Las Vegas Is Winning Again: Is Sin City Back?

The city that made casinos like The Venetian and MGM Grand famous has struggled to keep these casinos profitable in the last five years. But is the city back on the upswing now?

Aug 27, 2014 at 6:38PM

Las Vegas is the city that made huge successes of the casino resorts operated by companies such as Las Vegas Sands (NYSE:LVS) and MGM Resorts (NYSE:MGM). However, for the last five years gaming in Asia, rather than U.S. operations, have lifted these companies' profits. But with 2014 profits in Las Vegas on the rise, is Sin City on the way back?

Las Vegas Convention And Visitors Authority

Photo: Las Vegas Convention and Visitor Authority.

Following the 2008 financial crisis, Las Vegas profits dropped as U.S. gamers spent less on leisure travel and nonessentials like gambling. At the same time, Macau profits started surging as the Cotai strip there opened and Las Vegas Sands dominated the Cotai Strip with the most casino resorts and the highest total gaming revenue. Now, though,Vegas might be making its comeback.

Is this really the Las Vegas comeback?
Nearly 40 million people visited Las Vegas in 2013, helping the city to pick up both gaming and non-gaming revenues over 2012. Now, total revenue is continuing to increase to date this year. If current forecasts are correct, 2014 could be getting close to those peak 2007 revenues. The chart below lays out the past 10 years of gross gaming revenues for Las Vegas, while the graph compares those numbers to total gaming revenue in Macau during the same time.

 
Year

Las Vegas GGR ($US)

(Strip + Downtown)

2004 5,996,791
2005 6,687,747
2006 7,319,307
2007 7,460,816
2008 6,708,983
2009 6,074,019
2010 6,269,962
2011 6,565,637
2012 6,716,374
2013 7,005,649
2014 Est.  7,236,327

Data: UNLV Center for Gaming Research

Macau took over as the largest gambling region in the world by annual revenue in 2009, and Macau GGR nearly quadrupled Las Vegas GGR by 2010. So savvy investors who bet on this rising region reaped huge share price gains from the companies that have done well there.

Lv And Macau Revenue Through

Looking at the year-over-year growth for each region individually, Las Vegas has started to pick up again slightly from the slow progress it saw following 2008. Meanwhile, Macau growth seems to be curbing. However, the very low 6% YOY growth Morgan Stanley analysts estimate for Macau revenue for full year 2014 is still higher than the growth in Las Vegas seen so far this year. With 3.4% YOY revenue growth for the Las Vegas Strip and the 1.9% YOY revenue growth for Las Vegas downtown so far this year, if this revenue growth holds current for the rest of the year it'll be lower than that of Macau.

Still, revenue is rising again in Las Vegas and that's a good thing. And it's not only gaming operations that are starting to pick up. Resort and hotel nongaming operations are helping to spur on casino companies' Las Vegas revenues as well. MGM's resorts in Vegas, including the Bellagio and MGM Grand, gained revenue from higher occupancy rates and revenue per available room, or RevPAR, during the most recent quarter reported.

Bellagio Via Mgm

The famous Bellagio casino and hotel in Las Vegas. Photo: MGM Resorts.

MGM Resorts looks good, but is it the best bet now?
For Las Vegas Sands, which has made a much bigger bet on Macau than MGM, unfortunate events during the summer lowered revenue in that market and caused the company to miss earnings expectations for the second quarter.

MGM did well in Las Vegas, or at least better than expected. Revenue from MGM's U.S. wholly owned resorts were up 6% over last year's second quarter, and EBITDA at those properties was up 10% over the same time.

This offset MGM's slow summer in Macau. However, taking a global view, this does not make the company the industry's gaming profit leader. Las Vegas Sands, regardless of the weak second-quarter numbers, still posted the most profitable quarter of the two gaming companies: a net income increase of 27% year over year coming from net revenue of $3.62 billion, up nearly 12% on an annual basis; EBITDA in Macau was up 21.9% year over year.

Foolish conclusion: Where to bet now?
Las Vegas revenues are improving, and that's encouraging. But It's hard to say that this small upward trend, in light of the higher growth and nearly eight times higher revenue that Macau will bring in by the end of 2014, supports the notion that Las Vegas will once again be the gaming hub of the world.

Whether you believe in MGM Resorts for the Las Vegas comeback or Las Vegas Sands for continued growth and dominant gaming profits, there is still plenty of growth in this industry and current prices look attractive. This is especially true for Las Vegas Sands' stock, which was hit recently due to lowered forecasts on Macau's 2014 gaming revenue. At less than $70 a share, Sands is selling at a price-to-earnings multiple of just 22, less than MGM and the industry average. For consistently posting the highest profits in the industry, that makes Las Vegas Sands a very attractive bet now.

Another very attractive bet: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Bradley Seth McNew owns shares of Las Vegas Sands. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers