record-breaking year for gaming revenue in Nevada and the Strip.

Las Vegas poised for best gaming growth in 2024 despite challenges

According to the Nevada Gaming Control Board, the state’s casinos won $13.5 billion in 2023, surpassing the previous record of $13.4 billion set in 2021. The Strip’s casinos won $7.5 billion in 2023, also beating the previous record of $7.1 billion set in 2021. Katz said that he expects revenues for casino operators to remain relatively flat or grow minimally in 2024, compared to the prior year.

“As we move into the first quarter of 2024, gaming win amounts should continue to increase over 2023 driven by the Strip, which is hosting various distinctive special events and conventions throughout 2024,” Katz said. “However, looking at the back half of the year, we are anticipating two conflicting variables to converge: an incredible special-events calendar; and a moderation in the current levels of gaming win, due to a possible pullback in consumer leisure spending as a consequence of inflation, rising interest rates, and volatility in the stock market.”

Regional and international markets show mixed results

Katz also commented on the prospects of regional and international gaming markets in 2024. He said that regional casinos outside of Las Vegas will continue to post mixed results, depending on the maturity and competition of their respective markets. He said that some states, such as Pennsylvania, New Jersey, and Indiana, will benefit from the growth of online and sports betting, while others, such as Illinois, Louisiana, and Mississippi, will face headwinds from new gaming supply and regulatory changes.

He said that Boyd Gaming and Bally’s, which have significant exposure to regional markets, are expected to see margin deterioration in 2024, due to tough comparisons and macroeconomic factors. He said that Churchill Downs, on the other hand, is one of the few operators that has growth potential, thanks to its online and racing segments.

As for the international markets, Katz said that Macau and Singapore will remain challenging for U.S.-based operators, such as Las Vegas Sands, Wynn Resorts, and MGM Resorts International, due to the ongoing pandemic, travel restrictions, and regulatory uncertainties. He said that he expects these markets to recover gradually, but not to reach their pre-pandemic levels until 2025 or beyond.

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