Casino company stocks have tumbled even as inflation has risen to the highest rate in four decades and fears of a recession have shaken consumers and investors alike.
Caesars Entertainment shares are down 50% so far this quarter. Bally’s is down 40% over the same period, and shares in Penn National Gaming and MGM Resorts are down 35%. For comparison, the S&P 500, which recently entered a bear market, is down almost 19% this quarter.
Still, the nation’s commercial casinos just had their best April ever, according to the American Gaming Association. The industry posted revenue of $4.99 billion, up 12.4% year over year. It’s the second highest-grossing month of all time, after March of this year.
During earnings calls in April and May, casino executives collectively denied seeing a slowdown in customer spending, despite rising gas, housing and grocery costs, except among the bottom demographic of customers.
In a note released this week, Jefferies gaming analyst David Katz wrote that meetings with management teams in Las Vegas provided “evidence of the dichotomy between current operational strength and the markets’ expectation of a recession.”
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, Wynn Resorts, Boyd Gaming, Golden Entertainment and Red Rock Resorts, which owns Stations casinos, say business levels remained “very strong” in the second and third quarters, with demand prices and the Volumes above are in 2019 and strong bookings into 2023 as Las Vegas conferencing and international travel recovers.
But Derek Stevens, owner of three downtown Las Vegas properties including Circa, tells a different story. In April, he told CNBC he was starting to see the impact of inflation based on the amount of cash withdrawn from casino ATMs.
Since then there has been no let-up, he told CNBC this week.
“It’s just really accelerated,” Stevens said. “Each weekend was worse than the one before.”
He described it as a downward spiral: bars have suffered the largest percentage drop and games are having the biggest impact, as slots and table games have experienced a slowdown.
And yet, Stevens says, the demand for travel is still there: Reservations at his Las Vegas hotels are stable, with no room discounts. Hotel guests limit their spending elsewhere, he added, noting that customers are spending less on restaurants and additional poolside amenities and other discretionary items.
“If you’re on the West Coast, you might have felt it a little quicker because of gas prices,” Stevens said, referring to California’s super-high fuel costs. “You can see it immediately in discretionary consumer spending.”