SAY IT ISN’T SO(CAL)

Unemployment and housing matters when it comes to gaming. Southern California provides 25% of the visitors to Las Vegas.
  • As can be seen in the first chart, both metrics are correlated to Strip gaming revenues. It’s no secret that the economy in SoCal is horrendous. The problem is that the unemployment rate is getting worse, and at a worse rate.

  • National unemployment and housing prices also matter. While not as bad as SoCal, the US unemployment picture is worsening as well. The second chart provides the most recent YoY and sequential changes in employment for the large feeder markets to Las Vegas. Los Angeles and San Diego look the worst on a YoY basis but Houston and Dallas are deteriorating the fastest.

  • We’ve addressed the global situation in previous posts and the picture there is not pretty either. Global economies are slowing and entering recessions. Las Vegas is no longer on sale to prospering overseas visitors.

  • Investors should adjust the timing of a recovery scenario until at least 2010. MGM, WYNN, and LVS are all levered to the Las Vegas Strip in that order.

SoCal housing prices and unemployment rates are highly correlated with LV Strip revs
The recent unemployment trends in the LV feeder markets are getting worse