Stimulus cash may be petering out somewhat and international tourism has yet to open the floodgates, so September found Nevada on something of a cusp between the supercharged recovery of the summer and the hoped-for travel rebound in 4Q21. Still, Las Vegas Strip revenues were up 10% to $640.5 million and locals-driven receipts were 13% above 2019 levels. Statewide, gambling win tallied 9% higher than two years ago, hitting the wonted $1.1 billion level. As Deutsche Bank analyst Carlo Santarelli puts it, “the accounting calendar was clean in September of 2021,” meaning there was no held-over slot revenue from August. With numbers like these it’s little wonder that gaming executives are waxing optimistic for the long haul. Strip slot players lost $355 million, 16% more on 16% higher coin-in and flat hold. Baccarat wagering was down only 5% but luck wasn’t with the house, as win fell 24% despite higher-than-normal hold. Non-baccarat table games fared much better, up 20% on 12% more wagering. If it weren’t for baccarat, Strip revenues would have been 18% above 2019’s apogee.
Downtown hopped 11% to $73 million but North Las Vegas drooped 17% to $22 million. The Boulder Strip was up 9% to $81.5 million and miscellaneous Clark County leapt 22.5% to $137 million. Laughlin suffered a dip of 6.5% to $37 million but that was nothing compared to the wildfire-driven, 69% freefall at Lake Tahoe (a teensy $5.5 million). Reno gained 13% to $63 million and Elko—which contains economic barometer Wendover—was up 10% to $30 million. Tahoe aside, a pretty darn good September.
Euphoria was the order of the day at Boyd Gaming, where leadership announced $300 million in stock repurchases and record amounts of profit. This included best-ever cash flow at Boyd’s Downtown casinos despite a slim $42 million gross across 3Q21. (Locals came through big, however, and Midwest/South was huge.) Same for 11 regional Boyd properties, as EBITDA grew by double digits. Boyd execs are counting on a continued Covid-19 decline driving return business and while the company praised itself on “a more efficient operating model,” the question was begged as to what will happen when more labor is needed. Said CEO Keith Smith, “As the labor market recovers and we’re able to rent all of our hotel rooms and open more of our amenities, we believe there are more revenue opportunities,” especially as the 65-and-older crowd manifests itself in meaningful numbers.
“We expect those trends to underlie our business as we go into 2022 with the added benefits,” added CFO Josh Hirsberg. “In downtown Las Vegas, we anticipate continued growth as tourism throughout the city recovers and Hawaiian visitation improves,” Smith resumed. “We also have opportunities for future growth in our midweek business and meeting and convention business.” Marketing spend, you will be happy to know, will be going back up.
The Stardust i-gaming brand was described as “off to a good start in Pennsylvania and New Jersey,” while the FanDuel alliance is currently focused on Louisiana, where OSB is in a holding pattern. “In all, we expect our digital operations, including sports, casino, and social casino, will generate more than $20 million in [cash flow] this calendar year. Digital is a profitable business for us today and will be an increasingly important part of our overall strategy in the years ahead,” Smith said. Finally, the landward move of Treasure Chest in Louisiana is ‘on,’ with design work continuing to advance.
Wall Street analysts were duly impressed. Wrote Truist Securities‘ Barry Jonas, Boyd “highlighted continuing growth drivers next year and beyond, which we think should address some near-term investor concerns.” Those would include Hawaii business, which is still soft but expected to rebound. “Stable trends have continued into October, similar to what BYD saw in late Q3. Labor costs remain a headwind, but management continues to operate in the new normal with 14K [full-time employees] vs. the prior 24-25K,” which is a euphemism for ‘expect less customer service.’ Added Jonas, “The company may add back employees over time, but labor levels should still remain below prior pandemic levels.” (Great for Wall Street, not so good for the Culinary Union.)
Promotions were described as “stable” despite “some select aggressiveness from smaller operators.” In Indian Country, Boyd’s Wilton Creek Rancheria project, Sky River, was described as “on-time and on-budget,” and will hold 2,000 slots, 80 tables and 12 restaurants when finished, which will be in late 2022 (a slight pushback). In further good news, Louisiana’s mask mandate ends today and Nevada’s is expected to be lifted next month.
Santarelli opined, “From a big picture perspective, we think the market has gained and continues to gain incremental confidence in BYD’s ability to maintain the majority of the considerable margin expansion it has experienced in recent quarters, relative to 2019 levels … Accordingly, and given the continued top line strength regional gaming and the Las Vegas locals market continue to demonstrate, our estimates for BYD are higher, despite what we expect will be cost pressures in the business in 2022 and beyond.” He wasn’t as wowed by the stock buyback as some, noting it “was broadly expected, but our sense is that investors are likely to take a wait and see approach as it pertains to how aggressive BYD plans to be,” even though Boyd has never repurchased more than $100 million in any one previous tranche.
Santarelli hypothesized that Boyd could spend up to $800 million next year and still get its leverage down to a risk-averse 2.5X equity. “Accordingly, and given peer valuations, we continue to see BYD as a compelling idea within regional gaming, and we believe its approach to sports betting and iCasino will prove prudent over the near to medium term,” he concluded.
Boyd “nicely exceeded Consensus revenues, EBITDAR, and margins across its key regional reporting segments,” reacted JP Morgan analyst Joseph Greff, who was pleasantly surprised by the timing of the stock buyback. Like Santarelli, he marginally raised his price target on Boyd shares, predicated in part on expectations of 3.5% cash flow increases over the next two years. He had expected total 3Q21 revenues of $835 million and Boyd delivered $843 million, shaking off the effects of Hurricane Ida. Only three weeks of Main Street Station factored into the numbers and Eastside Cannery remains closed (and unaddressed). Greff only anticipated $36.5 million from the challenged Downtown segment, so perhaps we are too harsh. Still, he trimmed his Downtown forecast a bit. Even so, Boyd delivered a quarter of which management is understandably proud.
The East Coast Gaming Congress has been dominating the casino-biz headlines this week but a protest organized by Americans for Nonsmokers Rights was the proverbial tree that fell in the forest without being heard. Casino workers picketed Harrah’s Resort during address to the Congress by Gov. Phil Murphy (D). If you thought Murph was going to call for a smoking ban in casinos, boy, do we have some swampland in Florida to sell you. He’s facing an increasingly tough reelection battle and we sorely doubt if he’s going to piss off that smaller and smaller portion of the electorate that likes to light up whilst gambling. The real problem is state Senate President Stephen Sweeney (D), who holds the levers of power in the Garden State. He’s just fine with the status quo and shows no inclination to bring the gaming loophole up for a vote, even though the candidates for state senate from Atlantic City are in bipartisan agreement that it should be closed during the lame-duck session.
As for the protestors, UAW representative Patrick Ashton got to the nub of the issue, saying, “This summer was some of the most successful we have seen in Atlantic City and there was no smoking. The excuses are over … you don’t go to work to get poisoned.” Casino employee Nicole Vitola fumed, “we were reminded just how insignificant our lives are because Governor Murphy allowed the smoking ban to expire,” while 26-year dealer Lamont White called out Sweeney, saying “I don’t know what archaic and outdated information you men are operating from, but it’s 2021 and time for you to… show the rest of the country that the lives and health of your citizens really does come before everything else.” Don’t count on it, not if it means demonstrating political courage—a rare commodity these days.
Reno can forget about being the next Sin City. If you want to carry a whip in The Biggest Little City in the World you’d better get a permit. Seems there’s been an epidemic of unlicensed whip-snapping in Reno, making residents jumpy since it sounded like gunfire, causing a 61% jump in whip-related calls to police. The city says whips have become popular “in fights, for intimidation, and to practice ‘cracking’ the whip.” According to the cops, these whippersnappers “are amateurs when it comes to proper use, and it is evident they do not possess it for any intended proper use.” The American Civil Liberties Union disagrees, saying whips are the preferred defense mechanism of homeless people (this is news to us) and the ordinance falls predominantly on areas of Reno favored by the dispossessed. At the other end of the spectrum is Councilwoman Jenny Brekhus, who thinks the law isn’t restrictive enough, since it doesn’t cover all areas of Reno. You can still use a whip on your own property but Reason.com lashes itself into a frenzy, fantasizing “One could imagine local police harassing innocent citizens based on unfounded whip tips, or even conducting sting operations to corral violators.” We suggest they chill out with a copy of Ann Rice‘s Exit to Eden.
Jottings: Sportscasters doubling as wagering touts is a dicey blurring of the lines between reportage and advertising. NBC Sports analyst Drew Brees just smeared that border further by signing on as PointsBet‘s celebrity pitchman. That said, the ad is well-executed and Brees is an engaging advocate who doesn’t get all up in your business. Other sports betting sites could take a lesson from this low-key commercial … Congratulations to Nevada Gov. Steve Sisolak (D) on being the recipient of a Silver State Equality Award, given for “advancing LGBTQ+ civil rights and social justice for underserved and marginalized communities during the 2021 Nevada Legislature.” Said SSE Director André Wade, “We owe much of our success to support from leaders like Governor Sisolak … so it’s particularly fitting that we honor them for their significant role in helping to pass voter protection legislation, modernizing HIV laws, improving healthcare access, increasing support for LGBTQ+-owned businesses, enacting meaningful change in school curriculum to include the histories of marginalized communities, allowing for all consenting parents to share in the duties and responsibilities of raising a child, and more.” Nevada, you’ve come a long way from being “the Mississippi of the West” and in a relatively short time.