Casino stocks are plummeting even as inflation is rising at rates not seen in four decades and fears of a recession are shaking consumers and investors alike.
Caesars Entertainment’s stock is down 50% so far this quarter. Bally’s stock is down 40% over the same time period, and Penn National Gaming and MGM Resorts are down 35%. For comparison, the S&P 500, which recently entered a bear market, is down nearly 19% this quarter.
However, the country’s commercial casinos had their best April ever, according to the Gaming Association of America. The industry reported $4.99 billion in revenue, up 12.4% year over year. It’s the second highest-earning month ever, after March of this year.
In earnings calls in April and May, casino executives collectively denied seeing any slowdown in customer spending, despite rising gas, lodging and food costs, except for the lowest customer demographic.
In a note published this week, Jefferies gaming analyst David Katz wrote that meetings with management teams in Las Vegas provided “evidence of the split between current operating strength and markets’ expectations of a recession.”
Danny Owens is from Sacramento, California. He 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 remain “very strong” in the second and third quarters, with demand pricing and volume levels higher in 2019 and strong bookings. Until 2023, as the conference business and international travel rebounded 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 In April, he told CNBC that he was beginning to see the impact of inflation based on how much cash is being withdrawn from casino ATMs.
He told CNBC this week that there had been no downtime since.
“It’s really accelerating,” Stevens said. “Every weekend was worse than the previous weekend.”
He described it as a downward spiral: Bars experienced the largest percentage drop, games saw the biggest impact as slots and table games saw a slowdown.
Still, Stevens said, the demand for travel is still there: Bookings at his Las Vegas hotels are flat, with no room discounts. He added that hotel guests are limiting their spending elsewhere, noting that customers are spending less on restaurants, additional pool amenities and other discretionary items.
“If you’re on the West Coast, you might feel it a little faster because of gas prices,” Stevens said, referring to California’s exorbitant fuel costs. “You can see it right away in discretionary consumer spending.”