Casino stocks take a hit as inflation rattles economy

Shares of casino companies have fallen even as inflation has climbed to rates not seen in four decades and fears of a recession rattle consumers and investors.

Shares of Caesars Entertainment have fallen 50% so far this quarter. Bally’s fell 40% over the same period, and shares of Penn National Gaming and MGM Resorts fell 35%. By comparison, the S&P 500, which recently entered a bear market, is down almost 19% this quarter.

Still, commercial casinos across the country just had their best April ever, according to the American Gaming Association. The industry recorded revenue of $4.99 billion, up 12.4% year-over-year. It is the second most profitable month ever, after March this year.

In earnings calls in April and May, casino executives collectively denied seeing a slowdown in customer spending, despite soaring prices for gas, housing and food, except in the lowest demographic group. down.

In a note published 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 market expectations of ‘a recession’.

Danny Owens of Sacramento, California, plays a slot machine in downtown Las Vegas, Nevada on 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 activity levels continue to be “very strong” in the second and third quarters, with demand price and higher volume levels. 2019 and strong bookings through 2023 as conferences and international travel rebound in Las Vegas.

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 In April, he told CNBC he was starting to see the impact of inflation based on the amount of money withdrawn from casino ATMs.

There has been no respite since then, he told CNBC this week.

“It’s just really accelerated,” Stevens said. “Every weekend has been worse than the weekend before.”

He described it as a downward spiral: bars suffered the biggest percentage decline, and gaming saw the biggest impact, as slots and table games saw a downturn.

And yet, Stevens said, the travel demand is still there: Bookings at his Las Vegas hotels are holding up, with no discounts on rooms. Hotel guests are limiting their spending elsewhere, he added, noting that guests are spending less on restaurants and additional amenities at the pool and other discretionary items.

“If you’re on the West Coast, you might have felt it a little faster because of gas prices,” Stevens said, referring to California’s extremely high fuel costs. “You can see it immediately in discretionary consumer spending.”

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