Analyst: Caesars, MGM will be big winners from Mirage, Trop closures

The two largest casino operators on the Strip are most likely to experience the biggest economic boost from the closure of two nearby properties, according to a Las Vegas-based gaming analyst.

Caesars Entertainment and MGM Resorts International — who, combined, manage 16 casino-hotels and five non-gaming hotels — are “best positioned” to benefit from the April closure of the Tropicana Las Vegas and the impending July 17 shutdown of the Mirage. A reduction in available hotel rooms will drive up the average daily rates, which means higher revenue margins for existing operators.

In a July 2 note to investors, Las Vegas-based John DeCree, director of equity research at CBRE Group Inc., a commercial real estate firm, says the two gaming giants have several key advantages, including ample room inventory, desirable center-Strip locations and greater appeal to “price sensitive” guests.

Tropicana had 1,467 hotel rooms while the Mirage currently has 3,044. The elimination of those hotel rooms represents a collective 4.9 percent reduction in supply on the Las Vegas Strip’s main corridor, DeCree said.

Of the two properties, the Mirage’s closing is more likely to “move the needle” in terms of opportunity for other operators. CBRE estimates the Mirage had roughly 1 million occupied room nights and generated $596 million in revenue and $169 million of earnings before interest, taxes, depreciation, amortization and restructuring, or EBITDAR, in 2023.

“This represents significant underlying demand for the Las Vegas Strip that will need to find a home,” DeCree wrote. “Given their significant room inventory, particularly in the mid-tier asset class on and around the center Strip, we believe (Caesars) and (MGM) could be best positioned to consolidate displaced demand from The Mirage.”

MGM has 37,243 rooms on the main resort corridor, representing 40.4 percent of supply. Based on its analysis, CBRE estimates MGM could pick up an additional $69 million to $102 million of annualized EBITDAR.

Caesars has 20,630 hotel rooms on or near the Strip, or 22.4 percent of total supply. Reno-based Caesars could potentially generate $31 million to $49 million of incremental EBITDA “by capitalizing on the displaced demand from The Mirage,” DeCree noted.

The CBRE analysis notes that since Caesars and MGM “already have high occupancy,” large-scale events and weekends could put a strain on their room availability. As such, DeCree believes The Strat could see a boost from budget-minded travelers while higher-end guests will likely flock to Wynn’s two luxury properties.

Wynn could generate anywhere from $8.7 million to $31.4 million while Golden Entertainment, parent company of The Strat, could pick up between $2.5 million and $4.5 million of EBITDAR from the Mirage closing.

“While there are many variables that could impact our analysis, we see a clear benefit for all Strip operators with more customers chasing fewer rooms and ultimately driving higher (average daily rates),” DeCree said.