David Mckee

Posted on March 22, 2021 by David Mckee — 3 Comments

A cautionary tale

Las Vegas, be warned: This could be you. We’re referring to the chaos in Miami, where an 8 p.m.-6 a.m. curfew has been imposed by police in response to widespread hooliganism. The out-of-control situation in the streets was brought on by Gov. Ron DeSantis‘ open-for-business, head-in-the-sand attitude toward Coronavirus. There are no capacity limits, no masking mandates and a general elimination of restrictions meant to protect the public health. The result was thousands of overeager party animals descending upon Miami to, as City Manager Raul Aguila put it, “engage in lawlessness and an anything-goes party attitude.” Add Mayor Dan Gelber (D), “there are very few places that have been open as our state have been open. We’re in the middle of a pandemic. The virus is still very present in our community. We have 1,000 infections a day on most days.” That will fall on deaf ears in the governor’s mansion, where a Luddite, anti-science attitude holds sway.

Consequently, you have what The Associated Press describes as an “unruly spring break crowd gathering by the thousands, fighting in the streets, destroying restaurant property, and refusing to wear masks.” Five combined police forces and even SWAT teams have been all but powerless to control the rabble. DeSantis probably thinks the mob is good for business but Aguila responds that they’re not patronizing local businesses or restaurants, merely crowding the streets … twerking and ‘making it rain.’ Streets have been blocked by rioters, shots fired and at least one restaurant destroyed outright. As for the law-enforcement response, tourist Heather Price moped “I just feel like it’s really not fair. People paid a lot of money to come all the way out here, just to not be able to do the activities they wanted to.”

Posted on March 19, 2021September 14, 2023 by David Mckee — 1 Comment

Las Vegas: Are happy days here again?; Sands dibs NYC

As we’ve often said, when the American economy gets the flu (literally, in this case), Las Vegas catches pneumonia. During the depths of the Covid-19 pandemic, unemployment in Vegas levitated to 34%. Today it is a still-unhealthy 10.5%. Nonetheless, the Wall Street Journal paid a visit to Sin City and found a spirit of optimism, whether manifested in full classes at dealer schools or the $6.25 billion paid for Venelazzo. As one dealer-school manager put it, “You have to invest in the idea that Vegas always comes back bigger and better.” As the WSJ noted, Las Vegas may be attempting to diversify economically but it lives or dies with tourism.

“An all-time high of 42.9 million people visited Las Vegas in 2016, and convention attendance reached a record-setting 6.6 million meeting attendees in 2019,” reports the WSJ and while Vegas is recovering perhaps faster than anticipated, the brain trusts with whom reporters spoke don’t expect pre-pandemic numbers to return until sometime in spring 2022 or later. It’s a long climb back from 2020’s perigee of 55% fewer visitors (numbers not seen since 1991) and 43% less Strip gambling revenue, after all. A state budget overly dependent on gaming revenues and entertainment taxes is looking at a recovery not before 2023 at the earliest. Room rates have yet to recover their January 2020 average of $153/night. Hopefully, for the average Las Vegan, the road back will not be as long as after the Great Recession, when inflation-adjusted personal income didn’t return to normal until 2014.

Posted on March 18, 2021September 14, 2023 by David Mckee — 1 Comment

A.C.: A month to forget; Trump sticks it to Miami

Casino revenue headed 32% south in Atlantic City last month, to $148 million. Those were augmented with $46 million in sports-betting dollars and $94 million from Internet gambling (+80%), so that probably counts as a silver lining to a dark cloud. This Friday’s increase of capacity limits from 35% to 50% is expected to boost casino revenues. February slot winnings were -31.5% and table win -34%. Borgata had a terrible month at the slots, -45%, while its table-game winnings were 36% downward. Quarter-to-date, Borgata is tracking over twice as badly as JP Morgan analyst Joseph Greff projected. The Caesars Entertainment threesome fared even worse, down 40%, pretty evenly divided between slots and tables. Harrah’s Resort performed most weakly, falling 43% to $15 million, while Caesars Atlantic City was -37% to $13 million and Tropicana Atlantic City tumbled 38.5% to a Caesars-best $16 million.

Posted on March 17, 2021September 14, 2023 by David Mckee — 6 Comments

Trop sale teased; Michigan sports betting explosive

Gaming & Leisure Properties Inc. hosted JP Morgan analysts last week and tried to get them all hot and bothered with talk of a Tropicana Las Vegas sale. It said it felt one would happen sooner, not later, adding that it “feels like it is signing one [non-disclosure agreement] per day.” Before we get our panties wet, let it be known that GLPI then admitted that it’s only “a handful of serious buyers that have capital to effectuate a transaction.” Talk is cheap and so are NDAs, it would appear. The Trop would have to endure yet another market repositioning, whoever buys it and GLPI confesses that a sale will be easier said than done (it “has heard a broad range of prices, it notes the devil is in the details to finalize a deal”). A bigger opportunity would appear to be the eruption of sports betting, which “should help crossover play to table games.” It also makes casino operators more credit-worthy, which GLPI can exploit by purchasing their real estate.

Posted on March 16, 2021September 14, 2023 by David Mckee — 3 Comments

Wall Street meets Las Vegas, Part II

Station Casinos dispatched Executive Vice President Rodney Atamian to meet with JP Morgan analysts last week. According to Joseph Greff, he reported, “solid/improving visitation and spend per visit trends.” A possible increase in Nevada casino-capacity limits to 50% should propel that further, one presumes. As with other regional gaming companies, the under-40 crowd is providing the momentum as core Baby Boomers stay on the sidelines. “However, as vaccination trends have improved, this core customer has begun to return as well.” Management doesn’t anticipate promotional wars but expects some upward creep in labor costs. While undecided on the future of the Palms, Station is persuaded that whether by a sale or a reopening under “an improved cost structure/market strategy” it can be successfully monetized, although the potential new market was unspecified. As for its undeveloped real estate, Station noted strong expressions of interest both from industrial developers as well as residential builders. The fates of three closed locals casino remain hazy, however.

As for Station’s archrival, Boyd Gaming, CEO Keith Smith and CFO Josh Hirsberg showed the flag, and teased the 1Q21 numbers by disclosing “strong” January performance with “momentum continuing into February and March.” Visitation and consumer spending are higher, albeit in the 25-to-55 age stratum. Boyd expects older customers to return in 2Q-3Q21. “Of note, BYD has seen a positive uptick in business as stimulus checks get mailed, and thus expects future benefit in the coming weeks.” Indeed. Also, the wider popularity of cashless gaming appears to be increasing the slot manager’s Holy Grail, time on device.

Posted on March 15, 2021September 26, 2023 by David Mckee — 2 Comments

Vegas’ Dream is TSA’s nightmare; MGM disses Chicago

Part Two of our survey of analyst reports on Vegas-based casino companies will have to wait a day, given a bevy of breaking news. First up, a major setback for the planned Dream Las Vegas on the south Strip. Airlines don’t want it and neither (and perhaps more importantly) does the TSA. Buildings in the immediate vicinity of McCarran International Airport are height-restricted to about 135 feet. $300 million Dream wants to go big: 237 feet. This presented no concern to the Federal Aviation Administration, it should be noted. But the security boffins at the TSA are concerned, according to the Las Vegas Review-Journal, about “the potential threat of active shooters in the hotel, improvised explosive devices in vehicles and people throwing objects over the airport’s fence.” Given the peril to McCarran fuel storage posed by the fusillade of the Mandalay Bay Massacre, these are not idle worries. The Clark County Planning Commission is leaning the TSA’s way and is also concerned that the proposed height of Dream LV would make it stick out like a sore thumb.

Posted on March 12, 2021September 14, 2023 by David Mckee — 2 Comments

Wall Street meets Las Vegas, Part I

JP Morgan analysts conducted a pilgrimage to Las Vegas to meet with the top brass of Big Gaming. First up was MGM Resorts International, represented by CEO Bill Hornbuckle, CFO Jonathan Halkyard and BetMGM CEO Adam Greenblatt. They see positive movement toward Vegas with bookings “continually improving” and with much hope placed on World of Concrete expo coming off in June, which would be a major inflection point where conventions are concerned. Despite “minimal” international traffic, execs think 2019 levels could be achieved a year ahead of schedule, by late this year. Vacation bookings were described as near 2019 levels and “MGM is seeing an uptick in more spring/summer bookings and a shortening booking window.” Airlines are being very cooperative in adding capacity in anticipation of bigger airlifts, while occupancy at MGM properties may be 40% or so midweek but double that on weekends.

Tunica and Biloxi were described as still challenged, but drive-in resorts in Maryland, Ohio and Detroit are “faring well,” according to analyst Joseph Greff. Since the average age of the regional customer is in the early sixties, MGM is looking forward to a return of the risk-avers 55+ demographic. MGM brass thinks the regional properties can notch 80% to 90% of pre-Coronavirus levels if capacity limits continue to lifted over the next three months. Macao was praised with faint damns, January being said to be “broadly break-even” and Chinese New Year “decent.” MGM China is hopeful that the renewal of its concession will be considered this year or next but the government is—surprise!—keeping everyone in the dark. As for BetMGM, management is confident as it sees momentum from 4Q20 being continued early this year. It’s a useful tool for recruiting new players and at a lower cost (always a plus for gaming execs). Migration of sports bettors into i-gaming also looks promising.

Posted on March 10, 2021September 14, 2023 by David Mckee — 2 Comments

Chicago gets serious; Ohio recovering but Missouri swoons

Chicago Mayor Lori Lightfoot (D), having received 11 expressions of interest in a megaresort (two of them an exacta by MGM Resorts International and MGM Growth Properties) is ready to issue a request for proposals sometime next month. We’ll then see which of the 11 makes it to the semifinals, as would-be operators finally have to talk turkey. One incentive to do so is that the casino license comes with concessions for slot routes at the Windy City’s two major airports. Also, tax rates have been ratcheted down sufficiently that what was once a 1%-2% potential profit margin now looks more like 20%, best-case scenario. The bare-bones cost of a metro casino, according to one survey commissioned by Lightfoot, is $750 million. However, it was pointed that such comparable facilities as MGM National Harbor ($1.4 billion) and Encore Boston Harbor ($2.6 billion) came with substantially higher price tags, and Chicago leaders want a destination property, not ‘slots in a box.’ Wall Street analysts are projecting seemingly insane amounts of revenue: $833 million in Year One, then $929 million, then $1 billion in the third year. That doesn’t count the two-year temporary casino (with an option for a third year).

Posted on March 8, 2021September 14, 2023 by David Mckee — Leave a comment

Maryland: More gamblers = more money; Illinois improving

What will prompt recovery in gaming? Stimulus money, yes, but we got a strong indicator of something else out of Maryland last weekend. Overall, casino revenues were down 16.5% but the story is more complicated than that. At facilities restricted to 25% of capacity (MGM National Harbor, Maryland Live and Horseshoe Baltimore), the decline was 18%. But at (smaller) facilities bumped up to 50% of capacity, revenues grew 8%. So are capacity constraints keeping players at home? Based on the Maryland numbers one would have to say yes. The statewide gross was $126 million, with MGM reporting 15% less slot revenue and 19% less win at the tables. National Harbor held the top spot with 40% market share compared to Maryland Live’s 35.5%. Horseshoe has fallen so low that JP Morgan analyst Joseph Greff no longer breaks out its market share.

Speaking of Horseshoe, it eked out $14 million, a 20% decrease. MGM booked $51 million, -17%, and Maryland Live won $45 million (-18%). Nobody was revenue-positive but Ocean Downs‘ $6 million was only a 3% dip. Rocky Gap Resort made $4 million (-17%) and Hollywood Perryville was good for $6 million, down 5.5%. Over in West Virginia, revenues slid 34%, with Hollywood Charles Town tumbling 39%, thanks in large part to a -50% wipeout at the tables. (Slots were -35%, almost on par with statewide average.)

Posted on March 5, 2021September 14, 2023 by David Mckee — 2 Comments

Next stop … Richmond?!?; Alabama covets casinos

No fewer than six companies, some of them major, have descended upon Richmond, Virginia, seeking the Dominion State’s last casino license. They are: Bally’s Corp. ($650 million), Cordish Cos. ($600 million), Golden Nugget ($400 million), Pamunkey Indian Tribe ($350 million), Urban One/Pacific Peninsula Entertainment ($517 million), Wind Creek Hospitality ($541 million). The bigger the proposed investment, the more politicians tend to like it, so Bally’s and Cordish have that in their favor. The only proposal we’re tempted to rule out is the Pamunkey Tribe’s, partly because they’ve already got a bite of the apple in Norfolk and partly because of the low level of spend, barely half of Bally’s. (Peninsula Pacific already owns Colonial Downs and the Rosie’s slot routes, so either them that has will get or it will be adjudged to have too much of the pie already.) Bally’s has pitched its project for the same site as Golden Nugget, so we don’t know how that be resolved. Maybe if Tilman Fertitta goes on CNBC and cries about it Bally’s will take pity. Not.

But seriously … if Richmond wants a heavy hitter with brand equity, the Nugget is the ticket. Cordish has shown it can be a money-spinner in other East Coast markets, so it’s got that going for it, while Wind Creek has a more limited but auspicious track record and would build the largest number of hotel rooms (252). Urban One and the Pamunkey are minority-owned, while Fertitta is offering minority businesses 5% of his Richmond stake, which is mighty white of him. (Cordish numbers NFL great Bruce Smith among its minority investors.) The Bally’s and Pamunkey designs are the sexiest, even if the latter looks suspiciously like what the tribe is supposed to be building in Norfolk. Bally’s CEO George Papanier may have committed a faux pas when he condescendingly promised a “vibrant new attraction that is sure to turn Richmond into a dynamic tourist destination.” As though it weren’t already. Perhaps the $100 million entrance fee he’s promised the city will smooth any hurt feelings. Voters get the final say, choosing the winning proposal in a Nov. 2 referendum.

Author: David Mckee