For decades, gaming stocks were primarily dominated by casino operators and a few suppliers. However, recent years have ushered in a new era, with real estate and online sports betting emerging as major players in the gaming equity landscape.
In the realm of publicly traded casino landlords, there are two prominent names: VICI Properties (NYSE: VICI) and Gaming and Leisure Properties (NASDAQ: GLPI). These companies, structured as real estate investment trusts (REITs), originated as spin-offs from major casino operators. VICI was spun off from Caesars Entertainment (NASDAQ: CZR), while Gaming and Leisure separated from Penn Entertainment (NASDAQ: PENN).
Their business model is a major draw for investors. Unlike traditional casino operators, VICI and GLPI are not directly influenced by casino visitation rates or player outcomes. Instead, they collect rent from tenants, who face serious credit risks if they fail to pay. Additionally, maintenance and property upgrades are the responsibility of the tenants, not the REITs.
“In 2023, VICI’s revenue surged 35.8%, driven by an aggressive acquisition strategy,” commented Drew Anderson, product analyst at VanEck. “Their investments now extend beyond casinos into assets like Bowlero bowling centers and New York’s Chelsea Piers.” As the largest owner of Las Vegas Strip real estate, VICI also controls landmark properties like Caesars Palace, MGM Grand, and the Venetian.
Additional Advantages of Casino REITs
VICI and GLPI offer unique advantages. Many REITs, including gaming REITs, perform well in inflationary periods, as their contracts often include inflation-adjustment clauses. Furthermore, REIT stocks are sensitive to interest rate changes, frequently moving inversely to rates. Following recent rate cuts by the Federal Reserve, these REITs may see increased investor interest. The long-term lease structures in gaming REITs also simplify cash flow projections, benefiting both investors and analysts.
“These long-term leases mean tenants are responsible for virtually all expenses, from taxes to maintenance,” Anderson noted.
Online Sports Betting: A Major Growth Driver
Since the Supreme Court’s 2018 ruling on the Professional and Amateur Sports Protection Act (PASPA), 39 states and Washington, DC, have legalized sports wagering, driving up interest in stocks like DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT), parent company of FanDuel.
DraftKings and FanDuel now control a large share of the U.S. sports betting market, which has expanded rapidly with the proliferation of mobile and online betting options, eliminating the need for physical sportsbook visits.
Online sports betting is expected to continue growing, especially as more states consider legalizing iGaming alongside sports wagering. This digital evolution is reshaping the gaming stock landscape, making real estate and online sports betting the key players in the next generation of gaming investments.
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