• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

McCarran Airport released May passenger traffic down 1.6% YoY. Taking into account an expected low slot and table hold %, we project a 5% decline in Strip.

Today, McCarran Airport in Las Vegas announced that the number of enplaned/deplaned passengers decreased 1.6% in May from last year.  We expect total Strip gaming revenue to fall around 5% on a year over year basis.  Last May, gaming revenue fell only 6.4% which was one of the better months of 2009.  In addition to the tougher (but not exactly difficult) comparison, we have heard anecdotally that MGM may have held pretty low on the tables during the month.  Moreover, slot hold percentage will look low since the last day of May fell on a holiday which means the final day's slot revenue will not have been counted which artificially lowers hold since volume is included.  This also means June will be a catch up month and show a higher than normal slot hold percentage.  In terms of volumes, we think table drop will increase 3-4% and slot handle will fall 7-8%, following the recent monthly trends.

The Strip needs to do better to justify the valuation multiple awarded MGM which seems to price in a V-shaped recovery.  At least from a revenue perspective, we don't think June will be the start of better things to come.  Despite undoubtedly higher slot hold percentage, revenues will look weak.  We do not think MGM held very well in tables in June either.

Here are the projections and McCarran trends presented in convenient and easy-to-read charts:

PROJECTING A DOWN MAY FOR THE STRIP - VEGAS1

PROJECTING A DOWN MAY FOR THE STRIP - vegas2