Despite being known as the gambling capital of the United States, recent studies show that casino operators in Las Vegas are continuing to reap benefit from leisure, convention and group travel communities, which continues to offset ongoing weakness in traditional gaming revenue, Moody’s Investors Service says in a report.
According to Moody’s Financial Services, non-gaming revenue has now easily surpassed gambling revenue with between 55%-65% of total revenues, with hotel, food and beverage spending representing the largest non-gaming income streams.
The report “Gaming — US: Las Vegas Strip & Locals Markets are Getting Boost from Non- Gaming Revenue,” says the focus on driving non-gaming spending can be seen in capital projects underway. MGM Resorts International (Ba3 stable) is upgrading New York-New York and Monte Carlo as part of The Park, but is not adding new gaming areas, and Station Casinos LLC (B1 stable) is spending $55 million to update restaurants, nightlife and other amenities at its Red Rock Resort and Green Valley Ranch Resort.
For 2016, Moody’s anticipates Strip operators will post flat to 2% top-line growth, attributable almost entirely to non-gaming revenues. EBITDA will rise as much as 5% owing to cost containment an operating leverage.
“Strip gaming revenues are still stuck in the mud and are likely to remain there,” Peggy Holloway, a Moody’s Senior Vice President says. “Strong visitation has not translated into higher gaming revenues as it has in the past.”
Las Vegas’ local markets are expected to experience a slightly better rate of gaming revenues than Strip operators as the area benefits from rising commercial and infrastructure construction projects, declining unemployment and net population growth.
“Gaming revenues in the Las Vegas locals market have started to rebound, but have yet to exceed the $1.2 billion peak reached in 2006,” Holloway says.
The report is available to Moody’s subscribers at:
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1039786.
