Predicting the Las Vegas Strip’s Gaming and Non-Gaming Revenues for 2015
It can be next-to-impossible to predict gaming industry revenues. The recent past is littered with estimates that are wildly inaccurate. National and regional economic trends have a tremendous impact on an entertainment expense like gambling, so any hiccup in the economy can have immediate ripple effects on gaming revenues.
Governor Chris Christie predicted New Jersey’s online gaming industry would be worth $1 billion, but in the first year, the numbers were closer to $110 million–11% of the amount Christ predicted. Certainly, few people predicted the gambling industry would bottom-out in 2008, which is why Caesars Entertainment and Mohegan Sun each have had major problems dealing with the effects of the global recession.
No one predicted a year ago that Macau would see its first decline in gaming revenues in its history. Experts would have laughed at anyone who said the world’s largest gaming destination with a 10-year record of instant success would falter.
Las Vegas Strip Gaming Revenues
Guessing how 2015 will be for the Las Vegas Strip is a lot of guesswork. Making such prognostications is really more of an art–not a science. Another thing which makes Las Vegas Strip numbers so difficult to chart are the non-gaming revenues, which make up a majority of the revenues generated by the Vegas Strip.
In 2014, the Strip casinos generated $5.99 billion in gaming revenues, which was a 4.77% increase over 2013. The same casinos generated $16.3 billion in total gaming and non-gaming revenues, though. Once again, the 5% yearly increase is considered a solid year of growth. Conventional logic says the non-gaming revenues will always exceed the winnings from gambling, which is a good thing. Since 1998, non-gaming revenues have outperformed the casinos in Las Vegas, with a 60/40 split as the traditional and preferable rate.
Avoiding Atlantic City’s Fate
Take a look at the decline of Atlantic City to see what over-reliance on a gambling economy can lead to. In Atlantic City, civic leaders relied too much on roughly 12 casinos to provide 70% of the city’s property taxes. That worked fine when Atlantic City was the only gaming destination on the east coast. Over the past 25 years, Native American tribal casinos sprung up across the region, which was followed by private non-tribal casino expansion. Pennsylvania and New York State got their own gaming industries, which spelled doom for Atlantic City’s decades-old business model. In 2006, Atlantic City had $5.4 billion in gaming revenues, while that fell to $2.86 billion in 2013. The 2014 numbers are not released, but with 4 of the 12 casinos closed, those numbers are certain to be as low as $2.7 billion–one-half of the rake from 2006.
The Las Vegas Strip is still down 7.7% from its peak year of 2007, when the city has $6.5 billion in gaming revenues. Where Atlantic City continues a downward spiral, the Vegas Strip continues to rebuild. And where the Boardwalk didn’t have non-gaming revenue streams to fall back on, the Strip always had a more lucrative revenue source to help it in the lean times.
Hotels generated $4.25 billion in revenue in fiscal year 2014. Restaurants collected $2.51 billion, while alcohol sales added $1.2 billion in proceeds. Entertainment and retail combined for $2.35 billion in profits for the casinos.
The shows on the Vegas Strip generate a tremendous amount of revenue, drawing in tourists who don’t like to gamble. The shows include David Copperfield, Rod Stewart, Penn & Teller, Donny and Marie Osmond, Jeff Dunham, Terry Fator, Absinthe, Blue Man Group, and more Cirque du Soleil shows than you can remember. That revenue stream is often forgotten when comparing Las Vegas to Macau, which collected nearly 6 times the gaming revenue of Sin City. Put the shows and concerts into the mix and the figures are much closer.
Over 41 Million Visitors Expected
Las Vegas welcomed 41.1 million visitors in 2014. In 2015, the city is expected to exceed that number by about 500,000 people. Convention bookings already show an increase over last year’s numbers.
Part of last year’s increases came from the opening of The Cromwell and SLS Las Vegas Hotel & Casino. Both not only offered a variety of nightclubs and restaurants, but their gaming proceeds were respectable. As both increase their player database, both expect to see an increase in their yearly totals.
Resorts World Las Vegas Opening
Though it won’t be felt in 2015, expect to see a seismic shift in the numbers when Resorts World Las Vegas opens in 2016. Resorts World Las Vegas will be the most expensive casino ever built in Las Vegas, at just over $4 billion. The casino should not be overexposed to debt, either, because it will be owned by Genting Limited, a Malaysian conglomerate which owns not only casinos in Singapore and elsewhere, but also sugar plantations and oil industry assets in its home country. Genting’s executives say their Vegas Strip casino will attract visitors who never gamble.
The company expected to have the best 2015 is MGM Resorts, according to Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski. Mr. Wieczynski says MGM Resorts’ $2.9 billion casino opening on the Cotai Peninsula in Macau–also set to open in 2016–will drive up the price of MGM Resorts stock in 2015. The anticipation of that open should be intense, though Xi Jinping’s anti-corruption campaign is currently costing Macau gaming impresarios billions of dollars.