Nevada Revenues Fall in August After 3 Months of Growth - Analyst Blog

According to the Nevada Gaming Commission, gaming revenues in Nevada declined 3.7% to $920.2 million for the month of August. This was the first decline following three consecutive months of growth, 0.7%, 14.4% and 8.1% in the months of July, June and May, respectively. We believe the decline was due to the end of the summer tournament season in Las Vegas.

Revenues at the Las Vegas Strip – one of the leading gambling destinations in Nevada – fell 6.1% to $553 million. The downside reflects decline in revenues from Baccarat – a card game. Baccarat win that had been driving growth for the past few months declined in double-digits in August.

Share price of companies like Las Vegas Sands Corp. (LVS), Wynn Resorts Ltd. (WYNN), Boyd Gaming Corporation (BYD), MGM Resorts International (MGM) who operate in the region are expected to be impacted by the downside.

Despite the declines, a few analysts believe that the trends in Las Vegas remain healthy. They have a positive outlook for the region. So far, the improvement in economic fundamentals including housing, wage growth, population and employment has not translated into benefits for casinos that host local customers.

A couple of analysts believe that the market is yet to reap the benefit of new investments in the strip. They believe that once the major development projects begin, there will be an increase in hiring.  This will translate into improved employment rates and in the process revive the sluggish economy.

The optimism can be attributed to the improving performance of the region over the past few months. It has rebounded strongly from the recession owing to regional demographics and economic diversity. From Jan to Jul 2014, casino revenues in the Las Vegas Strip were reportedly up 3.7%, attributable to a 14.4% rise in baccarat revenues.

Though tourism in Las Vegas has not yet reached the pre-recession level, it is on its way to recovery. In fact, it was better than market expectations in the second quarter and Las Vegas is on track to break its annual visitation record. Its recovery has reportedly earned Las Vegas an Aa2 rating with a stable outlook from Moody's.

We would therefore prefer to wait and see whether the region can overcome this temporary roadblock and hit the growth track yet again.