“Scary” times for casinos; Hotel rates swoon

Donald Trump wants to reopen America for business May 1, come hell or high water. Former Atlantic City casino executive Robert Ambrose acknowledges that “going past 30 days [quarantine] is scary for the entire industry.” According to Ambrose, it ought to be especially frightening for stand-alone properties (he cites Mt. Airy in Pennsylvania). “Hopefully this can be right-sided pretty quickly, but the virus is a moving entity. We’re seeing the worst of it now in New York and North Jersey, but other states could be coming into the pipeline two to three weeks later, so casinos in those jurisdictions will be down longer and coming back online later,” he tells Global Gaming Business.

The upside, for some casinos anyway, is that people may play at Parx Casino or Rivers Philadelphia instead of making the traditional trek to the Boardwalk. Of course, potential players won’t have the ‘mad money’ that they did, pre-virus. As for players who are taking advantage of online alternatives, Ambrose thinks they will drift back to brick-and-mortar casinos. However, “In the short term, online may continue to see more of a bump than normal, simply because of a reluctant customer base, people not wanting to return to a crowded environment such as a casino.” Ambrose sees resort casinos making phased reopenings, in response to slow business. As for players, they should expect to see thinner slot floors and strict limits on how many can, for instance, play blackjack at a time.

As for his old stomping ground, he remains upbeat, saying, “I’m always impressed with Atlantic City. It amazes me how it always comes back from adversity. Just when you think they’re about to close the Atlantic City Expressway, some little spark happens, and it all comes back to life.”

* Across the country, in Las Vegas, a presumed May 1 reopening of the Strip means one thing in terms of room rates: discounts. ADRs for May 3-9 are 58% lower than last year, $102/night. That breaks down to -38% on weekends (seems like demand is still there) and -64% midweek. Wynn Resorts even managed to eke out a 17% weekend increase, despite a 46% midweek swoon. Las Vegas Sands swung between extremes, plunging 79% midweek but down only 10% on the weekend. Depressed weekend demand can be found at Caesars Entertainment (-59%), whose midweek rates are a weak -67%. Rounding out the biggies, MGM Resorts International plummets 60% on weekdays but only 34% on the weekend. Strip resorts are going to need a boffo May and June. Second-quarter rates to date are -84% (MGM, CZR), -85% (WYNN) and -83% (LVS). Most of the punishment is happening on low-end rates (-65%), although at -54%, high-end rates can hardly be called robust. In this climate, expect casinos to cling to their resort fees like drowning men to flotsam in a stormy sea.

Bereft of casino taxes, state budgets are also reeling. Said Block 22 CEO John Cunningham, “We went from enjoying record occupancy and record average daily rates to historic lows in just a matter of a couple of weeks.” According to Lucy Dadayan of the Urban-Brookings Tax Policy Center, “Overall, it’s a dire picture for state and local government budgets and economies. State and local tax revenues from hotels, transportation, restaurants and bars will be in the red in the month of March and most likely beyond, as we are still not seeing a flattening of the Covid-19 curve.” Perhaps the direst prospect comes from the University of Chicago‘s Angela Fontes, who predicts, “we’re going to see a decrease in the ability of folks to go on vacation and engage in tourism, either because they’ve had an employment disruption—which we’ve seen already happening—or they’ve already used some of their income or savings that they may have used,”

Jottings: This is very bad—according to Casino.org, 75% of sports fans will not feel comfortable attending a game until a Coronavirus vaccine has been developed. Imagine the Las Vegas Raiders making their debut to a nearly empty stadium … With its sports book idled, Hard Rock Atlantic City has been reduced to taking bets on the weather … Project delays and budget cuts at the Las Vegas Convention & Visitors Authority appear almost inevitable thanks to the current pandemic … Wynn Resorts sold $600 million in notes last week, with a 2025 maturity and 7.75% interest, a move that described as “good news for cash-starved rivals” … Fitch Ratings gave Crown Resorts a clean bill of financial health, saying its “low net debt position [and] highly variable cost structure” cause it to have “headroom to absorb the effect of the government shutdown of casinos” … The “human cockfighting” of the UFC has always been a renegade element of the sporting world. Now the UFC plans to proceed with an April 18 brawl at Tachi Palace Casino, despite bans from the California State Athletic Commission and Association of Ringside Physicians. People must have their bread and circuses, after all.