North America’s regional casinos had ‘a year to forget’ according to Deutsche Bank analyst Carlo Santarelli who said ‘2024 underperformed considerably versus the major indexes.’
The analyst highlighted that regional casino markets had a flat year in terms of GGR but pointed out that Illinois saw new casinos and Michigan had easy year-on-year comparisons.
He said in a note to investors: “Unless you were Boyd Gaming, 2024 underperformed considerably versus the major indexes. The last time the group experienced declines in back-to-back years was the 2007/2008 period, thereby adding historical credibility to the notion that the group is poised for an inflection trade in 2025. Given limited mergers and acquisitions, declining net revenue and property EBITDAR, and few investible narratives, investors have largely steered clear.”
He highlighted ‘lackluster state-by-state results coming out on a monthly basis.’
“Of late, while the optics haven’t improved materially, stability under the surface has seemingly emerged,” he explained. “We aren’t necessarily taking this as a sure sign that fundamentals are poised to change in 2025, but we do believe it adds optimism to the dynamics of what has been a tough slog for regional gaming markets for several years now. Some challenging geographies remain, though we view the headwinds as less problematic when compared with 2024.”
Mr Santarelli believes that competition will remain fierce in Bossier-Shreveport, Council Bluffs, and East Chicago next year.
“The key, in our view as we look to 2025, will be the ability for operators to offset the competitive headwinds with reinvestments of their own,” he explained. “Focusing specifically on the operators with investments that should bear fruit in 2025 (opened in 2024 or opening in 2025), we see Caesars likely generating about $70m of incremental EBITDAR from New Orleans and the permanent facilities in Danville, Virginia, and Columbus, Nebraska, though competitive headwinds are likely to rival these returns. We see a rather benign competitive outlook for Boyd and modest productivity from the Norfolk, Virg., temporary facility later in the calendar year.”
“Given the late-in-the-calendar-year potential completion of the Durango Casino & Resort project, and no material incremental competition in the Las Vegas locals’ market, we see a fairly uniform environment for Red Rock in 2025.”
“When looking ahead to 2025, the margin dynamics in our view are fairly straightforward,” Mr Santarelli explained. “We expect modest expense creep, though again likely more subdued than what was experienced in 2024, and as such the net revenue cadence is likely to guide the margin story. We believe same-store net revenue of about two per cent in regional markets is likely to be necessary to keep margins flat, though again, impacts from new competition and development activities, as well as other idiosyncrasies will also play a considerable role. As evidenced by our forecasts, we expect margin contraction to broadly continue in 2025, though moderate in magnitude relative to 2024.”
North America’s regional casinos had ‘a year to forget’ according to Deutsche Bank analyst Carlo Santarelli who said ‘2024 underperformed considerably versus the major indexes.’ The analyst highlighted that regional casino markets had a flat year in terms of GGR but pointed out that Illinois saw new casinos and Michigan had easy year-on-year comparisons. He…