Gulf Coast Casinos Remain Resilient Despite Macroeconomic Challenges, Analyst Says

The Gulf Coast casino market, which is primarily made up of venues in Louisiana and Mississippi, is managing to remain relatively stable in the face of difficult economic conditions.

Truist Securities analyst Barry Jonas recently paid a visit to casinos in the Baton Rouge, Louisiana, Lake Charles, Louisiana, New Orleans, and Biloxi, Mississippi areas and concluded that the impact of the macroeconomic environment has been minimal. He commented that very few locations were affected and any softness was limited to customers in certain markets that were more value-oriented and lower-to mid-tier.

This is good news for Gulf Coast regional operators, such as Bally’s (NYSE: BALY), Boyd Gaming (NYSE: BYD), Caesars Entertainment (NASDAQ: CZR), and Penn Entertainment (NASDAQ: PENN).

The Tale of Two Consumers

With inflation still very high, there is a fear that some casino customers may look to reduce costs during their stays or not visit at all. It appears that this is not the case in the Gulf Coast region, although some customers have chosen to scale back their spending.

Analyst Jonas explained that these value-oriented customers were in select markets and that enthusiasm was high for the older demographic due to the increased social security cost of living and higher interest rates on savings.

Meanwhile, those who visit destination properties such as Harrah’s New Orleans, Golden Nugget Lake Charles, and Penn’s L’Auberge du Lac in Lake Charles have not seen any decline in visits. Most properties are running at 100 percent occupancy on weekends, with weekday visits being relatively solid as well.

Casino Operators Investing in Refresh

Due to the competitive nature of the market, operators must invest in keeping their properties up-to-date. Boyd Gaming is renovating its Treasure Chest Casino in Kenner, Louisiana, while Caesars has changed the Isle in Lake Charles to its Horseshoe brand. Harrah’s New Orleans is undergoing a $325 million overhaul and will be changed to the Caesars name.

Jonas believes that each of these investments will generate the return on investment needed to justify the capital spent. At Horseshoe Lake Charles, the product will be finalized, and the management is already looking into expanding the hotel. He predicts that the property will meet its return on investment goals in 2023.