Gaming revenues were likely up solidly in July but should anyone get excited?
The answer is no. Our opinion likely won’t stop the initial euphoria that Vegas is back, baby. When Nevada releases July statistics in the middle of next week, gaming revenues will look strong. However, we think even a cursory review of the underlying metrics will reveal yet another soft month. July faces a very easy hold comparison on both slots and tables. We continue to believe that slot volume is the most important barometer of Strip health, and this metric will likely show another YoY decline.
We are projecting gross gaming revenues to increase 14-18% assuming normal slot and table hold percentages. However, we expect slot and table volume (ex baccarat) to fall YoY. Slots held at only 6.5% last year versus a normal 7.0% - mainly due to the accounting quirk of month end falling on a weekend. July 2012 will benefit from a June accounting catch up where the month ended again on a weekend. Meanwhile, table hold was only 10.3% against a normal 12.0%.
Despite the lower gaming volumes, July wasn’t a disaster. July 2012 is down a Friday and a Saturday. However, we do think investors may overreact positively to the initial revenue print and the Vegas stocks, particularly MGM, will trade off following the initial euphoria.
We were positive on MGM late last year and at the beginning of 2012 on improving slot volumes. However, the slot business turned negative in April and so did we. July should represent the 4th straight month of declining slot volumes in a period where the Strip should be in recovery mode. Not good.