Las Vegas Locals Casino Stocks Face 2025 Tests

Shares of the casino operators with significant exposure to the Las Vegas locals market were mixed in 2024 and more of the same could be in store this year as the segment is expected to notch slight growth.

That’s the take of Deutsche Bank analyst Carlo Santarelli, who in a new report to clients called 2024 “an interesting year” for the Las Vegas locals space. For Boyd Gaming (NYSE: BYD) and Golden Entertainment (NASDAQ: GDEN), the big 2024 test was the ascent of Red Rock Resorts’ (NASDAQ: RRR) Durango Casino & Resort in Southwest Las Vegas.

While Durango found quick success, Santarelli acknowledged that in 2024, Las Vegas locals operators likely notched lower earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) and same-store sales as operating costs slightly increased. Those are among the reasons why shares of Golden and Red Rock posted declines, leaving Boyd as the only member of the trio to trade higher in 2024.

Boyd, Red Rock Could Star in 2025

Santarelli noted better-than-expected revenue growth could go a long way toward to helping shares of Boyd and Red Rock this year.

We believe a favorable and growing gaming revenue cadence in 2025 would go a long way toward outperformance in both Red Rock and Boyd, though in the absence of market growth, we believe consensus forecasts will likely prove aggressive,” observed the analyst.

He added that Durango, which is slated for significant expansion this year, isn’t an threat to gaming venues along the Boulder Strip and North Las Vegas — areas that are homes to Boyd and other Red Rock casinos. The analyst did say that 2025 could be another year of impressive revenue growth at Durango.

“Given the premium margin relative to the portfolio, we estimate Durango annual net revenue for 2024 will be approximately $340 million,” Santarelli said. “Assuming net revenue splits at the property that are broadly similar to the portfolio aggregate, we imply annual net casino revenue of about $225 million, with annual gross gaming revenue approximating $260 million.”

Las Vegas Locals Workforce Trends

For investors, evaluating workforce trends in the Las Vegas locals market could prove instructive because many employees of one operator take their gaming business to other venues operated by their employer or competitors.

Santarelli noted that from 2014 to 2019, employment growth at Las Vegas locals properties nearly moved in lockstep with the 3% compound annual growth rate(CAGR) in revenue posted by those properties, but since 2019, top-line CAGR swelled to 5.1% while job growth rose just 0.9%.

“We do not see the above-trend gaming revenue growth as being problematic, though we are somewhat concerned with the workforce-growth trends, relative to the gaming revenue growth trajectory as it pertains to the 2025 outlook,” Santarelli concluded. “This concern stems from the slowing workforce growth and the challenging comparison in 2025, as gaming revenue per member of the workforce is up 4.2% over the last 12 months, primarily driven by the impact of Durango.”