Despite higher gas prices, rising interest rates, and an equity market that has not done well this year, U.S. gaming industry executives were quick to point out during their first-quarter earnings conference calls that they have not seen any meaningful changes in gamblers' behavior.
“Overall, the competitive environment has largely remained stable and further we continue to work on mitigating inflationary pressures by adjusting our offerings and pricing strategies to keep costs low,” Felicia Hendrix, CFO of Penn National Gaming, said in an earnings call on Thursday (May 5).
Consumer trends remain healthy, according to Caesars Entertainment CEO Tom Reeg.
Reeg said he remains optimistic about the rest of the year but admitted that investors are always waiting for “the next shoe to drop” from the effects of inflation.
He told analysts on Tuesday that the U.S. economy has seen significant inflation for about a year but Caesars has seen “no real impact” to its business.
“We just had a quarter where GDP (Gross Domestic Product) was down one-and-a-half points and the business of casinos held up quite well,” Reeg said.
“I can’t tell you what’s going to happen in September or December or March, but the resilience of this business and casino customers, especially, has been extraordinary.”
Reeg’s comments were made prior to the Federal Reserve raising interest rates on Wednesday by half of a percentage point, its biggest rate hike in more than two decades.
The Fed Funds Rate is now in a range of 0.75 percent to 1 percent, and it is expected to rise to 3 percent to 3.25 percent by year’s end.
Fed chair Jerome Powell said policymakers were not considering increases larger than half a percentage point at a time. Still, Powell stressed that reining in inflation remains the Fed’s top priority as consumer prices continue to rise.
“Obviously like everyone, we’re cognisant of what has happened … with the Federal Reserve raising interest rates,” Bill Hornbuckle, CEO of MGM Resorts International, said Wednesday at a Nevada Gaming Control Board hearing on MGM's $1.6bn purchase of the operations of The Cosmopolitan of Las Vegas.
The control board approved the deal, sending the matter to the Nevada Gaming Commission for a final decision on Thursday (May 12).
“To what the economy might hold over the next couple of months and the balance of the year … we still have great optimism both in Las Vegas and in our regional properties that the market will be resilient,” the MGM CEO said.
Hornbuckle, who was in Mississippi for a company board meeting and appeared by video conference at the hearing held in Las Vegas, said he thought as a company MGM had “proven in January of this year that even during a downturn” due to the omicron variant, casinos were still able to operate efficiently.
“We’re not seeing anything … any change in customer behavior,” MGM chief operating officer Corey Sanders told analysts on Monday in an earnings call with investors.
“Pricing power is still strong … betting revenues are breaking records, so we’re not seeing it.”
Nevada recently posted its 13th straight gaming revenue month of more than $1bn, while Las Vegas Strip resorts recorded their third-highest revenue month of all time during March.
The Nevada Gaming Control Board (NGCB) reported that the state’s $1.355bn gaming revenue figure for March trailed only July 2021, which holds the record at $1.59bn.
It is also a similar story on the other side of the country in Pennsylvania, where total revenue in March reached an all-time high of $462.7m, while New Jersey gaming regulators posted total gaming revenue of $423.7m for March, a 17.9 percent increase from March 2021.
Keith Smith, CEO of Boyd Gaming, said consumers have been “consistent or remarkably consistent” and have not shown signs of potentially weakening.
“That’s what we’ve seen,” Smith told analysts on April 26. “The higher worth customers continue to perform at an exceptionally high level. The mid-tier is performing well.”
“From an age demographic standpoint, our older customers, once the omicron and COVID count started to drop kind of mid-first quarter, have performed extremely well and are coming out in big numbers. But the younger demographic, that kind of 45 to 65 age group, … continues to perform extremely well.”
Smith said he assumed that there has been some falloff in play with some of casino patrons, but any such drop is not discernible.
“To the extent that they're falling off on the unrated side, they're being replaced with additional players on the unrated side,” he added, referring to customers who are not part of the company's loyalty program.
“But when we look at our core customers throughout our database, it's been remarkably consistent.”
John Farahi, co-chairman and CEO of Monarch Casino & Resort Inc. in Reno, said fiscal year 2022 was off to a strong start as the company benefited from the full scope of operations at its expanded Monarch Black Hawk in Colorado and the continued growth of market share at its resort in Reno.
The company does not host quarterly conference calls, but Farahi warned in a statement that labor market pressure and rising inflation “could impact further near-term margins.”