Author: David Mckee

Posted on by — Leave a comment

Open season in New York; Ohio, Missouri boom; Scientific baffles

Hero to zero in less than a year.

Rather than face (well-deserved) impeachment, New York State Gov. Andrew Cuomo (D) resigned in disgrace today. Which happened to coincide with the disclosure of the companies which have applied to be online sports betting provider(s) for the Empire State. Cuomo’s not-a-moment-t00-soon departure means that the contenders can hope not to be shaken down or chosen on the basis of how usuriously they are willing to be taxed (isn’t that tantamount to bribe solicitation, guv?). And Cuomo’s obvious favorite, DraftKings, now faces a level playing field. At least that is our hope. The finalists will be Bet365, Penn National Gaming/Kambi, FanDuel/BetMGM/DraftKings, TSG/FoxBet, TheScore and a jumbled combination of Kambi/Caesars Entertainment/Resorts World/PointsBet/WynnBet/Rush Street Interactive. DraftKings still has a very good chance of getting one of the plums, if for no other than reason than it’s riding the coattails of MGM and favorite son Empire City Yonkers. The second Kambi combination platter also has an edge since it contains two other New York brick-and-mortar operators, Rush Street and Resorts World.

“We expect to learn of the winning consortiums, and we believe two will be chosen, in the next 4-6 weeks. Based on the criteria put forth in the RFA, we believe there are obvious front runners from the list, and those for whom the prospects appear dim, based on their track records relative to the RFA selection criteria. That said, it’s New York and anything can happen,” wrote Carlo Santarelli of Deutsche Bank. Yes, anything can happen. Just ask Andrew Cuomo.

Continue reading Open season in New York; Ohio, Missouri boom; Scientific baffles
Posted on by — 1 Comment

Florida compact sneaks into effect; DraftKings buys out Fertitta

Secretary of the Interior Deb Haaland has jumped the shark. Her department has wisely-washily neither confirmed nor denied the controversial Seminole Tribe compact with the state of Florida, one that gives the Seminoles control over sports betting in the state. As a result, it goes into effect Oct. 15. What this means, practically speaking, is that we could drive across the Florida state line, park at the nearest rest stop, place a mobile wager from the restroom and have it be classified as ‘tribal gaming’ because all such bets are routed through servers on Seminole sovereign land. Yes, a toilet stall on the interstate could qualify as a ‘tribal gaming’ location under the terms of the compact. Haaland must have known this would be a hot potato, as the Interior Department snuck the decision out under cover of darkness (“quietly and passively,” as one newspaper put it). Or rather, they dumped it on the proverbial curb on Friday, the end of the news cycle when nobody would be looking. A court challenge is inevitable and, we hope, successful.

Deutsche Bank analyst Carlo Santarelli showed some skepticism of his own. He wrote, “While the initiative is likely to be legally challenged by numerous parties, and while [DraftKings] and FanDuel have partnered to get a petition signed to get on the November 2022 ballot, the way things currently stand, online mobile wagering in Florida is a monopoly, something we believed was likely to be the case, despite optimism around the skin partners. We believe that optimism should have faded once the DKNG/FanDuel effort to seek a different path got underway, as it essentially implied that both operators recognized that the hub and spoke OSB model via the Seminole Tribe wouldn’t work.”

Continue reading Florida compact sneaks into effect; DraftKings buys out Fertitta
Posted on by — Leave a comment

Maryland goes, goes, goes; Penn flips out; SEC scrutinizing DraftKings

We Americans sure do love us some gambling. Maryland‘s July numbers just came in and it’s 20.5% (!) ahead of 2019. Casinos won $180 million and two extra weekend days obviously helped the tally. MGM National Harbor led with $72 million (+19%), outpacing Deutsche Bank analyst Carlo Santarelli‘s $64.5 million forecast. Maryland Live locked up a 35% market share and $63 million in winnings, up 28%. Penn National Gaming was just in time in reacquiring Hollywood Perryville on July 1, $9 million gross was a 34.5% improvement on two years ago. Ocean Downs leapt 28% to $10.5 million and Rocky Gap Resort‘s $6 million was a 22% gain. And in what has to be a triumph for Horseshoe Baltimore, it was flat with 2019, grossing $19 million. So there’s some hope for it yet. West Virginia casinos nudged 5% above 2019 numbers, driven by a 34% increase in table win. Hollywood Charles Town was up 7%, 1% higher at the slots and vaulting 42% at the tables.

Penn had Wall Street analysts eating out its hand after the latest earnings call. “Memes [and] grandiose proclamations run wild” wrote Santarelli. “Well, this one was interesting. Between the call commentary, 95% of which was focused on a business that, as we have said for some time, will likely never amount to more than 20% of total Company [cash flow], if it is wildly successful, the social media promotion that began immediately, and the post call livestream ‘pumpapalooza’, PENN threw all it had at the retail investment community to promote a transaction, which, in our view, speaks to exactly what we have been saying for some time, the sports, and especially iCasino, strategies aren’t working.” You see, Penn used the quarterly earnings announcement to hype its acquisition of OSB provider TheScore. “We get that PENN needed a tech stack, but buying a media Company for a tech stack, knowing the challenges peers have had buying tech companies with sports betting tech stacks, seems a bit strange, and frankly, risky. We also get that buying a Canada based company, which has billed itself as a presumptive leader in provincial sports betting, once legalized, seemingly makes sense, but if we have learned any lessons from the US market, the willingness to spend and lose is the path to market share gains, more so than media presence.”

Continue reading Maryland goes, goes, goes; Penn flips out; SEC scrutinizing DraftKings
Posted on by — 3 Comments

Wynn “strong” this summer; MGM returning to form

Wynn Resorts released 2Q21 results yesterday and JP Morgan analyst Joseph Greff called them “strong” in both Las Vegas and Boston. In Macao, eh, not so much. He began by saying “results by region unsurprisingly reflect differences in vaccination rates and mobility/visitation availability.” Wynncore is gaining momentum as the temperature rises, posting the largest cash flow ever since except when it opened. Occupancy hovered around 95% on weekends and in the 80% neighborhood during midweek. “In Macau, limited mobility and small outbreaks continue to pressure travel, unsurprising and similar to 2Q commentary from” Sands China and Melco Resorts & Entertainment. As for WynnBet, it “expects to ramp up marketing ahead of the NFL season,” which seems to be a nice way of saying nothing much is happening right now. Wynncore generated $207 million in cash flow compared to a feeble (and worse than expected) $67.5 million in cash flow from all the Macanese properties. Wynn Macau and Encore Macau only contributed $14 million, while Wynn Palace has finally found its sea legs with a $53.5 million donation. Encore Boston Harbor was a little bit under certain projections at $47 million, though it improves month by month.

Due to a sharp decline in VIP play in Macao, Wynn Resorts is remarketing them as premium mass-market casinos, in order to get pre-Covid revenues without pre-Covid foot traffic. As Deutsche Bank analyst Carlo Santarelli put it, “Las Vegas & Boston shine as Macau remains a waiting game.” Word! “We don’t think we heard anything from management tonight that will meaningfully change the view on the resumption of normalized operations in Macau, with management acknowledging an uncertain timeline, while noting encouraging trend that resemble pent up demand at certain times,” he elaborated. “We expect the Macau names to continue to trade on virus headlines and policy decisions, things we, nor most, can truly opine on with any legitimate confidence.” Back in Vegas, business is fueled by slot fanatics, with coin-in up 37% and table wagering down 3%. Blame the latter on a lack of international players.

Continue reading Wynn “strong” this summer; MGM returning to form
Posted on by — 1 Comment

Monster monopoly on the Strip?; Caesars wows Wall Street

In a deal that Nevada regulators would block if they had an ounce of spine, MGM Growth Properties proposes to sell itself to Vici Properties, which would put nearly all the prime land on the Las Vegas Strip under one owner. Vici already owns most Caesars-branded properties on the Strip and is on the verge of adding The Venetian and Palazzo. It was, as Deutsche Bank analyst Carlo Santarelli put it with delicious understatement, “a deal with far-reaching implications.” The price tag is a whopping $17.2 billion, paid in a mix of cash and stock. Of that, $5.7 billion is debt already carried by MGP. Adds Santarelli, “the true driver of M&A in the [REIT] sector was cost of capital, and with VICI having traded at a healthy equity premium to the group for some time, with access to inexpensive debt financing, the transaction makes both intuitive and financial sense.” Still, $17.2 billion is a not-inconsiderable amount of debt, however low your interest payments may be (3.75% in this case).

“In 2016 we started on our journey to become asset light and this announcement, together with our recently announced Springfield and CityCenter transactions, reflects the culmination of those efforts and a major step forward in simplifying our corporate structure,” said CEO Bill Hornbuckle. “As a result of these actions, we are well positioned and remain focused on pursuing growth opportunities in our core business, with significant financial flexibility to continue to deploy capital to maximize shareholder value.” In a goodbye note to MGM, MGP Chairman Paul Salem wrote, “We are thankful to the MGP management team for all of their efforts to develop MGP into a premier gaming REIT.” “We have always admired the exceptional quality of MGP’s real estate portfolio,” added Vici CEO Ed Pitoniak, unable to conceal his glee.

Continue reading Monster monopoly on the Strip?; Caesars wows Wall Street
Posted on by — 1 Comment

MGM does the right thing; Killer chipmunks in Lake Tahoe

In a very george move, MGM Resorts International is donating two acres of Strip land to be the site of a memorial to the victims of the Mandalay Bay Massacre. The acreage, at the corner of Reno Avenue and Giles Street, is part of the larger area where the infamous Route 91 Harvest festival took place. The exact nature of the memorial remains to be debated and we’re sure it will be a contentious process. But we’re also certain that MGM could have seen megabucks for the two acres on the open market and chose to pass that up in favor of a generous gesture toward the Las Vegas community. (Sixty people died and hundreds were injured due to the act of domestic terrorism.) “Having a permanent memorial commemorating the victims and heroes of 1 October is vital to our community’s continued healing, and we are honored to donate a portion of the Village site to help bring that memorial to fruition,” read a formal MGM statement. We’ve often been critical of MGM’s response to the victims of the shooting but would like to think we’ve saluted it when it’s done the right thing. As it just did.

Gaming & Leisure Properties Inc. is dropping ominous hints about the future of the Las Vegas Tropicana, feeding into speculation that owner-to-be Bally’s Inc. will demolish the venerable resort so that its 35 acres can be converted into a baseball stadium. This would be the cruelest in a series of cruel blows to the Trop, which has suffered from a series of poor or inattentive ownerships. Admittedly, at 64 years of age, the Trop is ancient history by Vegas standards—and Bally’s might be left at the altar. The Oakland Athletics have reopened negotiations with Oakland Mayor Libby Schaaf, suggesting that Sin City just got played by the big boys. Since the A’s are committed to Oakland through 2024, Bally’s doesn’t have to make any rash decisions regarding the Trop’s immediate future.

Continue reading MGM does the right thing; Killer chipmunks in Lake Tahoe
Posted on by — 3 Comments

Masks back on, Las Vegas!; All’s right with the REITs

Mincing few words, MGM Resorts International CEO Bill Hornbuckle sent a letter to all employees, urging them to quit dithering and get their Covid-19 vaccinations, if they haven’t already. He pleaded, “In addition to the heart-wrenching thought of more illness and death, I fear that progressively more restrictive measures, including a return to social distancing and capacity restrictions, could be around the corner if we continue on this path. This would be a significant blow to our community, industry, and economy.” Clark County‘s current vaccination rate currently stands as a dismal 44%. The county is reliably “blue” territory, so this crisis goes beyond political chumming of the anti-vaxxer waters. Playing to his audience’s wallets, Hornbuckle warned that, as Las Vegas‘ health goes, so does its economy. If Coronavirus worsens and scares tourists away, furloughs and layoffs could follow. He wrote, “After the pain endured by so many these past 16 months–and the tremendous progress made in 2021–I can think of no more damaging scenario for us as a community.”

We think that Hornbuckle and others in like positions in Big Gaming are stopping one step short and need to mandate vaccination for their workers. If little outfits like Google, Facebook, Twitter, Netflix, Lyft, Morgan Stanley, Saks Fifth Avenue, The Washington Post, Ascension Health and BlackRock can do it, MGM can. We know you’re feeling cabin fever and ‘pandemic fatigue’ out there, America. We feel your pain. It would be great if events ran in a bright, linear fashion. But this is a war, a once-in-a-century calamity and, had we been so easily discouraged in the 1940s, the Axis powers would have won World War II (gladdening the heart of Imperial Palace founder Ralph Engelstad).

Continue reading Masks back on, Las Vegas!; All’s right with the REITs
Posted on by — 3 Comments

Station hits records, drops hints; Strip suffers mild setback

Station Casinos announced 2Q21 earnings yesterday and “blows through” previous peaks, according to Deutsche Bank analyst Carlo Santarelli. Despite expiration of the management contract at Graton Rancheria, Station recorded record levels of net revenue ($426.5 million) and cash flow ($210 million), leaving Wall Street‘s $159 million consensus in the dust. Management is in no hurry to reopen Texas Station or Fiesta Rancho or Fiesta Henderson and why not? It costs only $2 million per quarter to keep them dark and their business is obviously being soaked up elsewhere. Station execs performed a fan dance regarding Durango Station, withholding the budget but announced their intent to break ground in early (pre-April) 2022, with an 18-24 month construction timeline envisioned. When completed, it will have 2,000 slots, 40 tables and four restaurants, along with the inevitable sports book. Santarelli expects Durango Station to be financed out of (abundant) free cash flow, possibly filled out with the sale of some excess land. The $650 million all-cash Palms sale proceeds have also been earmarked to cover construction costs.

Buffets may be gone with the wind but Station expects to reopen its showrooms in the second half of this year, and for group business to return over the next two years. Truist Securities analyst Barry Jonas noted “incremental hotel business” improvements congruent with the distribution of the Coronavirus vaccine. “Stimulus payments have also played into recent strength, though management noted sizable savings and discretionary income with their core customer base beyond stimulus.” While acknowledging “uncertainty” around the state mask mandate, Station brass said that business didn’t change markedly when masks came off in June. “This suggests there may not be any meaningfully negative impact with reintroducing masks,” reported Jonas, “Management also notes that they expect any potential impact to be short-lived.”

Continue reading Station hits records, drops hints; Strip suffers mild setback
Posted on by — 1 Comment

Boyd beats The Street but charts cautious course

“Massive beat” and “exceptional” results were some of the terms being bandied about after yesterday’s Boyd Gaming 2Q21 earnings call. Wall Street expected $803 million in revenue and Boyd delivered $896.5 million, while profit margins at its Las Vegas locals casinos rose all but exponentially over 2019. “We believe this acceleration is likely to surprise investors,” wrote Deutsche Bank analyst Carlo Santarelli, adding that Boyd executives thought their performance targets had been too conservative. They also gave a hint about 3Q21, saying that June’s strength was (no surprise) carrying over into July. “While investors are sure to question the sustainability of margins going forward, as any right minded individual would, especially after this quarters [sic] performance, we continue to believe there is support in the thesis for the likes of” Station Casinos, Golden Entertainment and Boyd. Leadership, JP Morgan analyst Joseph Greff wrote, “notes that the 2Q21 undoubtedly benefitted from government stimulus and unemployment insurance padding consumer spend, but also strong demand from its core customer.

“While labor shortage is an issue, we don’t think elevated labor costs going forward will pierce margin gains in a significant way which poses risks to our new forecasts,” Greff continued. He liked a business plan “predominantly focused on a drive-to, leisure gaming customer. We think our estimates are reasonably based, with a steady return of its older demographic.”

Continue reading Boyd beats The Street but charts cautious course
Posted on by — 5 Comments

Caesars massacres table games, renames Superdome; Bally’s boffo

At the risk of flogging a deceased equine, the emperor at Caesars Entertainment has yet again showed himself to be without clothes. The latest Eldorado-ization of the Roman Empire is the wholesale slaughter of table games along the Las Vegas Strip. As Vital Vegas reported over the weekend, “entire swaths” of the games have disappeared from casino floors, leaving blank patches to be filled in with slot machines or that dreaded new idol of casino executives, electronic table games. Just think of all the high-salaried dealers you can pink-slip! As Scott Roeben wrote to us, it’s “a really big shift that was happening under our noses.” We should have known, perhaps. Caesars execs had been promising to run a post-pandemic company at pandemic-era cost levels, which would require some real creativity. Enter the robo-games and the conversion of properties like Caesars Palace and The Cromwell into giant slot parlors.

Not only do ETGs cost less than old-fashioned table games, they offer lower minimums (and table minimums along the Strip have gotten pretty steep). It’s a shameless play for the low-roller clientele and another symptom of “Less Vegas,” the post-Covid environment in which the casinos make money by offering a diminished experience for the same—or sometimes higher—price. Certainly in Caesars’ case it bespeaks a contempt for the player, providing a regional-casino atmosphere in what was supposed to be the Holy See of gambling. It’s the latest in a death of the Roman Empire by a thousand cuts: short-poured liquor, closed buffets, shuttered shows and defunct player lounges. Roeben gloomily writes, “As there’s unlikely to be a new wave of demand for table games, expect this to be the new normal in Las Vegas casinos.”

Continue reading Caesars massacres table games, renames Superdome; Bally’s boffo