FSE gets new look; Tilman’s big bet; Boyd beats The Street

Fremont Street Experience will now be ‘branded content’ or, to put it less politely, a big-ass billboard for slot companies. Well, one slot company: Aristocrat Gaming. It’s inked a pact with FSE to present “an action-packed new video … The show highlights Aristocrat’s biggest game themes, which are real fan favorites.” The infomercial debuts this week. No word yet on whether competing game makers can hope for similar exposure but we think not. After all, FSE President Andrew Simon nearly knelt in gratitude, saying, “We are proud that industry leader Aristocrat chose the world-class Viva Vision screen to share their messaging in a unique and one-of-a kind environment.”

Just imagine the buffalo stampedes to come, rampaging from the Plaza Hotel down 1,500 feet of canopy and past eight more casinos. Aristocrat is clearly wagering that all that HD action will make Fremont Street pedestrians want to hit the nearest Glitter Gulch casino for some Aristocrat-branded action. We’ll find out how it works at the next quarterly report. And if it doesn’t play for Aristocrat, some other slot maker will be quick to try it themselves. Happy viewing.

In a shocking surprise to anyone who hasn’t been reading Vital Vegas, Tilman Fertitta went and plunked down in excess of $200 million for six acres on Las Vegas Boulevard‘s southeast corner with Harmon Avenue. It includes a Travelodge motel (no, not the $52 million one), among other crappy, low-rise real estate. It’s prime Las Vegas Strip acreage, mind you, directly across from CityCenter, so Tilman is crazy like a fox to be spending $33 million-plus an acre for the land. Only a third of it fronts the Strip but Tilman has a history of making limited footprints work to his advantage. According to the Las Vegas Review-Journal, “plans to develop an upscale hotel, according to people familiar with the matter.” Like, duh. We thought he was going to erect a six-acre Chuck E. Cheese. (Not.)

The sale isn’t final, according to the R-J‘s bevy of anonymous sources, and it’s all very top-hush. At this point we can but speculate about what Tilman will build on the site but, according to early reportage by Scott Roeben, a non-Golden Nugget megaresort is in the works (probably under his Post Oak Hotel brand). Someone who is talking is developer Brett Torino, who has projects on two of the other corners of the Strip and Harmon, told the R-J, “You have the opportunity to squeeze—I don’t know if this is his plan—a massive amount of construction and development on that site.” Torino is also experienced at squeezing the most out of a small footprint, so we’ll go with his assessment.

Today was a day for surprises, as Boyd Gaming exceeded Wall Street estimates for 1Q22 cash flow and reinstated stock dividends at double pre-Covid levels. The Street also underestimated Boyd’s first-quarter net revenue ($861 million), riding positive trends that management indicated are continuing into this month. Travel restrictions to and from Hawaii are still having an effect on Downtown business, but cash flow ($18 million) was 101% higher than Truist Securities analyst Barry Jonas anticipated, while locals-derived cash flow ($119 million) was 15% above his expectation. Pure revenue hit record levels not only in the locals segment ($227.5 million) but the Midwest and South territories ($584 million) as well, while Downtown chipped in $49.5 million. Although Boyd bosses hope that fiscal year 2022 exceeds its predecessor, they warned that the second quarter of this year may seem a disappointment as casino demand normalizes and government stimulus money peters out.

As for its recent, $170 million purchase of Pala Interactive, Boyd rationalized this shortcut to online gambling as a case of it being cheaper to buy than build. The company, Jonas wrote, “plans to participate in the wider [long-term] iGaming opportunity to complement its land-based portfolio.” We presume Boyd will put the beloved Stardust brand on Pala Interactive when the deal closes early next year.

While not as exuberant as Jonas, Deutsche Bank‘s Carlo Santarelli also put a “Buy” rating on BYD and slightly more conservative price target ($77/share vs. Jonas’ $90). “While the beat, in a vacuum, should be viewed favorably, as we see little, if any, rationale for Consensus forecasts to come in, it is likely the near term remains choppy, from a stock perspective, given the current equity market temperament, and specifically, concerns around the consumer. That said, we continue to see BYD as a well positioned, relative outperformer, within the regional group,” Santarelli explained. The company is holding the line on promotions, he said, although unnamed competitors (probably Penn National Gaming) were said to be “aggressive” in that respect).

Among the things he liked were Boyd’s margin expansion, faster than the gaming group overall, and its steady Downtown recovery, which he attributed to an offshoot from returning Las Vegas Strip business. Santarelli described the Boyd balance sheet as “healthy” and warmed to the forthcoming return on investment from the company’s venture into California tribal gaming. Still, he warned, “regional comparisons get considerably tougher in the 2Q22, relative to the 1Q22, and as such, we expect Y/Y [gross gaming revenue] declines in the period” to the extent of 8%.

Well, the pace of casino revenue has been awfully torrid and what went way, way up had to come down sooner or later. Perhaps stung by recent criticism of its labor shortage, “Management noted that it continues to struggle to obtain the labor required to best utilize the hotel components of its assets, while also noting that raising its minimum wage for non-tipped employees to $15 per hour should help the labor situation over time.” That’s good. Considering that $17.70 is a living wage these days, Boyd could do still better.

Elaine “Mouchie” Wynn may have exited the casino industry but she’s still good for a headlines. She’s certainly not hurting for finances, being the owner of four homes, as well as a Francis Bacon triptych of paintings that she acquired for a cool $142.5 million at auction (anonymously). The classy half of the ex-Wynn power couple may have stepped down from Wynn Resorts but she retains a Wynncore condominium and an 8% stock position in the company. Her vision, these days, stretches far beyond Sin City, pet projects being the Los Angeles County Museum of Art and Michael Heizer‘s massive earthwork City, out in the Nevada desert. She’s also a rainmaker for Communities in Schools, which helps the underprivileged. She donated $50 million to LACMA’s new museum, demurring naming rights.

As for gaming, Elaine Wynn’s lingering influence has been to have expunged good old boys D. Boone Wayson and John Hagenbuch from the Wynn Resorts board. As she says, “The stock’s in the toilet but that’s OK. I’m here for the long term. We’re doing fine. And I do like the management now.” Unlike El Steve, Elaine has devoted her post-casino years to making other people’s lives better, not in making herself wealthier. A big S&G thanks for that, Mouchie.

Elvis, Baz Luhrmann‘s cinematic ode to the power of one young man’s crotch, wowed them in Vegas at CinemaCon. Be warned that Luhrmann’s isn’t yours or your father’s Elvis Presley: “You will hear the classics, you will see the story of Elvis, but we’ve also translated that for a younger generation,” said the filmmaker, whose biopic features Tom Hanks as a mephistophelean Colonel Tom Parker. The soundtrack sports rapper versions of Presley hits, while Luhrmann’s ADD visual style is apparently as frenetic as ever. (What happened to the guy who made Strictly Ballroom?) “If it feels a bit like a superhero film, it is,” Luhrmann told an enraptured Caesars Palace crowd. “Elvis is kind of the original superhero: He rises so high, finds his kryptonite, falls so low and then a beautiful, powerful tragedy ensues.” We’ll say this for the movie (of which we’ve only seen trailers): It will look very out of place viewed via a streaming service. If want to see it, the big screen will be a must.

Opposition to Rivers 78, the would-be Chicago megaresort of Neil Bluhm, continues to mount. Civic leaders of the affected Chinatown neighborhood are inveighing against the proposal, arguing that it would negatively impact their community, already heavily targeted by Indiana casinos. Meanwhile, Mayor Lori Lightfoot (D) is trying to clobber casino opponents into submission, threatening Windy City citizens with higher property taxes if they don’t fall in line. Considering that Lightfoot is planning to help subsidize some of the casino infrastructure, this could be the very definition of ‘tax and spend.’