Three things we learned about Las Vegas and the gaming industry in the second quarter

Gamblers try their luck with slot machines during the opening of the casino floor at the Cromwell, formerly Bill’s Gamblin’ Hall & Saloon, on the Las Vegas Strip and Flamingo Avenue, Monday, April 21, 2014.

Though casinos did mostly well in Las Vegas during the second quarter this year, it wasn’t because of any nationwide gambling surge.

In fact, it was in spite of the U.S. gaming industry’s weakness. Earnings reports from the major Las Vegas-based casino companies drove home that lesson, among others.

Here’s a more detailed look at three important points that emerged from the reports and analyst comments.

1. Las Vegas is doing better than the rest of the country

Most of the U.S. gaming industry is in a bleak position. Case in point: On June 30, Moody’s Investors Service downgraded its industry outlook to “negative” from “stable,” predicting that domestic gaming revenue will decrease at a rate between 3 percent and 5 percent over the next year to year and a half.

But bad news for the country’s overall market doesn’t mean bad news for Las Vegas. Moody’s noted that the Strip is performing well by comparison, and it expects that trend to continue.

MGM’s domestic casino revenue increased 6 percent from last year, driven by growth in Las Vegas. Caesars Entertainment saw a 1.9 percent decline in casino revenue compared to last year’s second quarter. But the company said “strong performance” from its Las Vegas properties helped partially offset “less favorable conditions in regional markets.”

Wynn Resorts, meanwhile, reported a 57 percent increase in its second quarter earnings due to its Las Vegas properties. The Cosmopolitan of Las Vegas recorded a nearly 70 percent increase in casino revenue alone.

The Strip’s health makes sense given that, in June, gaming revenue there jumped 22 percent from the same month one year earlier.

These Las Vegas highlights are a world away from flailing Atlantic City, which is shuttering casinos as its revenue is sapped by competitors in nearby states.

“In Las Vegas, what’s really driving the growth is the nongaming segment,” said Union Gaming Group analyst Robert Shore, pointing to the city’s diverse nightlife, restaurant and entertainment offerings. “One thing that Atlantic City hasn’t done that Las Vegas has is they haven’t given somebody a reason to drive to Atlantic City and spend money on gas and tolls. They don’t offer much else aside from gaming.”

2. Local gamblers aren’t rebounding like the Strip

All of that strength on the Strip isn’t translating into the same kind of increased gaming revenue from Las Vegas locals. Mark Falcone, the chief financial officer of Station Casinos, referred to it as a “tale of two cities” in a conference call with analysts.

He said that revenue from local gamers doesn’t reflect how well the Las Vegas economy is doing. Casino revenue at Station dipped slightly to $223.9 million from $224.9 million in 2013’s second quarter.

Boyd Gaming, another casino company that caters to Las Vegas locals, said its locals revenue was down slightly — less than 1 percent — in the second quarter.

Shore said he was “perplexed” by the disconnect between all the positive data points for Las Vegas and lackluster locals gaming. He said that construction workers have helped growth in the locals market before, so projects like MGM’s arena might help moving forward.

3. Macau remains strong but growth could be slowing

The narrative over the last few years has been one of steady growth in Macau, the only place in China where gambling is legal. That story could be changing now.

Macau officials said casino revenue went down more than 3 percent in June — its first decline in five years — and July.

Analysts have said that declines in VIP gaming could be behind the speedbump. MGM, for example, reported that VIP table-game revenue decreased by 18 percent from the same quarter last year.

According to Bloomberg, Macau casinos get 60 percent of their revenue from high rollers who wager at least $645,000 per trip. One analyst told Bloomberg that high rollers “don’t want to draw unnecessary attention” during a nationwide crackdown on corruption in China.

That doesn’t mean Macau is declining everywhere for Las Vegas-based companies. Despite the falloff in VIP revenue for MGM, the company’s main-floor table game revenue went up 41 percent.

And Las Vegas Sands, a major player in the Macau market, said its China income increased by 27.2 percent from the previous year. The Sands relies comparably less on VIP revenue than its competitors, Shore said.