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Source: Las Vegas Convention and Visitor Authority.
Las Vegas saw substantial growth during the 1990s and early 2000s,primarily driven by a profitable gaming industry fueling its economy. Tourists flocked to the splendor of Sin City, and companies such as MGM Resorts Internationaland Wynn Resortsscored massive profits from gambling revenue.
But the 2008 U.S. recession slashed discretionary spending and led to a 20% decline in total gambling revenues between 2008 and 2010.
Yet Las Vegas lives on, thriving in new ways. Sin City is changing for sure, and for savvy investors who are looking at the big picture, there may still be opportunities in the companies doing well there.
Here are four graphs that provide insight into where Las Vegas' economy is now.
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Record-breaking visitor volume
In 2014, Las Vegas welcomed more visitors than ever before, at over 41 million during the year. This is the first time the city has broken the 40 million visitor mark. Even though the recession lowered visitation by a small amount for two years, Las Vegas is as much a tourist destination now as ever. And the city is hoping it stays that way. The Las Vegas Convention and Visitor Authority, or LVCVA, has set a goal to reach 45 million visitors in the next couple of years.
"Breaking the 40 million visitor mark has been a goal of ours, and reaching beyond that to more than 41 million is a testament to the hard work of our resort partners and everyone who works in the industry. Tourism drives our local economy, and the growth in recent years is a positive sign for both the industry and our community. With more than $9 billion in recent and planned developments, we are poised to continue that growth and march toward our next goal of 45 million visitors in the coming years."
-- Rossi Ralenkotter, LVCVA President
Las Vegas gambling revenue is down -- but that's not a bad thing
Yes, gambling revenue dropped 20% between 2008and 2010. It droppedagain in 2014 year overyear. Yet most companies there are still reporting rising revenues and profits year over year. How can that be?
It's because the gambling companies in Las Vegas are now much more diversified with other non-gambling revenue, such as hotel, dining, entertainment, and convention revenue. In fact, the portion of the economy that comes from gambling revenue is at a historic low of just 34%.
So even though gambling revenue decreased in the most recent year, that's actually not a bad thing, since these companies are still posting rising revenues and income for their Las Vegas operations, meaning that less and less of their total income is reliant on gambling. The diversification in non-gambling income suggests that Las Vegas' economy is likely to be much more stable in the coming years and less vulnerable to economic shocks.
MGM is one company betting and winning on this trend. The company has done a great job of increasing its total non-gambling income with impressive convention and meeting spaces. MGM is currently updating its Mandalay Bay Convention Center, which already has 1.7 million square feet of meetingand convention space and will have anadditional 350,000 square feet of space, along with otheramenities, by early 2016.
An example of non-gambling growth
Hotel revenue growth is one way these companies are capitalizing on the increasing tourist volume in Las Vegas. MGM and Wynn have each benefited from rising revenue per available room, or RevPAR, driven by higher occupancy rates and daily rates.
It's interesting to see that the total number of hotel rooms in Las Vegas has been relatively steady in the past couple of years. That might be one reason these companies are able to report rising RevPAR, since more visitors for the same number of total rooms means these companies can start to charge slightly more.
However, occupancy rates are still remaining at around 85% to 90% for most of these properties, meaning that this is not just a simple supply and-demand rise in RevPAR. Instead, the companies winning the most on hotel revenues are those same companies that have spent the past couple of years, such as MGM, updating their existing hotels and creating more reasons for visitors to stay at their resort for higher prices.
Speaking of MGM's hotel growth in Las Vegas, look just how much MGM dominates Wynn in the number of hotel rooms it offers in Las Vegas.
Source: Total hotel room numbers from LVCVA; other figures from each company's reported hotel operations.
MGM is the clear winner in terms of hotel operations in Las Vegas, followed by Caesars Entertainment. Of course, as Caesars is currently undergoing a bankruptcy, this pie chart could look different in the coming months or years, especially if some of Caesars' properties are sold off during its restructuring.
These graphs above show a picture of Las Vegas as a place where investors might still have the chance for a winning bet on the right companies. With rising visitation and rising growth from non-gambling income, the economy might be poised to exceed expectations. Of course, there are risks still in Las Vegas, such as outside competition, and smart investors know to weigh risks versus rewards. To dig further, you might want to see this article next: "Is It Time to Make a Bet on Las Vegas?"
The article 4 Charts That Las Vegas Casino Investors Should See originally appeared on Fool.com.
Bradley Seth McNew has no position in any stocks mentioned. The Motley Fool is short Caesars Entertainment. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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