Las Vegas Room Rates Plummet As Casino Stocks Remain In Limbo
Tuesday 21st April 2020
Casino stocks have been among the hardest-hit groups in the market due to the COVID-19 shutdown.
On Sunday, Wynn Resorts, Limited (NASDAQ: WYNN) CEO Matt Maddox called on the state of Nevada to begin reopening the Las Vegas strip resorts in mid-May, and Bank of America analyst Shaun Kelley said Tuesday hotel room rates in Vegas are dropping even into the month of June.
Kelley said Las Vegas Strip room rates booked in the month of May are averaging just $106 per night, down 50% from a year ago. June room rates are averaging $136, a 22% decline.
"It's hard to speculate on an exact date that the Strip re-opens, and we think properties will open selectively and in phases, not all at once," Kelley wrote in a note.
Among the large Vegas casino operators, MGM Resorts International (NYSE: MGM) has taken the largest hit to May room rates, which are down 62%. So far Caesars Entertainment Corporation (NASDAQ: CZR) has taken the biggest hit in June, with room rates down 31.2% from a year ago.
Bank of America is modeling for casinos to stay closed through June 1. Even when the casinos do start to open back up, Kelley said occupancy rates will initially remain low due to a lack of air travel. The good news for casino room rates is that they will likely open the Strip back up in phases, limiting initial supply.
In an op-ed over the weekend, Maddox laid out his plan to begin reopening the Nevada economy in early May.
"The only way to cross this river is one stone at a time, and we need to put our feet in the water before it is too late," Maddox said.
Bank of America has the following ratings and price targets for Las Vegas casino operators: