Over the past couple of weeks, we have discussed Florida tourism, cruising, and international travel. This week, we got more reports from the leisure and entertainment industry to allow for a more complete view of consumer spending and choices being made. In sum, the reports indicate that consumer spending on leisure travel and experiences continues on a strong pace with consumer wallet share still moving from goods to experiences. The results also show that the affluent are still off on international holidays, which is a negative to U.S. consumer expenditures and the brands that cater to those households.
SeaWorld provided preliminary Q2 2023 results this week and reported on a -3% decline in attendance. Placer showed visits (with a length of stay exceeding 120 minutes) within 97% of the reported 6.1M tickets sold and visitor trends consistent with the attendance decline. Williamsburg and SeaWorld Orlando were the largest contributors to the group’s decline. Busch Gardens Williamsburg had a sharp decline in mid- to late-April, which may be weather related. The announcement read, “The decrease in attendance was primarily due to adverse weather across a number of the company's markets, including during peak visitation periods.” Attendance is up +2% for July despite roasting temperatures for the month.
Cedar Fair reported that adverse weather in California led to a -17% decline in its parks in the state. Cedar Fair CEO Richard Zimmerman is quoted in its Q2 2023 update press release saying, “Several initiatives are underway to spur demand...over the balance of the year. We have increased our marketing outreach activities at our largest parks and are testing limited duration promotions around single-day tickets, with the goal of driving incremental demand and creating urgency to visit our parks over the balance of our summer operating calendar and into the important fall season. Our operating trends in July demonstrate that our marketing initiatives led to an initial lift in attendance, aided by a return of more normal operating conditions at several parks previously impacted by extreme weather.” (Cedar Fair’s parks appeal to more moderate incomes and local visitation which makes them more prone to macroeconomic pressures like food inflation depressing demand.) Placer data (below) shows that the California visitation trend has improved since the start of Q2, but with persistent declines, one can understand why marketing and promotions are being increased.
Gaming and Lodging
In Marriott International’s Q2 2023 update, CEO Tony Capuano noted, “In the U.S. & Canada, revenue per available room (RevPAR) increased 6%, with many urban markets showing impressive growth in the second quarter. Within customer segments, the group once again performed extremely well, with revenue rising 10% above 2022. Business transient revenue also saw strong year-over-year growth, driven by solid average daily rate growth. Leisure transient revenue rose as well, albeit more slowly, as more travelers from the region chose to visit overseas destinations.” One can see this dynamic in the company’s domestic results by brand: occupancy is down for its luxury segment like The Ritz-Carlton (customers off to Europe) and its mass segment like Residence Inn (inflation fatigue). The Westin, Marriott, and Sheraton brands which serve the business transient customer showed good occupancy and RevPAR growth.
A similar dynamic is also evident in Vegas with Caesar’s Entertainment and MGM Resorts (Bellagio, MGM, Aria, Mandalay Bay, New York-New York, Luxor, and Excalibur) reporting solid but no longer growing results for their Strip properties. MGM reported a drop in casino revenue despite an increase in table drop and slot handle (below).
A drop in casino revenue despite an increase in table and slot activities implies less food and beverage spend, which would also reflect fewer visitors, which Placer shows (below). Placer shows softer year-over-year traffic for both Bellagio and New York-New York. For Bellagio, this would reflect its more affluent customer base that was vacationing abroad compared last year’s “Vegas Vacation” trends, a dynamic that is also affecting Florida. (We recently discussed Florida being a 2021-2022 story.)
In terms of next year, MGM Resorts International CEO Bill Hornbuckle said, “If you think just more macro in terms of events activity, the great news is we're still a net beneficiary where carriers like to bring their aircraft. I think we're sitting at 115% or 116% of inventory seats over where we were pre-pandemic. So that's been great news. Conventions will pick up pace. We have yet to see the full return of international business to Las Vegas, particularly from Asia.”
On "Vegas 5.0", a new theme that we are developing about Vegas becoming an all-in destination leisure and entertainment city--including pro sports--Hornbuckle noted "Bookings are strengthening for the remainder of the year and as we get closer to the Formula One in November. We've also got a great fall home schedule for the Raiders, which will have fans flocking into Vegas from Green Bay, Pittsburgh, Kansas City and New England, among other cities that all travel well. For Formula One, while still early, we already have twice the occupancy on the books and at 4x the average rate compared to last year and with more than 70% of our ticket inventory already committed. A portion of these tickets will go to our gaming customers, and early front money and credit data suggested Formula One is shaping up to be an all-time record casino event for the company. Our pace into the first quarter of 2024 is also setting up quite well, highlighted by the Super Bowl at Allegiant Stadium in February. We're already seeing stronger rates than a typical Super Bowl weekend with exceptional early business from sponsors and media that has led to 3-4x higher room rates on the books. Looking longer-term, we're excited by the possibilities of welcoming the A's to Las Vegas literally in our front yard at the current Tropicana site. The A's are proposing a 30,000-seat stadium, representing an additional 2.4 million seats every year during the regular season, that should drive over 400,000 new tourists during and a focus on midweek business. The Raiders and the Stanley Cup Champion Golden Knights have shown that Las Vegas is the go-to destination for away fans seeking a fun and entertaining getaway to see their favorite teams play and when we think the A's will be no different. The A's stadium, Allegiant and T-Mobile, represent 100,000 seats holding 3 professional sports teams that are directly adjacent to one or more of our properties with a possibility for multiple events on the same day. It's clear that Las Vegas has become the world's premier sports and entertainment destination...We have several bids in for several NCAA tournaments, the college championship game, the Final Four, the Frozen Four. And so, the programming of legion and the opportunity it provides has proven to be highly successful for whether it's Beyonce that's coming in later this month or others. Selling out in Las Vegas is almost given the nature of the activity, it's not a 3-hour event, it's a 3-day event. We keep getting more than our fair share of looks at all of those things as a community.” SVP Corey Sanders also added “Thinking of the Sphere with U2, which at 20,000 people a night has to help the entire city. And I think boxing is definitely coming back. We just hosted fight last week and that was spectacular for us.”
To capitalize on the opportunity, MGM and Marriott International created a new MGM collection with Marriott Bonvoy, allowing its more than 180 million members to book rooms and earn and redeem Marriott Bonvoy points at seventeen MGM Resorts domestic properties. The agreement is expected to drive lower customer acquisition costs and with a better mix and higher ADRs and on property spend. By 2025, the expectation is that the Marriott customer base represent a meaningful segment of its hotel mix at premium rates by replacing approximately 5%-7% of its lowest yielding rooms (particularly at the Cosmopolitan) with Marriott direct bookings. Upgrading these lower-yielding room nights with Marriott brings lower customer acquisition costs, higher ADR, and a higher-yielding customer with more on-property spend.
With respect to live entertainment in the U.S., Live Nation reported over 8K events for Q2 2023, bringing the first half of 2023 to +17% increase in events compared to 2019 and expectations that the second half will see an +8% increase versus 2029. Attendance was up +17% relative to 2019 and the company expects the second half to be up +20%. Along with higher ticket, food, beverage, and merchandise prices, this represents about +$4B in additional concert spending for the second half on an annualized basis.
Live Nation CFO Joe Berchtold said, “year-to-date, up +8% in North America with the fan count [to 2022]. Expect that to be double-digit fan growth in Q3 2023, probably verging on double-digit fan growth for the full year in North America as we're seeing that top to bottom. We're seeing strong growth in theaters and clubs. Our amphitheaters are doing great, substantially up in number of fans attending per show, and the high-end stadiums are doing very well...I've seen some things talking about [the health of middle and lower-income consumers]. Demand across all of those [groups] continues to be very strong." CEO Mike Rapino said, “We're not seeing any indicators that would give us any concern on any slowdowns...We're seeing high single-digit increases in attendance per show, which is really driven by more lawn tickets being sold. The people that you might say are going to be the most price-conscious are continuing to spend strongly per caps growing even as we're continuing to increase our number of fans per show, which again means that even the marginal fan is continuing to spend a lot when they show up...We're looking next year, we're seeing top-to-bottom an incredible pipe of artists that will be filling all of the different venue types and markets across the world. We think we're heading to a very, very strong 2024, 2025, onward...The consumer demand is growing, and our ongoing bolt-on acquisitions, venues, new market entries compounded on top of our organic growth is going to give us this continual one-two punch of growth for the next multiple years.”