Category: Las Vegas Advisor

Florida Gov. Ron DeSantis (R) succeeded where predecessor Rick Scott failed, inking a pact with the Seminole Tribe that would unlock the $35o million a year that the Seminoles have been holding in escrow. In return, the tribe gets a pretty ‘george’ gambling expansion: three new casinos, craps and roulette (Take that, blackjack-offering racinos!), Internet gambling, and both retail and online sports betting. For his part, DeSantis was able to get the Seminoles to up their annual ante to the state to as much as $600 million a year over a period of 30 years, with $2.5 billion guaranteed by 2026 and $6 billion by 2031. So everybody wins.

Or do they? The Seminoles could yet be hoist on their own petard, having teamed with Disney to pass a constitutional amendment that puts any expansion of gambling in the hands of the voters. Which means the new compact is certain to face a court challenge. Then there’s the butter-fingered Lege, which has managed to fumble every significant piece of gaming legislation within memory. When last seen, lawmakers were trying to sneak through a sports-betting bill on the excuse that it wasn’t ‘casino gambling.’ Excuse us while we fall down laughing. At worst, however, legislators could disapprove or try to f-up the DeSantis compact with add-ons of their own.

Even with capacity restrictions still in place at MGM National Harbor and Horseshoe Baltimore, the Free State enjoyed an epic March with casinos posting an all-time-record $169 million. On March 12, MGM and Horseshoe were bumped up to 50% capacity (from 25%) and restrictions at the state’s four smaller casinos were lifted. (Last year, casinos were closed March 16-June 19.) As usual, MGM was out front with $66.5 million, 6% better than March 2019. It and Maryland Live dominated the market, with 39% and 36%, respectively. Maryland Live gained 9% to $61 million but while Horseshoe Baltimore grew sequentially (up $5.5 million from February), it was still the state’s lone disappointment, down 23% to $20 million. Ocean Downs was up 13% to $7.5 million, Hollywood Perryville vaulted 21% to $9 million and Rocky Gap Resort was up 8.5% to $5.5 million. The leading edge of a trend? We certainly think so. As America goes, so goes Maryland—only more so.

As we’ve often said, when the American economy gets the flu (literally, in this case), Las Vegas catches pneumonia. During the depths of the Covid-19 pandemic, unemployment in Vegas levitated to 34%. Today it is a still-unhealthy 10.5%. Nonetheless, the Wall Street Journal paid a visit to Sin City and found a spirit of optimism, whether manifested in full classes at dealer schools or the $6.25 billion paid for Venelazzo. As one dealer-school manager put it, “You have to invest in the idea that Vegas always comes back bigger and better.” As the WSJ noted, Las Vegas may be attempting to diversify economically but it lives or dies with tourism.

“An all-time high of 42.9 million people visited Las Vegas in 2016, and convention attendance reached a record-setting 6.6 million meeting attendees in 2019,” reports the WSJ and while Vegas is recovering perhaps faster than anticipated, the brain trusts with whom reporters spoke don’t expect pre-pandemic numbers to return until sometime in spring 2022 or later. It’s a long climb back from 2020’s perigee of 55% fewer visitors (numbers not seen since 1991) and 43% less Strip gambling revenue, after all. A state budget overly dependent on gaming revenues and entertainment taxes is looking at a recovery not before 2023 at the earliest. Room rates have yet to recover their January 2020 average of $153/night. Hopefully, for the average Las Vegan, the road back will not be as long as after the Great Recession, when inflation-adjusted personal income didn’t return to normal until 2014.

Boyd Gaming leaked January data, what Wall Street calls “offered an encouraging commentary,” to help put an upbeat spin on its 4Q20 numbers. It worked like a charm. JP Morgan analyst Joseph Greff moved his price target up $8 to $62/share. He was motivated by news of “improving gaming customer spend trends thus far in the 1Q21 relative to its results in the 4Q20 … this is despite the older casino patron demographic not really returning to any great extent, which is something that could serve as upside or a cushion to the presently strong/growth trends from younger, non-rated players.” He liked a business plan structured around a “favorable localized/regional footprint predominantly focused on a drive-to, leisure gaming customer.” Greff also raised his cash flow estimates based on strength in the Midwest and South regions of BYD and on its strong sports-betting prospects, thanks in part to FanDuel (“DFS Operator #2” in Wall Street code).

Fourth-quarter revenues were a better-than-expected $636 million (Greff anticipated $608.5 million), despite being 24% down from 2019. But the Midwest and South were only 15.5% off the pace, bringing home the bacon to the tune of $456 million. This enabled the company to shrug off the temporary closures of Par-A-Dice and Valley Forge Casino Resort. In Las Vegas, support from locals was somewhat undone by lackluster tourist biz, particularly at The Orleans. Vegas numbers overall were down 28%, a $161.5 million take. Downtown needs a defibrillator, generating just $18 million, a 74% collapse “pressured by weaker tourism to southern Nevada, especially from the core Hawaiian customer base.” In other words, Main Street Station isn’t coming back any time soon and no reopening date was floated for Eastside Cannery on the Boulder Strip. Greff forecast a recovery in locals biz (good for Cannery) but only “modest” improvement in Downtown numbers.