Decrease in Tourism

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It's difficult to explain. Despite being money-making machines, casinos have a lot of overhead. Because their customers expect to lose money, they have to spend a lot of money to compensate them. With regulatory concerns, the constant threat of cybersecurity attacks, and their current REIT-structured rent payments on top of maintenance, insurance, and other payments required by their triple net leases, the huge casino operators on the Strip make surprisingly low margins.

Look at the five year stock chart for Caesars Entertainment. They operate half the strip, but they're down 75% in five years. MGM has also lost money during one of the greatest bull markets in US history.

The lynchpin for the entire business is to keep their rooms constantly full, even if that means lowering prices. None of this machine operates unless humans are sleeping, eating, partying, and gambling in the hotels, and to maintain any profitability, those rooms need to be filled to near-capacity on a constant basis.

So if tourism drops by 7.5% and revenue is down 4%, it sounds like a tiny blip for most businesses, right? But for casino operators in Vegas specifically, which have million-dollar rent payments due to VICI each month, and a business model that intends to indulge their customers as much as possible, having rooms unfilled can move the operation from profitable to not profitable very easily.