Caesars slashes costs; Circa to open early

News out of Eldorado Resorts and Caesars Entertainment, where Tom Reeg is showing the whip hand, are good for investors, maybe not so much for customers. In a period in which revenue fell 21%, cash flow rose 16%, thanks in part to draconian cost-cutting measures. Eldorado stock, down 31% year to date, rose 6% on the news. Caesars nudged up 2%. The Caesars brand is doing better in the post-reopening environment, with revenue 2% and cash flow improved as much as 40%. How? Higher table minimums. Less marketing to low-margin customers. No buffets. No shows or nightclubs, either. “I think it’s going to be a long time before customers are willing to eat at buffets,” proclaimed Reeg, with CNBC adding, “Buffets are a moneypit for the operators. They are labor-intensive and wasteful.”

For the time being, Caesars is being carried by its regional properties (minus Atlantic City), not Las Vegas, where revenue is 58% down and cash flow is in the toilet. However, CNBC reports that “gaming revenue has been strong.” Caesars is taking out a $400 million mortgage on its new Caesars Forum convention center (at least Reeg’s idiotic notion of selling it to Sheldon Adelson has passed) and selling 23 acres near the Strip to Vici Properties for $4.5 million/acre. Considering the premium on Strip real estate these days, Vici got a steal.

Speaking of the stock market, patience is counseled for those playing the gaming group these days. Stifel Nicolaus analyst Brad Boyer told Global Gaming News, “People came back and that’s an encouraging first step. But what do things look like once we get deeper into this, when the stimulus money goes away, when we have more competition coming online? Does this pent-up demand burn off?” Gaming stocks spiraled upward June 4, then cratered a week later, along with the rest of the market. According to Federal Reserve Chairman Jerome Powell, a return to pre-outbreak job levels will be a long time coming, news that was a double-whammy when Coronavirus cases began spiking across 20 states.

Innovation Capital Managing Director Matt Sodl is skeptical of that double-digit surge in early June, saying, I think they got caught up in the exuberance of the overall market, with nothing at this point to reference to fundamentals … just the exuberance of reopening, the comfort of knowing they were not going to be sinking into the abyss.” He tempers his sentiments a bit, remarking that “We’re actually seeing encouraging results from a lot of pent-up demand, and not just in regional markets, but the destinations as well. But I think things got ahead of themselves a little bit.” Among the companies doing well are Eldorado, Boyd Gaming and Penn National Gaming, all of whom enjoy a wide regional spread. Some analysts think regional casinos will only be off 20% this year, compared to 50% for Las Vegas.

Chimed in Boyer, “I like that hyper-local model that’s over-indexed to gambling revenue. It’s a customer base with a higher propensity to gamble in areas where there’s not as much competition for the entertainment dollar. It’s slot-driven, and it’s not dependent on hotels, air travel and conventions.” He added, “Investors are looking at 2021 and beyond.” Whoever thought 2020 would be a write-off?

* Around-the-clock construction of Circa has paid off for Derek Stevens, who will open the casino … well, some of it … on October 28, far ahead of expectations. But only the first five floors will be ready, as will the Garage Mahal, so this is the squishiest of soft openings. Guess Derek needs the cash flow pretty bad, having collateralized Circa on the backs of The D and Golden Gate casinos. Construction workers were rerouted from the hotel floors (rooms will go on line December 28) to the podium level to expedite its completion. In the meantime, guests are encouraged to stay at Stevens’ extant hotels. If you do, you get pre-opening, privileged access to Circa amenities. Specific dates for the dining, sports book and gambling amenities aren’t announced but we’ll presume that Stevens will have those all ready to roll on 10/28. That penthouse, year-round pool will have to wait, though.

* An outbreak of Covid-19 in the NFL, reported by the Dallas Cowboys and Houston Texans, is not going to imperil the 2020-21 season. Not if Commissioner Roger Goodell has anything to say about it. “All of our medical experts indicated that as testing becomes more prevalent, we are going to have positive tests,” he told ESPN. “The issue is, can we obviously prevent as many of those from happening, but in addition, treat them quickly, isolate them, and prevent them from impacting other personnel?” Some obvious preventive measures have been taken, such as banning mass workouts and team buffets. And for recalcitrant Baltimore Ravens coach John Harbaugh, Goodell had a simple message: Tough shit. (We paraphrase.)

* Conditions of the NBA‘s special Orlando-only playoff season are emerging and they include no penalties for players who opt out of the tourney. Upon arrival, players will quarantine for 36 hours, then be tested twice for Coronavirus. Fraternizing is banned, masks will be mandatory and six feet of social distance will be required off the court. No entourages, either. Each team will be restricted to 35 personnel. Medical staffing will be consolidated. Play will take place across three arenas at ESPN’s Wide World of Sports. Although the Orlando area boasts over 150 hotels, teams will be restricted to three on the Disney World campus. (If you get booked at the Grand Floridian, it means your playoff hopes are dim.)

Leave the campus without permission and you’ll be placed on 10-day quarantine. Boredom shouldn’t be a problem. The myriad amenities available include “golf, bowling, boating, tennis courts, a pool, and running trails, as well as other entertainment options like movie screenings.” They’ll even access to barbers, hair stylists and personal chefs (gotta look good out there on the court). And eight-game “season” would be played starting July 30, followed by play-in playoff games on Aug. 15-16. It’s going to be a long haul, definitely, with play ending Oct. 13. Should we rename the NBA playoffs the Fall Classic?