Please ensure Javascript is enabled for purposes of website accessibility

Boyd Gaming Booming as Local Tourism Grows

By Rich Duprey - Updated May 3, 2019 at 8:08AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The regional casino operator's off-Strip properties had their best results since 2007.

Las Vegas casinos are so thirsty for money they've imposed or hiked a variety of fees, from parking to resort, but in the process have driven tourists off the Strip and into downtown and locals markets, which are now able to promote themselves as the more affordable Las Vegas destination.

Boyd Gaming's (BYD 0.94%) first-quarter earnings report is evidence of how this is playing out, as revenue and earnings surged from the influx of patrons.

Boyd Gaming's Sam's Town Hotel & Casino in Las Vegas

Image source: Boyd Gaming.

A bet on growth

Revenue for the regional gaming operator rose 36.5% to $827.3 million, as its locals business hit its highest level of earnings before interest, taxes, depreciation, amortization, and rent expense (EBITDAR) in a dozen years. Net income came in at $45.5 million, or $0.40 per share, a 10% increase over the $41.4 million, or $0.36 per share, it recorded last year.  

Boyd President and CEO Keith Smith said the better performance was due to "the successful execution of our strategy ... deliver[ing] growth and margin improvement across every segment of our business." While its Nevada performance was strong, its Midwest and South gaming operations also did well, having overcome adverse weather conditions.

Yet its downtown and locals market casinos are benefiting from long-term growth trends in visitation, which are getting a boost from the rising cost of staying on the Strip.

Nickel and diming visitors

Parking fees were first initiated in 2016, but resort fees have been a staple longer and are like a hidden tax that is added onto a customer's bill at the end of their stay. The highest ones are at Las Vegas Sands' Venetian hotel and casino and its Palazzo hotel where they run $45 a night. Other resorts, including those from Caesars Entertainment and MGM Resorts, charge as much as $39 per night.

The average resort fee in 2019 is $28.47, representing a 7.5% increase over the $26.48-per-night rate in effect in 2018. Boyd has resort fees, too, with its Sam's Town charging the most at $22.95, but others like Gold Coast and The Orleans charge around $21, while the Cannery Casino Hotel fee is just $7. But with Strip casino fees significantly larger in most cases, the downtown section has become a cheaper deal for tourists.

Boyd's bet beyond the Strip is paying off. The company noted business was so good only one of its regional casinos didn't deliver growth in the quarter. Revenue in the segment surged 67% year over year due to its newest additions contributing their first full quarter since being bought. They brought in $213 million in revenue and $59.5 million in adjusted EBITDAR for the period.

CEO Keith Smith said Boyd was interested in making more acquisitions, too, but they couldn't just be "vanity projects," but rather had to be priced right and able to generate a return. If assets met this standard, Smith said the company would "execute on it" -- even if it's an asset on the Strip. 

Swinging for the fences

Another trend Boyd is starting to benefit from is the legalization of sports betting. It offers sports betting in three states currently, and Smith said, "We have seen great results at the IP [Casino Resort Spa in Biloxi, Mississippi] since its sports book opened in August as sports betting is contributing to strong growth in visitation at this property."

It also has a new partnership with FanDuel at its Valley Forge Casino Resort in King of Prussia, Pennsylvania, and with the sportsbook opening in March, Boyd is expecting to see it take off, using the sportsbook's experience in New Jersey as a guide.

New Jersey has quickly grown into one of the largest sports betting markets. FanDuel operates through the Meadowlands Racetrack there. It posted $17.6 million in revenue in March, or 55% of the total sports betting market in the state.

Boyd Gaming reiterated its previous guidance for full-year adjusted EBITDAR of $885 million to $910 million in 2019, but with its locals market in Las Vegas booming and the potential sports betting provides as it is legalized in more states, the regional casino operator seems positioned for better results well into the future.

Editor's note (May 3, 2019): This article has been corrected to say that the current resort fee at Sam’s Town Las Vegas is $22.95 per night.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Boyd Gaming Corporation Stock Quote
Boyd Gaming Corporation
$55.01 (0.94%) $0.51
Caesars Entertainment Corporation Stock Quote
Caesars Entertainment Corporation
MGM Resorts International Stock Quote
MGM Resorts International
$34.37 (2.14%) $0.72
Las Vegas Sands Stock Quote
Las Vegas Sands
$33.46 (0.60%) $0.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.