Question of the Day - 30 July 2021

[Editor's Note: This answer was written by our own David McKee. For most of David's QoDs, he writes them anonymously. But when he hands one in that's this good, we give him the credit he's due.]

Perhaps your (and our) nostalgia for the vertically integrated casino-resort of the past is over-enthusiastic. Casino executives aren't especially qualified as restaurateurs or retailers, speaking generally, and few have excelled as entertainment impresarios (see below). The outsourcing of these functions has probably improved the customer experience. 

For instance, Las Vegas is no longer the place where entertainers’ careers go to die. It's perhaps not entirely coincidental that the alliance of Strip casino showrooms with Anschutz Entertainment Group or LiveEnt coincided with Las Vegas attracting a more heavyweight caliber of headliner, a change of pace that allowed visitors and locals to see the biggest names in show business on a regular basis. Occasionally, a culture-conscious casino owner or executive, such as Steve Wynn, comes along who can program his or her own showrooms, but people like that are very much the exception to the rule.

Similarly, when it comes to dining, casino destinations have become must-do locations for celebrity chefs. True, the restaurants are usually branches of what has succeeded in larger cities. But the Las Vegas dining scene is now orders of magnitude bigger, better, and more diverse than the days when F&B was entirely in-sourced. It wasn't that long ago that the best restaurants in town were cookie-cutter so-called gourmet rooms meant to cater to the high-roller crowd. They were fine as far as they went -- free food always tastes better -- but they weren't exactly paragons of culinary trends. 

As for the casinos themselves, it's true that many are operating on the cheap nowadays. This is attributable to various motives. Some have been congenitally frugal. Others are seeing for how long they can get away with pandemic-era levels of staffing, higher minimum bets, and cutbacks on givebacks, making profit hay while COVID still shines. And others have had draconian economies imposed on them by new ownership. (Caesars Entertainment is a hybrid of all three.)

To address your concerns as regards specific casinos, it's too soon to comment on Resorts World Las Vegas, other than to observe its astonishing number of amenity tenants and its varying range of price niches. Yes, Virgin has a lot of chefs in the kitchen, probably because Virgin itself has provided little more than the name. The casino is farmed out to one operator, the hotel to another, and the showroom to a third. It remains to be seen how this three-headed creature fares in contemporary Las Vegas, even with business returning at a blistering pace. (We have observed that Virgin, so far, is under-visited.)

Some of the “Less Vegas” mentality you’ve observed is a result of private-equity funds buying casinos, then gutting them for quick profits Caesars, again for example, went from 87,000 employees to 65,000 when it emerged from bankruptcy and there's already much grumbling from customers about the new regime from Eldorado Resorts. 

But such dire events are hardly the sole province of private equity. Racking up debt in pursuit of growth is nothing new to Vegas. The Tropicana became one of the seediest grind joints in town, the hangout of prostitutes, when hotelier Columbia Sussex went heavily into hock to buy a Strip property. Station Casinos sacked the entire workforces of the Santa Fe Casino and Fiesta (now Santa Fe Station and Fiesta Rancho respectively) when it bought them — from different owners — in 2001. If you’re a locals player who likes to know employees by name, that’s hardly a welcome turn of events. And as the pandemic lifts, that locals-friendly amenity, the buffet, is going to be a bygone at Boyd Gaming- and Station-owned casinos, because they’ll make more money that way and the players are expected to spend more time gambling instead.

Workers at The Venetian and Palazzo have to be apprehensive about the impending Apollo/Vici takeover. Sheldon Adelson, to his great credit, sheltered them from the economic effects of COVID, keeping them all on the job. When Apollo takes the reins and has to show (or justify) speedy dividends — private equity ownerships not being in it for the long haul, generally — jobs will be the first items on the chopping-block agenda. Most of the anticipated frugalities will probably be hidden in the back of the house. For instance, the food in Caesars casinos’ employee dining rooms got so bad under Apollo/TPG that the Culinary Union filed a grievance.

However, Las Vegas is a customers’ paradise compared to Atlantic City. Despite Caesars’ promise to reinvest $400 million in its casinos there, they are notorious for their lack of upkeep (ditto certain regional Caesars properties). On the Boardwalk, years of declining revenue, as competition blossomed nearby, have led to a “don’t-do-anything” mentality. There are exceptions, such as MGM-owned Borgata and owner/operator Hard Rock Atlantic City. But the third casino that’s continually upgrading is private equity-owned Ocean Casino Resort. So you see how difficult generalizations are?

The bottom line is that you're probably best advised to spend your money with owned-and-operated casinos such as those of Wynn Resorts, Boyd, Hard Rock International, Station, and Resorts World. As for Venetian/Palazzo, we hope we don’t look back on its Adelson years and say “You should have seen it in those days.”