Barring a recession, Strip revenue expected to grow in 2013

Tourists pass by the Flamingo with Caesars Palace in the background Thursday, April 28, 2011.

Depending on how the U.S. economy performs, Strip resorts next year could see revenue from all sources increase as much as 5.3 percent or decline as much as 8 percent, a group of analysts said Thursday.

Commercial real estate brokerage Newmark Grubb Knight Frank’s Global Gaming Group, based in Las Vegas, issued a 2013 forecast and investment guide that, for the most part, projects growth on the Strip assuming the "fiscal cliff" is dodged and the nation doesn't sink into recession.

The group forecast growth in total Strip revenue of 1.5 percent to 5.3 percent, in line with trends seen this year. NGKF said Strip revenue was up 2.5 percent through June; the State Gaming Control Board said Strip gaming win improved 4 percent to $6.2 billion in the year ending Sept. 30.

Strip hotel-casino operators have benefited from an increase in visitation to the city this year, combined with a lack of new hotel rooms. Las Vegas' visitation rate is up 1.8 percent through September.

The Strip's only planned hotel room addition is projected for 2014, with the SLS Las Vegas at the former Sahara site adding an estimated 1,217 rooms. An additional 650 rooms are planned for the Downtown Grand, opening next year. That hotel is in a different market but will compete with the Strip for visitors' dollars.

Not all resorts are benefiting from the trend, however. While the high-end Cosmopolitan sold rooms for an average of $257 during the third quarter, up from $233 last year, the budget-minded Stratosphere saw its average room rate decline from $50.31 to $48.99.

One of the biggest factors affecting visitation and spending is the health of the U.S. consumer as measured by household net worth. That indicator, led by housing prices and the stock market, foretells positive growth in 2013, NGKF said in its report.

But "the uncertainty of how and when the fiscal cliff will materialize, along with the actual impact of the spending cuts and tax increases, could negatively influence the market next year," NGKF warned.

Analysts said that in a deep economic downturn, with 5 percent to 10 percent declines in the housing market and 10 percent to 20 percent declines in the stock market, total Strip revenue could decline by 2 percent to 8 percent instead of increasing.

"The fiscal cliff could affect us," said Se Oei, director of gaming research and analysis for the group. "The Eurozone situation could affect us. Overall, we're positive, with a few concerns. We're modestly optimistic.''

Another factor to watch is the Chinese economy and how it affects high-end baccarat players.

NGKF projects that baccarat revenue could fall or grow as much as 5 percent depending on the performance of Chinese real estate and stock markets.

And, as usual, the health of the city's convention industry will be a big factor affecting Strip revenue in 2013.

NGKF said demand next year for hotel rooms booked with conventions and meetings is expected to increase 1 percent to 4 percent, with room pricing for that segment increasing 3 percent to 7 percent.

"Although this projection is positive, there are some emerging points of concern related to future convention business," the NGKF report said.

Convention bookings for groups of 15,000 people or more are projected to decline.

"Many large events are on a natural rotation out of Las Vegas in 2013, but economic concerns may cause businesses to hold off on group bookings," analysts said.

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  1. Another promotional story. Fact: Since 2008 few have the expendable income they had previously and if they do have the funds they aren't willing to take the risk on same. Fact: In the mean time many states have developed their own casino industries finding the investment profitable to their own citizenry rather than the powers that be in Las Vegas. I could go on and on. This Vegas, Inc. thing isn't really about reporting the news. Now is it.