Caesars, MGM: Recovery slow but promising

Regional gaming is more of a mixed picture, although mostly upbeat. Revenues aren’t what they were a year ago but—perhaps due to cost cuts—cash flow is higher. Contrary to initial appearances, L’Auberge du Lac saw “significant damage” from recent hurricanes and will be out of commission for some time to come. While Caesars waits for the insurance to be settled, it is reportedly fielding strong offers for its Indiana assets, particularly Tropicana Evansville. $400 million has been placed in escrow for promised Atlantic City upgrades, “a lot” of that to be reinvested in Caesars Atlantic City. A long-term, multibillion-dollar expansion of Pompano Park in Florida is also on the drawing board but hasn’t progressed very far at this point. Cost savings elsewhere look to be in the mid-$30 million range, not quite what was expected before Coronavirus struck.

Also breaking bread with JP Morgan was MGM Resorts International CFO Corey Sanders, along with colleague Jim Freeman. Again the Strip was the lead item and the refrain was the same: “weekends are strong (pushing capacity) and mid-week remains challenging with little convention business and airlift. MGM saw a lot of demand on Labor Day weekend as well as this past weekend given it was the first week of the NFL season.” Occupancy, even at low levels, has been deemed preferable to burning cash—hence the Park MGM return (and perhaps that of The Mirage as well). Simply put, it’s cheaper to be open, regardless of business. It’s not clear how much convention business is returning, although 80% of meetings are smallish: 250 people or fewer. Commented analyst Joseph Greff, “if it can get some of this business back it would be material.” At this point MGM seems to be looking at the back nine of 2021 for convention recovery.

Revenue on the regional front is “still recovering” but more than offset by cost cuts. Indoor dining gave Borgata an early September boost, where revenue has “been tracking better than expected.” Empire City Casino is cleared to reopen but is holding off until Sept. 21. As for sports betting, “MGM will continue to evaluate all aspects of this business and how it can make it more transparent and easy for investors to understand/value.” Barry Diller‘s IAC buy-in is expected to be an activist investment and MGM is counting on IAC to bring “deep expertise in taking a traditionally brick/mortar business and maximizing its value in the digital space.” Given Coronavirus depletions of the tax base, MGM anticipates an accelerated adoption of sports betting and believes that BetMGM is poised to be a market leader. Finally, “plenty of demand is expected to come” to Macao, as the Individual Visa Scheme is loosened. Even so, given rigorous testing for Covid-19, MGM anticipates a slow recovery and is sanguine about it, looking to develop more of a one-on-one relationship with VIP players, implying lower reliance upon (cash-strapped) junkets.

Jottings: Good news for fans of Wrigley Field. Contrary to the blather of DraftKings, a Wrigleyville sports book would have to be freestanding, built outside the Friendly Confines. So say MLB regulations. “Baseball rules … prohibit teams from requiring a ticket to a game in order to access the sportsbook,” reports Global Gaming Business. Even DraftKings is toning down its rhetoric, saying, “We look forward to working in collaboration with the Cubs, an organization steeped in tradition, and making our presence felt in and around Wrigleyville” … Remember the Crown 18 (actually 19), jailed for 10 months in Shanghai? One of the imprisoned execs tacitly admits guilt: Jason O’Connor says colleagues were “blinkered” to Chinese law in their pursuit of profit … Barstool Sportbook begins beta testing in Pennsylvania tomorrow. The online wagering portal is predicted to capture as much as 20% of the U.S. market. Heady stuff, that, and there’s much more to come … Poker champ and broadcaster Mike Sexton has died of cancer at age 72. We send our condolences, as did World Poker Tour CEO Adam Pliska, who said, “His glowing presence resonated with players and fans of poker alike, who will all miss him onscreen and at the table. Mike’s legacy will forever be a part of poker’s history” … According to TheLines.com, the Las Vegas Raiders will inaugurate Allegiant Stadium as 4.5-point underdogs to the New Orleans Saints. The over/under is set at 50. That sounds credible.