Station Casinos dispatched Executive Vice President Rodney Atamian to meet with JP Morgan analysts last week. According to Joseph Greff, he reported, “solid/improving visitation and spend per visit trends.” A possible increase in Nevada casino-capacity limits to 50% should propel that further, one presumes. As with other regional gaming companies, the under-40 crowd is providing the momentum as core Baby Boomers stay on the sidelines. “However, as vaccination trends have improved, this core customer has begun to return as well.” Management doesn’t anticipate promotional wars but expects some upward creep in labor costs. While undecided on the future of the Palms, Station is persuaded that whether by a sale or a reopening under “an improved cost structure/market strategy” it can be successfully monetized, although the potential new market was unspecified. As for its undeveloped real estate, Station noted strong expressions of interest both from industrial developers as well as residential builders. The fates of three closed locals casino remain hazy, however.
As for Station’s archrival, Boyd Gaming, CEO Keith Smith and CFO Josh Hirsberg showed the flag, and teased the 1Q21 numbers by disclosing “strong” January performance with “momentum continuing into February and March.” Visitation and consumer spending are higher, albeit in the 25-to-55 age stratum. Boyd expects older customers to return in 2Q-3Q21. “Of note, BYD has seen a positive uptick in business as stimulus checks get mailed, and thus expects future benefit in the coming weeks.” Indeed. Also, the wider popularity of cashless gaming appears to be increasing the slot manager’s Holy Grail, time on device.
Depending on who returns to Boyd’s Las Vegas locals-oriented properties and when they do it, gaming supply was described as “adequate” (i.e., no return of Eastside Cannery anytime soon). The company espies a comeback in Downtown visitation, although the return of all-important Hawaiian business remains three-four months distant. (No need to bring Main Street Station back on line yet.) It hinted at “something” in the nature of a capital investment in Downtown, or possibly an upgrade of its Treasure Chest casino in Louisiana, bringing it ashore. (If so, we applaud the move.) The partnership with “DFS Op #2” (psssst … it’s FanDuel) gives “a lot of flexibility,” said Boyd execs, in what they consider a long-term growth market. Boyd is “happy” with its current online position but is keeping its options open. As for M&A, Boyd sounds cool to the idea, setting the criteria that purchases have to A) strategic, B) ROI-generating and C) in wide-open markets.
Finally, Boyd is reviving the Stardust brand for the purposes of online gaming. Given the cachet of the Stardust name and the nostalgia associated with it, Boyd either has to go big or go home. It’s decided to go big, rolling out Stardust-branding Internet casinos in Pennsylvania and New Jersey. This is a far higher-value and growth-oriented strategy than just slapping the ‘Dust logo on a brick-and-mortar casino.
Golden Gaming reported 4Q20 results and while revenues were down 15% (or $36.5 million), there were some silver linings. Nevada slot route income was flat while Montana routes were up 5.5%. Rocky Gap Resort in Maryland was off 8.5%, not too bad considering its small revenue volume. The soft spot were Nevada casino operations, falling 36% to $97.5 million. Morgan’s Daniel Politzer scrutinized the numbers, which “reflected a strong October followed by a softening in November and December” (as, not coincidentally, Covid-19 spiked). Although casino revenues were “deteriorating” at the time, Golden “operated its properties efficiently with casino margin generally improving across its portfolio” (except for The Strat). Even the latter is doing better, with March occupancy reported at 50%, part of a company-wide trend that manifested itself in January/February improvements. (Casino companies are having to spin 4Q20 numbers by leaking so much first-quarter data that they may have little left to report come April 1.)
Glass half-empty: 40% of Golden’s 65-and-older customer base is staying home. Glass half-full: Those who have returned are spending 25% more. 4Q20 revenues were narrowly above Wall Street expectations, helped by lower corporate outlays. The Strat had a near-death experience in December, with occupancy falling to 30%, right at the minimum it needs to break even. (As noted above, matters have subsequently improved.) Cash flow at properties which, unlike The Strat, don’t depend on drive-in customers, were positive. Also to the good is an anticipated $75 million breakup fee from William Hill, which is going Caesars-only. “GDEN’s main priorities continue to be improving its operations and also using free cash flow to reduce debt,” wrote Politzer, adding that dividends would be renewed as leverage decreases. In light of “strong” profit margins at present, Golden sees no need for acquisitions.
Looking back on last week’s meetings, Greff was in an expansive mood. “If there was one word that describes the tone of last week’s conference, it would be optimism. Optimism on the parts of CEOs and CFOs that the U.S. consumer should spend more and travel more given U.S. fiscal stimulus programs and relatively high savings rates, and a legitimate (in our view) expectation that consumers want to return to a more normal life of socializing and travel; some companies are seeing this in certain pockets (spring break March pricing and volumes, timeshare advanced bookings, increased occupancies in Las Vegas),” he wrote. He added that he was in agreement, predicting “positive trends with more acceleration to come.” (He was also mildly bullish on Macao but you don’t care about that, do you?) He boosted his price target for Wynn Resorts by $24 share (to $143) and Las Vegas Sands by $10 (to $72).
Las Vegas Strip-based operators were said to be “gaining confidence” in a material recovery starting in July (one year earlier than previously anticipated), “driven in part by the return of group business.” Hallelujah! Regional casinos will bounce back even sooner—one to three months—as Baby Boomers get vaccinated. Greff noted that “most of the margin expansion achieved by regional operators post-reopening is seen as sustainable,” which means cost-cutting is here to stay. Finally, “fast growing” online gambling and sports betting should drive a new round of mergers and acquisitions, both to obtain technology and to gain platforms. More good news for the Strip came in the form of April 4-10 hotel rates, the best we’ve seen in a year (from an operator’s perspective) down only 11%.
Room rates, which were cratering at this time last year, are averaging $115/night for early April. Weekend demand (prices up 15%) is driving the bus, as weekday prices are still 24% lower. Las Vegas Sands is the most aggressively priced, up 76% across the week. Wynncore is sucking wind midweek, plunging 52% and defying the weekend trend by being 5% lower. Caesars Entertainment is 27% off the pace on weekdays but up 10% on weekends, while MGM Resorts International is also up 10% on the weekend but just 20% down midweek. Expect future such manifestations of improved demand.
Amidst all this positivity it must be noted that casino revenues in Massachusetts last month were … not that great. $67.5 million, a 22.5% decline. Capacity restrictions are being blamed, although craps will be coming back and blackjack tables will be permitted to go to four seats from the current three. So improvement is anticipated. Plainridge Park did best in win/slot/day with $284 compared to Encore Boston Harbor‘s $271 and MGM Springfield‘s $194. MGM made $14 million from slots and $3 million from tables, down 23%, while slots-only Plainridge did $9.5 million, off 18%. Market-dominating Encore (61% share) grossed $41 million for a 25% decline, $17 million of that coming from table play. During the quarter to date, Encore is the only of the three casinos to outperform JP Morgan’s revenue projections.
California opening up vaccination to people with Covid comorbidities will boost Las Vegas visitation, and because of HIPPA law and equality issues no documentation is required, its all self-certification. Initially this lax policy irked me, I have 15 specialist doctors taking care of me, but that is the rub. People less fortunate in some cases have zero doctors taking care of them, so its not fair to them, I am now on board. Many Boomers will now get their shots, and we have pent up Las Vegas fever… I am eyeing a midweek middle of May pilgrimage, I might even have a few bucks of Biden money left over to spend…
Mike, just before the J&J vaccine was close to approval, I looked at my email the morning of 2/27 and found out we both had 6:00 AM emails informing us of vaccine availability, and made appointments the following morning. A local college facility suddenly had FEMA people and the military very organized. For unknown reasons, the Feds or less likely NJ had a stash of Phizer to give out to us 60+ co-morbidities people, rather than the July forecast date. Our 2nd shot is this Sunday.