Optimistic economic outlook brings locals back into the game

By J.D. Morris

Monday, May 9, 2016 | 2 a.m.

April was a big month for Boyd Gaming Corp.

The Las Vegas-based casino operator, which came into the month owning nine casinos in the Las Vegas Valley, announced it would spend hundreds of millions of dollars to buy three more: the Aliante and Cannery in North Las Vegas, and the Eastside Cannery on Boulder Highway.

In making those moves, Boyd placed a heavy bet on locals. Through its $380 million planned acquisition of Aliante and its $230 million intended purchase of the Cannery casinos, Boyd will significantly extend its presence in the locals gaming market.

CEO Keith Smith has been optimistic about Southern Nevada’s economic outlook.

“By almost every metric, the Las Vegas growth story is getting brighter,” he said on a conference call with analysts in late April.

Smith elaborated by pointing to the valley’s fast growth rate, its increase in total employment, a more diversified job base and a rise in average weekly wages. He also cited a healthy number of businesses created in the past year, the region’s record-breaking tourism levels, an “all-time high” in taxable retail sales, and billions of dollars in planned construction activity.

Those trends were helping to “drive significant, broad-based growth throughout our locals business,” Smith said.

Smith also referred to the valley as “one of the most robust growth markets in the country” and said his company was “confident that a strong growth will continue.”

Those rosy feelings — and the planned expansion that comes with them — are a far cry from Boyd’s status amid the recession, when the company halted work on a multibillion-dollar Strip casino, Echelon. Boyd ended up selling the Echelon site to Genting Group, which intends to build the $4 billion Resorts World Las Vegas there.

Colliers International Las Vegas research analyst John Stater said he could understand why Boyd felt better about Las Vegas these days. “The numbers all appear to be good,” Stater said. “It looks like people are getting back to work; it looks like we’re seeing more development of various kinds in the valley.”

But Boyd’s big casino acquisitions reflect more than just positive feelings about the Las Vegas economy in general. They also demonstrate a specific confidence in North Las Vegas; two of the three properties the company plans to purchase are in that city.

Smith has described North Las Vegas as an area poised for substantial growth. He said the city had a lot more room to grow and that economic development in store for Apex Industrial Park — the site chosen by electric-car builder Faraday Future for a manufacturing plant — could bring more customers to the area.

Boyd previously had owned no property in North Las Vegas. Smith further justified his company’s entrance into the area by claiming that gaming in North Las Vegas has done well lately — and data from the Gaming Control Board indicate he’s right.

So far this fiscal year in North Las Vegas, revenue generated by gambling has grown 2.6 percent, compared with an increase of 1.6 percent on the Boulder Strip and a slight decline on the Las Vegas Strip. Downtown Las Vegas, where Boyd owns three casinos, has outpaced them all with growth of 7.4 percent over the current fiscal year, which began July 1.

“We’re seeing much stronger growth in the area in that portion of the locals market than we’re seeing in the locals market overall,” Smith has said of North Las Vegas. “So that’s what gets me excited about the opportunity.”

Stater said North Las Vegas probably wouldn’t see explosive growth in the near future, but in the longer term — the next decade or so — it could develop a lot more.

“If you think things are going to continue to grow in Las Vegas, then the question is, where are they going to grow?” Stater asked. “There’s a lot of room to expand up in North Las Vegas, and the truth is, as the population continues to grow … some of it’s going to be moving up there.”

Similarly, Union Gaming Group analyst John DeCree said the financial results of Boyd and Station Casinos showed that the locals gaming market had been healthy lately. Boyd just reported its strongest year-over-year revenue growth from its locals gaming segment in more than 10 years, and as of a few months ago, Station had reported 11 consecutive quarters of year-over-year net revenue increases.

“From their reports, things look good in the locals market,” DeCree said.

Like Boyd, Station recently sought to show its confidence in the local economy. Late last month, the company raised more than $531 million in its long-awaited initial public offering, and regulatory filings in advance of the IPO spoke highly of where Southern Nevada was headed.

“We believe the Las Vegas regional market is one of the most attractive gaming markets in the United States due to favorable economic and market fundamentals, a number of which drive demand for our products,” Station’s IPO prospectus said.

Station is publicly traded under the name Red Rock Resorts Inc., but its stock price was down on its first day of trading in April. DeCree said that may have occurred because there wasn’t a clear “growth story” in that IPO, and he noted that Boyd’s stock also fell in late April.