Not even Rivers Casino Des Plaines was spared the impact of Hard Rock Rockford, as the newbie helped take a 4.5% bite out of Rivers’ December casino revenues compared to 2019, for a Des Plaines gross of $43 million, still easily the best in the state. Prairie State casinos grossed $110 million, down 12% from two years ago. Without the Hard Rock infusion, those numbers would have been worse still (-15%). The latter brought in $4 million, as did Bally’s Quad Cities (-25%), while Argosy Belle clung jealously to last place with $2.5 million (-35.5%). Other than Rivers, Grand Victoria suffered less than most, down 8% to $13 million. Business was not so kind to its sister properties, with Harrah’s Joliet off 27% to $11 million and Harrah’s Metropolis down 22% to $5 million.
Penn National Gaming wasn’t much more fortunate upstate than in Alton. Its Empress Joliet plunged 26% to $7 million and Hollywood Aurora slipped 13.5% to $9 million. Boyd Gaming‘s mid-state Par-A-Dice was down 14% to $5 million and DraftKings Casino Queen plummeted 30.5% to $6 million. God help ’em when the wave of temporary casinos fully comes online—let alone if the Lege legalizes i-gaming. Perhaps the winningest operator in the Land of Lincoln is MGM Resorts International, which had the good sense to get the hell out.
Boyd Gaming came in for some relatively rare Wall Street love in an investor report by Bank of America analyst Shaun Kelley. Between its broad regional exposure and heavy investment in the Las Vegas locals market, Boyd is seen as one of the better investment notions for the coming year. Like Boyd, Churchill Downs impressed Kelley with its cash flow, one of the factors that is keeping the stock in the stratospheric levels of almost $225/share, heading north. By contrast, Station Casinos and Las Vegas Sands got knocked down to “underperform.” Sands’ predicament can be summed up in one word, Macao. It put nearly every egg in that basket and was left with a lot of Humpty Dumpties. Nor is Singapore immune. Wrote Kelley, “we think key source markets around Southeast Asia could weigh on the pace of recovery in Singapore.”
Station’s problem is replicating a sensational 2021 performance, which Kelley thinks will be difficult. Higher wage costs will be one thing holding Station back. (Just think if the Fertittas had regulated wages by permitting unionization. Such are the perils of dogmatism.) Second-half rebounds are seen in the cards for Caesars Entertainment and even for Penn National, which has been crashing and burning of late on The Street. Looking past its sports betting debacle in New York State, Kelley points out that it still has a large and enviable portfolio of regional assets (including M Resort) which should buoy Penn over the long term.
An “intense promotional environment” throughout 2022 is likely to offset territorial gains made by DraftKings. That’s one of our takeaways from a Deutsche Bank report by Carlo Santarelli. He figures DKNG can make its $1.9 billion revenue projection and then some, thanks to all the hubbub in New York, along with the addition of Maryland, Louisiana and (we hope) tardy Ohio, plus the launch of Internet gambling in Ontario. Even so, Santarelli lowered his price target to $27/share. Why? Negative return on investment. Wrote Santarelli, “we are now forecasting 2022 adjusted EBITDA losses to eclipse those experienced in 2021.” Ouch.
He cites the example of Bet365, whose margins peaked in 2016, even as revenues continued to climb for several years thereafter and “we would also note that Bet365 likely operates in some jurisdictions in which taxes are considerably less of a factor, has a healthy iCasino mix, and is not subject to some of the costs US operators are forced to cope with.” And DraftKings will have to contend with state taxes (some of them steep), federal excise taxes, “integrity” fees, access fees and varying levels of competition, etc.
The analyst thinks DKNG will meet the higher end of its 4Q21 earnings guidance, thanks to “early success” in Arizona and the Connecticut launch. This does, however, raise the troubling question of whether DraftKings is growing revenue by adding territories rather than on a same-store basis (a strategy that brought down the original leadership team at Isle of Capri Casinos). Lower-than-average hold is also problematic: “Given the level of promotional activity, if one bases a promotional strategy on a percentage of handle, and hold is below normal, the impact to net revenue is considerably more significant.”
Santarelli foresees a setback in Florida with sports betting operators unable to qualify their initiative for the November ballot. “We also believe it is likely that the inability to push the Florida initiative further, heightens the scrutiny on the industry efforts in California.” Higher-revenue Internet casinos are going to be “relatively sparse” with only Indiana, Iowa and Illinois on the bubble. “We are not optimistic on the prospects for the group, as we believe casino operators are likely to approach the legalizations in a more tepid manner, state budgets are on firmer ground, and gaming legislative fatigue is likely a factor.” In other words, one great weekend in the Empire State doesn’t make a quarter, let alone a year.
Jottings: John “Mattress Mack” McIngvale is $1.2 million poorer after the Georgia Bulldogs rolled over the Alabama Crimson Tide last night and it wasn’t even close. No free mattresses for McIngvale’s customers, alas … Congratulations to the Downtown Grand (above) on making all guest rooms smoke-free. We applaud the continuation of this trend … Despite having a pretty good case, Full House Resorts has dropped its lawsuit against the Indiana Gaming Commission, paving the way for Churchill Downs to begin construction on a Terre Haute casino. Visitors to the eventual CHDN resort can look forward to fine vistas of a neighboring wastewater-treatment plant and the Vigo County Jail … Except for a $20 million allotment toward childhood education, sports betting taxes in Louisiana are essentially a slush fund for the Lege to spend as it pleases. Since tax revenue is estimated to only hit around $37 million a year, even the kiddies get shortchanged.
