Credit Suisse analyst Cameron McKnight hosted three (!) days of investor meetings with Caesars Entertainment and came away giving the company a rave review. “Management’s tone was very good, and long-only interest was high … We think CZR’s business is much more resilient than the Street gives credit. CZR’s analytics and database are extremely advanced, when the entire hospitality industry is trying to catch up to internet companies, and there’s still room for margin expansion,” he wrote. October was described as “a record month,” with 100,000 extra room bookings and the first half of 2019 is looking like 10% growth in convention attendance. As for much-bruited merger talk, McKnight opined “interest in CZR is high, and expect industry consolidation to continue. We think the board is very open to proposals — but we see large scale deals as complex and potentially lengthy.” Given the intricacy of Caesars I should not expect anything less. Also, the lingering clouds of the Mandalay Bay Massacre are said to be finally lifting from the Strip, good news on any day. Also, Caesars is $1.3 million poorer after a Wisconsin man playing Three Card Progressive Poker at Linq hit the jackpot.
* On a not-so-good note, Hainan Airlines has cut China-to-Las Vegas flights from thrice weekly to twice, reducing seat capacity into Vegas by 41%. “While this could be interpreted as a sign of reduced Chinese visitation to Las Vegas, we note that there could be a multitude of causes (e.g. low load factors, seasonal adjustments) driving the change,” McKnight wrote, adding, ” we understand the baccarat business is really driven by 40-50 super VIP players, who would likely have other means of transport.” For “other means of transport” read “corporate jet.”
* Typhoon Mangkhut dealt a $119 million blow to Macao casinos. We’re not talking about physical havoc but indirect economic disruption. Part of the adverse economic impact was the unprecedented closure of all the enclave’s casinos. The Macanese government is looking at making such shutdowns mandatory when calamitous weather threatens. It’s a tribute to how well Macao’s newer casinos were built that they withstood 99.5 mph winds. Whether they were among the areas afflicted with flood damage is unclear.
A more lingering concern is a lower rate of revenue growth in Macanese casinos. Bloomberg takes a look at the issue and questions whether new investment will occur, even as the local government toys with the idea of adding another concession or two. The six existing concessionaires are almost all willing to risk cannibalizing their market in order to operate in Japan, where Chinese high rollers could play without Beijing looking over their shoulders. “We are not seeing a rosy picture for 2019, as Macao’s business depends on China’s economy and policies so much,” junket operator Andrew Lo told the magazine. With real estate and the Chinese stock market in a slide, Lo’s concern is well-founded. The six concessionaires are so frightened of City Hall — and of imperiling renewal — that they ran and hid when Bloomberg came calling.
Hoffman Ma, who co-owns a Sociedade de Jogos de Macau casino was more forthcoming: “We are confident that Macao still has great potential to attract more tourists and gamblers. But in the next one or two years, Macao operators are unlikely to make investment decisions in Macao, as the license bidding process is still unclear. It’s too risky to invest with concerns on whether the business can continue in two or three years.” Indeed, it will be difficult (read: impossible) to monetize the latest wave of megaresorts before concession renewals start in 2020. As for American dominance of the Macanese market, that “already does not sit well with Beijing,” says iGamX analyst Ben Lee. While lawyer Carlos Lobo foresees a fair and balanced renewal process, he fires a shot over Sheldon Adelson‘s bow, saying that “if operators try to play international politics in Macao, they may get into trouble.”
* Three cheers for Tennessee state Rep. Rick Staples (D), who has introduced legislation to legalize sports betting in the Volunteer State. (Let’s hope other legislators volunteer to co-sponsor the bill.) Licensing fees would be cheap — $7,500 — as would the 10% tax rate. As business-friendly as the law is, Gov. Bill Lee (R) is already against it, brandishing the bogeyman of organized crime, last refuge of a sports-betting opponent. With neighboring Arkansas moving to vigorously expand gambling, Lee might want to think twice about his do-nothing attitude.
* The sport of kings likes to flex its political muscle but the real money’s in racinos. Case in point: Kentucky Downs, just sold to Kentucky Racing Acquisition. And no wonder. Since the introduction of “historical racing” terminals, revenue has gone from $20 million in 2010 to $800 million (and climbing) this year. So when you hear all that bull about the sanctity of horse racing point to the Kentucky Downs and tell them to follow the money. The new owners include Marc Falcone, late of Deutsche Bank and long-suffering CFO of Station Casinos during its emergence from bankruptcy. Partner Winchell Thoroughbreds is said to operate “in excess of 20 gaming facilities across Nevada,” by which I presume they mean slot routes, in which case Kentucky Downs will be a natural fit.
* Both chambers of New Hampshire‘s Legislature have gone Democratic, the Boston Globe reports. Might we suggest that this is a propitious moment for legalization of casinos in the Granite State?
