While MGM Resorts (NYSE:MGM) has been minting money at Macau, business has been picking up slowly at the Las Vegas Strip. The casino operations at the Strip were hit hardest by the recession but now appear to be recovering well. According to the recently published data, Las Vegas Strip’s total win amount increased by 10% for the period of six months ending January 2014. The growth was predominantly driven by baccarat, which saw 32% jump in 2013 revenues. Baccarat hold percentage (this refers to the percentage of wagers that casinos kept versus what players won) was 15.5% as compared to 11% in December 2012. 
The casino operators such as MGM have been trying to attract more Asian high rollers, who prefer baccarat to other casino games, and the growth of baccarat is helping the company grow. Going forward, the economic recovery and higher consumer spending will only make things better for the casino operators at the Strip.
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Las Vegas Casino Operations Are Picking Up
2013 was a good year for casinos in Nevada. The state’s casino industry collected $11.14 billion in revenues, up 2.6% from the prior year.  This was the state’s best collection since 2008. The all-time single-year record remains $12.8 billion seen in 2007. MGM saw 1.8% growth in overall casino revenues while the table games revenue jumped 5% compared to the prior year period. This can be primarily attributed to an increase in overall tables games hold percentage from 19.7% in 2012 to 20.5% in 2013. 
The U.S. casino operations contribute more than 15% to MGM’s value, according to our estimates. Asian high rollers prefer baccarat to other games and this has led a steady increase in the game’s market share from 22% in 2004 to over 40% in 2013.  The casino operators have been trying to attract more players from Asia and rightly so. The major casino players in Las Vegas have large room capacity while the supply of rooms is limited in Macau. MGM for instance has more than 35,000 guest rooms and suites at the Strip as compared to 582 in Macau.  It makes sense for these casino operators to attract customers from Asia to Las Vegas with more rooms to offer high rollers. The city also offers lower prices as compared to China when it comes to upscale shopping. It must be noted that MGM is also involved in other business activities including retail malls and entertainment.
On the other hand, domestic players prefer slot machines over table games. Slot machines constitute the major chunk of casino revenues in the U.S. In 2013, it accounted for 61% of the overall casino revenues in Nevada.  However, it is contracting slowly and 2013 figure was lowest since 1990. MGM has more than 23,000 slot machines in the U.S. The company’s slot revenues at the Las Vegas Strip resorts increased by 4% in 2013.  MGM’s businesses including casinos, hotel, retail malls, entertainment and food & beverages are linked to the strength of the economy and travel spending. A faster recovery in the U.S. economy will be great news for domestic casino operators such as MGM. According to the Bureau of Economic Analysis, consumer spending in the U.S. increased 0.6% to $10,812 billion in the fourth quarter of 2013, as compared to $10,744 billion in the third quarter of 2013.  The trend has been positive since 2010, evident from the chart below. Higher consumer spending could translate into better sales for MGM’s casino and other operations. We expect steady growth in the company’s U.S. operations throughout the forecast period.