Indy Gaming: Will the gaming revenue bubble pop?

I’ve changed how we cover monthly gaming and tourism numbers (hat tip to the editors for suggestions). I’ll highlight trends or records and provide a story on the year-end totals.

Here is some trivia: Nevada casinos experienced their first $1 billion revenue month in March 2005, the first of 28 sporadic $1 billion months that ended in September 2008. The recession depressed gaming numbers during the next 39 months.

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Nevada casinos have produced a combined $1 billion or more in gaming revenue for 41 straight months.

But that’s just part of the story.

According to the Gaming Control Board, casinos statewide averaged more than $1.3 billion a month in gaming revenue during the past 12 months —  between August 2023 and July 2024. The figure includes the single-month record of $1.43 billion last December.

Some analysts wonder when this bubble will pop or show signs of a slow leak.

Historically, catastrophic events — the 9/11 terrorist attacks on New York and Washington, D.C., in 2001, the recession and the pandemic — have reduced or halted gambling activities.

Several analysts said as long as the Las Vegas special events calendar remains full — notably USC’s 27-20 victory over Louisiana State that drew a record crowd of 63,969 to Allegiant Stadium — casinos will prosper.

The investment community’s focus is on the Las Vegas Strip, the state’s largest submarket, which accounts for more than 57 percent of the state’s monthly and annual gaming revenue total.

Strip casinos averaged $744 million a month in gaming revenue in the past 12 months, which includes the single-month record of $905 million in December. During a comparable 12-month gaming revenue period between August 2018 and July 2019, Strip resorts averaged $546 million  — more than 36 percent below the current pace — said control board senior economic analyst Michael Lawton.

Strip gaming revenue declined 15 percent in July, primarily due to a 62 percent decline in baccarat revenue — a game favored by the high-end crowd that often sees steep monthly revenue fluctuation swings based on how lucky gamblers are in betting against the house. In July, Strip casinos held just 8.8 percent of the $727.4 million wagered. A year ago, the casinos held 23.9 percent of all bets.

Lawton said if baccarat was excluded from the mix, the state would have experienced a nearly 2 percent gaming revenue increase and the Strip would have been up less than 1 percent.

Macquarie Securities gaming analyst Chad Beynon said he isn’t sure how long the run will continue.

He told investors in a research note last week that the Strip was facing a tough comparison given July’s then-monthly record. Strip resorts also saw large hotel room rate fluctuations during the last seven months, affecting non-gaming revenue.

In February, with Allegiant Stadium hosting Super Bowl LVIII, Strip resorts reported their highest-ever average nightly hotel room rate for a single month — $248.35. The figure, according to the Las Vegas Convention and Visitors Authority (LVCVA), translated into a record $208 in revenue per available room, a metric used by the investment community to gauge profitability.

However, the LVCVA said Strip hotels experienced a collective 3.6 percent decline in July to $147 a night. Hotel room rates averaged $160 a night, which was down almost 2 percent from a year ago.

Beynon said he suspects the decline was driven by lower-end Strip properties. Wynn Resorts, on its second-quarter earnings call, said revenue per available room increased in July while MGM Resorts credited its luxury resorts for the company’s 3 percent revenue increase for its Strip properties.

“Although we remain positive on the non-gaming outlook in Vegas given strong group travel and [the] events calendar, we are becoming more cautious on slowing leisure travel demand,” Beynon wrote. He suggested a slowdown could lead to a “more competitive promotional environment” that would reduce profit margins.

The balance of Clark County, which includes casinos in unincorporated parts of Southern Nevada, was the one reporting region outside the Strip that caught analysts’ attention, given its 19 percent gaming revenue increase to $171.1 million in July.

The market has seen a nearly 13 percent revenue increase for the year's first seven months.

Last December’s opening of the $780 million Durango Casino Resort is fueling the increase.

The property, built by Red Rock Resorts, is in a growing area of southwest Las Vegas where it is the closest casino within a 5-mile radius of many residential neighborhoods.

Truist Securities gaming analyst Barry Jonas told investors Durango is drawing business away from other Red Rock properties and gaming options, such as taverns.

“We still suspect some cannibalization to the market from Durango as well as some aggressive competitive promotional responses,” Jonas wrote, saying that the casino’s performance has improved since the first three months of the year.

This trend could continue as Red Rock announced plans to expand Durango in August.

Virgin Las Vegas faces union protests; receives clean energy financing

Nearly two dozen members of Culinary Workers Union Local 226 were detained for performing acts of nonviolent civil disobedience outside Virgin Hotels Las Vegas just ahead of the busy Labor Day Weekend.

The 23 union members — including Culinary Secretary-Treasurer Ted Pappageorge and President Diana Valles — were briefly detained by the Las Vegas Metropolitan Police Department last Thursday after sitting in the middle of the off-Strip resort’s porte cochère and blocking traffic.

Virgin is the only resort that has not settled on a new five-year collective bargaining agreement stemming from last year’s citywide contract negotiations. In May, the union and its affiliated Bartenders Union Local 165 led Virgin employees on a 48-hour strike in front of the resort to call attention to the stalled contract negotiations with JC Hospitality, the owner-operators of the property.

Pappageorge said the union and Virgin leadership have not held any contract talks since July.

Meanwhile, Virgin became the recipient of the largest commercial property assessed clean energy (C-PACE) financed deal in Nevada and the second largest in the country in receiving  $190 million from Nuveen Green Capital, a real estate financing business.

In a statement, Nuveen said Virgin would use the financing to pay off improvements to the 1,500-room Virgin Las Vegas, including heating, ventilation and air conditioning upgrades, LED lighting upgrades, window replacements, water-saving plumbing upgrades, building control system, pool and spa improvements and desert landscaping.

What I'm reading

Jacks Valley Ranch sells for $18 million — Kurt Hildebrand, Northern Nevada Business Journal

The 1,230-acre working cattle ranch in northwestern Douglas County was purchased in 1969 by the late John Ascuaga, who owned the Sparks Nugget.

Downtown Las Vegas casino to open more rooms — McKenna Ross, Las Vegas Review-Journal

Derek Stevens plans to add 106 rooms and suites to Circa Casino Resort using four floors that were left unfinished when the property was first built in 2020.

Judge dismisses suit seeking to ban smoking in Atlantic City casinos – Erin Nola and Hurubie Meko, New York Times

The ruling was a blow to casino workers who sought to ban smoking in one of the few places exempt from the state's 2006 indoor smoking ban.

American Gaming Association survey points to Americans’ embrace of gaming — Rege Behe, CDC Gaming Reports

In a poll of Americans, 75 percent believe the gaming industry behaves responsibly, 9-out-of-10 say sports betting is an acceptable form of entertainment, and 75 percent support legal sports betting.

News, notes and quotes

Venetian-Palazzo employees nearly unanimous in union support

Some 4,000 non-gaming employees at The Venetian and Palazzo overwhelmingly approved a four-year contract agreement with Culinary Workers Union Local 226 and Bartenders Local 165. A week after first reaching the agreement covering wages, benefits and other working conditions, the union announced on the social media platform X that 99 percent of the workforce voted to approve the four-year contract. The contract ended a decades-long standoff between Nevada’s largest labor organization and the biggest nonunion property on the Strip. The $6.25 billion sale of The Venetian complex by Las Vegas Sands following the death of owner Sheldon Adelson helped move along the contract discussions.

MGM Resorts, BetMGM sponsoring responsible gaming messages at NFL stadiums

MGM Resorts International and BetMGM are partnering with the American Gaming Association to promote the organization’s Responsible Gaming Education Month by sponsoring messages at nine NFL stadiums, including Allegiant Stadium in Las Vegas. The stadiums are in markets where MGM or BetMGM have operations. MGM Resorts is also contributing $440,000 to fund responsible gaming research.

AGEM changes its operating structure

The Association of Gaming Equipment Manufacturers (AGEM) is changing the Las Vegas-based trade group’s structure and operations, including designating a president and CEO and its elected board of directors. AGEM will be led by its current CEO Daron Dorsey, who oversees day-to-day management. Light & Wonder executive Robert Parente is the current chairman and will complete his term in March along with the current board. Parente said AGEM is developing diversity, equity and inclusion initiatives to expand the board’s composition.