Vegas in the time of Coronavirus; Trump squelches tribe

Las Vegas on lockdown is pretty spooky. It’s like a neutron bomb fell on the Strip, wiping out all the people and leaving the casinos intact. However, there may be a glimmer at the end of the April 17 tunnel. JP Morgan analyst Joseph Greff has been looking at Las Vegas Strip room rates for the week of April 19-25 and they’re not as depressed as we were expecting. True, 46% down isn’t great but it could be so much worse. Weekend rates suffer the most (-57%) with average room rates hovering at $101. Wynncore suffers the least, down -4% on weekdays and -14% on the weekend. The splits for the other majors are MGM Resorts International -39%/-58%, Caesars Entertainment -48%/-68% and Las Vegas Sands -47%/-63%. Bargain hunters, take heed!

Looking ahead through the end of June, Greff predicts Caesars will suffer the most, down 22% on weekdays and 27% on weekends. As for the remaining biggies, it’s MGM -8%/-16%, Wynncore -13%/-14% and Venelazzo -25%/-17%. At least Sands and Wynn Resorts are coming off strong first quarters. Wynncore room rates were +16% midweek and +25% on weekends, while it was +3% and +12%. Caesars and MGM were less fortunate. The Roman Empire’s rate were -16% midweek and -6% for the weekend, while MGM’s were -15% and -7%. Now that, in his signing statement, Donald Trump has stripped oversight from the $500 billion corporate bailout, if any of these companies are found to be buying back stock or issuing dividends instead of rehiring employees (as they said they would do), we’ll know who to blame. At least the federal government finally seems to be getting realistic about a problem it barely seems to comprehend.

American Gaming Association President Bill Miller welcomed the financial relief, writing “Past federal responses to natural disasters and financial crises excluded gaming companies from assistance available to the rest of the business community. Some called to do so again in the CARES Act. But with the help of industry leaders, the AGA convinced lawmakers that gaming deserves the same access to economic relief available to every other industry. [emphasis in original] The CARES Act provides tax relief to help gaming companies keep workers on the payroll; opens access to critical capital through loans for all industry segments; provides direct economic support for millions of American workers and their families; and offers vital stabilization funding for tribal governments.” Miller has been fine-tuning his message, dropping the ‘Reopen now!’ battle cry in favor of “The gaming industry united to achieve a major first step that will help sustain us during the required shutdown and ensure America’s employees can return to their jobs as soon as it’s safe.”

It’s encouraging to see the once-tone deaf AGA tuning its message into something more concordant with reality. As for what Big Gaming (and small casinos) will be getting, it’s too much to summarize here but the AGA has produced a helpful set of bullet points, which I highly recommend reading. Casinos are particularly going to like the package of tax cuts (50% of cash flow) and write-offs that are coming. Although casinos aren’t eligible for Small Business Administration disaster loans, the AGA is hoping to fix that. Tribes got $8 billion of the $18 billion they sought, which beats a poke in the eye with a sharp stick.

Have you noticed a disconnect between the happy talk coming out of Washington, D.C., and the sober leadership displayed in the hospitality industry, laid low by the virus? For instance, in a company-wide memo, Loews Hotels CEO Jon Tisch wrote, “From a business perspective, this is unlike anything we’ve ever experienced. I vividly remember managing through the Great Recession as well as after the tragedy of September 11. The scale and impact of this on our team members and on our business is much vaster than either of those … While there is much uncertainty remaining on how long our lives and business will be disrupted and what the recovery will look like, we do know the economic hit to the company will be significant. That is why we are taking aggressive steps to manage controllable expenses.” [emphasis added]

Tisch concluded on a hopeful note, penning “We too will see this through. One lesson from the virus is the realization of how connected we all are. While we find ourselves physically separated from each other, it is with a sense of community that we will meet these challenges and overcome them together.” Amen to that.

* Getting back to Greff, if one reads between the lines of his investor note on the Tropicana Las Vegas sale it would seem that Gaming & Leisure Properties Inc. took Penn National Gaming to the cleaners. It gets the Trop by forgoing $300 million in rent, is given five additional years on its master lease of Penn-branded properties and “receives LV Strip real estate for which there was, at one time pre-COVID-19, meaningful buyer demand. The agreement also gives GLPI the potential to monetize the Tropicana LV real estate in the future.” Penn’s consolation prize is “participation” in any profits realized from a future Trop re-sale … if it happens in the next 24 months. Pay and benefits for idled Penn workers expire tomorrow. Meanwhile, “PENN also announced pay cuts for its CEO and remaining property and corporate employees effective April 1, and that the majority of its corporate team will be furloughed, with PENN operating with a minimum, mission critical staff during the closures.” The company has withdrawn its earnings forecasts for 2020. As Greff says, “no surprise.”

* The Trump administration continues to crack down on the Mashpee Wampanoag, this time by disestablishing its 321-acre reservation on Cape Cod. Or so says tribal Chairman Cedric Cromwell. The Interior Department insists the Mashpee Wamps will still be recognized as a tribe (albeit a landless one). Cromwell called the dissolution of the rez “cruel and unnecessary.” He added gamely, “This Administration has come and it will go. But we will be here, always.” However, it’s Game Over for Cromwell’s casino hopes. As for the timing of the move, at the height of the Covid-19 pandemic, Cromwell said, “it was like a punch in the nose from a bully.” For Rep. Bill Keating (D), it was “one of the most cruel and nonsensical acts I have seen since coming to Congress. In a time of national health and economic emergency, the secretary of the Interior should be reaching out to help all Native American tribes.”

Why is the administration so fixated on this one tribe? It may because nearby Twin River-branded casinos are run by George Papanier, a former member of the Trump Plaza executive team. The Twin River-White House connection is frankly incestuous, with Twin River lobbyist Matt Schlapp chairing the Conservative Political Action Committee and his wife Mercedes Schlapp the White House strategic communications director. Conflict of interest much?