Macroeconomic Challenges Fail to Dampen Consumer Demand for Gaming

By John Isaac,
Editor at online-gambling.com

John Isaac Editor at online-gambling.com

John Isaac is an editor with many years of experience in the gambling industry. He writes expert articles on card games like blackjack and poker. In addition, he is also well aware of the US gambling laws and the Indian and Dutch gambling markets. You can rely on verified information and insightful details.

• Twitter
• Email

More About John Isaac

Last updated: April 10, 2023

Concerns about how high inflation and rising interest rates will impact consumer discretionary spending are still a hot topic in 2023. Recent Consumer Bright Ideas Conference surveys, however, indicate that the gaming sector is still growing, as evidenced by the strong demand for casinos.

Despite the aforementioned socioeconomic difficulties, Caesars Entertainment and Century Casinos are two casino operators who have demonstrated that customer demand for gambling is still strong in the first quarter of 2023. The Macquarie analyst Chad Beynon analyzes some of the conference’s significant findings in a report titled “Looking for Weakness in All the Wrong Places,” including continued earnings before interest, taxes, depreciation, and amortization (EBITDA) and revenue strength on the Las Vegas Strip.

Caesars Entertainment: Levered to Nevada Gaming Vibrancy and Beyond

Casinos in Nevada have been reporting at least $1 billion in gross gaming revenue every month for almost two years. Room rates and total revenue/EBITDA contribution appear to be quite solid in early 1Q, with additional catalysts coming to the city, thanks to an increasing events and convention calendar. Notwithstanding the challenging year-over-year comparisons in 2Q, predictions for 2023E are positive, especially for 2H with extra events.

Caesars is one of the leading casino brands in the Reno-Lake Tahoe and Laughlin sectors and the second-largest operator on the Las Vegas Strip. The business is heavily reliant on Nevada’s thriving gambling industry; therefore, it continues to gain from numerous growth initiatives in other regional regions. These initiatives include the ramping up of Lake Charles’ land-based transition, the temporary openings in Danville, Virginia, and Columbus, Nebraska, as well as the expansion of Harrah’s Hoosier Park, the ramping up of Pompano, New Orleans restorations and growth, and Atlantic City expenditures.

Contrarily, Century Casinos, a small-cap regional operator, recently received regulatory permission for its $195 million acquisition of the Nugget Sparks, which represents its first foray into Nevada. This might lead to long-term EBITDA growth, along with a prospective purchase in Maryland. It is possible that the operator will look into further merger and acquisition prospects, including those in Las Vegas, given Century’s propensity for savvy deal-making.

Bally’s Could Be a Casino Equity Redemption Story, Says Macquarie

The only places the corporation will not look to acquire are very minor markets like Atlantic City, according to Beynon. The firm is continuing to pursue M&A inside the US, with recent profitable transactions, management prefers the idea of purchasing, not constructing assets. It indicated potential interest in a Vegas asset at the proper price and thinks there would be significant synergies with its area assets, including Reno, which is listed as having an 80k value in the database.

According to Macquarie, Bally’s, which has decreased by 40.42% over the past year, might be a casino equity redemption story. The operator will replace its soon-to-be-opened temporary gaming facility in Chicago with a more pricey permanent facility.

In spite of certain market players’ reservations over Bally’s Chicago project’s $1.7 billion price tag, Beynon points out that the operator has access to funding sources and growth accelerators. In addition to using a combination of debt, equity, cash on hand, and the revenues from a sale-leaseback with Lincoln, management stated that there are other methods to fund the project. With holdback on track and the company being EBITDA-positive in February, Atlantic City is positively trending.