Stealth Pricing Backfires On Las Vegas

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Includes: CZR, LVS
by: Hedgeye

Summary

Consumers are catching on to hidden resort fees and lower returns on casino games.

Google trend search for “Las Vegas resort fee” has rocketed to an all-time high, coinciding with the weak quarter.

This stealth pricing practice will continue to bite companies like Las Vegas Sands, MGM and Caesar’s unless conditions change.

The cat is out of the bag for Las Vegas’s stealth pricing scheme.

Consumers are catching on to hidden resort fees and lower returns on casino games. Both had been significant revenue drivers for the industry. But after a rough third quarter, it appears it’s becoming a liability.

Case in point: Google trend search for “Las Vegas resort fee” has rocketed to an all-time high, coinciding with the weak quarter.

According to Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan, that stealth pricing practice will continue to bite companies like Las Vegas Sands (LVS), MGM and Caesar’s (CZR) unless conditions change.

“I’m all in favor of companies raising prices if they can, but now it looks like it’s really starting to hit demand,” Jordan explains in the clip above.

“You need volume and you need visitation. How do you get that when prices are already too high? We think it’s going to be very, very tough unless demand grows into this pricing scheme.”

Watch the full video above for more.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.