Gambling win in Massachusetts shot up 14.5% in February, reaching $98 million. Market leader, of course, was Encore Boston Harbor with $63 million (+14.5%). MGM Springfield leapt 17% to $23 million and Plainridge Park climbed 10% to $12 million. Wynn Resorts, Penn Entertainment and MGM Resorts International were among the companies represented at the J.P. Morgan Gaming & Lodging Forum and you can read our takes on most of them at CDC Gaming Reports. As for the others …
Boyd Gaming was one of the few companies to send its CEO, Keith Smith, as well as CFO Josh Hirsberg. Like almost everyone else, they met with lead J.P. Morgan analyst Joseph Greff and reported business to be steady across all database segments “with concern only for the lowest tier stemming from recession risks, while the highest age demographic continues to perform well.” The biggest growth potential lies in downtown Las Vegas, due to its tardy post-pandemic recovery as well as the comeback of the Hawaii customer base. “Historically, half of the total visitors to the Las Vegas market visit the downtown area during their trip.”
Smith and Hirsberg were euphemistic about how they’re maintaining profit margins, beyond nixing buffets. Terms like “price discipline,” “data analytics” and “targeted marketing spend” were bandied about, with little quantification beyond an increase in unrated play. Otherwise it’s business as usual, right down to $100 million per quarter in share buybacks, as well as beaucoup dividends. Although a wage increase at many Boyd properties is inevitable, the company sees that as a net plus, since many of those workers are also BYD customers. Give with one hand, make it back (and more) with the other! Sweet.
Caesars Entertainment‘s priorities are reported to be deleveraging and capex investment, and we can’t think of better ones. The goal is to increase cash flow by $150 million this year while retiring $1 billion in debt. The endgame is $5 billion in cash flow by 2025’s end and a 4X debt-to-EBITDA ratio. It doesn’t hurt that Las Vegas Strip occupancies are running at 96%—even minus The Rio—with demand from groups improving “complementing a resilient leisure customer, where compression is driven by enhanced entertainment offerings” (think Adele, newly extended).
The company’s goal of $500 million positive ROI from its digital assets is contingent of its Internet-gambling assets equaling the 10% market share of Caesars Sportsbook. That may be a heavy lift, if an achievable one, requiring a 100% increase in market share. “Management continues to stress the importance of efficiency in this business, with promotional activity now representing ~1% of handle.” For example, CZR does not expect to generate a negative-ROI return in Massachusetts, “though is does not benefit from the physical [retail] presence in that state that some peers have.”
Regionally, CEO Tom Reeg perceives Vegas-like growth, if not quite at the same profit and cash-flow margins. And should Caesars get the New York City nod, Reeg expects high ROI from Times Square, especially since CZR would be merely retrofitting a building that’s already there. He’s looking at a 2026 or 2027 opening.
Golden Entertainment sent prexy Charles Protell to meet with analyst Omer Sander. The company was understandably pleased with its 9X EBITDA sale of its Nevada and Montana slot routes. As Sander observed, “We believe the business took much more effort to run than the 15% of EBITDA it contributed.” Throw in the sale of Rocky Gap Resort to Century Casinos and you have a Golden that is a “much simpler company with a substantial cash balance.” Also, management will be intensifying its focus on the tavern business, its cornerstone, adding as many as six locations per year (to a base of 64). Said Sander, “management feels it can reach 90-100 locations without much meaningful additional infrastructure,” at as much as 30% ROI (25% conservatively).
The Strat is sky-high, sold out through March at $400 ADRs on weekends. Wow. “In March, the property should generate record room revenues even without a full room suite given capex disruption, missing mid-week/convention room nights and international visitation.” During NFL season, Las Vegas Raiders home games drive occupancy and rates enormously. However, the property relies on online travel agencies for 60% of its bookings, something management hopes to bring down to a still-substantial 45%. Atomic Golf is producing as much as $15 million ROI and it is hoped that cash flow will grow from $200 million now to as much as $240 million in the near terms.
DraftKings CEO Jason Robins dropped by to elaborate on the company’s new, profit-oriented strategy. Among its keys are “more efficient state launches” (i.e., smaller and less expensively marketed). Others enumerated by Greff are “improving hold through greater parlay mix, optimization of promotional spend, and the launch of new features.” Robins is also counting on attrition in the OSB field, as epitomized by PointsBet‘s Massachusetts dropout. Meantime, heavy ad spending during NFL season is redounding to the benefit of DraftKings’s Ohio and Massachusetts launches, as the company is no secret anymore. (Robins expects to be profitable in Ohio by 4Q23, even if overall profitability always remains two to three years away.) In addition to a marketing cutback, DraftKings employees may have to fear for their jobs, as they’re under the cost-reduction spotlight.
Proposition bets (bigger in the U.S. than in Europe) have been especially beneficial to DKNG, as have parlays, which players love irrespective of cost. As for Internet casinos, those should perform better now that Golden Nugget Online has been fully integrated. Unsurprisingly, New Jersey is the company’s number-one market for i-gaming player share. Robins said he was “encouraged [by] ongoing conversations” with the New York State Lege regarding legalization of Internet gambling and/or lowering of the onerous OSB tax rate. In the meanwhile, the company will hit its Empire State targets by marketing less and tightening holds. Lovely.
Jottings: Expansion of sports betting and Internet gambling is going slowly, very slowly and politics is to blame. As veteran analyst Brendan Bussmann says, “Two months into the legislative cycle, there are lots of losers and no winners.” Well, maybe, just maybe Missouri—but probably not … Meanwhile, the actual amount of wiggle room for OSB operators not named FanDuel or DraftKings looks limited. Caesars Sportsbook appears to have the best chance, per one analyst. Of course, a second wave of promotional wars is always to be feared … Las Vegas Sands leadership has no regrets about abandoning Venelazzo. It figures it makes up that much and more from Macao and Singapore, plus what it might make from New York State and Texas … Station Casinos might even expand Durango Resort (above, which it plans to open earlier than scheduled) before launching new projects in the Las Vegas suburbs. For the moment, deleveraging and land sales are the priorities, other than Durango itself.