Is Las Vegas Hot Again?

Las Vegas has been one of the cities hardest-hit by the recession. Suddenly, a weekend trip to Sin City to gamble and make it rain at nightclubs didn't seem so attractive in the face of rising unemployment.

But there are signs that the desert oasis is on the comeback trail, good news for companies like MGM Resorts (NYSE: MGM  ) , Boyd Gaming (NYSE: BYD  ) , and Penn National (Nasdaq: PENN  ) , which operate casinos there.

October saw the highest passenger travel of the year at McCarran International Airport, a good proxy for the health of Las Vegas. Some 3.7 million passengers landed in Las Vegas during October, and the city is expected to pass 40 million passengers this year after dipping below 40 million last year. At the peak in 2007, 47.7 million people flew to Las Vegas.

That should have a positive effect on room rates, which have fallen from a peak of $119.43 per night in 2007 to $104.52 this year. Analysts at Union Gaming are expecting an 8% rise in room rates in 2012 and 2013. So far, stronger room rates haven't translated into more gaming wins, but gaming should eventually catch up with more customers coming to the city.

Las Vegas has a ways to go to return to its glory days, but with supply remaining constant for the foreseeable future and customers returning, the dark days may soon be over.

Online gaming update
In other gambling news, yesterday was the first time that online poker was actually taken to a judge, and we will soon find out what the legal system really thinks about online play. Companies have argued that they weren't breaking the law by running online poker rooms, but two of the defendants charged when Full Tilt Poker and PokerStars were taken down put motions forward to have charges against them dismissed.

Online poker could be a boon for MGM, Wynn Resorts (Nasdaq: WYNN  ) , and Las Vegas Sands (NYSE: LVS  ) , which are all struggling to return to form with their U.S. operations.

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On December 03, 2011, at 5:52 AM, CaptainWidget wrote:

    Las Vegas is doing better. The mal-investments are clearing. Big unwanted casinos/hotels/multi-use centers are being demo'd. The glut of housing is lowering prices to all time lows. Consumer prices are going down throughout the entire city.

    Vegas used to be a ritzy, fabulous, extravagent vacation. However now the draw is the massive value of Vegas as a vacation. Cost of living is ridiculously low, consumer goods are cheap, the perks to gamble (or let's be real, even to THINK about gambling) are at an all time high. The value proposition of coming to Vegas just for a vacation is comparable to any other location in the US at this point.

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