OREANDA-NEWS. The Las Vegas strip is among the most competitively positioned gaming market in the U. S., benefitting from a variety of non-gaming amenities to prop up revenues as gambling grapples with a secular decline in popularity, according to Fitch Ratings. However, the Las Vegas market remains vulnerable to economic downturns, even after improvements made since the last recession.

"Non-gaming amenities are key to secular strength on the Strip," says Alex Bumazhny, Senior Director of Gaming, Lodging & Leisure. "A critical mass of other activities including convention infrastructure help insulate the Strip from the pressures facing other gaming markets."

Fitch estimates larger resorts on the Strip generate more than 60% of their gross profits from non-gaming amenities, a figure that has grown from a decade ago. This trend supports the view that Strip resorts are real estate investments and should trade at comparable multiples.

During the last downturn, the Strip underperformed significantly, with gross gaming revenue and RevPAR declining 18% and 37%, respectively. More recently, baccarat volumes have declined in the wake of weakness in Macau, although these challenges are manageable.

Many Strip-oriented operators have improved their financial profiles since the early 2000s when a building and M&A boom eroded liquidity and weakened balance sheets. However, overhangs remain: the Caesars' bankruptcy could impact some of its entities and Wynn's Las Vegas expansion could become a burden. New supply from Wynn or others could be problematic in a downturn, as the Strip's RevPAR growth has lagged the national average since the recovery, without new supply since 2010.