Analysts Highlight Las Vegas Strip’s Strong Performance and Growth Prospects

Reports from analysts discuss the powerful performance of the Las Vegas Strip recently, as well as the increasing number of customers for DraftKings and continuous income potential for US regional casinos.

Las Vegas Strip Posts Strong May Revenue Despite Headwinds

In a June 27 note, Truist Securities analyst Barry Jonas highlighted the strong performance of the Las Vegas Strip. Despite baccarat wins falling 7% year-on-year and some headwinds in Nevada slot accounting, May revenue on the Las Vegas Strip jumped 4%. Underlying demand was strong, as when excluding baccarat, normalized revenue was up an impressive 10% year-on-year, visitation trends looked healthy with a 5% increase, and Strip revenue per available room was up 11%.

Jonas is positive on Las Vegas Strip operators heading into 2Q earnings season, reported CDC Gaming. He pointed to good results from their most recent room survey and May’s 5% locals’ revenue growth. While growth was primarily driven by Red Rock Resort’s Durango, the revenue increase of 10% implies a stable performance for same-store local properties.

Similarly, JP Morgan analyst Joseph Greff highlighted in a note that the Las Vegas Convention and Visitors Authority reported a 4.6% rise in visitation with 3.66 million visitors in May. Citywide occupancy was 86.1%, a year-on-year decrease of 470 basis points against a 3.4% rise in room inventory.

Convention attendance also saw a modest increase of 1.8% year-on-year with 461,900 attendees in May. Greff noted that the Strip’s revenue per available room was $188, marking an 11% year-over-year increase. The average daily room rate grew 9% and occupancy rose by 150 basis points.

DraftKings’ Strong Q2 App Downloads to Boost User Engagement and Future Earnings

A particular focus among analysts has been DraftKings following Jefferies analyst David Katz’s June 30 note. Katz said there have been significant app downloads this quarter due to heightened marketing efforts post-migration of Golden Nugget Online Gaming (GNOG) to DraftKings tech stack. Downloads and sign-ups were above expectations mainly due to promotional offers targeting new customers.

According to Katz, there are three key implications from this trend: iGaming monthly unique players could be higher than expected, near-term quarterly profitability could be negatively impacted by the elevated promotional expenses, and longer-term earnings power could be improved. The increased user engagement bodes well for the future of DraftKings.

US Regional Gaming Operators to See Modest Revenue Growth in Q2

Using data from geolocation services provider Placer AI, JP Morgan analyst Joseph Greff looked at gaming revenue and foot traffic trends for US regional operators in a June 28 note. For 2Q2024, he predicts modestly positive revenue growth for these operators but notes that monthly state results were influenced by the number of weekend days versus the prior year.

The performance in April was weaker mainly because it had fewer weekends than in April 2023, whereas May benefited from a more favorable calendar. 

Greff concluded that based on year-to-date results through April and seasonal trends since 2017, the second half of 2024 could see low-single-digit revenue growth in the US regional gaming market for the full year.