Wall Street meets Las Vegas, Part I

JP Morgan analysts conducted a pilgrimage to Las Vegas to meet with the top brass of Big Gaming. First up was MGM Resorts International, represented by CEO Bill Hornbuckle, CFO Jonathan Halkyard and BetMGM CEO Adam Greenblatt. They see positive movement toward Vegas with bookings “continually improving” and with much hope placed on World of Concrete expo coming off in June, which would be a major inflection point where conventions are concerned. Despite “minimal” international traffic, execs think 2019 levels could be achieved a year ahead of schedule, by late this year. Vacation bookings were described as near 2019 levels and “MGM is seeing an uptick in more spring/summer bookings and a shortening booking window.” Airlines are being very cooperative in adding capacity in anticipation of bigger airlifts, while occupancy at MGM properties may be 40% or so midweek but double that on weekends.

Tunica and Biloxi were described as still challenged, but drive-in resorts in Maryland, Ohio and Detroit are “faring well,” according to analyst Joseph Greff. Since the average age of the regional customer is in the early sixties, MGM is looking forward to a return of the risk-avers 55+ demographic. MGM brass thinks the regional properties can notch 80% to 90% of pre-Coronavirus levels if capacity limits continue to lifted over the next three months. Macao was praised with faint damns, January being said to be “broadly break-even” and Chinese New Year “decent.” MGM China is hopeful that the renewal of its concession will be considered this year or next but the government is—surprise!—keeping everyone in the dark. As for BetMGM, management is confident as it sees momentum from 4Q20 being continued early this year. It’s a useful tool for recruiting new players and at a lower cost (always a plus for gaming execs). Migration of sports bettors into i-gaming also looks promising.

While Greff was huddling with MGM’s braintrust, colleague Daniel Politzer had an audience with Caesars Entertainment CEO Tom Reeg (pictured). While imbibing watered-down liquor—just kidding!—the two reviewed Caesars’ booking trends, which are on the upswing with 50% of reservations made for a month down the road or farther. Contrary to reports we’ve seen, Reeg says Caesars’ Strip occupancy has been 60% or so midweek, heading toward 70%, while weekend occupancies could be real revenue drivers. “Airlift capacity is not seen as an impediment as it usually fills in once demand comes,” which could be as soon as June where meetings are concerned. Reeg sees The Forum driving a 15% ROI once it’s fully exploited. Those much-hyped Las Vegas Strip asset sales are on hold until next year, when Reeg believes Caesars can get a proper cash-flow multiple for its properties, although he’s encouraged by the Venelazzo sale price. The two didn’t get into Caesars’ newest profit-enhancement strategy: refusing to “grandfather” table players, as is customary when bet minimums are raised.

Baby Boomers are still fighting shy of Vegas, being the weakest-performing age tier of any customer demographic. CZR expects them to come back once vaccinated. Some amenities will return (such as shows) “but most will not,” especially buffets. That’s Caesars for you: Pay more, expect less. This is despite record profit margins at the regional casinos, which have been improving of late, including the Lake Tahoe ones, which are pulling customers averse to California‘s Covid-19 restrictions. Reno is trending 10-15% under 2019 levels but New Orleans and Atlantic City are just hanging in there. The pending close of the William Hill deal limited what Reeg could say but he expected “to be fully rolled out with OSB by the start of the NFL season, and believes that once it closes on the WMH acquisition, it will have every tool it needs to emerge as a leader in the space (brand, rewards program, brick/mortar footprint/market access to 80% of states, Liberty Technology platform etc.).”

Apollo Capital‘s and Vici Properties‘ $6.2 billion offer for Venelazzo/Sands Expo Center was just too good to pass up. That’s essentially how Las Vegas Sands CEO Rob Goldstein put it to Greff. It was also reflexive of a corporate belief that its capital could be more remuneratively used in markets not called “Las Vegas.” For instance, New York City (“complicated”) or Texas (“huge opportunity and LVS would take a category-killer approach”). For that matter, the online-sports-betting/i-gaming sphere continues to beckon. With the Las Vegas Strip in the rear-view mirror, Goldstein took a sanguine view of concessional renewal in Macao, given how much Sands has spent there and will continue to invest. LVS believes it is sitting pretty for a Macanese recovery, with The Londoner and Tower Suites positioned to appeal to its preferred customer strata (premium-mass and retail gamblers). With twice as many rooms as Venetian Macao, The Londoner (management believes) could equal or surpass its progenitor.

Sands’ Singapore retail mall is off the market for the nonce and the company says it has a “voracious appetite” to keep investing in the city-state, where it anticipated a 20% ROI from its $3.3 billion Marina Bay Sands expansion. Given that it only has one competitor, Sands thinks there’s plenty of space for additional room product and slot machines. Indeed, domestic business has propped up Marina Bay Sands nicely when customers from overseas were being turned away.

Penn National Gaming CEO Jay Snowden says he is feeling better than he has in a year about regional business, described as trending solidly, with business levels reminiscent of 3Q20 reopenings. Foul weather in Texas dampened February business in Louisiana but Snowden and CFO Felicia Hendrix reported “pent-up demand” making up for it this month. Baby Boomer habits are improving, still only at 80% of pre-Covid play levels but increasing month by month. Those players are the “most frequent, highest worth, and most profitable customer,” but while they’re Penn’s bread and butter, gamblers in the 21-45 age range are described to be “stable” and one whose trends have “encouraged” management, which thinks that the younger group’s openness to both brick-and-mortar and online play represents a new bastion of strength.

All-important Barstool Sports incepted in Illinois yesterday and the opening-day numbers were described as “coming in better than Michigan and Pennsylvania.” With New York State Gov. Andrew Cuomo‘s political capital at a low ebb, Penn is optimistic that a 14-skin approach to sports betting will clear the Lege. But while it expects far more states to legalize sports betting than i-gaming, it believes the latter will be far more remunerative.

In other news, Indiana bettors stayed away from the Super Bowl, breaking a five-month string of increased handle in the Hoosier State’s sports books. Some of that business may also have been lost to Michigan, which went live just in time for “the Big Game.” Indiana books are banking on the NCAA tournament to bring a return to prosperity. Handle in February was $274 million, well down from January ($348 million). Revenue also shrank from $29 million to $17 million. Only $19 million was bet on the Super Bowl, while college and professional basketball generated $127 million in handle. Even in a down month, DraftKings managed to grow market share, up to 45% from 41%.

While March Madness is always good for roundball betting, the playing of all tournament games in Indiana is expected to juice action to “once in a lifetime” proportions, fueled even further by Illinois residents flocking across the border to bet on their teams, which they can’t do at home. Said PlayUSA analyst Dustin Gouker, “last year, before the pandemic shut down sports, we saw Indiana’s love of basketball begin to shine. And this March, that might be particularly so.” Let’s hope he’s prophetic.

Speaking of sports, Wild Horse Pass casino-resort is investing in them in a big way. It’s creating “a miniature city,” in part by building a second, 11-story hotel tower, a new, 10,000-seat soccer stadium destined for the Phoenix Rising Football Club, and an events center/amphitheater. On the drawing board are five more hotels, condos, a water park, a theme park, an expansion of the equestrian center and a third golf course, plus more. Interstate 10 is being widened to handle the anticipated traffic. It’s a grand economic-diversification strategy for the Gila River Indian Community. We didn’t think we’d see someone take up the torch of new urbanism from CityCenter but more power to Indian Country for trying it. The Gila River community is hardly slumbrous at present: In addition to its casino it has an outlet mall, a motor-sports park and driving school for high-performance cars, a history museum, two golf courses, and a Western theme park.

The goal is create the premier tourist attraction in the greater Phoenix area, home to MLS preseason matches as well as regular-season, minor-league soccer. Reports the Wrangler News, Phoenix Rising “played the past four years at 6,200-seat Casino Arizona Field, northeast of the Loop 101/Loop 202 interchange near Scottsdale. The team sold out 23 consecutive matches before COVID-19, building a rowdy, loyal fanbase in the stands and a winning product on the field. The Rising reached the 2020 USL championship game but the pandemic forced cancellation of the match. The facility was not fan friendly.” (It had no restrooms.) The Gila River band aims to change that. Marvels the team’s general manager, “What we found, and this is a unique thing about soccer, is the fans standing and chanting and singing when we score goals, banging on their drums. That’s the sound of soccer. People prefer to be outside and feel the energy from the crowd and environment and it’s a fantastic experience.”

Casino guests will find two new swimming pools, one of them “adult” (read: topless), along with cabañas, hot tubs, a bar—and a renovated convention center. The re-lit casino floor will be dominated by a 12-foot-by-80-foot LED screen. In time, the master-planned community will sprawl across 3,300 acres and casino gaming—which initially made it possible—will be a minor component. That’s fine. From such tiny acorns do mighty oaks grow.

Finally, on a sad note we mark the passing of Stargate SG-1 supervillain Cliff Simon (Ba’al), a strapping outdoorsman who was killed last weekend while kiteboarding in Malibu (he always had a taste for adventure). A fan and convention favorite, Simon was interacting with constituents as recently as last month, participating in a Wizard World virtual convention. Not only will he be missed but the once (and future?) Stargate universe is a much emptier place. (Now that Star Trek Discovery has become a crashing bore, we need to fall back on some good science fiction around here.)