Is the new year bringing a Las Vegas comeback? If you set store by anecdotal evidence, things look relatively normal on Fremont Street. God knows Downtown could use a dose of normality, especially after a December devoutly to be forgotten. For those, like us, who are waiting upon empirical evidence, the good news is that there is some, albeit hailing from the Las Vegas Strip. Room rates for March 14-20 are 49% off last year’s pace, averaging $134/night. Whilst this may not be indicative of “surging” demand, there are some positive omens. Whoever decided to close Palazzo midweek was a genius. Las Vegas Sands‘ room rates are shooting up 47% on weekdays and 19% on weekends, when competition is stiffer. The Venetian is carrying the market at this point. Frankly, everyone else’s midweek rates stink. Convention-reliant MGM Resorts International can perhaps be excused for being down 57% (reopening three hotels will make that price point harder to defend) but how to explain Caesars Entertainment‘s -67% and Wynncore‘s -68% At least MGM and Wynn Resorts are rebounding on weekends, down 25% and 28% respectively. Caesars is in the weekend tank, off 46%. Perhaps management is trying to recoup traffic by deep discounting but that’s the best spin we can put on it.
Continue reading Mixed signals from Vegas; It’s all good in Atlantic CityAuthor: David Mckee
Sign of the times
Metal detector at the entrance of Philadelphia Live. It may be the first but we doubt it’s the last.
Boyd better than expected; Marching through Georgia
Boyd Gaming leaked January data, what Wall Street calls “offered an encouraging commentary,” to help put an upbeat spin on its 4Q20 numbers. It worked like a charm. JP Morgan analyst Joseph Greff moved his price target up $8 to $62/share. He was motivated by news of “improving gaming customer spend trends thus far in the 1Q21 relative to its results in the 4Q20 … this is despite the older casino patron demographic not really returning to any great extent, which is something that could serve as upside or a cushion to the presently strong/growth trends from younger, non-rated players.” He liked a business plan structured around a “favorable localized/regional footprint predominantly focused on a drive-to, leisure gaming customer.” Greff also raised his cash flow estimates based on strength in the Midwest and South regions of BYD and on its strong sports-betting prospects, thanks in part to FanDuel (“DFS Operator #2” in Wall Street code).
Fourth-quarter revenues were a better-than-expected $636 million (Greff anticipated $608.5 million), despite being 24% down from 2019. But the Midwest and South were only 15.5% off the pace, bringing home the bacon to the tune of $456 million. This enabled the company to shrug off the temporary closures of Par-A-Dice and Valley Forge Casino Resort. In Las Vegas, support from locals was somewhat undone by lackluster tourist biz, particularly at The Orleans. Vegas numbers overall were down 28%, a $161.5 million take. Downtown needs a defibrillator, generating just $18 million, a 74% collapse “pressured by weaker tourism to southern Nevada, especially from the core Hawaiian customer base.” In other words, Main Street Station isn’t coming back any time soon and no reopening date was floated for Eastside Cannery on the Boulder Strip. Greff forecast a recovery in locals biz (good for Cannery) but only “modest” improvement in Downtown numbers.
Continue reading Boyd better than expected; Marching through GeorgiaMichigan gaming explodes; Massachusetts droops
Online sports betting and Internet gambling have come to Michigan and they’re a smash hit. In the first 10 days of sports betting, handle was $115 million, with revenues of $13 million. FanDuel led market share with 32% of handle, well ahead of DraftKings‘ 24.5%, followed closely by Penn National Gaming‘s 24%, then BetMGM‘s 20%, per Credit Suisse analyst Ben Chaiken. He described the i-gaming haul—$29.5 million—as “well above expectations,” led by MGM Resorts International with 38% of market share, trailed by FanDuel’s 23% and DraftKings’ 24%. Whereas Chaiken had anticipated a monthly gross of $28 million, he’s upped that to $90 million, quite a dramatic change to say the least. To put that in perspective, it would be at least $10 million higher than Pennsylvania, which has 3 million more inhabitants. Talk about the proverbial “pent-up demand”! The downside was that sports books spent so much to acquire players that they ended up losing $5 million.
“The circumstances for Michigan’s online launch could not have been better ahead of two of the biggest sports betting holidays of the year,” reported PlayUSA analyst Dustin Gouker. “Ultimately, it’s a small sample size, and the results of which are less important than sportsbooks launching and engaging sports bettors and setting the groundwork to flourish for years. By that metric, Michigan’s launch was a success.” It not only obliterates Tennessee‘s online-only debut but, with 10 OSB books, was the largest-scale launch in U.S. history. Gross receipts for tribal operators were mostly small potatoes, except for DraftKings/Bay Mills Indian Community‘s $3.5 million. Other big winners were BetMGM ($5 million) and Barstool Sportsbook/Greektown Casino ($3 million). Although FanDuel led in handle, luck was with the punters, leaving the casino with well under a million dollars won.
Continue reading Michigan gaming explodes; Massachusetts droopsA.C.: Trump Dump gone, Hard Rock and Ocean going strong
At 9:08 a.m. yesterday, one of the towers of Trump Plaza was finally imploded, an important first step in clearing Atlantic City of its last excrescences of You Know Who. Maybe owner Carl Icahn, having been a “george” donor to the Boys & Girls Clubs of Atlantic City, can hold a charity raffle for the right to push the plunger on the next tower, assuming it doesn’t crumble of its own accord.
Now would ordinarily be the time for a catty metaphor involving implosions and Atlantic City gaming revenues but they actually did fairly well in January, 17% off last year’s pace. (And, as American Gaming Association President Bill Miller will point out, January and February 2020 were two of Big Gaming’s best months ever.) Casinos grossed $160 million, led by Borgata despite a pummeling from newcomers Hard Rock Atlantic City and Ocean Casino Resort. Borgata slot winnings fell 28% and table win plunged 31%. Citywide, table games were the saving grace, off 9% while slots were down 19%. Slots were also unkind (-28%) to the Caesars Entertainment threesome, down 25%, while its tables were -13%. Volatile Caesars Atlantic City was the most stable for a change, off 9%, for a $15.5 million gross. Harrah’s Resort plummeted 38% to $15 million while Tropicana Atlantic City imploded, er, tumbled 24% to $15.5 million.
Continue reading A.C.: Trump Dump gone, Hard Rock and Ocean going strongNo joy in Sin City
What follows was shared with us via Facebook. It shows the (ugly) face of customer interactions in present-day Las Vegas …
“I need you to know what people in positions of service are experiencing right now.
“Tonight I am working at the Piano bar with … two of the most patient and composed people I know. A party of 18 came in. Sundays have been pretty slow lately, so we were grateful for the business. This party, like many, started out upset at the mask requirements and like many, expressed their displeasure by haranguing the bartender taking their orders. After receiving their drinks, they became even more upset by our current ‘no open mic’ policy, a safety precaution mandated by the state. By the time I was called to sing my set, their ire and inebriation had snowballed into aggressive shouting, again, not uncommon for the current bar scene. I sang my party songs, hoping to turn it around. By my third song, the were singing/shouting along with the music and replacing the lyrics with sexually explicit verbiage about me. As I began to pass the tip jar, a member their party became unreasonably upset about the minimum on his tab, which is posted on our door and explained when patrons are seated. The whole party rallied behind him and they all decided to close their tabs and leave. They closed their many tabs, upon only one of which was left a tip, of two dollars. This is not a story about the money though …
Continue reading No joy in Sin CityF-blue returns from the grave; Caesars socks it to you
The Thing That Wouldn’t Die, aka Fontainebleau, is back again. Former owner Steven Witkoff has sold it to Koch Real Estate Investments for an undisclosed price. Considering that Witkoff bought it from Carl Icahn for $600 million and estimated that “The Drew” (as it was briefly called but never came to be) would cost in the neighborhood of $3 billion to finish, we’re looking at a very pricey megaresort project for Koch (as in Koch Brothers). The latter is in partnership with Fontainebleau Development so, yes, F-blue is a thing once more. Mind you, we’re talking about a casino-resort that’s been under construction for 14 freaking years (so old that Harry Reid was Senate Majority Leader when the original owners came cadging for a bailout). That $3 billion figure may have been optimistic.
Looking on the bright side, Koch trumpeted, “With Las Vegas‘s tourism recovery underway, the city has safely reopened to millions of visitors since June with even more success on the horizon.” Koch assures us that it practices “an agnostic approach to product, geography, and capital position,” which I guess is meant to assure us that this isn’t a leap of faith. As for Fontainebleau Development, it’s—oh no!—the return of the Soffer clan, the people who got us in this mess in the first place. Let’s hope their edifice complex is better-financed this time around. Even so, it may indeed take an act of God to make F-blue pencil out. As Scott Roeben emphasizes, it’s dumping—er, debuting—3,780 hotel rooms into a market that will be hard-pressed to absorb them, even a couple of years down the road. After all, F-blue is being beaten to the punch by not-unchallenged Resorts World Las Vegas. So there’s that. Even Resorts World fan Roeben is nervous about the latter’s prospects. “We suspect Koch will take a wait-and-see approach, sitting on this asset until market conditions improve, should that ever happen,” Roeben writes. Which means the butt-ugly corpse of F-blue is with us to stay for a long time.
Continue reading F-blue returns from the grave; Caesars socks it to youMGM revisited; Mixed month for Indiana
Today it was Credit Suisse analyst Ben Chaiken‘s turn to weigh in on MGM Resorts International‘s 4Q20 numbers and he found even more to like than did Joseph Greff yesterday. Leading with Macao, Chaiken saw MGM China capturing more of mass-market play “which presents a powerful high margin earnings story should there be a mass recovery story in ’22, as is our expectation.” The only damper on that prospect is the stream of big-ticket resort openings from Sands China, Sociedade de Jogos de Macau and Galaxy Entertainment, which could shake things up further. Chaiken also predicted that Wynn Resorts would pivot to mass-market players, presumably because VIP action has been thin on the ground. Like us, Chaiken was keen on the performance of MGM’s regional U.S. casinos, which have boasted “a faster than expected rebound” from pandemic constraints. Although he arguably buried the lead, the analyst was also impressed by BetMGM‘s performance in both i-gaming and sports betting, “outperforming expectations … driven by efficient customer acquisition and better than expected share.”
Continue reading MGM revisited; Mixed month for IndianaBetMGM saves company’s bacon; Whither the Palms?
Seesawing between the effects of closures and capacity restrictions, Detroit casinos were down 28% last month. They grossed $87 million, led by MGM Grand Detroit with $34 million (-32%). Breathing down MGM’s neck is MotorCity‘s $33 million haul (-21%), while Greektown lagged with $19.5 million (-20.5%). Walk-up sports betting was a smash, with $4 million in revenue realized in just nine days on $36 million in handle. The numbers for online wagering and i-gaming aren’t in yet but they should be impressive. So, all things being equal, it could have been much worse.
Elsewhere in the MGM Resorts International empire, 4Q20 numbers were reported by Deutsche Bank analyst Carlo Santarelli and they send one reeling. Las Vegas was a black hole of nothingness, plunging 66.5% ($480 million), while regional operations were better—if one defines “better” by being 34% off 2019’s pace. At least they brought in more money: $595.5 million. MGM China was nothing to write home about, being down 58% and winning $305 million. The disparity between Las Vegas and the rest of the U.S. was more pronounced in terms of net revenue, $53 million vs. $158.5 million, leading one to wonder if MGM reopened its Las Vegas Strip fleet too much and too soon. (More on that theme later.) Bad as these results were, JP Morgan analyst Joseph Greff had actually expected them to be worse, calling the numbers “unsurprising.”
Why so sanguine? OSB and Internet gambling were “objectively impressive” with BetMGM forecast to capture 15% of American OSB share and 20% of i-gaming action. (He wasn’t so chill about the Strip, lowering his cash-flow projections.) The good online news inspired Greff to boost his MGM price target from $32/share to $37. MGM leadership thinks business will not return to 2019 levels for a couple of years, projecting that it will be 90% of prior-year levels by late 2022. Greff is a bit more optimistic than that. Strip occupancy fell from 89% to 38%, thanks of course to nonexistent convention business, table-game wagering was 41% less (though the house won more often) and “properties are still being negatively impacted by capacity constraints, lack of demand/airlift, etc.”
Station sitting pretty; Missouri booms; All bets off at MGM
Despite fourth quarter revenues that were 28% off the pace ($122 million) in Las Vegas, analysts on Wall Street are liking Station Casinos these days. Native American management fees in 4Q20 were up 21% ($25.5 million) for one thing. JP Morgan‘s Joseph Greff opined that the Vegas locals market “should be in a good supply-demand relationship for a while.” And it’s throwing off a great deal of free cash flow, a good thing to have when A) the Palms investment may be extremely difficult to recoup and B) you’re looking at new projects like Durango Station, which management expects to generate 20% or better ROI. And no wonder, given how underserved that part of the valley is. Having four shuttered casinos isn’t a bad thing, says Greff, reporting that traffic is being redirected into other Station properties. “Moreover, we think there is upside potential in our future forecasts related to a return in its older, core customer (65 years and older), which should complement/provide a cushion related to its presently favorable growth in new, younger casino patrons.”
Continue reading Station sitting pretty; Missouri booms; All bets off at MGM