Inflation might be tightening its grip on gamers’ wallets and casino operators with lower household income players might be the most affected.
Highest Income Players Choose Wynn
Back in May, Seeking Alpha reported on The Wells Fargo Investment Institute’s change in economic growth forecasts and defensive positioning on stocks, noting that recession is the “base case” for Wells Fargo. Now, with inflation levels rising by more than 8% for the past 12 months through April, Wells Fargo has turned to analyze the average household income (HHI) data for casino players in the US, and the findings might be surprising.
Analysts wrote they started the analysis for visitors of US casinos to “gauge which operators are most exposed to the lower/middle-income customer, where food/fuel/broader inflationary pressures could reduce gaming’s wallet share,” indicating that feeling the negative results from inflation is inversely proportionate to income. The lower the income, the more the household hurts, and in the case of casinos – the less money they make when visited by those households.
Wynn Resorts is topping the chart with an average HHI for its customers of $108,780 and it is projected that this translate into smaller or at the very least barely noticeable inflation effects for the company’s casinos and overall business. Wealthy players are great news any day of the week, but it according to this analysis, it becomes a critical component for survival in a climate where the Consumer Price Index (CPI) sits at a forty-year high, making inflation a top concern for casino operators. And if players are wealthy enough, inflation becomes less of a concern, loosening its grip on the wallets of high rollers.
The Wells Fargo List
The top five from the list have the following HHI, according to the recent analysis:
- Wynn Resorts (WYNN): $108,780
- MGM Resorts (MCHVF): $94,352
- Caesars Entertainment (CZR): $82,679
- Red Rock Resorts (RRR): $82,279
- Penn National Gaming (PEBA): $74,995
It stands out that the top 3 operators all have a solid Strip presence, while regional operators that mostly cater to locals, like RRR (3rd on the list), Boyd Gaming (6th on the list with HHI = $74,944), Bally’s (close 7th on the list with HHI = $74,424) and Churchill Downs (8th on the list with HHI = $73,531), all drastically fall down in terms of average HHI for their players.
Red Rock stands out, however, in Wells Fargo analysts’ statements, saying they “see about $40 as an attractive entry point for RRR, with the potential impact from a slowing at the lowest end of its database likely minimal”, signaling bullish attitudes towards RRR at this point. Its stock is at $40.26 at the time of writing and it was below $40 just recently, for the entirety of the last week of May.
The outlook for the rest of the list doesn’t look that way, with most of the regional operators expected to cater to most of the households below $70 thousand HHI.
Wynn Keeps Winning
Just recently, Wynn Las Vegas was announced to be partnering with the World Poker Tour in December for the 20edition of WPT, making headlines with a record-breaking guaranteed prize pool. The GTD poker tour will start on December 1 and through December 20, 2022, and the prize pool is a whopping $15 million guarantee – “the largest single live tournament guarantee in the history of poker,” as WPT said in its announcement.