LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015

Transcription

1 OCTOBER 2015 PRICE $500 LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 Author Shannon Okada Associate Director, Gaming Vice President, Consulting & Valuation Editor Linda Gee, Senior Editor HVS.com HVS Gaming Division 8170 W Sahara Avenue, Suite 201, Las Vegas, NV USA

2 Las Vegas remains a premier destination: over 41.1 million people visited Las Vegas in 2014, an all-time high. The market continues to benefit from its variety of demand generators, including gambling, dining, entertainment, convention/meetings, and shopping. The trending declines in the percentage of people who gamble and gaming win per visitor are further evidence of the continuing need for Las Vegas market operators to monitor and focus on total revenue being spent per patron. Las Vegas pipeline of development activity, including The LINQ, The Park, and the proposed Resorts World Las Vegas, will help the market maintain its iconic image and will also serve to increase the generation of non-gaming revenue, which will enable the market to better withstand any economic downturns in the future. VISITATION The number of visitors to the Las Vegas market exceeded 41.1 million visitors in 2014, an all-time high. Demand and visitation have continued to grow through the first seven months of 2015 as people continue to seek out the new and unique experiences found only in Las Vegas. Table 1 illustrates the visitor volume to Clark County beginning in 2005 through the year-to-date period ending in July Visitation to Las Vegas from 2010 to 2014 increased at a compound annual growth rate (CAGR) of 2.4%, evidencing the market s recovery from the declines exhibited in 2008 and 2009 as a result of weak economic conditions and reduced discretionary spending during that time. TABLE 1 LAS VEGAS (CLARK COUNTY) VISITORS Year Total Visitors Percentage Change ,566, % ,914, ,196, ,481,552 (4.4) ,351,469 (3.0) ,335, ,928, ,727, ,668,221 (0.1) ,126, CAGR ( ): 0.7 % CAGR ( ): 2.4 The percentage of visitors who arrived via ground transportation (58%) versus air (42%) remained stable in 2014 compared to Overall, the number of visitors arriving by ground has trended Year-to-date July: ,247, ,743, % Source: Las Vegas Convention & Visitors Authority upward over the last several years, from 54% in As nearly half of all visitors to Las Vegas arrive through McCarran International Airport, passenger levels and capacity are important to the market. McCarran International Airport s Terminal 3 opened in June of 2012 and increased the capacity of the airport to approximately 53 million passengers annually. Terminal 3 contains 14 gates, half of which can be used for international arrivals. Since the opening of Terminal 3, passenger capacity from Mexico, Canada, Europe, and Latin America has been expanded. lnterjet, Magnicharters, Volaris, and VivaAerobus have offered new routes from Mexico in the past few years. In 2013, Canadian airline WestJet became the first foreign-flag carrier to bring 1 million passengers to Las Vegas in a calendar year, a record it surpassed in 2014 with 1.1 million passengers. Air Canada increased the number of passengers it served by 24.3% from 2013 to British Airways has added service from London-Gatwick and Edelweiss Air offers direct flights from Zurich, Switzerland. Copa Airlines, with service from its hub in Panama City, Panama, connects Las Vegas with Latin and South America; the airline s increase in passengers from 2013 to 2014 was 57.1%. As indicated in Table 2, passenger levels in 2014 increased for the fourth straight calendar year to nearly 42.9 million passengers. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 2

3 TABLE 2 - MCCARRAN INTERNATIONAL AIRPORT OPERATING STATISTICS Percent Percent Year 2005 Passenger Traffic 44,267,362 Change* Change** ,193, % ,729, ,074,642 (7.7) (0.1) ,469,012 (8.2) (2.2) ,757,359 (1.8) (2.1) ,479, (1.1) ,667, (0.9) ,857, (0.7) ,869, (0.4) Year-to-date July ,960, ,089, % *Annual average compounded percentage change from the previous year **Annual average compounded percentage change from first year of data Source: McCarran International Airport Airport passenger traffic has grown by 4.5% in the year-to-date period through July 2015 compared to the same period in 2014, above the growth rate of the number of visitors overall (2.0%). The Las Vegas Convention and Visitors Authority (LVCVA) issues the Las Vegas Visitor Profile Study annually, which is based on 300 in-person interviews conducted each month. The demographic profile of those surveyed since 2006 is set forth in Table 3. TABLE 3 - DEMOGRAPHIC PROFILE OF VISITORS Mean Age Female 48% 50% 49% 50% 50% 49% 49% 50% 51% Male 52% 50% 51% 50% 50% 51% 51% 50% 49% U.S. % of Visitors 87% 88% 85% 86% 82% 84% 83% 80% 81% California % of Visitors 32% 31% 28% 31% 30% 31% 33% 33% 33% Non-U.S. % of Visitors 13% 12% 15% 14% 18% 16% 17% 20% 19% Retired 24% 26% 28% 28% 27% 25% 19% 20% 20% Source: Las Vegas Convention & Visitors Authority The survey data from the LVCVA indicates that the average age of visitors to the market is declining and a smaller percentage of visitors are retired. The Silent Generation (those born between 1925 and 1945) comprised 7% of all visitors in 2014; Baby Boomers (those born between 1946 and 1964) comprised 30%; Generation X (those born between 1965 and 1980) comprised 37%; and Millennials (those born between 1981 and 1993) comprised 27%. The increasing percentage of non-u.s. visitors is a positive trend for the Las Vegas market, given that foreign travelers tend to stay longer and spend more than domestic visitors. Overall, 23% of all visitors to Las Vegas in 2014 were non-white; the fastest growing ethnic group were Asian/Asian-Americans which comprised 10% of all visitors, increasing from 2% in LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 3

4 The visitor reports from LVCVA also indicate that vacation or pleasure was the primary reason for visiting Las Vegas for 47% of all visitors in 2014, up significantly from 41% in The percentage of visitors whose primary purpose for visiting for vacation or pleasure since 2006 ranged from a low of 39% in 2008 to a high of 51% in Nineteen percent (19%) of 2014 visitors indicated they were first-time visitors to Las Vegas; the majority of first-time visitors continue to come primarily for vacation or pleasure (69%). The proportion of visitors who said they visited Downtown Las Vegas in 2014 was 36%, up from 30% in 2013; the percentage of Las Vegas visitors who visited Downtown Las Vegas generally trended downward, from 48% in The percentage of visitors that gambled while in Las Vegas declined from 87% in 2006 to 71% in 2014, and the average time spent gambling per day trended down from 3.4 hours in 2007 to 2.6 hours in The LVCVA survey data further reveals that the average trip gambling budget for visitors declined from $652 in 2006 to $448 in 2011 before increasing to $530 in In 2014, the per-night lodging expenditure (non-package and non-comp) was $87, with 2.1 occupants per room, on average. Additionally, visitors in 2014 spent over the course of their entire stay in Las Vegas an average of $282 for food and drink (compared to $279 in 2013) and $150 for shopping (up from $141 in 2013). Visitors also spent an average of $69 for local transportation (up from $60 in 2013), $48 for shows (up from $38 in 2013), and $14 for sightseeing (up from $9 in 2013) during their stay. Table 4 sets forth the CAGR from 2006 to 2014 for visitors gambling budget and other expenditures by category. Gambling Budget TABLE 4 - EXPENDITURE CAGR (2006 TO 2014) Lodging Expenditures Food and Drink Expenditures Shopping Expenditures Average (2014) $530 $87 $282 $150 $69 $48 $14 Average (2006) $652 $107 $261 $141 $69 $51 $8 CAGR ( ) (2.6) % (2.6) % 1.0 % 0.8 % 0.0 % (0.8) % 6.9 % Source: Las Vegas Convention & Visitors Authority Local Transportation Expenditures Show Expenditures Sightseeing Expenditures Competition for visitor spending is now even fiercer with nightclub, restaurant, and lounge revenue consuming a greater proportion of spending. As a result of the shift in spending patterns away from gaming activities, the percentage of total revenue from gaming for the properties along the Las Vegas Strip corridor with over $1 million in gaming revenues, also known as the Las Vegas Strip $1 Million and Over submarket, dropped, from approximately 58% in 1990 to 37% in Table 5 sets forth the breakdown of total revenue for the Las Vegas Strip $1 Million and Over submarket for fiscal years 1989/90 to 2013/14 ending June 30. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 4

5 TABLE 5 - REVENUE FOR LAS VEGAS STRIP PROPERTIES WITH GAMING REVENUES AT LEAST $1 MILLION Total Revenue Gaming Revenue Rooms Revenue Food and Beverage Revenue Other Revenue Fiscal Year Ending June 30 Locations Amount ('000s) % Change % of Total $3,939, % 16.8 % 17.2 % 8.1 % ,531, % ,463,692 (1.5) ,707, ,777, ,537, ,866, ,087, ,397, ,585, ,195, ,569, ,882,061 (6.5) ,448, ,708, ,906, ,937, ,823, ,794,362 (0.2) ,783,663 (12.7) ,257,553 (3.8) ,494, ,272, ,538, ,307, CAGR ( ): 6.1 % CAGR ( ): 5.4 Source: Nevada Gaming Control Board % of Total % of Total % of Total Chart 1 graphically illustrates the percentage of gaming revenue versus non-gaming revenue for the Las Vegas Strip $1 Million and Over submarket for 1990 to LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 5

6 % of Revenue CHART 1 - % OF GAMING REVENUE VS. % NON-GAMING REVENUE - LAS VEGAS $1 MILLION AND OVER SUBMARKET 80.0% % of Gaming Revenue vs. % of Non-Gaming Revenue (Las Vegas Strip $1 Million and Over Submarket) 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% % Gaming Revenue % Non-Gaming Revenue Year Sources: Nevada Gaming Control Board, HVS GAMING DEMAND Seventy-one percent (71%) of all visitors surveyed by the LVCVA indicated that they gambled while in Las Vegas in 2014, the same as in The survey data further indicates that only 63% of Millennials gambled while visiting Las Vegas in 2014, compared with 87% of Silent Generation visitors, 78% of Baby Boomers, and 68% of Generation X members. Twelve percent (12%) of all visitors said they came primarily to gamble, down from 15% in Since 2006, the percentage of visitors whose primary purpose for visiting was gambling ranged from 7% in 2011 to 15% in According to statistics from the Nevada Gaming Control Board, gross gaming revenue in Clark County reached $9.6 billion in 2014, a 1.3% decline from With visitation increasing in 2014 and spending patterns shifting away from gaming activities, gaming revenue per visitor declined 4.8% compared to Gaming win per visitor in 2014 was at $232, the lowest level since Through the first seven months of 2015, visitation to Las Vegas increased 2.0% over the same period in 2014 and gaming revenue for this period declined slightly, resulting in a further decline in gaming revenue per visitor in the year-to-date period through July 2015 of 2.2% compared to the same period in Table 6 sets forth the total gaming revenue, visitors, and gaming revenue per visitors for 2005 through July LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 6

7 Gaming Win (Billions) Visitors Year TABLE 6 - TOTAL VISITORS, GAMING REVENUE, AND WIN PER VISITOR (CLARK COUNTY, NEVADA) Total Visitors % Change Total Gaming Revenue (Win) % Change Gaming Revenue per Visitor % Change ,566, % $9,716,860, % $ % ,914, ,630,387, ,196, ,868,029, ,481,552 (4.4) 9,796,970,000 (9.9) 261 (5.7) ,351,469 (3.0) 8,833,902,000 (9.8) 243 (7.0) ,335, ,908,698, (1.8) ,928, ,222,906, (0.7) ,727, ,399,882, (0.1) ,668,221 (0.1) 9,676,458, ,126, ,554,002,000 (1.3) 232 (4.8) % CAGR ( ): CAGR ( ): 0.7 % (0.2) % (0.9) % 2.4 % 1.8 % (0.7) % Year-to-date July: ,247, $5,623,524, $ ,743, % 5,610,995,000 (0.2) % 227 (2.2) % Source: Nevada Gaming Control Board, Las Vegas Convention & Visitors Authority, HVS Chart 2 graphically illustrates the number of visitors and gaming win for 1980 to 2014, as well as what appears to be an aberrational spike in gaming revenue during the 2004 to 2007 period. CHART 2 - CLARK COUNTY GAMING REVENUE AND VISITORS (1980 TO 2014) Clark County Gaming Revenue and Visitors $ ,000,000 $ ,000,000 35,000,000 $ ,000,000 $ ,000,000 20,000,000 $ ,000,000 $ ,000,000 5,000,000 $ No. of Visitors Revenue (US$ in Billions) Sources: LVCVA, Nevada Gaming Control Board, HVS LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 7

8 The downward trend in the percentage of people who gamble and the decline in win per visitor are further evidence of the continued importance for Las Vegas market operators to monitor the various sources of revenue. Las Vegas Strip $72 Million and Over Submarket As of the end of 2014, 22 large casino-resorts located on the Las Vegas Strip corridor earned over $72 million in annual gaming revenues the Las Vegas Strip $72 Million and Over submarket. As of the end of June 2015, this submarket had increased to 23 properties. The Nevada Gaming Control Board does not release the identity of the specific properties in each segment, but the Las Vegas Strip $72 Million and Over submarket contains those prominent properties located on or near the Las Vegas Strip (South Las Vegas Boulevard) such as Bellagio, Caesars Palace, MGM Grand, Wynn/Encore, and Venetian/Palazzo. There is an inherent limitation in period-over-period comparisons of the composite data, as it is grouped by the gaming revenue earned by a property released by the Nevada Gaming Control; specifically, revenue for a given period may include data from more or fewer properties depending on how many have exceeded the $72 million gaming revenue threshold during the preceding 12 months. In 2014, total gaming revenue for the Las Vegas Strip $72 Million and Over submarket s 22 properties was $5.8 billion, or over 60% of the total gaming revenues for Clark County. Segmented gaming revenues for the Las Vegas Strip $72 Million and Over submarket for 2005 through July 2015 are set forth in Table 7. Year TABLE 7 - SEGMENTED GAMING REVENUES - LAS VEGAS STRIP $72 MILLION AND OVER SUBMARKET Total Casinos at End of Period Slot Machines Win Amount ('000s) % Change % of Total Table Games Win Amount ('000s) % Change $2,789, % 50.8 % $2,508, % 45.7 % $196, % 3.6 % $5,494, % ,059, ,860, , ,163, ,142, ,964, ,981 (8.1) 3.5 6,331, ,886,892 (8.1) ,596,219 (12.4) ,903 (16.1) 3.3 5,671,014 (10.4) ,471,788 (14.4) ,408,137 (7.2) ,655 (9.7) 3.4 5,049,580 (11.0) ,397,238 (3.0) ,656, ,063 (5.1) 3.1 5,214, ,507, ,884, ,209 (9.2) 2.6 5,538, ,553, ,986, , ,692, ,593, ,297, , ,050, ,497,551 (3.7) ,107,963 (5.8) , ,769,186 (4.7) CAGR ( ): (1.2) % 2.4 % (2.0) % 0.5 % CAGR ( ): 1.0 % 4.0 % 0.4 % 2.6 % Year-To-Date July $1,518, % $1,830, % $87, % $3,436, ,533, % ,721,315 (6.0) % , % 2.9 3,351,389 (2.5) % Source: Nevada Gaming Control Board % of Total Other (Keno, Race Book, Sports Book, Card Games) Win Amount ('000s) % Change % of Total Total Win Amount ('000s) % Change In 2014, the percentage of revenue from slot machine relative to total gaming revenue for the Las Vegas Strip $72 Million and Over submarket increased to 43.3%, while the percentage of revenues from table games revenue declined to 53.9%; the balance of gaming revenues was generated by keno, sports/race book operations, and non-banked poker/card tables (2.8%). Total gaming revenue for the Las Vegas Strip $72 Million and Over submarket declined 2.5% in the first seven months of 2015 (compared to a 0.2% decline for Clark County overall during the same period). Through the year-to-date period ending in July 2015, table games revenue for the Las Vegas Strip $72 Million and Over submarket was down 6.0% compared to the same period in The Las Vegas Strip $72 Million and Over submarket continues to benefit from, and is affected by, baccarat play, the game of choice in many Asian cultures. Chart 3 sets forth the table game revenue for the Las Vegas LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 8

9 Revenue (millions) Strip $72 Million and Over submarket segmented between revenue generated by baccarat and that generated by other table games. CHART 3 - TABLE GAMES REVENUE - LAS VEGAS STRIP $72 MILLION AND OVER SUBMARKET $4,000 $3,500 LAS VEGAS STRIP $72 MILLION AND OVER TABLE GAMES REVENUE (BACCARAT/NON-BACCARAT) $3,000 $2,500 $2,000 $491 $661 $832 $899 $764 $922 $1,178 $1,254 $1,361 $1,588 $1,482 Baccarat Revenue $1,500 $1,000 $1,679 $1,847 $2,029 $2,066 $1,832 $1,487 $1,478 $1,630 $1,625 $1,710 $1,626 Table Games Revenue (Excluding Baccarat) $500 $0 Year Baccarat revenue ranged from 43.5% of table games revenue in 2011 to 48.2% in 2013 over the last calendar four years, as indicated in Table 8. Game Type TABLE 8 - SEGMENTATION OF TABLE GAMES REVENUE - LAS VEGAS STRIP $72 MILLION AND OVER SUBMARKET 2011 % of Total 2012 % of Total 2013 Black Jack $728, % $675, % $783, % $744, % 2.2 % 0.7 % $16,278 Craps 262, , , , (10.1) (3.5) (26,457) Roulette 256, , , , ,568 Three-card Poker 100, , , , (5.2) (1.8) (5,215) Baccarat 1,254, ,361, ,588, ,481, ,529 Mini Baccarat 68, , , , (5.4) (1.8) (3,673) Let it Ride 26, , , , (10.9) (3.8) (2,871) Pai Gow 9, , , , ,186 Pai Gow Poker 60, , , , Other Games 118, , , , (4.6) (1.6) (5,444) Total $2,884, % $2,986, % $3,297, % $3,107, % 7.7 % 2.5 % $223,176 Source: Nevada Gaming Control Board % of Total 2014 % of Total % Change CAGR Absolute Change The difference in performance between the Las Vegas Strip $72 Million and Over submarket and the Clark County market overall can be traced to the volatility of high-end baccarat. For the first seven months of 2015, baccarat revenue for the Las Vegas Strip $72 Million and Over submarket was down 20.6%, as indicated in Table 9. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 9

10 Game Type TABLE 9 - SEGMENTATION OF TABLE GAMES REVENUE LAS VEGAS STRIP $72 MILLION AND OVER SUBMARKET Year-To-Date July 2014 % of Total Year-To-Date July 2015 % of Total % Change Absolute Change Black Jack $448, % $456, % 1.9 % $8,412 Craps 149, , (1.4) (2,044) Roulette 155, , Three-card Poker 55, , ,642 Baccarat 866, , (20.6) (178,070) Mini Baccarat 56, , (18.0) (10,246) Let it Ride 13, , (1.1) (152) Pai Gow 10, , (10.5) (1,069) Pai Gow Poker 35, , ,727 Other Games 65, , ,678 Total $1,857, % $1,687, % (9.2) % ($170,145) Source: Nevada Gaming Control Board The trending decline in baccarat volume and revenue is running parallel to the performance in the Macau SAR over the past year. July 2015 marked the 14th straight month of declines for the world s largest gaming market. The Macau SAR s slump in gaming revenue has coincided with the anti-corruption crackdown initiated by Chinese President Xi Jinping and the reported government scrutiny of overseas transactions. Concerns about the Chinese market owing to the devaluation of the Yuan in August 2015 have also been expressed. Skill-Based Slot Machines Currently, Nevada s slot machines are purely games of chance; essentially everyone has the same chance of winning. Legislation has been enacted that will allow the adding of an element of skill e.g., driving a virtual racecar or shooting at targets to the slot machine games in Nevada casinos. The passing of the bill has resulted in the potential entry of slot machines with arcade-game elements, skill-based games, and other unique features, which would require more skill and less luck. As such, if a player masters certain skills included in these games, his/her chances of winning would improve. The new law requires the Nevada Gaming Commission to adopt regulations relating to the development of technology in gaming, as well as to allow flexibility in payout percentages or a game s outcome. Skill-based slot machines are not being created to cannibalize the existing market, but rather to attract new customers to the gaming floor. The development of skill-based gaming is aimed at attracting younger people who have been raised on Xbox, PlayStation, and mobile game applications. Game developers, slot-machine makers, lawmakers, and regulators support the possibility that skill-based games could expand the revenue base for Nevada s casinos. Slot machine manufacturers are likely to team up with videogame makers in creating the new attractions. Nevada s gambling regulators hope to have the rules drafted and ready for the Nevada Gaming Commission to approve as early as October Regulations must take into account a range of payback systems, platforms for multiple players on a single slot machine, and slot machines taking in new elements, such as social networking. Additional challenges in developing regulations for skill-based gaming for Nevada s casinos involve balancing the need for fairness i.e., laying out game rules and outcomes upfront with the inherent nature of arcade games where players often learn as they proceed. Nevada Gaming Control Board Chairman A.G. Burnett has been quoted as saying that [t]his is the most important regulation I ve worked on in 17 years and is a turning point that could reinvigorate the slot machine floor. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 10

11 LODGING MARKET According to the LVCVA statistics, virtually all visitors (99.6%) stayed overnight in 2014, with 97% of those staying in a hotel or motel. In 2014, the per-night lodging expenditure (non-package and non-comp) was $86.55, with 2.1 occupants per room, on average. Sixty-two percent (62%) of visitors used the Internet to book accommodations; 16% reported using a travel agent to plan their trip to Las Vegas, up slightly from past years. As indicated in Table 10, average citywide occupancy, which includes data for all transient lodging properties, grew to 86.8% and average daily room rate increased $6.01 to $ in 2014 compared to TABLE 10 - LAS VEGAS LODGING MARKET STATISTICS Year Inventory % Change Total Rooms Occupied % Change Occupancy ADR % Change RevPAR % Change , % 39,142,115 (3.1) % 84.7 % $76 -- $ , ,872,894 (0.7) % 64 (0.4) % , ,482, , ,526, , ,362, ,605 (0.4) 43,415, , ,867, , ,967,252 (2.1) (9.8) 103 (14.2) , ,986,134 (2.3) (22.0) 76 (26.1) ,935 (0.0) 43,365, , ,654, , ,479, , ,191,449 (0.6) ,544 (0.0) 47,497, % % CAGR ( ): CAGR ( ): CAGR ( ): 1.3 % 1.5 % 3.3 % 3.5 % 1.4 % 1.0 % 1.4 % 1.1 % 0.3 % 2.3 % 5.3 % 7.3 % Year-to-date July: , ,247, % $ $ ,071 (0.2) % 24,743, % % % Source: Nevada Gaming Control Board, Las Vegas Convention & Visitors Authority, HVS Consulting and Valuation The year-to-date performance of the Las Vegas lodging market through July 2015 compared to the same period in 2014 evidences a stabilizing market. Occupied rooms, occupancy, ADR, and RevPAR for the Las Vegas market by month for 2014 and through July 2015 are set forth in Table 11. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 11

12 TABLE 11 - LAS VEGAS LODGING MARKET STATISTICS BY MONTH (2014 TO JUNE 2015) Month 2014 Percent 2015 Percent Percent 2015 Percent 2014 Percent 2015 Percent Occupied Rooms Change Occupied Rooms Change Occupancy Occupancy January 3,900, % 3,811,184 (2.3) % 83.5 % 81.7 % $ % $ % $ % $ % February 3,607, ,565,960 (1.2) March 4,284, ,125,637 (3.7) (9.7) (12.9) April 4,016, ,028, May 4,101, ,227, June 4,032, ,044, (0.7) (0.3) July 4,107, ,228, August 4,071, September 3,875, October 4,152, November 3,774, December 3,572, Total 47,497, % 86.8 % $ % $ % CAGR From % 4.7 % 6.0 % ADR Change ADR Change RevPAR Change RevPAR Change Year-To-Date July Total: 28,049, % 28,031,721 (0.1) % 88.3 % 88.1 % $ % % $ % $ % Source: Las Vegas Convention & Visitors Authority Significant declines were exhibited in March 2015 owing to strong performance in March 2014 resulting from the timing of the CONEXPO construction trade show, which attracts nearly 130,000 attendees. The CONEXPO show is expected to return to Las Vegas in The casino segment, which consists of those hotel guests that are classified as "casino-invited guests," are an important demand segment for Las Vegas casino-hotels and casino-resorts. A casino-invited guest can range from a rated slot player to a "high roller." Casino-invited guests are targeted by marketing campaigns and usually "comped" (given complimentary rooms, food, and/or beverages), or partially comped, in return for expected levels of casino play. Gaming operators can offer complimentary rooms, aggressive package rates, or other forms of discounting with the intention of sustaining occupancy levels to generate consistent demand for the casinos, food and beverage, and other profit-generating operations, offsetting these promotional expenses through the capture of gaming and ancillary revenues. The percentage of casinosegment rooms to total occupied rooms for casino-hotels and casino-resorts ranges dramatically. The impact upon the casino segment for non-gaming hotels is significant, particularly during periods of low visitation, as these properties are limited in their ability to generate revenues from sources other than rooms to the same degree as the casino-hotel properties. A casino-hotel can, theoretically, induce sufficient demand to be 100% occupied throughout the year by comping all its guests; however, in order to do so, comped players must generate sufficient revenues through gaming, food, beverage, entertainment, or other sources in order to cover both the expenses associated with the sale of the room and the opportunity cost of selling the room to a cash-paying customer, at a minimum, in order to be economic feasible. Because of this economic restriction, and frictional vacancy, 100% occupancy of a casino-hotel is rare. Occupancy levels for the Las Vegas Strip $72 Million and Over submarket have historically been strong over 90% since Average daily rates for this submarket are returning to precession levels following significant declines in 2009 (-14.2%) and 2010 (-9.0%) owing to the economic downturn and the addition of new guestroom supply from the openings of the CityCenter (2009) and the Cosmopolitan (2010). Over the more recent period, 2011 to 2014, the RevPAR CAGR has been a robust 6.8%. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 12

13 TABLE 12 - LAS VEGAS LODGING STATISTICS - LAS VEGAS STRIP $72 MILLION AND OVER SUBMARKET Fiscal Year Ending June 30 Locations Available Rooms % Change Occupied Rooms % Change Occupancy Average Rate % Change RevPAR % Change ,106, ,245, % $ $ ,537, % 10,266, % (6.2) % 52 (7.9) % ,986, ,770, (2.6) 52 (1.6) ,250, ,362, ,556, ,907, ,239, ,273, ,531, ,666, ,460, ,296, ,344, ,784, ,905, ,426, ,251, ,710, ,289, ,825, ,391, ,775,409 (4.8) (5.5) 94 (10.4) ,635, ,784, ,429, ,717, ,734, ,137, ,259, ,931, ,622,936 (2.4) 24,504,276 (1.7) ,529,460 (0.4) 24,277,794 (0.9) ,515,657 (0.1) 23,311,839 (4.0) (14.2) 123 (17.5) ,935, ,343, (9.0) 110 (10.4) ,832,645 (0.4) 23,537, ,503, ,417, ,617, ,561, ,718, ,751, CAGR ( ): 4.6 % 4.7 % 3.9 % 4.0 % CAGR ( ): CAGR ( ): Source: Nevada Gaming Control Board The most recently developed hotels, primarily the Aria in CityCenter (2009), Cosmopolitan (2010), and SLS Las Vegas (2014), represent the latest evolution of the Las Vegas casino. The next major new casino-resort that is expected to be developed in the market is Genting s Resorts World Las Vegas, which broke ground in May 2015 and is slated to open with 3,000 guestrooms in In addition, several other projects totaling over 3,000 rooms are in various stages of development, including the proposed Alon Las Vegas. While all of these projects may not progress to completion, several smaller properties are further along in the development process than others and are expected to open in 2016 and 2017, including two Residence Inns, two Fairfield Inns, and a SpringHill Suites. CONVENTION MARKET Ten percent (10%) of the visitors surveyed for LVCVA s study in 2014 were in Las Vegas to attend a convention, trade show, or corporate meeting (up from 7% in 2013); since 2006 this percentage has ranged from a low of 7% in 2006 to 12% in In 2014, 5,169,034 delegates attended 22,103 conventions. According to the Las Vegas Convention and Visitors Authority, a total of 12 new and rotating conventions and trade shows consisting of more than 10,000 delegates are scheduled in Combined, the shows will draw an estimated 242,000 attendees generating nearly $315 million in local non-gaming economic impact. Nine of these shows will be held at the Las Vegas Convention Center. In addition, several parcels have been acquired to improve access to the facility and for expansion of the district, including the purchase of the 26-acre site of the former Riviera Casino and Hotel in May Given Las Vegas premier convention center facilities and LVCVA s expansion plans, attendance and facility use should continue to improve along with stronger national and global economic conditions. Table 13 sets forth number of convention attendees for the Las Vegas market by month from January 2011 to July LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 13

14 TABLE 13 - LAS VEGAS CONVENTION ATTENDANCE BY MONTH 2011 Percent 2012 Percent 2013 Percent 2014 Percent 2015 Month Attendance Change Attendance Change Attendance Change Attendance Change Attendance January 615, % 538,552 (12.6) % 571, % 631, % 682, % February 458,623 (11.5) 575, ,866 (4.1) 490,754 (11.1) 550, March 533, ,010 (3.9) 518, , ,793 (11.7) April 435, ,510 (4.9) 477, ,462 (17.1) 501, May 352,303 (0.0) 367, , , ,171 (4.6) June 367, , , , ,989 (16.6) July 263,441 (17.9) 255,961 (2.8) 292, , ,988 (9.4) August 412, , ,561 (7.3) 422,679 (4.7) September 434, ,648 (16.1) 382, ,700 (0.9) October 457, , , ,695 (9.1) November 375, , ,762 (2.6) 400,205 (6.2) December 157, ,697 (8.7) 145, ,533 (8.2) Total 4,865, % 4,944, % 5,107, % 5,169, % Percent Change CAGR from % 2.5 % 2.0 % Year-To-Date July 3,027, % 3,041, % 3,187, % 3,359, % 3,378, % Source: Las Vegas Convention & Visitors Authority MAJOR DEVELOPMENTS As hotel rooms, restaurants, bars, day/nightclubs, entertainment venues, and retail shopping have grown in importance to the overall revenue picture for Las Vegas, operators have placed more emphasis on enhancing amenities and attractions design and development. The pipeline of development activity, such as The LINQ, Mandalay Bay s conference center expansion, the MGM-AEG Arena, and Genting s proposed Resort World Las Vegas, helps Las Vegas to maintain its iconic image and also serve to increase the generation of non-gaming revenue. While the Palms was one of the first casinos to feature nightclubs as a primary draw, the newer casino-hotels are designed as even more elaborate entertainment destinations with gaming as just one of the activities. Designed with larger complements of restaurant space with internationally recognized chefs and larger branded day/nightclub and entertainment venues, the programming and entertainment focus of these properties are targeting younger visitors. The Cosmopolitan represents a high-rated version of this property type. SLS Las Vegas The SLS Las Vegas opened in third-quarter 2014 following a $415 million renovation. The redeveloped Sahara was closed in 2011 and had undergone a nearly 18-month extensive renovation. In addition to the 1,620 rooms and suites, the SLS Las Vegas includes a 60,000-square-foot casino, several of SBE Entertainment s restaurant and nightlife brands, convention space, and retail. The LINQ Caesars Entertainment Corp. has completed its redevelopment of the LINQ retail, dining, and entertainment district, which is anchored by the 550-foot High Roller observation wheel, with 28 transparent pods holding 40 passengers each. The LINQ s 2,253 hotel rooms were renovated, including 244 suites and two urban loft-style penthouses. The hotel lobby was redeveloped to include a signature bar and lounge area and the pool deck was redesigned to include 25 poolside cabanas. The LINQ features an automated valet retrieval system and an automated check-in process, which includes a self-check-in and touch-screen interaction to make bookings for dining and entertainment. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 14

15 Mandalay Bay In August 2015, meeting space at the Mandalay Bay Convention Center grew to 2 million square feet with the opening of the property's $70 million, 350,000-square-foot expansion. With more than 2 million total square feet and 1.1 million square feet for exhibit space, the facility moves up in ranking from seventh to fifth in total square footage and from 11th to 5th in exhibit space in North America. Mandalay Bay is third behind the Las Vegas Convention Center and the Sands Expo and Convention Center in terms of total meeting-space square footage. The expansion features a 70,000-square-foot ballroom that is divisible by five. A 900-space parking lot has been built beneath the convention center. Atop the expansion is an 8-acre rooftop solar photovoltaic array that is expected be online by fall Combined with the existing 20-acre array in place, the facility will be capable of producing 3.4 million kilowatt hours a year. With the expansion in place, Mandalay Bay will now be able to attract shows that it had not been able to accommodate before, secure more new shows to the building simultaneously with others, and keep existing shows from defecting to other cities. The Park MGM Resorts International and AEG is developing a $375 million, 20,000-seat arena that will be located on a 16-acre site behind the New York-New York parking garage and near the Monte Carlo parking garage. The MGM-AEG arena will be built with a wide array of money-making food and beverage features and high-end seating options, ranging from spacious clubs and 50 luxury suites to more than 25 luxury loge boxes and multiple balconies. The arena project is anticipated to be the top of the line in terms of amenities, seating options, and opulence. MGM anticipates that the arena will be occupied every weekend. Content such as mixed martial arts and boxing fight events, concerts, award shows, college basketball, hockey tournaments, and other activities will be pursued. Arena operators have reportedly signed multiple college basketball nonconference games and are in discussions with several professional teams. The arena will be built to NBA and NHL specification and a bid for an NHL team in Las Vegas has moved to the next phase of consideration. The NHL Board of Governors could potentially vote on the bid at a meeting in September 2015 or January 2016 and a franchise could potentially start playing at the new arena by the season. Reportedly, more than 13,000 NHL season ticket deposits have been received. In conjunction with the development of the arena, MGM is spending $100 million on The Park, an outdoor retail, dining, and entertainment area under construction between New York-New York and Monte Carlo. The Park will create an immersive outdoor destination spanning more than eight acres and will include landscaped areas, casual eateries, bars, restaurants and retail attractions. The outdoor district will serve as the gateway from the Las Vegas Strip to the MGM-AEG arena. Both New York New York and Monte Carlo will transform their park facing facades with a series of unique indoor/outdoor dining and entertainment venues, cultivating a vibrant patio culture that encompasses The Park s landscaped spaces. To create a harmonious dialogue between resorts, Rue de Monte Carlo, the adjacent street providing access from Las Vegas Boulevard, will be realigned as a gently curving, tree lined parkway to the new arena. New cobblestone walkways in front of New York New York and Monte Carlo will lead guests into The Park. The Park and arena are expected to completed by spring MGM will also build a 5,000-seat theater at Monte Carlo Resort and Casino, creating another entertainment attraction as part of the Park development. The theater is expected to open at the end of The theater will offer seating flexibility, thus allowing for easy transformation into multiple configurations. The new theater would enable the company to host performers seeking a setting larger than the average showroom, but smaller than an arena. The theater size will be similar to other venues on the Las Vegas Strip, such as the Colosseum at Caesars Palace and the showroom at Planet Hollywood, but the design allows the venue to have multiple uses. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 15

16 MGM Resorts International is the most active developer in the Las Vegas Strip market of new restaurants, retail outlets, entertainment attractions, and other amenities. MGM Resorts currently operates two arenas on the Strip, the MGM Grand Garden and the Mandalay Events Center. The company s properties also have seven theaters housing Cirque du Soleil production shows, 14 showrooms for concerts, headliners, and comedy performances, and more than two dozen lounges and nightclubs. The company recently built two outdoor festival grounds on previously vacant land: a 33-acre site on the Las Vegas Strip s north end and a 15-acre site across from Luxor, which were programmed for music events and specialty shows. Resorts World Las Vegas Genting Bhd. s proposed resurrection of Boyd Gaming s former Echelon project is further signs of investor confidence in the market. Genting purchased the 87-acre site in 2013 from Boyd Gaming for $350 million and groundbreaking for the proposed Resorts World Las Vegas occurred in May The development of Resorts World Las Vegas will take place over multiple years and encompass at least two or three phases. The initial phase will cost $4 billion and will include 3,000 hotel rooms, a casino with a combined 3,500 slot machines and table games, 30 food and beverage outlets, a 4,000-seat theater, and an elaborate garden attraction that will serve as the property s front door to the Las Vegas Strip. The build-out of the first phase is expected to take 24 to 36 months. Genting reportedly is still evaluating the next phases, which may include additional hotels, a convention center, a water park, more restaurants, and other amenities, and a tour-style theme park. This is the first Las Vegas megaresort to be developed entirely by an international company, as Dubai World is a 50%/50% partner with MGM Resorts International on CityCenter. Genting s cross-marketing opportunities with a Las Vegas property would be substantial and the opening of the Resorts World Las Vegas is expected to induce a significant amount of new demand to Las Vegas. Genting is a multinational company with holdings in New York and Miami. Its flagship property in Malaysia was considered the world s first full-scale resort. It has properties on seven continents, and its worldwide resorts draw 50 million customers annually. Genting is one of the largest casino operators in the United Kingdom, and the company also is part owner of the Norwegian cruise line with ships ported in Miami. Genting operates casinos around the world, including Resorts World properties in Singapore, Malaysia, and Manila, Philippines, and at New York s Aqueduct Racetrack. Alon Las Vegas Preliminary plans for the proposed Alon Las Vegas, a hotel-casino project led by Australian billionaire James Packer and former Wynn Resorts executive Andrew Pascal, include a 1,100-room hotel in two towers with integrated resort offerings. The project is proposed for the site of the former New Frontier across South Las Vegas Boulevard from Wynn and Encore. A controlling stake in the site was purchased by the current ownership group in August The New Frontier had been imploded in November 2007 to make way for the $5 billion proposed Plaza Hotel Las Vegas development, which ultimately failed. Groundbreaking for Alon Las Vegas is targeted for early 2016 with the resort to open by late TRANSACTIONS Recent transactions involving large-scale Las Vegas properties are an indication of investor interest and the continuing evolution of the market. The rehabilitation of obsolete and/or blighted casino-hotels, including the 60-year old Riviera Casino and Hotel and the 66-year old Las Vegas Club, into higher and better uses will benefit the community overall. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 16

17 Cosmopolitan Las Vegas Blackstone agreed to buy the two-tower, 2,995-room Cosmopolitan from Deutsche Bank AG for $1.73 billion in May 2014; ownership of the Cosmopolitan changed on December 19, The bank had foreclosed on the hotel and casino after developer Ian Bruce Eichner defaulted on a construction loan in The resort cost more than $3.9 billion to build and was opened in December The property posted a quarterly profit in the second quarter of 2015, the first time since opening. For Blackstone, the Cosmopolitan purchase was its latest investment in the area. Blackstone also owns single-family rental homes and the Hughes Center, a 1.4 million-square-foot office campus in Las Vegas that it bought in 2013 for $347 million. Riviera Casino and Hotel The LVCVA acquired the 26-acre site of the Riviera Casino and Hotel for $182.5 million in February The Riviera first opened in 1955 as one of the earliest resorts on the Las Vegas Strip. The casino had emerged from bankruptcy in November 2010, the third in its history. The property was closed in May 2015 and the LVCVA has expressed plans to demolish the property s improvements at an estimated cost of $42 million. Acquiring the site of the former Riviera gives the LVCVA control of frontage on the Las Vegas Strip and adds more adjacent property that will be utilized in the development of the Las Vegas Global Business District. Tropicana On April 29, 2015, Penn National Gaming announced that it entered a definitive agreement to acquire the Tropicana Las Vegas from private-equity investor Onex for approximately $360 million. Nevada gambling regulators approved the sale in August The Tropicana Las Vegas is situated on 35 acres of land located on the Las Vegas Strip with 1,467 remodeled guestrooms and suites and a 50,000-square-foot casino floor. Aztar Corp., which owned the Tropicana Las Vegas along with four other properties, was acquired in May 2006 by Columbia Sussex for about $2.1 billion. Tropicana Entertainment, Tropicana Las Vegas then-parent company, subsequently filed for bankruptcy protection in May The Tropicana Las Vegas emerged from bankruptcy in July 2009 as a separate company led by Onex. Penn National said it will invest $20 million to improve facilities at the Tropicana. Penn National Gaming, through its subsidiaries, owns, operates, or has ownership interests in 26 gaming and racing facilities in 17 jurisdictions, including Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario. Penn National benefits from its loyalty program, which encompasses its portfolio of properties, including the M Resort, and provides the company with the opportunity to leverage its player database. Loyalty programs provide numerous cross-marketing opportunities and patrons can use loyalty points earned regionally for discounts on rooms and benefits in Las Vegas. The lack of an expansive database of gamblers with play at regional casinos has hindered the gaming operations of independent properties such as the Tropicana, the Riviera, the Cosmopolitan, and the SLS. Hooters Casino Hotel The Hooters Casino Hotel was sold to Trinity Hotel Investors for $70 million, including real and personal property, in May Canyon Capital Advisors of Los Angeles had owned the property since 2012, after foreclosing on the development. The resort has had several names and different ownerships since it was originally opened in the 1970s. The Navagante Group has been managing the property s 35,000-square foot casino since 2012 and is expected to continue in that role. The property has been known as Hooters Hotel LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 17

18 since 2006, when it was bought by a group of partners associated with the Hooters of America restaurant chain. Las Vegas Club Las Vegas Club was sold in August 2015 for $40 million by T-LVCR, LLC, a subsidiary of the Tamares Group, to 18 Fremont Street Acquisition, LLC, an entity controlled by Derek and Greg Stevens. Tamares gained control of Las Vegas Club and other downtown properties, including the Plaza and Gold Spike, in 2005 when Barrick Gaming Corp. reportedly defaulted on loan payments to Tamares. Reportedly, the purchase price included only the building and land, not the name, gaming equipment, or business. The new owners intend to evaluate the building, including its structure and foundation, with an engineering team before decisions are made as to how to best utilize the property. Derek and Greg Stevens bought into the Golden Gate in 2008 and, in 2011, purchased Fitzgerald s Hotel and Casino, which was turned into D Las Vegas. Both of those properties are more viable and have been transformed into vibrant casinos, in part due to successful promotions under new ownership. At the time of sale, Las Vegas Club s guestroom operations had been closed for over two years. CONCLUSION Las Vegas is expected to continue to be a dominant domestic and international gaming destination; yet in order to maintain its competitive edge it must continue to raise the bar as a unique entertainment destination with appropriate revenue-generating amenities. Regeneration is necessary for Las Vegas to maintain its continued iconic status. New projects, including the revamped convention center, will be a part of the evolution of the city, which will help to redefine Las Vegas' future competitive landscape as efforts to increase sources of non-gaming revenue continue. It is important that cutting-edge technology be incorporated in future developments and refurbishments going forward in order for properties to effectively compete and enhance the attractiveness of the market. Features such as The LINQ s automated valet retrieval system and automated check-in process, and skill-based slot machines that are aimed at attracting new, younger customers to the gaming floor, thereby expanding the revenue base for Clark County, are good examples. Game zones on the gaming floor with a club-like feel, a disc jockey, and a bar may be the face of Las Vegas Strip casinos in the future. Since the Great Recession, operations have been streamlined, operators have adapted, and the Las Vegas market is emerging stronger. As the market s visitor demographics continue to evolve, less reliance on gaming and a more balanced base of appeal allows the market, as a whole, to be in a better position to withstand any economic downturns in the future. LAS VEGAS CASINO & HOTEL MARKET OUTLOOK 2015 PAGE 18