Truist Securities analyst Barry Jonas recently took a tour of Las Vegas‘ C-suites, meeting with executives of seven companies. He concluded that “Despite market sentiment, operators remain generally positive.” Both the Las Vegas Strip and the recently declining locals market were both deemed “healthy,” while crucial convention business was seen as returning to pre-Covid-19 levels (with prices to match, we might add). Strong product from manufacturers is reported to be propelling higher demand from operators, even in advance of Global Gaming Expo.
Inflation? What inflation? That remained the prevailing sentiment. Or, as Jonas put it, “While downtown operator Circa recently noted seeing some decline in casino revenue from increased gas prices inflation, our meetings noted no impact on Strip visitation and customer spend. One operator notes a possibility of seeing some inflation pressure on margins given rising costs with potential wallet shift from gaming to lower margin non-gaming.” If there’s a dark lining to the silver cloud it’s operators’ reversion to a mentality that gaming is recession-resistant (disproven after the Great Crash of 2008) “with variable cost and pricing structures ability to mitigate revenue declines.”
Events like the upcoming Formula One race and the opening of the MSG Sphere are said to be helping drive meeting business. Additional upside that has yet to manifest itself is the return of international travel, something that will not factor into the numbers until the third quarter at the earliest and next year at the latest. Quoth Jonas, “The Locals environment appears to remain strong, benefiting from population growth, with the promotional environment still stable/rational.”
Outside of Las Vegas, Baby Boomers continue to prove elusive customers, as Covid fears persist. At least upward movement in wages (hurrah!) is offsetting some of inflation’s baneful effects. In addition, customer spending hasn’t been discouraged by heavy cutbacks in non-free-play promos. Another area in which casinos had curtailed spending—but are now opening their purses—is capex, which is good news for game makers, who expect to be carried on this tailwind. “A focus on quality over quantity remains with most operators, and we expect to continue to see slight decreases in overall slot counts with a higher mix of new and premium games,” said Jonas.
In the realm of visitation, there is cause for both caution and optimism. Drive-in traffic to Sin City is down 6% this year but May passenger counts at Reid International Airport were 30% higher than the previous year. Other analysts see the glass as half full, noting that convention attendance is still down over 25% from 2019, leaving ‘room to grow.’ We’ll take that for now.
Our East Coast bureau reports on an interesting wrinkle in the Unite-Here/casino negotiations. Although a majority of the New Jersey legislature now supports a ban on smoking in casinos, Unite-Here will reportedly come out against it. Was this a concession made in order to seal the deal with Big Gaming? If so, Local 54 President Robert McDevitt has made a Faustian bargain with his constituents’ lives. Incidentally, final contract holdouts Resorts Atlantic City and Golden Nugget (above) are expected to quickly fall in line. Coincidence? In other news, anybody remember a casino boat called Texas Star? The ship was recently sunk, along with some old streetcars, to form an artificial reef in the Delaware River.
Does the right hand at Philips 66 know what the left is doing? The company issued a pro forma denunciation of black-market slots in Missouri … the same illegal machines that are cropping up in gas stations that sell Philips fuel. (As though a trip to the gas station weren’t expensive enough already.) Missouri slot routes exist in a gray area between outright unlawfulness (which the Lege has failed to enact) and legality, thanks to a loophole that allows machines that show the outcome of a wager in advance, adding an element of masochism to the slot play. Some gas stations aren’t even bothering with that pseudo-legal fig leaf. Reports the St. Louis Post-Dispatch, “On Tuesday, the Newton County prosecuting attorney accused a gas station manager and a slot machine supplier of misdemeanor gambling charges after a highway patrol investigator found actual, casino-style slot machines at a Neosho station run by Vinod Kumar.” Other counties are also starting to crack down, in what we hope is the beginning of a trend.
Boris Johnson‘s government finally came out with its long-awaited recommendations for reform of Great Britain‘s gambling industry and they landed like a ton of bricks, at least for online operators. If approved by 10 Downing Street—and the industry is already shrieking in pain—bet limits would placed on online wagers, which would be capped somewhere between $2.45 and $6 a wager. Free play would be banned. The purpose of such measures would be to curb disordered gambling, although the industry says the cure would be worse than the disease. Huffed the industry’s lobbying body, “Ministers shouldn’t be sticking their nose into how people choose to spend their own money, and the last thing they should be doing at this time is damaging business and sport.”
Brick-and-mortar casinos, by contrast, got much of what they wanted, including an increase from 20 slots apiece to 80, as well as the ability to extend credit to foreign players. And the teams of the Premiere League of soccer got a break. Instead of gaming-ad patches being banned outright, teams can simply opt out on their own. Whether the online restrictions, if adopted, sent players scurrying to the black market (as the industry claims) remains to be seen. But that online casinos have been singled out for opprobrium … of that there can be little doubt.
Quote of the Day: “That’s a pretty overwhelming vote and suggests Bally’s doesn’t play well with its partners in organized labor. I hope that Labor Peace Agreement with Bally’s is rock-solid here in Chicago because it’s looking pretty weak & wobbly in Rhode Island.”—Chicago Alderman Brendan Reilly, reacting to a pro-strike vote at Bally’s Corp.’s casino in Lincoln, Rhode Island.