Eldorado Resorts continues to grow in methodical, disciplined fashion. Its latest coup was to acquire MGM Resorts International’s Reno holdings – half of the Silver Legacy plus Circus Circus Reno. The company also purchased MTR Gaming Group in 2014, giving it three racinos, including Presque Isle Downs, in Erie, Pennsylvania, and Mountaineer Casino Racetrack & Resort, in Chester, West Virginia.
Business at the latter has been hampered somewhat by a county smoking ban and by the encroachment of racinos in Ohio. Eldorado has its own Buckeye State track, Scioto Downs, which is holding its own against Hollywood Casino Columbus, despite not having table games. Business is so good, in fact, that Eldorado is building a hotel at Scioto Downs. Eldorado CEO Gary Carano is averse to heavy debt loads, so look for Eldorado to consolidate and de-leverage rather than make another major acquisition soon.
Longtime slot-route and tavern owner Golden Gaming has become the newest of the mini-majors. It merged with Lakes Entertainment and is now being traded on the NASDAQ (ticker symbol GDEN). The Lakes deal gave Golden a substantial foothold in Maryland in the form of Rocky Gap Casino, increasing Golden’s casino portfolio to four (it also owns three in Pahrump). The company simultaneously expanded into Montana, purchasing a trio of slot routes in that state and adding another 1,000 one-armed bandits to its posse. Look for similar such expansions by Golden, especially now that slot routes are growing in Illinois and are being contemplated for Pennsylvania.
Gaming & Leisure Properties is the new kid on the casino block. It’s a real estate investment trust (REIT) with a rather complicated structure. It owns most – but not all – of the former assets of Penn National Gaming, which it leases back to Penn. It also owns some non-Penn properties, such as the Casino Queen riverboat in East St. Louis, and it’s in the process of executing a purchase-and-leaseback deal with Pinnacle Entertainment, one which would see the latter company become strictly a casino-management firm. It would also net GLPI some prize assets, like L’Auberge du Lac in Louisiana’s lucrative Lake Charles market.
REITs are a largely untested form of ownership in the casino industry and there are concerns that lease obligations could hamper Penn’s or Pinnacle’s ability to maintain their casinos in tip-top shape. While there was some initial talk of GLPI branching out into amusement parks and other forms of entertainment, the company recently stated that it was going to remain a casino-only proposition.
Where does that leave Penn? Well, it still has some wholly owned casinos, like Hollywood Casino Perryville, in Maryland, M Resort and the Tropicana Las Vegas. It is also financing and building a tribal casino at Jumal Village, near San Diego, one that is expected to dominate that market once it opens. Penn management has been rather opaque as to its intentions with regard to the Trop. Its immediate goals are to wean the property off online-booking agencies, increase room rates and integrate its Marquee Rewards loyalty program. Beyond that, there has been some vague talk of revamping the Trop’s restaurant offerings and maybe even adding new rooms to the hotel, although Penn’s capital commitment is a relatively modest $200 million, which doesn’t seem to portend a hotel expansion.
Offshore corporation, Hard Rock International, the gaming arm of Florida’s Seminole Tribe, has been flexing its muscle of late. Its new casino in Sioux City, Iowa, has been so successful that Hard Rock is already talking about an expansion. An even bigger success story is its Hard Rock Rocksino, midway between Akron and Cleveland. Despite not having table games, it is the highest-grossing casino in Ohio, eclipsing Caesars Entertainment’s Horseshoe Cleveland and absolutely crushing Caesars’ ThistleDown Racino.
Although Hard Rock was briefly rumored as the operator for a reopened Revel in Atlantic City, it has thrown in its lot with Jeff Gural and his Meadowlands Racetrack, which is trying to break Atlantic City’s monopoly on casino gambling in New Jersey. If passed by the Legislature (not a sure thing at this point), a referendum would be held this November on whether to allow two non-Atlantic City casinos.
Gural and Hard Rock would be a leading contender but others are vying for a casino, including shoe mogul Paul Fireman, who has proposed an insanely expensive, $4.5 billion casino megaresort for Jersey City. Hard Rock (which does not own Las Vegas’ Hard Rock Hotel & Casino) is also trying to help push a new Seminole gaming compact through a recalcitrant Florida Legislature. If approved, the state would get $3 billion from the Seminoles, in return for exclusive rights to blackjack, craps and roulette. A $1.8 billion expansion of the Hard Rock Tampa casino has been unveiled … contingent upon passage of the compact. Its salient feature would be a hotel tower shaped like the body of a guitar.
MGM Resorts International has more irons in the fire than anybody at this point. It’s hired a battalion of lobbyists to push for a billion-dollar casino in Atlanta. Halfway around the world, it continues to court the Japanese government, but Prime Minister Shinzo Abe’s ruling coalition is so frail that casino legalization is constantly being pushed into the next session of parliament and the one after that and the one after that … you get the idea. While it continues to sell off non-core assets, like antiquated Railroad Pass Casino, MGM is expanding into new markets. It’s spending almost a billion dollars on a resort casino in Springfield, Massachusetts, and nearly double that on MGM National Harbor, a megaresort within sight of our nation’s capital.
The flank of MGM’s Springfield project is currently under assault from Connecticut, where the Legislature has authorized a no-bid Mohegan Sun/Foxwoods Resort Casino satellite casino, to be built off-reservation in the Hartford area, in hopes of interdicting gambling dollars that would otherwise go to Springfield. MGM is challenging the constitutionality of the no-bid process and expressing a sudden interest to build a casino in Bridgeport.
Closer to home, MGM is putting final touches on the T-Mobile Arena and The Park. The latter is part of CEO Jim Murren’s crusade to bring New Urbanism to Las Vegas. The latest design touch is the erection of several 75-foot-tall "shade structures," stylized metal representations of trees built by Dutch shipmaking firm IHC Studio Metalix. The company is also going to renovate and re-brand Monte Carlo, to capitalize on its proximity to the T-Mobile Arena. At the north end of the Strip, the jury is still out on MGM’s new concert plaza. Its inaugural event, Rock in Rio, was a succes d’estime and the area is still very isolated, with only SLS Las Vegas and the in-progress Lucky Dragon Casino in close proximity.
However, MGM’s Strip business has been very solid, with convention visitors being the company’s bread-and-butter customer. This reliability has been a bulwark against uncertainty in Macao, where gaming revenues have fallen off the ledge. The company just took a $1.5 billion writedown in Macao-related costs. It has also delayed the opening of MGM Cotai at least three months, to early 2017, hoping for improved market conditions.
But the biggest news MGM has made was the imposition of parking fees -- $10 for self-park, $17 for valet – at all its Strip properties except Circus Circus. The announcement set off an uproar, as MGM was depriving customers of the last comp they could take for granted. The immediate justification was the need to pay for a new parking garage at Excalibur but MGM is carrying $13 billion in long-term debt – second only to Caesars – and needs every dollar it can scrape together. Nobody has leapt to emulate MGM’s new parking fees … yet. They’re mostly waiting to see how the market reacts, but only The Cosmopolitan of Las Vegas has publicly vowed not to start charging customers for parking, which would be yet another annoyance atop those niggling resort fees and surcharges casinos have been piling on their guests.
Tomorrow, Neil Bluhm’s Midas touch and SLS Las Vegas’ catastrophic first year.
