- The commonly held belief espoused by analysts and casino executives is that the unemployment rate is the major economic driver for gaming revenues. I think I’ve debunked that theory with some hard math. Over the last 10 years local median housing prices are more statistically significant in predicting local gaming revenues, not unemployment and not gross metro product (GMP).
- The first chart clearly shows the strong correlation between average housing price changes across the locals casino markets (riverboat and LV locals) and average gaming revenue growth. With this in mind, look for LA to continue to outperform and the LV locals market to continue to struggle. In terms of stocks, PNK appears to be the prime beneficiary of the Texas regional strength with over 50% of its revenue derived from Louisiana.
- The second chart provides a snapshot of the locals Las Vegas historical economic and revenue picture. Here, GMP actually proves to be the most important driver of gaming revenue historically in this market. Check out the economic volatility. Boom or bust in LV I guess. It’s no secret that Boyd Gaming and Station Casinos have been struggling during the local recession there.
You can bet that we’ll continue to have our eye on local housing prices.
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