While the U.S. economy faces unprecedented inflation, high oil prices and a tight job market, the current economic woes are very different from past recessions. There are problems with the economy, but many people are doing well and jobs are still relatively plentiful.
There’s a kind of grey cloud hanging over everything, and people don’t quite know what’s coming next, but for many Americans, the time is actually pretty good. Many people who kept their jobs during the recession increased their savings and are eager to have a good time.
Vichy Properties (VICI) – Get VICI Properties Inc. Reportsthe largest landowner on the Las Vegas Strip owns many properties owned by Caesars Entertainment (CZR) – Get Caesars Entertainment Inc. Report and MGM Resorts International (MGM) – Get the MGM Resorts International report property, it only saw good news from tenants on the Strip.
The REIT, which generates nearly half of its revenue from its Las Vegas properties, doesn’t see strong results from Caesars and MGM as an anomaly.
Is Las Vegas Strip Recession Proof?
Vici CEO Ed Pitoniak shared his views on the state of Las Vegas and the company’s business during the second-quarter earnings call.
“As we’ve discussed in the past, gaming customers have proven to be more resilient than any other discretionary consumer in ordinary recessions and full-blown crises. This has been demonstrated in the financial crisis and throughout the COVID-19 pandemic. 19 pandemic,” he said,
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In fact, Vici doesn’t need Caesars and MGM to prosper, it just needs them to be able to pay the rent. According to Pitoniak, this doesn’t appear to be an issue anytime soon.
“Several of you sellers have done sound analysis that shows that gaming operators in general, and many of our partners in particular, are going to be in a very solid position in terms of free cash flow and balance sheet strength, even if The same is true for the next year or so in a pretty severe recession,” he said. “Our operators are responsive and agile in responding to changing conditions. The resilience of both gaming consumers and gaming operators gives Vici confidence that a possible recession will not compromise the credit quality of our operators.”
Vici may be the best investment in Las Vegas
Both Caesars and MGM are doing well in a post-pandemic restricted world. These two companies, and in fact most companies, remain vulnerable to economic conditions. If things get worse, or people worry about the economy, they might be less inclined to take a trip to Las Vegas or swap Bobby Flay’s burger joint for Nobu at mealtime.
That’s not a problem for Vici, Pitoniak said.
“There are a number of questions about the outlook for consumer spending, and I just want to reiterate that our revenue doesn’t fluctuate based on monthly or quarterly trends,” he said.
But while the CEO isn’t worried about his company’s revenue stream, he’s also very confident that Caesars and MGM have nothing to worry about either.
“Having said that, in Las Vegas, the Strip continues to generate incredibly strong numbers. For example, May gross gaming revenue was 41% higher than 2019 levels, while Harry Lee Deutsches International Airport has just set an all-time record for passenger traffic in June. While growth rates are becoming increasingly difficult to beat given record activity levels, the gaming industry has proven its resilience over the decades,” he added. .