Shares of casino companies have plummeted even as inflation spikes at a rate not seen in four decades and recession fears hit consumers and investors alike.
Caesars Entertainment shares have plummeted 50% so far this quarter. Bally’s dropped 40% in the same time period and Penn National Gaming and MGM . Resort shares fell 35%. For comparison, S&P 500which recently entered a bear marketdown nearly 19% this quarter.
However, the nation’s commercial casinos just had their best April ever, according to Game Association of America. The industry generated $4.99 billion in revenue, up 12.4% year-on-year. This is the second-highest-grossing month ever, after March of this year.
On earnings calls in April and May, Casino executives both deny seeing any slowdown in customer spending, despite skyrocketing costs of gas, housing and food, with the exception of customers with the lowest demographic.
In a note published this week, Jefferies game analyst David Katz wrote that meetings with the management team in Las Vegas provided “evidence of the dichotomy between operational power and strength. current movements and expectations of a market downturn.”
Danny Owens of Sacramento, California plays a slot machine in downtown Las Vegas, Nevada, June 4, 2020.
Steve Marcus | Reuters
Katz wrote that MGM, Caesars, Beach Hotels in Wynn, Boyd Gaming, Golden Entertainmentand Red Rock Beach HotelsCasino owner Stations, said business continued to be “very strong” in the second and third quarters, with prices and demand volumes above 2019 and bookings rising sharply in 2023, when activity International tourism and convention business recovers in Las Vegas.
But Derek Stevens, owner of three properties in downtown Las Vegas, including Circa, tells a different story. In April, he told CNBC he began to see the impact of inflation on the amount of cash withdrawn from casino ATMs.
He told CNBC this week.
“It’s just really accelerated,” says Stevens. “Every weekend is worse than the last.”
He describes it as a downward spiral: Bars experienced the biggest percentage drop, and gaming had the biggest impact as slot and table games experienced a slowdown.
Still, says Stevens, the need to travel is still there: Bookings at his Las Vegas hotels are holding steady, without any room discounts. Hotel guests are limiting their spending elsewhere, he added, noting that customers are spending less on restaurants and additional pool amenities and other discretionary items. .
“If you’re on the West Coast, you can feel it a bit quicker because of gas prices,” Stevens said, referring to California’s super-high fuel costs. “You can immediately see that in discretionary consumer spending.”
