For many years, the gaming equities scene was primarily controlled by casino stocks, with suppliers playing a smaller role. In recent times, this has shifted due to substantial input from online sports wagering and property firms. 

In the realm of publicly listed casino landlords, there are only two notable entities — VICI Properties (NYSE: VICI) and Gaming and Leisure Properties (NASDAQ: GLPI). Those real estate investment trusts (REITs) are derivatives of casino operators. VICI was divested from Caesars Entertainment (NASDAQ: CZR), while Gaming and Leisure was separated from Penn Entertainment (NASDAQ: PENN). 

Their business approach attracts numerous investors. Neither REIT depends on casino attendance or unfavorable outcomes for players at the tables. Instead, they gather rent, and this rent must be paid; tenants (gaming companies) face considerable harm to their credit scores. Moreover, tenants — rather than GLPI or VICI — are accountable for improvements and upkeep at the properties.

"In 2023 alone, VICI's revenue surged by 35.8%, largely thanks to its aggressive acquisition strategy,” noted Drew Anderson, product analyst at VanEck. “They’re not just snapping up casinos either — VICI has diversified its revenue streams beyond traditional gaming activities, scooping up assets like Bowlero bowling centers and the Chelsea Piers complex in New York.”

VICI is the foremost owner of casino real estate on the Las Vegas Strip and possesses the property holdings of legendary establishments like Caesars Palace, MGM Grand, and the Venetian. 

Additional Advantages of Casino Real Estate Stocks 

Gaming and Leisure and VICI provide investors additional potential advantages. Market participants generally prefer the wider universe of REITs during inflationary periods, like those experienced in 2022 and 2023, since landlords frequently include inflation adjustments in tenant agreements, which also applies to gaming REITs. 

Moreover, REITs of various types are sensitive to interest rates, indicating that their stocks frequently move in the opposite direction of rates. After a 50 basis point cut in September, the Federal Reserve reduced rates by 25 basis points earlier this week. Next, there are the lengthy lease agreements gaming firms establish with companies such as GLPI and VICI. This simplifies the process of predicting future profits and cash flow for analysts and investors. 

“These long-term leases ensure that the tenants (the casino operators) are responsible for virtually all expenses, from taxes to maintenance. Rent escalation clauses are also baked into lease agreements, which means GLPI and VICI sit back and collect steady rent checks, giving them a predictable revenue stream that’s less volatile than the ups and downs of daily gaming activity,” added Anderson.

Since their separation from those casino companies, both VICI and Gaming and Leisure have surpassed Caesars and Penn in performance. 

Digital Sports Wagering a Leader in Growth 

Following the 2018 Supreme Court decision regarding the Professional and Amateur Sports Protection Act (PASPA), 39 states along with Washington, DC, have legalized various types of sports betting, boosting interest in companies like DraftKings (NASDAQ: DKNG) and FanDuel's parent company Flutter Entertainment (NYSE: FLUT). 

Currently, these two companies dominate the US sports betting market, which has surged as numerous states have allowed mobile and online wagering, eliminating the need for in-person visits to physical sports books. 

“The internet has fundamentally reshaped gambling, and the old stereotype of gamblers traveling to casinos is becoming increasingly outdated,” observed Anderson. “Sports media outlets cover the betting odds of every event. With the rapid expansion of online gaming and sports betting, the action has moved from the neon-lit Strip to the palm of your hand.”

The chart above indicates that online betting is on the rise and this trend is likely to persist, especially if additional states legalize iGaming along with sports wagering.