Solid airport and taxi data suggest Strip could see double digit YoY gaming revenue growth.
We’re finally pretty bulled up on the two hardest gaming markets from the Great Recession: the Las Vegas Strip and the Las Vegas locals markets. Q4 looks like it was a strong one for the Strip and relatively solid for the LV locals. The latest data was positive: taxi traffic was up 9.9% in December. That combined with the number of enplaned/deplaned passengers at McCarran Airport (+3.9% YoY), drives a 10-14% YoY increase in Strip gaming revenues per our model for December. We’ve found a statistically significant correlation between airport traffic and slot volume and between taxi traffic and table play.
December 2011 slot hold will be below normal due to the deferred revenues from New Year's Eve; last year's slot hold was 5.7%. Table hold was slightly below normal last year. As usual, the biggest delta from our projection will probably be Baccarat volume and hold. Most importantly, from our perspective, slot volume should post the 4th straight month of increases. We think slot volume should post the biggest delta from expectations in 2012 and this is where the leverage is.
With most of its exposure on the Strip, MGM should consistently beat quarterly consensus expectation in 2012 if slot volume continues to improve. Everyone knows RevPAR is strong on the Strip and the flow-through on rate increases is very high. However, we don’t see a big focus on slot volumes and the profit potential there. Again, watch this metric.