Las Vegas Will Return to Pre-Pandemic Revenue in 2023, Says Fitch

The Las Vegas Strip’s rebound from the coronavirus pandemic is coming together more rapidly than analysts and experts forecast. That’s putting the largest domestic casino hub on pace to reach pre-pandemic gaming revenue sooner than expected.

In a recent note, Fitch Ratings says strong demand from US patrons is propping up Strip casinos while business from international customers remains subdued. Strong domestic traffic is enough for the research firm to estimate Sin City will return to 2019 levels in 2023, up from the previously forecast 2024.

We have revised our Las Vegas Strip recovery assumptions to reflect a full return to pre-pandemic revenues by 2023 rather than 2024,” said Fitch.

“Revenues are now projected to be down about 20 percent and six percent in 2021 and 2022, respectively, relative to 2019, compared with our previous forecast that revenue would be down 50 percent and 20 percent in 2021 and 2022,” the rating agency continued.

The research firm highlights surging demand among Americans for leisure gaming as one of the catalysts for its upbeat outlook on Sin City. But it acknowledges “slowing domestic vaccinations and uncertainty regarding virus variants” are issues worth monitoring.

Viva Las Vegas Even Without Convention Business

While enthusiasm is palpable for the Las Vegas recovery, it’s one currently built on a foundation of consumer demand, because convention traffic remains scant.

Earlier this year, executives from multiple Strip operators said weekend bookings at their integrated resorts were close to 100 percent through the end of 2021.

“Slot machine drop fully recovered to 2019 levels in March and was 23 percent higher in May,” according to Fitch. “Table game drop, which relies somewhat on international visitation for baccarat, was only down 14 percent in May. Hotel revenue per available room (RevPAR) on the Las Vegas Strip was down 55 percent, 40 percent and 30 percent in March, April and May, respectively, supporting the gradual recovery.”

Individual Operator Notes

Some Strip operators are bullish on convention trends, noting bookings in the second half of 2021 and 2022 look sturdy. As such, Wynn Resorts (NASDAQ:WYNN) recently commenced a $175 million room renovation in response to strong 2022 bookings. That’s a bullish sign when considering Macau is a far larger market for that company.

Other operators, including MGM Resorts International (NYSE:MGM), are highlighting impressive earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) margin trends.

“MGM Resorts, for example, reported a 20 percent EBITDAR margin in first-quarter 2021, which compares with a high-20 percent EBITDAR margin pre-pandemic, and continued margin growth likely throughout the year,” according to Fitch.

The research firm has a “negative” outlook on MGM’s “BB-” credit rating, noting it and Las Vegas Sands (NYSE:LVS) need to see more recovery in international markets before positive alterations to credit ratings and outlooks can be considered.