Adios, Tropicana; Wynn’s beat goes on; Sex & OSB

As much as we sensed it was coming and were resigned to it, it’s sad to know that the Tropicana Las Vegas has been marked for imminent death. The Las Vegas Strip dowager is showing her years, admittedly, but she’s the last remaining vestige of classic Vegas, especially after Sam Nazarian disemboweled the Sahara and the Riviera went the way of all flesh. Just when Station Casinos thought it was going to see a big real estate payday, it was double-crossed by the Oakland Athletics. Turns out the A’s had been playing footsie with Bally’s Corp., which did a great job of pretending nothing was transpiring at the Trop. Under the new deal, which was sniffed out by Howard Stutz, the A’s would build a nine-acre $1.4 billion stadium atop the ex-Trop, with Bally’s holding onto 25 acres for future redevelopment.

This may be a case of mistaking motion for progress. There are 27 days remaining for the Nevada Lege and a concrete, new-tax plan has yet to be presented to underwrite this vanity project. Moving from the Wild Wild West site to the Trop one shaves $105 million off the budget—because the land would be leased from Gaming & Leisure Properties—but still leaves $395 million to be underwritten by taxpayers, a big ask by any measure. (Kudos to Phil Ruffin, who sensed that the A’s were shopping a bad deal around and gave them a wide berth.) If you’re in Las Vegas, check out the Trop by all means … while you still can.

Whilst keeping mum on the Trop deal, Bally’s execs didst rejoice in a record first quarter that saw them come up off the canvas with record first-quarter revenue and a fat, $178 million profit, mostly driven by terrestrial casino play. If you’ve read our CDC Gaming Reports feature there’s not much Wall Street analysts can add. The happy financial news was overshadowed by the sudden exit of CFO Barry Lavan, to be replaced by casino-operations veteran Marcus Glover, late of MGM Resorts International. This was one of several managerial changes that were announced just a few hours before the earnings call. It sufficiently spooked Truist Securities analyst Barry Jonas to the point where he lowered his EBITDA target and knocked six bucks off his $29/share price target.

“While we believe Mr. Lavan has been integral to BALY’s strategic plans, we think his leaving reflects more personal family commitments rather than any concerns on BALY’s business,” Jonas hinted. “We think the broader recent organizational changes reflect BALY shifting to execution following its evolving strategic and financial direction.” He seems to also have been bothered by retrenchment that included reducing capex commitments by $10 million and bruiting more job cuts about. Management, however, is bullish on its Medinah Temple temporary casino (below) in Chicago, even if “late summer” is the new opening timeframe. Bally’s is projecting $25 million in near-term cash flow and $50 million in 2024, which would be an impressive return on investment.

Wanna buy part of a Chicago megaresort? Bally’s rattled its tin cup during the call, dropping hints about an IPO that would put as much as 25% of the casino in the hands of suckers, er, minorities. This was part of the dicey deal that Bally’s cut in order to be juiced into the casino by former mayor Lori Lightfoot (D). According to the Chicago Sun Times, “at least 25% of the project’s equity must be held by minorities or by minority-owned and controlled businesses.”

Sayeth the company Web site, “Minority investors will own 25% of the project, and include philanthropists, business owners, sports stars, celebrities and everyday Chicagoans from the Black and Latino communities, as well as other ethnic and gender representation.” And yet, the Sun Times says, “The Providence, Rhode Island-based company said it makes no guarantees that the shares will be issued.” There’s a bit of double-talk for you. Bally’s predicts the $1.6 billion resort will now open in 2026.

“All roads lead to Macau,” concluded J.P. Morgan analyst Joseph Greff after an impressive Wynn Resorts 1Q23 earnings call. Cash flow at Wynn’s two Macanese resorts edged past Greff’s expected $148 million to hit $155 million, despite lower-than-normal VIP action. Overall, the company did very well, with cash flow blowing past $380 million (anticipated) and reaching $430 million. Added Greff, “We think this is at the high end of recently elevated buyside expectations, based on conversations with investors.” Components of success in Macao included wagering that was 82% of pre-Covid levels and retail sales that exceeded 2019 altitudes by 60%. While gross revenues grew $483 million, operating costs in Macao were up only $268 million, meaning nice, plump margins for The Street.

The only less-than-bright spot on the Wynn ledger were worse-than-expected losses for WynnBet. At Wynncore, revenues of $587 million dwarfed Greff’s $500 million forecast, while $210 million was expected at Encore Boston Harbor, which delivered $216 million. In addition to gambling, F&B, entertainment and retail all contributed to the Wynncore beat. Wynn Interactive brought in $21 million of negative ROI, compared to the anticipated -$15 million. Despite its outsized on-the-ground presence in Massachusetts, WynnBet is only garnering 4% of the total gross gaming revenue to be had from sports betting.

Deutsche Bank analyst Carlo Santarelli was less impressed, moving his price target up to $140 (still shy of Greff’s $142) and generally sounding unsurprised by the numbers. He did allow that “Las Vegas had a really strong April, and while comps stiffen materially in May and June, the group segment is shaping up to provide record performance in 2023, with 2024 pace ahead of 2023.” That’s heartening to know.

Ben Chaiken of Credit Suisse was more enthusiastic, even though he thought Wynn was losing market share in Macao. While slot play at Wynncore was 99% larger than in 1Q19 it was flat with 4Q22, possibly portending a slowdown in domestic gambling. He added, “We continue to see upside on the hotel side, driven in part by the ~2x expansion of convention space, which should drive rate higher than expected. Recall ~30% of room nights pre covid were corp/convention, so the expansion should be needle moving.” Let’s hope so.

As sports betting scandals hang over the University of Alabama, the University of Iowa and Iowa State University, The Associated Press is saying, ‘told you so.’ Uncontrolled wagering in the cornfields of our beloved home state? Surely you jest! “With the proliferation of legal wagering in the United States the past five years, it wasn’t a question of if but when a college sports gambling scandal would become public,” opines the AP. Adds Keith Whyte of the National Council on Problem Gambling, “This is probably just the tip of the iceberg. n surveys, the athletes self-report a high rate of gambling participation and sports betting. It wouldn’t surprise us if there’s more problems that surface.” Whyte’s a straight shooter, so we believe him.

Indeed, the last NCAA study, which indicated rampant gambling amongst student athletes, is three years old, so there’s reason to believe the problem has become much worse in the interim. 26 Iowa State athletes (and 85 other students) are targeted in one probe, 15 Iowa Hawkeyes by the other. No game-fixing has been alleged so far. Where are these student athletes getting their wagering money? Endorsement deals, where else? They’ve opened themselves to a variety of criminal charges, including federal ones—which should bring a lusty Congress blundering into the fray, Bill Miller‘s worst nightmare.

Already U of I baseball star Keaton Anthony is under a cloud and others will soon follow. At Iowa State, the football, wrestling and track teams are under scrutiny. (Thank God the debate team is unscathed … yet.) Student athletes in Iowa are under a triple bind, being forbidden to wager on pro sports, their own sports or indeed any sports if they’re under 21. Which is as it should be. Maybe a scandal is what we need. If college students are forced to see the hard consequences of illegal sports betting they might, just might think twice about it.

Finally, regulators in Australia are getting serious about the marketing of sports betting. OSB provider Sportsbet ran absurd ads that “implied successful gambling would lead to sexual success and make men more attractive.” (Funny, it didn’t a thing for us when we cleaned out the slots at the New Aladdin.) The Ad Standards council dinged Sportsbet for implying that having a flutter “could result in enhanced attractiveness and an improvement in self-image.”

Au contraire, argued SportsBet. “The advertisement depicts a modest award ceremony and the crowd reacts to the winner’s announcement and acceptance speech with balanced levels of applause and disappointment in a way that is consistent with that seen at the Oscars or similar event,” it flustered. SportsBet has been in the penalty box before for this sort of thing—and sounds like it will be again.