Las Vegas is Hot, But the Economy May Deal Casinos a Losing Hand

Casinos Rebound

Las Vegas was hit hard during the pandemic. Casinos, previously open for 24 hours a day, were shuttered and unemployment soared over 30% in April 2020. In June of that year, the average hotel price dropped to about $118 a night.

The Strip’s fortunes have begun to change. Business is increasing as some are directing their pent-up entertainment demand to the gambling tables and slot machines. In June, the average hotel price rebounded to $168 a night, a 42% increase from its 2020 dip. It seems after years of pandemic restrictions, Americans are looking for ways to get out and have some fun, despite record-high inflation raising prices.

Experience-Based Economy

Market observers have noted a trend toward experience-based spending. MGM Resorts (MGM) CEO William Hornbuckle said their company has benefited from “this insatiable appetite for travel experience,” as well as “the millennials stepping into it.”

Las Vegas has seen a 12% increase in tourists from last year, however the city has yet to reach the level of visitors it had pre-pandemic. Even so, MGM Resorts reported this year’s revenues from its Las Vegas casinos have surpassed what was generated in the same quarter of 2019. Caesar’s (CZR) casinos also experienced encouraging results, with revenue up over 33% since last year.

Dead-Cat Bounce?

Still, market observers are keeping a wary eye on both economic growth and inflation. Both have the potential to impact casino operators’ bottom lines. Rising prices can be double-jeopardy — they drive labor costs higher all while discouraging budget-stretched visitors.

For now, Las Vegas seems to be a low-cost option for travelers who want to get out and have a little fun. Economic woes could certainly cause the current Sin City boom to fizzle. Casino operators will take the gamble.

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