Investors are gearing up for a potentially slower year of revenue growth at Las Vegas Strip casino hotels in 2025, with non-gaming sales playing a significant role in this outlook.
In a recent report to clients, Deutsche Bank analyst Carlo Santarelli highlighted challenging comparisons, such as the first quarter of 2025 being compared to 2024 when Las Vegas hosted the Super Bowl. Santarelli forecasts a slight decline of 0.1% in gross gaming revenue (GGR) at the US casino center for 2025, but a steeper drop of 2.4% in net revenue due to a decline in non-gaming sales.
“While Las Vegas rarely lacks a robust event calendar, the 1Q24 Super Bowl will be difficult from a comparable perspective and is likely to put the market in a hole to begin the year,” observed Santarelli.
MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ: CZR) are the two largest operators on the Strip. Their stocks have fallen 21% and 22.18%, respectively, year-to-date, indicating that investors may have already factored in the challenging comparisons awaiting these companies.
Modest Slot Growth Expected in 2024
As Las Vegas casino operators prepare to deliver fourth-quarter results in early 2025, market participants are trying to forecast how different gaming segments will perform this year.
Santarelli anticipates modest year-over-year growth in slots GGR, while noting that non-baccarat table games revenue likely saw a slight decline. Given the challenges of the past two months, he predicts a low double-digit decrease in baccarat revenue.
“Given a healthy slot handle exit rate, we believe the slot segment sets up reasonably well for 2025, though we are forecasting modest contraction, primarily due to the more challenging comp stack the segment will face around the Super Bowl and in the second half of 2025,” added Santarelli.
He also noted recent stability in non-baccarat table games hold, which he expects to continue into next year, with a “benign” environment for table games hold and a slight year-over-year decline.
Anticipate RevPAR Compression
For operators like Caesars and MGM, revenue per available room (RevPAR) is a critical metric that indicates how effectively companies are monetizing hotel rooms. Santarelli advised investors to expect some declines in this area for the current quarter and into 2025.
“The rate of growth has decelerated over the course of the year, and we expect 4Q24 same-store RevPAR to contract for the first time in years,” noted the analyst. “Accordingly, and hampered in part by the challenging 1Q25 year-over-year comparison with the Super Bowl, we expect 2025 RevPAR for the larger operators to compress in the low to mid-single-digit range. This is one reason why we don’t put a ton of credence in RevPAR for Las Vegas casinos.”
Regarding overall Strip capacity, Santarelli mentioned that the closures of the Mirage and Tropicana earlier this year, along with planned room renovations at MGM Grand next year, are unlikely to significantly impact the overall supply and demand dynamics on the Strip.
