A Wall Street analyst is “becoming more cautious” about Las Vegas casino earnings due to slowing leisure travel, while looking positively at Macau and Chinese economic-stimulus policies.

Chad Beynon, senior analyst for Gaming, Lodging & Theatres at Macquarie, issued the note Friday after the Nevada Gaming Control Board reported that Las Vegas Strip gaming revenue fell more than 3 percent year over year in August.

Beynon is leaving Las Vegas gaming-revenue estimates unchanged, but noted a risk to the current third-quarter Wall Street consensus “currently skewed to the downside” based on market data through August.

Last month, Las Vegas local casino gaming revenue was down 6% year over year, while downtown fell 9%.

Baccarat revenue declined 34% despite drop increasing 12%; the hold came in at 10% versus 18% in August 2023, about 500 basis points below the long-term average. Similarly, slot handle increased 8%, but revenues were flat, with the hold 100 basis points below the long-term average of 8%. Under more normalized hold conditions, Beynon estimates monthly gaming revenue growth would have reached double-digits, which compares to broader U.S. regional casino same-store growth of 5% in August.

It was the second month in a row with very low baccarat hold. Given the results, Beynon said they’re sticking with their call for minus 8% Strip gaming revenue growth in the third quarter, with September representing another tough baccarat hold comparison.

“We remain positive on the non-gaming outlook in Vegas, given strong group travel and events, but slowing leisure travel could lead to a more competitive promotional environment and hurt Vegas margins. Additionally, comps in the fourth quarter and first quarter become increasingly difficult as we lap F1 and Super Bowl, respectively.”

Not everything is negative going forward. On the non-gaming front, Beynon said Strip revenue per room in August increased 14% year over year versus down 4% in July. Visitation increased 2% year over year.

“The strong RevPar rebound in August aligns with second- quarter commentaries from management teams for positive room-rate growth for third quarter and group room bookings pacing up mid-single digits for the remainder of 2024, in addition to mid-single-digit group growth in 2025.”

As for Macau, Beynon said the third quarter was coming in “light,” but stimulus and the holidays provide for a strong fourth quarter set up.

Macau gaming revenue through the week ending Sept. 22 is tracking at MOP 12.15 billion or ADR of MOP 552 million as VIP volume was down 11% to 13% month over month and mass was down 11% to 14% in the seasonally weaker September period that also had typhoon impact, Beynon said.

Channel checks suggest that foot traffic was strong for the Mid-Autumn Festival, but that visitor spend was weak. Assuming the rest of the month generates ADR of MOP 510 million to 600 million and considering the typical slowdown leading into Golden Week imply that September gaming revenue could end in the range of MOP 16.2 billion to 17 billion, Beynon said. That represents growth of 8% to 14% year over year and a drop of 14% to 18% month over month.

This would imply a third quarter Macau gaming revenue of MOP 54.5 billion to 55.3 billion, representing growth of 12% to 13% year over year and negative 2%-3% quarter over quarter.

With September revenue coming in softer than expected and impacted by typhoons, Beynon revised their industry model and adjusted company estimates for third-quarter earnings.

Consensus currently calls for third-quarter Macau EBITDA quarter over quarter to be: Las Vegas Sands +2.4%, Wynn Resorts +3.4%, and MGM Resorts International -5.7%.

“The Chinese government announced economic-stimulus policies on September 24 that should be positive for the Chinese economy and thus Macau and we believe this has improved sentiment on Macau gaming stocks,” Beynon said.

For 2024, Beynon expects gaming revenue of -22% versus 2019 (+25% year over year). That’s $28.7 billion, with mass continuing to run above pre-pandemic levels.

“With additional operator revenue growth in mass and non-gaming, we model for margin upside despite higher opex concessionaire commitments,” Beynon said.