Caesars bares all; Midwest flattens; Adelson pledges neutrality

Landing a meeting with Caesars Entertainment CEO Tom Reeg, as well as several top execs, J.P. Morgan analyst Joseph Greff didn’t hear so much as a peep about the mooted Las Vegas Strip asset sale, which he assumes is on hold “given present financing terms for sizable asset sales and that CZR retains until market conditions improve.” Even so, Reeg & Co. asserted that “demand remains strong” and that neither macroeconomic conditions (read: inflation) nor gas prices were putting a dent in business. They expect even better things from next year thanks to Formula One, which they say will bring in “hundreds of thousands” of tourists, just as it drove 300,000 people to visit Singapore. It will also shore up one of the traditionally weakest weekends of the year.

One area in which the Roman Empire is retrenching is its digital sphere, with spending cuts on the way, Caesars “having achieved its targeted market share sooner than anticipated.” It will shed another $200 million or more in partnership costs in 2024. Caesars execs say they’re comfortable with their leverage and will be using cash flow to bad down (hefty) debt. It’s managed to push some debt maturities out and reduce interest expenses, too. Getting back to that Flamingo, er, “Strip asset” sale, Reeg’s peeps claimed that its value continues to appreciate and “they’re happy to hold onto the asset and continue to clip the cash flow.”

Meanwhile, Penn Entertainment CEO Jay Snowden and CFO Felicia Hendrix met with Greff and bristled that “we can walk and chew gum at the same time” in response to Wall Street‘s apparent lack of enthusiasm for Penn’s new, $850 million quartet of property projects. They sought to assure investors that share repurchases and dividends would continue unabated despite the big spend. Greff continued, “Demand trends today are presently solid, as evidenced by recent monthly regional GGR reports. Management is not oblivious to the macro backdrop—it just hasn’t shown up in results.” Snowden and Hendrix attributed any weaknesses to the quality of individual properties and not to geographical factors. In other words, deferred maintenance doesn’t pay.

21 to 45 year-olds are sticking with Penn, as it continues to see laggard business from Baby Boomers, with the younger set comprising 20% of all revenues. That’s double the pre-Covid level, while 65-somethings are 20% down. In a possible Penn rationalization, “some may still recover, though it appears that a portion of this bucket was just unprofitable (and intentionally not marketed to) and is strategically removed.” The bosses are contemplating less advertising spend and a bigger push instead in database marketing, which is deemed both cheaper and more effective.

On the digital front, Ontario has been a hit for Penn and looks to get even better next month, when gray-market operators are shown the door. Not only does Penn’s online strategy look like the better mousetrap, it will be leading in Canada with an emphasis on its brand and experience, partly out of necessity as big promo giveaways are discouraged by Ontario authorities. Although Barstool Sports has yet to crack double digits so far in any states, Penn expects it to do so in Ohio and Massachusetts, somewhat less so in Maryland when those states launch. “With each new state,” Greff concluded, “PENN continues to see a better ramp and brand recognition.”

Meanwhile, Greff colleague Omer Sander repaired to a Sierra Gold tavern in Spring Valley to (maybe) play some video poker and (definitely) meet Golden Entertainment CFO Charles Protell. “Management described demand trends across as its portfolio as steady, attributing the slowdown in the summer months to a return to normal seasonality,” Sander reported, modeling a post-Labor Day speed-up into his projections. The tavern business is benefiting from the resumption of football as well as by the fortunes of the Las Vegas Golden Knights. The recovery in the convention business is giving The Strat a lift. Like Caesars, Golden is banking on the Formula One weekend, as well as on its year-away Atomic Golf Range. Golden has been able to reduce the amount of Strat guests who book via online travels agencies to 60-65%, down from 75-80% when the company took the keys. 50% is the target level.

Unlike most other companies, Golden acknowledged economic worries, projecting a high-single-digit contraction in its cash flow, which it intends to ameliorate through cost cuts. Even so, the company is aggressive in the tavern business, planning on adding four to five a year, which a target of an eventual 90 or 100 outlets. Any new casino purchases would happen in Nevada, the better to capitalize on the Golden database. As for the sale proceeds from Rocky Gap Resort, some of them will be rechanneled into share repurchases, music to investors’ ears.

Inflation or no, Americans continue to spend a great deal more gambling than they did in 2019 and a bit more than last year, generally speaking. Take Ohio, where gaming receipts are 21.5% higher than than they were before the pandemic. Casino win nudged 2% up last month from 2021 for a gross of $188.5 million. Typically, MGM Northfield Park was out front with $24 million, a 3.5% gain. Next closest was Hollywood Columbus, leaping 13% to $22 million, followed by Jack Cleveland, up 3% to just under $22 million. Hard Rock Cincinnati was up 2% to $20 million, while Hollywood Toledo brought in $17 million, sliding 5.5%. It was bested by Scioto Downs ($18 million, +2%) and Miami Valley Gaming ($19 million, +8%) but not by Jack Thistledown ($15 million, -4%). Belterra Park fell 16.5% to $6.5 million, while Hollywood Dayton was flat at $12 million and Hollywood Mahoning Valley gained a point to reach $13 million.

Moving west, Indiana casinos were a wee bit (-1%) down from last year, pulling in $204 million. Even an extra day didn’t enable the casinos to pull even with 2021, as it arguably did in Ohio. Hardest hit was Ameristar East Chicago (pictured), plunging 22.5% to $16 million. Other revenue-negative performers were led by Horseshoe Hammond, tumbling 16.5% to a still-impressive $27 million Belterra Resort ($7 million, -11.5%) and Blue Chip ($11 million, -7%) made for a grim month for Boyd Gaming, while Rising Star ($3.5 million, -9%) and Harrah’s Hoosier Downs ($19.5 million, -5%) both trended negative. Hard Rock Northern Indiana continues to devour everyone’s lunch, wolfing down $36.5 million for a +24% feast. Also doing quite well was Bally’s Evansville ($15 million, +13.5%). Everyone else eked out modest gains, with French Lick Resort up 4.5% to $7 million, Hollywood Lawrenceburg up a point to $13.5 million, Horseshoe Indianapolis gaining 4% to $27.5 million and Caesars Southern Indiana up 3.5% to $20 million.

Of all places, Illinois did surprisingly well, hopping 7% although the fact that this was just 2% above the 2019 ‘floor’ tells you how badly slot routes have eroded the casino business (and why some on Wall Street are skeptical of new investment in the Prairie State). Foot traffic was 12.5% higher, which compensated for 5% less per-visitor spend, with a final tally of $114 million. Way out in front was Rivers Casino Des Plaines, accelerating 10% to $47 million. Best of the rest was Grand Victoria ($12 million) despite being 6.5% down. Penn’s northern riverboats made a good case for relocation, with Empress Joliet slipping 8% to $7 million and Hollywood Aurora dipping 3% to $8 million. Penn’s seemingly forgotten Argosy Belle chipped in $3 million, down 7.5%. Bally’s Quad Cities surged 30% to $5 million, while Par-A-Dice was flat at $5 million. It was a mixed month for the Caesars portfolio, led by Harrah’s Metropolis, jumping 15% to $5.5 million, while Harrah’s Joliet tumbled 16% to $10 million. Newcomer Hard Rock Rockford posted $5 million, while DraftKings Casino Queen leapt 14% to $7 million.

Missouri did a bit better, up 4% and grossing $158 million overall. Customers visited less (-5%) but spent more (+9%). Spoiler alert: Ameristar St. Charles was numero uno with $24.5 million on a 3% gain. Nearby Hollywood St. Louis didn’t make out badly, up 9% to $21 million. River City grew 4% to $20 million while Horseshoe St. Louis (shown) continues to play a hot hand: +11.5% to $13.5 million. To the west, Ameristar Kansas City was dominant in its market with $17 million, vaulting 17%, as Bally’s Kansas City ($10 million, -2%) finally began to cede market share. Also down was Harrah’s North Kansas City (-4.5% to $14 million) while Argosy Riverside held rock-steady at $14 million. Century Casinos grossed $3.5 million (-12%) in Caruthersville and $5.5 million in Cape Girardeau, defying the general trend.

Come the 2024 Nevada primary, GOP rainmaker Miriam Adelson will be sitting on her assets. She’s vowed neutrality—not necessarily a bad thing, as Adelson-endorsed candidates traditionally bomb in the Silver State. So maybe it’s a blessing for Nikki Haley, Gov. Ron DeSantis, Mike Pence, Mike Pompeo, Sen. Rick Scott and Gov. Asa Hutchinson, all of whom have puckered up for the Adelson kiss of death. Donald Trump is conspicuously absent from that list but he doesn’t need Miriam’s megabucks either. Dr. Adelson quietly continues to play both sides against the middle, as when she met with Senate Minority Leader Mitch McConnell and House Minority Leader Kevin McCarthy alike. We figure she’s going to wait and see who’s on the winning side and then claim victory after the fact.

Jottings: Are you ready for some football? (Probably not, if you’re a Las Vegas Raiders fan.) It’ll cost you. Sports books are the new profit centers of the Las Vegas casino. At Caesars Palace, viewing a game will set you back anywhere from $92 to $550 and Circa is a real clip joint, with prices starting at $275 and maxing out above $1K … What is Station Casinos‘ word for its perception on Wall Street? That’d be “misunderstood” … Mandalay Bay‘s convention center is going to be literally whitewashed as part of a $100 million makeover. Don’t worry, MGM Resorts International‘s commitment to artists of color is undiminished … Wynncore continues to power Wynn Resorts‘ earnings, although the company is encouraged by recent developments in Macao. It was expecting at least two carpetbaggers to vie for casino licenses and only one (Genting Group) materialized.

Quote of the Day: “You build your mind, so make it into something you want to live with.”—novelist Marilynne Robinson