Brick-and-Mortar Holds Its Own

If one thing is clear from the spate of recently released first-quarter earnings and accompanying guidance, it’s that the demise of U.S. brick-and-mortar casinos has been greatly exaggerated.

Whether it’s in regional casinos across America or in the hand-wringingly discussed destination resorts that line the Las Vegas Strip, real live human beings are visiting and spending dollars on real, tangible entertainment from casino floors to showrooms to restaurants.

And, it should be noted, the desire of people to go out for entertainment is not a parochial phenomenon. Just look at the rising visitation in Macau and the bang-up gaming revenues in Singapore to see that live, touch-and-feel experience maintains its allure.

The numbers have been mixed, for sure, with dips in some regional markets and just modest increases in others. But, overall, they are up, even while digital gaming grows faster.

Nevada, which can rightfully be considered the heart and soul of the casino world, demonstrated brick-and-mortar health, with March revenues full of exclamation points.

Las Vegas Strip gaming revenue soared 14.43 percent over last year. Some of that doubtlessly is attributable to an unusually strong convention calendar, but March had one fewer Saturday than did 2025, which would tend to dampen gambling numbers.

Some of the increase is because casinos played lucky, but gamblers also played more. Baccarat drop soared 41.8 percent in a signal of strong international play at the highest levels. Blackjack drop jumped a healthy 5.13 percent and gamblers poured 4.98 percent more into slot machines, both signs of strong domestic play.

The strong play wasn’t just Strip conventioneers. Locals casino revenue leaped 8.91 percent and Reno enjoyed 7.5 percent growth.

Clearly, the attraction of fun on the casino floor is universal and, we daresay, eternal, in a world where so many people are glued to their screens for hours per day of mind and body-numbing non-exercise.

So, upon the assumption that in-person experience will retain its appeal, who are the winners?

The big national and international casino operators will stay around.

But the two companies we find interesting are Boyd Gaming and Red Rock Resorts. Stocks of both companies fell just after reporting strong earnings. Both pay dividends and buy back shares. Boyd, especially, is a big buyer of its stock, having reduced share count by a third in recent years.

The culprit in dinging their stock prices was construction disruption from numerous upgrades and expansions that will cost some business in the coming year. Red Rock is also being penalized for its higher-than-peers valuation. In truth, Red Rock’s stock valuation is at around a dozen times this year’s expected enterprise value-to-EBITDA, which isn’t high, as casino operators generally are valued too low, with most in the single digits.

Both companies have demonstrated that their capital investments yield strong returns, and investors thinking beyond a calendar year ought to be jumping into them given the numbers those projects will generate. Red Rock, particularly, makes the strong case in its investor materials that it will benefit significantly by what may be the industry’s most certain growth plan in one of America’s greatest growth markets, though Boyd also plays in the Las Vegas locals sandbox and intends to capitalize on that growth.

It is also worth noting that both companies are heavily owned by founding families. They are successfully experienced and they aren’t going anywhere. Indeed, committed ownership with track records of success and clear, step-by-step growth strategies are the key, foundational advantages that Red Rock and Boyd possess over competitors.

Red Rock, for example, builds quality properties that attract loyal, repeat customers. The cost and disruption of their capital projects can be thought of as exchanging minor short-term pain for considerable long-term gain.

That’s as opposed to Strip competitors who, calculators in hand to show costs-versus-savings, charge an array of fees to raise revenues or close amenities to cut costs. That customer-alienating approach trades the short-term gain of higher profit margins today for the long-term pain of less profit growth, or even dwindling profits, tomorrow.

Another advantage of family ownership is that companies can give first loyalty to customers and employees, not to Wall Streeters. On their recent earnings conference call, Red Rock managers boasted of their awards for employee satisfaction. For a company in the hospitality industry, that’s a distinct advantage, as happy employees are likely to make happy customers. And happy customers—not profit margins from parking fees and the like—are the basis of a successful hospitality business.

It should also be noted that Red Rock owns 100 percent of its real estate. That’s not just a bookkeeping advantage in owning appreciating assets. It also avoids the major new operating expense of rent that burdens competitors who still bear the cost and construction disruption of expansions and renovations to what are now someone else’s properties.

Finally, as mentioned, there is this advantage: Demographics are the future.

While Strip operators compete nationally for tourist and convention dollars, Red Rock, and to a lesser extent, more geographically diversified Boyd, will rake in returns as their property upgrades and expansions serve a growing population.

Frank Fantini is principal at Fantini Advisors, investors and consultants with a focus on gaming.