The June gaming numbers and passenger statistics at McCarran International Airport confirmed what many suspected would happen — Las Vegas residents and visitors from California are carrying the load for the resort industry and neighborhood casinos are doing the best by far.
It was the performance of locals’ casinos in June that stood out in the numbers and provided the most optimism for now, especially as team sports returns. That shows the strength of the Las Vegas economy despite a jobless rate of 15% and the significance of additional federal government stimulus being debated in Washington, D.C., for sustaining that run, analysts said.
Locals’ casinos saw gaming revenue decline by 28% in June — a much lower hit than the Strip at 61% and downtown at 55.5%.
The Strip relies on flights from around the world and convention travelers, but that’s not happening without a vaccine. McCarran had one million passengers in June, but that’s a little less than 25% of what it normally does. Conventions are canceling by the day.
“There was some upside surprise in the locals’ market, and their pace of recovery will be a lot faster,” said Brent Pirosch, director of gaming consulting at CBRE. “Margins were better in the locals’ market with the higher spenders on the property. There was less revenue, but their profit margins were better by operating with a leaner staff and low-margin amenities like buffets and entertainment have been removed that makes it more of a pure gaming operation.
On the Strip, it was about what people expected. We need flights to come back to change that story.”
Traditionally, California accounts for 22% of McCarran passengers, Texas at 10%, Washington and Florida at 5%. California is making up a bigger chunk of that along with drive-in traffic that has been seeing more than 50,000 vehicles pass the California/Nevada border on Friday and Sundays in recent weeks — a solid number but still 20%-plus down from the same time in 2019.
Downtown has been hurt because Strip casinos with their high-end rooms are offering reduced rates that make them a great value to stay there, Pirosch said. That might change with the Circa opening its casino in October and creating excitement downtown, he said.
Brendan D. Bussmann, director of government affairs with Global Market Advisors, said the June numbers show, “it’s not going to be an easy road to recovery and it’s going to take some time.”
Casinos are in the middle of quarterly earnings and MGM Resorts International said last week that occupancy in Las Vegas has been in the 30s on weekdays and 50s on the weekends. It has yet to announce when Park MGM and Mirage will open.
“MGM is saying they’re positive in every one of their open properties with exception of Mandalay Bay,” Bussmann said. “It goes to show the market will come back. But until we can improve (air passenger numbers) and bring back business customers to this town, it’s going to be a struggle.
“It shows how much Vegas is about business. It will be a lot longer than people thought, especially when the Consumer Electronics Show five months out (from their January show) says we’ll see you in 2022.”
Chad Beynon, an analyst at Macquarie Capital, said it’s hard seeing the Strip doing any better than a decline of 50 percent in gaming revenue until there’s a vaccine. He said analysts thought with most Strip casinos reopened that maybe Las Vegas was doing better than expected but reports that most guests are booking rooms less than a week out still says otherwise.
“These assets that make $100 million to $500 million a year in cash are going to make 10% to 20% percent of that in a year like this,” Beynon said. “We think Vegas can recover as fast or faster than the (2008) global financial crisis, but these next nine months are going to be tough in Vegas. It’s tough to paint a positive picture without a vaccine and until air lift picks up.”
Josh Swissman, founding partner of The Strategy Organization, said looking at the gaming and airport passenger numbers shows there’s an “outsized contribution from the drive-in market.” Those who like to gamble are still showing up because the parts of Vegas they enjoy the most like the gaming, pools and dining are operating, and there’s a lot of value, he said.
Swissman said the numbers show it will be an interesting fall and winter, and we’re all going to have to buckle up and tighten our seatbelts and hope for the best in 2021 with vaccines becoming a reality and conventions sticking with their dates.
“Be cautiously optimistic, but be prepared for additional months in 2021 of tough sledding,” Swissman said.
Locals’ casinos, meanwhile, continue to be the strong suit, and additional federal stimulus will keep that going, analysts said. The properties will also be bolstered by the return of team sports that are bringing back bettors who also play slots and table games and eat at restaurants. That will pick up even more when football starts in September as scheduled.