Durango: Wall Street raves

Analysts from that curious subculture known as Wall Street descended upon Durango Resort for its opening and liked what they saw. J.P. Morgan‘s Joseph Greff pronounced himself “impressed,” in views that will be synopsized later today in CDC Gaming Reports. He wasn’t alone. Deutsche Bank analyst Carlo Santarelli, like Greff, started with the property’s aesthetics, “right on par with Red Rock, a premier LV locals destination resort.” He observed that foot traffic was steady all day long (although he was there on a Monday) and that Station Casinos expects Durango to be profitable from the get-go. Station execs said they were “pleasantly surprised” by the younger player cohort, with the 25-35 demographic seen in force both on the casino floor and in the restaurants.

Added Santarelli, “Another surprise, although somewhat related to the demographic element, has been the late night demand at the property, specifically in the F&B segment, as Strip workers head home from shifts and are looking for a meal closer to home, prior to returning home.” (All the early indicators bode well for Durango and rather poorly for Fontainebleau Las Vegas, the latter’s problems being quite trenchantly summed up by Anthony Curtis in a recent KNPR-FM appearance.) Although Greff doesn’t think cannibalization will be an issue at all, Station brass are anticipating 10% (or $80 million of annual cash flow) to be business sucked away from Red Rock Resort and other company properties. By 2025, Durango is expected to be doing an ROI of $220 million a year (on an $800 million investment), remuneration of a kind not seen in aeons.

Station’s rivals, meanwhile, are taking a wait-and-see stance before retaliating with promotional offers to retain business. Since Durango has the southwest Las Vegas Valley all to itself, Station is sitting in the catbird seat. Players who return to other casinos for George promos could well gravitate back to Durango when the comps and coupons run dry. Speaking of players, Durango sits in a heavily (30%) Asian-American part of town, which has been reflected in disproportionately heavy table play. Customers are also mobbing the food hall (and overwhelming the extant parking), a consideration Santarelli thinks will prompt Station to move forward with Phase II sooner rather than later. That second phase would entail 400-600 more hotel rooms, extra gambling inventory, a doubling of the convention center, as well as some amenities whose absence has been noted (movie theaters, a bowling alley, a Country dance hall). Durango is such a hit that Phase II is expected to supersede Inspirada (the cherry on Station’s sundae), Skye Canyon and the company’s play for California drive-in traffic, Cactus Lane.

In meantime, Station is tilting at Golden Entertainment by dabbling in the tavern business. It’s inked pacts with eight and is in talks with four others. This is another play for younger customers with disposable income. Explains Santarelli, “These taverns are in sub markets of Las Vegas, which provide the opportunity to add to the loyalty program through incremental sign-ups. Management noted that all of the prospective tavern opportunities are along the beltway, in high income areas, where [Station] does not currently have a property.” Makes sound strategic sense. And the high-margin business is expected to add some incremental millions to Station’s bottom line. What’s not to like?

Indeed, Barry Jonas of Truist Securities observed that Durango is growing the market and performing ahead of expectations. He mostly echoed Greff’s and Santarelli’s comments, adding that the casino-resort was looking like an “early slam dunk.” (It may have only 209 hotel rooms but Greff found them comparable to Las Vegas Strip product.) As for any effects on upon the flagship Red Rock megaresort, wrote Jonas, “management reiterated confidence around new housing developments around Summerlin backfilling Red Rock property demand over time.” In addition, Station has four less-mentioned sites (350 acres, total) which could—and probably will—become home to a bunch of little Durangos. Taverns. Casinos. Resorts. Station has a pretty full plate these days and there’s no sign that they can’t handle it.

Revenues were flat from last year in the commonwealth of Pennsylvania but 15% down from November of 2019. Casinos grossed $268 million, with expansion canceling out a very modest increase in win. I-gambling brought another $158 million, whilst sports betting generated $49 million—$13 million after prodigal promotional outlays—a 30% plunge on handle of $934 million, the most ever, as hold was a dreadful 5%. ESPN Bet flooded the zone, representing 21% of all promotions (nobody else was even close) and was rewarded with 8% market share in its debut. Internet casinos were a familiar story, with Hollywood Casino dominant ($61 million), followed by FanDuel ($41 million) and faded BetRivers ($28 million).

Back in the brick-and-mortar world, the only eye-popping statistic was a 32% vault (to $2 million) at Lady Luck Nemacolin. Chasing Churchill Downs out of there really did a world of good. Parx Casino dipped 2% to a state-leading $45.5 million. Its Philadelphia competitors were led by Live Philadelphia, up 4% to $20 million, besting Rivers Philadelphia ($17 million, -8%). Valley Forge Resort accelerated 16% to fourth place and $11 million while picturesque Harrah’s Philadelphia (shown) tumbled 16% to $10 million and last place. When in doubt, build next to a penitentiary. Wind Creek Bethlehem was predominant amongst non-Philly casinos with a whopping $44 million, riding an 8% boost.

The Pittsburgh market saw Rivers Pittsburgh hold steady with $28 million while its competitors faded somewhat. Live Pittsburgh was down 7% to $8.5 million and Hollywood Meadows slipped 7% to $14 million. Mohegan Pocono slipped 6.5% to $16 million, Presque Isle Downs cantered -4% to $7.5 million, Mount Airy climbed 7% to $15.5 million and Hollywood Penn National dipped a point to $13.5 million. The three remaining satellites were led by Hollywood York, up 3% to $8 million, then Hollywood Morgantown‘s $5.5 million (+5.5%) and lastly Parx Shippensburg, whose $2.5 million was perilously close to Lady Luck territory.

Sports betting operators in the Wolverine State gave away the store last month. Revenues of $34 million evaporated into $300,000 after all the giveaways were given away. Hold on handle of $569 million was a measly 6%. We won’t bother with rating winners and losers, because there were none, although it sure looks like the entry of ESPN Bet (18% market share) spooked everyone. I-gaming came to Michigan‘s rescue, garnering $175 million, a 21% leap. BetMGM was tops with $47 million. Then came FanDuel at a surprisingly close $44 million, then DraftKings, also breathing down MGM’s neck with $42 million. BetRivers had $11 million, Caesars Digital made $9 million and everyone else got participation trophies.