Author: David Mckee

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 …

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.”

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.”

Caesars Entertainment, aka Eldorado Resorts, has become possessed by the evil spirit of spare-every-expense Columbia Sussex. In one of the most odious of recent cutpurse moves, bartenders have been ordered to short-pour liquor: The ‘new normal’ is .75 ounces per drink, meaning you’ll have to buy more drinks in order to get that buzz going. Caesars has been the prime offender in recent moves such as jacked-up table limits but this story, broken by Vital Vegas, has clearly struck a nerve, going viral in no time flat. (Viral Vegas?) CEO Tom Reeg had already established a reputation for cheeseparing but this move couldn’t have been better designed to alienate customers if he tried. Much more of this and Sin City will lose its cachet as a bargain destination, if it hasn’t already.

To get to the nub of the issue, Linq has essentially halved the amount of liquor that will be poured into your Vodka Cranberry but will of course charge you just as much for it as though it were actually a stiff drink. (It’s 1.25 oz. per pour at MGM Resorts International, in case you wondering.) Vital Vegas paid a visit to Linq and found it in a significantly down-market state: “there were virtually no customers. Entire swaths of table games have been removed and replaced with slot machines. Such moves make some sense given low demand (table games involve much higher labor costs), but even if these changes are temporary, you’d think casinos would want to draw customers, not repel them with weak drinks.” Indeed.

It’s earnings-report time for Wynn Resorts and JP Morgan analyst, Joseph Greff, for one, is feeling blasé about the numbers. “Overall, we’d characterize the quarter as in line with investors’ recent expectations, and its earnings conference call outlook commentary as appropriately hinged on a resumption of travel that is predicated on a decline of COVID-19 infection rates and an acceleration of vaccination rates,” he wrote. Luckily for Wynn, its preferred Macao sector (premium mass-market) is outperforming the mass-market and VIP ones. While Sands China saw a 61% plunge in table-game wagering, Wynn had a victory of sorts by being down only 51%. Wagering volumes in Las Vegas were described as “impressive,” thanks to weekend play and California drive-in business. 4Q20 table game and slot handle were 72% and 85% of comparable 2019 levels, which bodes well for recovery. Still, Greff thought cash flow would be “stuck” at recent levels until Coronavirus vaccines are more widely promulgated.

The Morgan analyst shaved five bucks off his target price for WYNN, to $119/share, but encouraged buying on any downticks in the stock. Early-2021 cash flow projections were more optimistic for Wynncore (-4%) than Macao (-27%), but rosiest of all for Encore Boston Harbor, given a 16% boost. Internet gaming is slow to obtain traction, posting a $38 million negative return on investment. Looking over the horizon, Greff sees Wynncore gaining 5% more cash flow, bringing it to 93% of 2019 levels. Macao is dicier, only 83% of 2019 levels, led by slot play. VIP win is predicted to be 36% of 2019. At least Wynn Palace appears to have turned the corner, dwarfing Wynn Macau in EBITDA. Cash flow from all sources was $70 million for 4Q20, with Macao contributing $39.5 million and Vegas $21 million (on $173 million in revenue). Those numbers were above expectations and, going forward, “3Q/4Q events are hanging in (at least for now).” Whew.