Casino stocks are taking a hit as inflation shakes the economy

Shares of casino companies have fallen, although inflation has risen at an unprecedented rate for four decades and fears of a recession have shaken both consumers and investors.

Caesars Entertainment shares have fallen 50% so far this quarter. of Bali has fallen by 40% over the same period and Penn National Gaming and MGM Resorts shares fell 35%. For comparison, S&P 500who recently entered bear marketdecreased by nearly 19% during the quarter.

Still, national commercial casinos have just had their best April so far, according to American Games Association. The industry reported revenue of $ 4.99 billion, an increase of 12.4% year on year. This is the second highest revenue month since March this year.

For earnings calls in April and May, Casino executives collectively denied seeing a delay in customer spending, despite rising costs for gas, housing and food, with the exception of the lowest demographic group of customers.

In a note published this week, Jefferies game analyst David Katz wrote that meetings with management teams in Las Vegas provided “evidence of the dichotomy between current operations and market recession expectations.”

Danny Owens of Sacramento, California. Play Slot Machine in Downtown Las Vegas, Nevada, June 4, 2020.

Steve Marcus Reuters

Katz writes that MGM, Caesars, Wynn Resorts, Boyd Gaming, Golden Entertainmentand Red Rock Resortswhich owns Stations casinos say business levels remain “very strong” in the second and third quarters, with demand prices and volume levels above 2019 and strong bookings in 2023 as conference business and international travel resumes in Las Vegas.

But Derek Stevens, owner of three properties in downtown Las Vegas, including Circa, tells a different story. He told CNBC in April he was beginning to see the impact of inflation based on the amount of money withdrawn from casino ATMs.

There has been no shutdown since, he told CNBC this week.

“It’s really fast,” Stevens said. “Every weekend was worse than the previous weekend.”

He described it as a downward spiral: bars suffered the largest percentage drop, and games had the biggest impact as slots and table games suffered the slowest.

Still, Stevens said, the demand for travel is still there: bookings at his Las Vegas hotels are stable, with no room discounts. Hotel guests limit their spending elsewhere, he added, noting that customers spend less on restaurants and extra amenities in the pool and other discretionary items.

“If you’re on the West Coast, you may have felt it a little faster because of gas prices,” Stevens said, referring to California’s super-high fuel costs. “You can immediately see it in discretionary consumer spending.”

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