Las Vegas plus sports betting equals strength
Boyd Gaming’s fourth quarter earnings call late last month showed what a strong Las Vegas presence plus regional casinos across the country can deliver in terms of results and outlook.
The combination of a buoyant Las Vegas local economy and the spread of sports betting nationally is working for Boyd currently and the case for continued success is strong.
Companywide revenues grew 5 percent for the fourth quarter ended Dec. 31. Companywide revenues rose 5 percent; adjusted EBITDAR grew 9 percent; and net income was up 6 percent. Boyd operates 24 properties nationwide, eight of which are in Las Vegas. Boyd’s operating margin increased more than 100 basis points. All segments of its business achieved same-store revenue and earnings gains. For the year, Boyd’s five new properties—Ameristar Kansas City, Ameristar St. Charles, Belterra Resort, Belterra Park, and Valley Forge Casino Resort—each exceeded performance expectations. On the sports betting side of things, FanDuel sportsbooks got off to a strong start in Pennsylvania, Iowa and Indiana.
“2019 was a year of significant achievement for our company and the fourth quarter provided a strong conclusion to a great year,” said Keith Smith, president and CEO, Boyd Gaming. “We identified new ways to operate smarter and more efficiently. And we expanded our relationship with FanDuel, the nation’s most powerful sports betting brand. FanDuel sportsbooks are bringing new customers to our properties in the Midwest and the northeast and we are well-positioned for future growth as new states prepare to legalize sports betting. As we begin 2020, we are encouraged by the trends we have at our properties in January and remain optimistic for the full year.”
Macro trends in Vegas that favor Boyd’s long-term growth in the locals sector are a key source of optimism as well, said Smith, who rattled off a number of positive metrics. The Las Vegas metropolitan area recorded a 2.5 percent job growth rate in 2019, one of the 10 best performances in the country and well ahead of the national average. Unemployment is down to 3.5 percent, the lowest level in 20 years. Personal income and weekly wages continue to rise. This income growth is driving long-term gains in consumer spending, with taxable sales rising 7 percent over the prior year.
Then there is the impact of the Raiders. The NFL draft will be held in Las Vegas for the first time in April and starting in August the Las Vegas Raiders will host the first of 10 home games, bringing a new boost of visitation to southern Nevada throughout the third and fourth quarters. Boyd has more than 6,000 hotel rooms in the southern Nevada market including more than 2,500 rooms near the Strip.
“In addition, projects like Allegiant Stadium, expansion of the Las Vegas Convention Center and the addition of more than 5,000 hotel rooms are all part of a local development pipeline that now exceeds $20 billion,” said Smith. “The project will significantly expand Las Vegas’ event and convention capabilities over the next two years. This ongoing expansion.”
Downtown Las Vegas (three properties) posted its fifth straight quarter of record performance, with strong growth of revenue, EBITDAR and margins across the segment. Boyd’s core Hawaiian business remains solid with continued growth in business volumes. The company also continues to see strong increases in unrated play a clear indication that we are getting our fair share of growing visitation throughout the downtown market.
“As construction projects downtown—such as the modernization and upgrade of the Fremont Street Experience video canopy and the addition of more than 1,000 hotel rooms in the next year—are completed, the stage will be set for further growth throughout the area,” said Smith.
As for the impact of sports betting, analysts on the earnings call pushed Smith for specifics, which he didn’t deliver. But putting two and two together, strong same-store revenue results and seeing new customers in casinos that offer sports betting, Smith expressed confidence that sports betting is generating incremental revenue.
“Unfortunately, these people don’t necessarily walk around with a button on that says, ‘I came into bet sports,’ so it’s hard to track,” he said. “Some of them get cards and we can track them through that. But largely it’s just the anecdotal information and talking to our operating teams who are seeing new faces in the building and observing a completely different customer set. Whether it’s volumes in restaurants or slots and tables, in every case, in every operation we’ve seen an uplift in all those metrics: food and beverage, table game slots, a little different in each store, in each property but definitely an uplift. It’s hard to quantify, once again because we don’t know they’re not always getting cards, so we don’t know their exact behavior. But it is very much a positive additional amenity for us.”