Kentucky Derby fallout continues to reverberate around Churchill Downs, leading to a 2Q23 earnings miss. A mass die-off of horses during the Run for the Roses caused the flagship track to be closed and races shifted to Ellis Park. Cash flow for the company slipped to $364 million, 4% under Wall Street‘s consensus forecast. Net revenues ($769 million) were comparably down. All that being said, live and “historical” racing were the least off-pace, down 3%, versus online TwinSpires‘ 13% and casino gambling’s 4% declivity.
Fontainebleau owner Jeffrey Soffer and top exec Brett Mufson are certain to be approved after their audition for the Nevada Gaming Control Board. And why not? Aside from an ancient tax issue involving the Town Square mall, there’s nothing untoward about Soffer’s application. (Trivia question: Upon what casino’s gravesite was Town Square built?) The only beef we have is the NGCB’s habit of waiting until the last possible minute to approve such applications. If something truly noisome turned up it would be too late to address it properly. The Control Board essentially takes itself hostage to the unstoppable momentum generated by large casino projects. As for the total budget for 16-year construction folie de grandeur that is F-blue, nobody’s talking. We have to defer to Citizen Kane‘s stentorian newsreel description of Charles Foster Kane‘s Xanadu: “Cost? NO MAN CAN SAY!” However, we strongly suspect that F-blue will outstrip Resorts World Las Vegas as the costliest megaresort in Las Vegas history, were the tab to be honestly accounted.
Having been spared being the next home of the miserable Oakland Athletics, now The Rio faces the question of whether there’s life after Caesars Entertainment. To that end, owner Dreamscape Cos. is going to try to go it alone as a casino operator. We wish them luck because they’re going to need it. Operating a casino in Las Vegas is not for the faint of experience. It puts a bucketful of problems in the lap of President Eric Birnbaum. Dreamscape says its aim is “to preserve the property’s bones and honor its legacy.” So far so good. Making a go of an off-Strip resort won’t be easy, as the newish owners of Palms Casino Resort and the many chefs over at Virgin Las Vegas could tell you. (Hell, Mohegan Sun is quite candid in admitting that Virgin is struggling as a casino.)
Don’t look now, Las Vegas but we may have another failsino on our hands. Construction has ground to a total halt on Dream, the south-Strip resort project that looked like a sure thing not so long ago. Developer Bill Shopoff is as much as $30 million in hock, stalling work on Dream. Shopoff is evidently renegotiating with his principal lender, for reasons undisclosed. (Cost overruns?) With a budgetary cap of $575 million, Dream has been proceeding so far from cash on hand, leaving it $400 million-plus short of the finish line. That’d require a “bridge loan” big enough to span Long Island Sound.
Most people wouldn’t spend Christmas Day in a casino or two but our East Coast correspondent did. He reports, “At the Golden Nugget on Christmas, Chart House, Lillie’s Asian, the Grotto (Italian), Michael Patrick’s coffee shop, Bean & Bread for breakfast sandwiches and light bites, and the Chairman’s Club lounge were open. At Bally’s, the valet parking closed to the intake of vehicles at noon, rather than the usual 5 p.m. Sunday. Their (alleged) VIP lounge was closed all of the weekend. The three restaurants on their sixth floor were closed. The pizza place was closed. If you want Dunkin Donuts or a simple sandwich, you’re in luck, otherwise go somewhere else for food.
“We had our ‘strange’ Christmas this year,” our reporter explains. “For the first time, we stayed in Atlantic City for Xmas, starting Friday for three nights. Friday started off with rain and strong wind, then our first snow of the season, followed by a ‘flash freeze’ in the afternoon (good reasons to not live in New Jersey). When we got to Golden Nugget, the valet intake was like a wind tunnel. A visit to Hard Rock included early dinner at their lounge. We went back to Golden Nugget and went to their Chairman’s Lounge at 10 p.m. as it was open until 11 p.m. on Friday. It was almost completely empty, as the photo shows, and it was so very cold due to to all of the windows.
Yesterday’s Hard Rock International road show before the ostensibly investigative Nevada Gaming Control Board played out pretty much as expected. Hard Rock CEO Jim Alleneffectively ran out the clock by dwelling on how Hard Rock would make over The Mirage when its purchase closes, which is now a fait accompli. Not one question was asked about Hard Rock’s 10-day defiance of Judge Dabney Friedrich‘s order to shut down its sports betting servers in Florida—and what this means about Hard Rock’s attitude toward regulations going forward. Nor did anyone raise the messy topic of a Seminole Tribe lottery that was mounted the incentivize Covid-19 vaccinations. (The Seminoles own Hard Rock, ICYMI.) The lottery was supposedly won by Chairman Marcellus Osceola‘s bastard son, sparking a petition drive to recall Osceola, who negotiated the compact with Florida Gov. Ron DeSantis (R) that granted Hard Rock sports betting in the Sunshine State. (Say what you like about DeSantis, he treated the Seminoles as equal partners, a hint other state governors should take.)
Bad economy? Not if you’re Boyd Gaming. The regional giant significantly improved third-quarter income, from $843 million in 3Q21 to $877 million this year. Said CEO Keith Smith, “Continuing into October, customer spending has been very consistent with the trends we’ve seen throughout this year. While there are clearly headwinds in the economy, we haven’t seen any meaningful change in our customers’ behavior.” Rated play was up 5%, compensating for a faling-off of unrated, stimulus-driven spending. Hotel revenue was also up 5% and occupancies up 6%, those rooms being filled with what Smith characterized as high-value guests (10% higher gaming win). Food and beverage was a revenue geyser, jumping 11% and nowhere was business better than in Sin City’s Downtown, where earnings leapt 17.5% to $49.5 million, driven by the reopening of Main Street Station and by the return of business from Hawaii, a Boyd mainstay.
In a billion-dollar coup, MGM Resorts International has sold the operations of The Mirage to Hard Rock International, a huge markup on Steve Wynn‘s 1989 creation—and Hard Rock isn’t even getting the underlying land! All this for 17X EBITDA, an exponential price boost for a Las Vegas Strip asset. VitalVegas was the first to report that the Seminole Tribe was getting a look-see at The Mirage a couple of weeks ago and negotiations must have quickly started in earnest. While Mohegan Gaming Entertainment is struggling over at Virgin Las Vegas, Hard Rock—pretty iconic in itself—gains one of the most iconic properties on the Strip, in a killer location and with 32 years of history-making cachet. MGM figures to net $815 million on the sale while Hard Rock inherits a master lease valued at $90 million per year. (The Mirage did $154 million in cash flow in 2019.) MGM CFO Jonathan Halkyard said MGM’s payday would go toward “opportunities that will enhance the customer experience at our other locations in Las Vegas.” (Maybe that proposed hotel tower in front of Excalibur … please.)
November was another terrific month for Maryland casinos, as revenues picked up a bit from October, accumulating 14% more than in November 2019.. (If inflation is so bad, where do Marylanders find all this money with which to gamble, one wonders? But anyway … ) After a month out of the top spot, MGM National Harbor was back at #1, grossing $68 million, a 26% leap by the lion. Maryland Live was not quite so buoyant, up 10% to $58 million. Horseshoe Baltimore tumbled 15% to $16 million, remaining the problem child of Caesars Entertainment. Business was slightly slower at Rocky Gap Resort, up 11.5% to $5 million, while Ocean Downs cantered +22.5% to $6.5 million and Hollywood Perryville gained 22% to $7 million. Despite flat slot revenues, West Virginia casinos garnered 3% more last month, on the strength of robust (+18%) table win. Hollywood Charles Town Races was particularly fortunate, climbing 4% at the slots and 32% at the tables.
Donald Trump won’t be opening a casino in Doral. Neither will anyone else. Not if the Doral City Council has its way. It voted unanimously to bar casino gambling within the city, which encompasses The Donald’s struggling resort. This has nothing to do with Trump’s financial chicanery and moral turpitude (which ought to bar him from a gaming license outright), and everything to do with preserving the letter and spirit of Amendment 3 to the Florida constitution. The latter reads, in part, “This amendment ensures that Florida voters shall have the exclusive right to decide whether to authorize casino gambling by requiring that in order for casino gambling to be authorized under Florida law, it must be approved by Florida voters pursuant to Article XI, Section 3 of the Florida Constitution.” It’s hard to be much clearer than that. The juice job for Trump and Jeffrey Soffer recently passed by the Lege is unlikely to withstand the smell test in court and it certainly flopped with the Doral city fathers.
Stalking horse Eric Trump has been jawboning in favor of Doral for months, telling the Washington Post, “Many people consider Trump Doral to be unmatched from a gaming perspective—at 700 acres, properties just don’t exist of that size and quality in South Florida, let alone in the heart of Miami.” Admittedly, “many people” is usually Trumpspeak for “I’m totally pulling this out of my ass,” but even if Trump fils is right, that doesn’t make it constitutional. The Eric needn’t start putting slot machines in yet; a long court fight is surely looming over the Seminole compact, which has the watertight integrity of a sieve.
Casinos in the Free State jetted 13% above 2019 levels, grossing $172 million, a new record. MGM National Harbor led with $68.5 million (+16%) and 40% market share. Maryland Live was up 15% to $61.5 million for 35.5% market share, while Hollywood Perryville justified Penn National Gaming‘s faith in the property, jumping 23% to $8.5 million. Ocean Downs gained 19%, also to $8.5 million and Rocky Gap Casino was up 21.5% to $6 million. The only loser was—you guessed it—Horseshoe Baltimore, sagging 5% to $19.5 million. New management at Caesars Entertainment has announced no plans for the property and it’s an open question whether they have any. Now would be a good time. Over in West Virginia, casinos continue to lag the 2021 recovery, down 18%, with Penn Charles Town further behind at -20%. Overall, slots were a relative bright spot, -17%, negated by a -21% dive at the tables.
“I think there’s incredible resiliency,” restaurant impresario Elizabeth Blau says of Las Vegas. There needs to be, as the Great Shutdown took a scythe to Sin City’s dining scene. “Now with the Virgin hotel opening, Resorts World opening, and numerous hotels having major restaurant openings. Major arenas reopening—the old Vegas is roaring back,” Blau contends. The cascade of debuts includes Virgin Las Vegas‘ One Steakhouse (March), Linq Promenade‘s Sweet Sin (April) and Wynncore‘s long-awaited Delilah (July), all perfectly timed to trade in on Las Vegas’ comeback. And that’s to say nothing of the 40-plus eateries Resorts World Las Vegas will unleash upon the market, with something for every price point. Even buffets are returning, albeit few and cautiously. However, if restaurants are on the rebound, their workers aren’t getting the memo. “Half our union is still not back to work. We have half the union back to work and the other half is still waiting for the jobs. Waiting for when they call them back,” groused the Culinary Union‘s Geoconda Argüello-Kline. Even the new ‘right to return’ law can’t redress that.
Against all odds, it appears that Las Vegas‘ recovery is taking place faster than anticipated (save by a very few). A CNN feature is vaguely euphoric but it does cite several new must-see attractions. For the all-important convention business, which sustains the town Monday-Thursday, there is the lure of the West Hall of the Las Vegas Convention Center, which may banish memories of the Riviera, whose site it occupies. Then there’s a triple-whammy of new casinos: Circa, Virgin Las Vegas (or Mohegan Sun Las Vegas, according to the TITO vouchers) and the July-debuting Resorts World Las Vegas, the most expensive megaresort yet built in Sin City. And, for a wholesome change of pace, the Pinball Hall of Fame reopens at a new location at the southern terminus of the Las Vegas Strip, complete with a park for food trucks. We sense a smash hit in the making.
More quantifiably, Plaza Hotel CEO Jonathan Jossel reports that business was “hopping” during March Madness and that casino play has regained pre-pandemic levels, which would be no small achievement. Gov. Steve Sisolak (D) is so optimistic that he’s planning a return to full capacity in public spaces as of June 1 (Nye County, for one, is jumping the gun, going 100% on May 1). Self-service buffets—if they return—can come back at 50% on May Day, as can nightclubs and strip joints. (No word yet on brothels.) As for casinos going back to 100%, that’s the Nevada Gaming Control Board‘s call to make, although we imagine the pressure will be overwhelming.
Virginia has now had two full months of sports betting and February handle was an impressive $266 million—not quite the explosion that Michigan was but still noteworthy as the second-biggest debut in U.S. history. Reacted PlayUSA analyst Dustin Gouker, “The nation’s major operators have the resources to engage bettors in new markets in ways that were impossible in the early days of legalization, which benefits later-comers like Virginia. Ultimately, that will mean a market that goes through fewer growing pains than some of the earlier adopters.” Compared to other states, Super Bowl handle wasn’t bad: $19.5 million. Revenue was $12 million but books went overboard with promotional credits, ending up with a $3 million loss. The tax haul was a scant $300,593. FanDuel, DraftKings, BetMGM and BetRivers were all on the field, joined just before the Super Bowl by William Hill. This month brought the entry of WynnBet, which should reap some of the rewards of March Madness … to a degree. Virginia law forbids betting on in-state teams, which could mute interest in the NCAA tournament.
If you cruise by Circa, you’re liable to see members of Teamsters Local 986 walking a picket line on behalf of the ‘Circa Seven,’ a group of unfortunate warehouse workers. The seven were employed by Derek Stevens‘ Three Corners company, which services Circa. What caused the Circa Seven to get the axe? According to the Teamsters, it discovered they were pursuing union membership and gave them the chop. “The Circa Seven came to work, informed that their jobs were ‘outsourced’ to [subcontractor] QLI and then fired without warning,” claims Local 986 Secretary-Treasurer Chris Griswold. “It is heartless of this company to displace its own workers during the worst health crisis in a century.” If you agree with the Teamsters, you can make your feelings known online. If you side with Stevens, you of course don’t need to do anything … except maybe cross a picket line.
Room rates on the Las Vegas Strip were tanking this time last year, so maybe improvement is in eye of the beholder but they continue to trend upward. For April 18-24 they’re 28% higher, averaging $129/night, including an encouraging 2% improvement in weekday rates (weekends are up an eye-popping 73%). Mind you, at that time last year the averages were -33% midweek, -56% weekend and -44% overall. Caesars Entertainment is seeing a 23% midweek climb and a 106% improvement on the weekend. Venelazzo leapt 185% weekends and 50% weekdays. Convention-dependent MGM Resorts International saw only a 1% midweek nudge, plus a 70% weekend uptick, while Wynncore tumbled 26% midweek, even on such an easy comparison, and bumped up just 12% on the weekend. Was it too soon for Encore to reopen?
Things simply have to get better on the Las Vegas Strip. Not even a Feb. 15 capacity increase saved some casinos from perdition. Let’s hope February represented a bottoming-out of gaming revenues, as tourists starting flocking back this month. Strip gaming win was down a precipitous 41.5% to $348.5 million, led by slot winnings that were 34% down (to $189 million) on 27% less coin-in. Baccarat continues to be a black hole into which casinos plunged 58% on 58.5% less wagering. Players dropped 36% less on the green felt at non-baccarat table games but revenues suffered 43%, as punters bet less and won more. The Strip’s woes can be explained by a 54% falloff in visitation. 1.6 million arriving and departed airline passengers represented a 58% decline, including a measly 8,033 international travelers. Conversely, auto traffic was actually up at the California border by 1.5%. Hotel occupancy was a woeful 42%, depressing revenue per available room by 65% and room rates 26.5% (to $104/night). With no measurable convention business, midweek occupancy was 32% compared to 63% on weekends.
Las Vegas locals casinos were the bright spot, flat at $186 million, quite an accomplishment in a depleted Silver State economy. (Fortunately, employment numbers have been trending positively.) Tighter slots meant only 1% less win despite 6% lower coin-in. Perhaps the infusion of Circa eased Downtown‘s pain. It was only off 7% ($51.5 million), while North Las Vegas slipped 12% ($19 million), the Boulder Strip dipped 2% ($64 million) and Laughlin tumbled 31% ($33 million). Miscellaneous Clark County casinos were up 3.5% ($103 million) and Mesquite climbed 5% ($13 million). Upstate, Reno slid 14% to $50 million but Lake Tahoe leapt 16% to $20.5 million. Utahns shunned Wendover, down 9.5% to $17.5 million.
Online sports betting was quick out of the gate in Virginia—$59 million in handle in 11 days—although books spent so much money acquiring customers that they took a loss on the month. “Debuting ahead of the NFL’s conference championship games and the Super Bowl ensured there would be heavy interest from bettors. In addition, launching with top-flight sportsbook operators in place to serve a market with years of pent-up demand is a recipe for success,” diagnosed PlayUSA analyst Jessica Welman. Although Tennessee, with a full month of wagering, notched $134 million in handle, the neighboring state recorded less wagering per day than did Virginia. As for the monetary loss, analyst Dustin Gouker observed, “We saw the very same dynamic play out in the first days of Michigan’s online market, as well. The bottom line is that Virginia’s market is off to a good start, with significant interest from bettors across the state. That will certainly pay off for the state in coming months.”
While per-operator numbers are not available, first-mover status (Jan. 21) undoubtedly redounded to the benefit of FanDuel. It was followed into the market on Jan. 24 by BetMGM and DraftKings, then BetRivers on Jan. 26. William Hill didn’t arrive upon the scene until February, although it won’t be the last into the pool. Since enabling legislation for sports betting in Maryland is still tied up in the Lege, Virginia has every opportunity to make hay whilst the sun shines.
Boyd Gaming leaked January data, what Wall Street calls “offered an encouraging commentary,” to help put an upbeat spin on its 4Q20 numbers. It worked like a charm. JP Morgan analyst Joseph Greff moved his price target up $8 to $62/share. He was motivated by news of “improving gaming customer spend trends thus far in the 1Q21 relative to its results in the 4Q20 … this is despite the older casino patron demographic not really returning to any great extent, which is something that could serve as upside or a cushion to the presently strong/growth trends from younger, non-rated players.” He liked a business plan structured around a “favorable localized/regional footprint predominantly focused on a drive-to, leisure gaming customer.” Greff also raised his cash flow estimates based on strength in the Midwest and South regions of BYD and on its strong sports-betting prospects, thanks in part to FanDuel (“DFS Operator #2” in Wall Street code).
Fourth-quarter revenues were a better-than-expected $636 million (Greff anticipated $608.5 million), despite being 24% down from 2019. But the Midwest and South were only 15.5% off the pace, bringing home the bacon to the tune of $456 million. This enabled the company to shrug off the temporary closures of Par-A-Dice and Valley Forge Casino Resort. In Las Vegas, support from locals was somewhat undone by lackluster tourist biz, particularly at The Orleans. Vegas numbers overall were down 28%, a $161.5 million take. Downtown needs a defibrillator, generating just $18 million, a 74% collapse “pressured by weaker tourism to southern Nevada, especially from the core Hawaiian customer base.” In other words, Main Street Station isn’t coming back any time soon and no reopening date was floated for Eastside Cannery on the Boulder Strip. Greff forecast a recovery in locals biz (good for Cannery) but only “modest” improvement in Downtown numbers.
The Thing That Wouldn’t Die, akaFontainebleau, is back again. Former owner Steven Witkoff has sold it to Koch Real Estate Investments for an undisclosed price. Considering that Witkoff bought it from Carl Icahn for $600 million and estimated that “The Drew” (as it was briefly called but never came to be) would cost in the neighborhood of $3 billion to finish, we’re looking at a very pricey megaresort project for Koch (as in Koch Brothers). The latter is in partnership with Fontainebleau Development so, yes, F-blue is a thing once more. Mind you, we’re talking about a casino-resort that’s been under construction for 14 freaking years (so old that Harry Reid was Senate Majority Leader when the original owners came cadging for a bailout). That $3 billion figure may have been optimistic.
Looking on the bright side, Koch trumpeted, “With Las Vegas‘s tourism recovery underway, the city has safely reopened to millions of visitors since June with even more success on the horizon.” Koch assures us that it practices “an agnostic approach to product, geography, and capital position,” which I guess is meant to assure us that this isn’t a leap of faith. As for Fontainebleau Development, it’s—oh no!—the return of the Soffer clan, the people who got us in this mess in the first place. Let’s hope their edifice complex is better-financed this time around. Even so, it may indeed take an act of God to make F-blue pencil out. As Scott Roeben emphasizes, it’s dumping—er, debuting—3,780 hotel rooms into a market that will be hard-pressed to absorb them, even a couple of years down the road. After all, F-blue is being beaten to the punch by not-unchallenged Resorts World Las Vegas. So there’s that. Even Resorts World fan Roeben is nervous about the latter’s prospects. “We suspect Koch will take a wait-and-see approach, sitting on this asset until market conditions improve, should that ever happen,” Roeben writes. Which means the butt-ugly corpse of F-blue is with us to stay for a long time.
Although casinos across the nation have been swooning in November, results in Nevada—which we feared would take it worse than average—were in line with national trends, a victory of sorts. Statewide, gaming win fell 18% and the Las Vegas Strip, which has been the epicenter of the problem, tumbled 32% but frankly we expected a lot worse. Locals came out to play, too, and win from them was up 6%. Since October ended on a Saturday (a non-reporting day), a weekend’s worth of previous-month revenue helped fatten the November results, offsetting one less weekend last month. December is not likely to be such a positive story, casino-capacity restrictions having been tightened to 25% on Nov. 24.
As far as Strip casinos were concerned, baccarat continued to be a black hole, with players wagering less (-25%) and winning more, are revenues toppled 45%. Other table games fell 32% on 35% less wagering. Strip slots slid 29% (to $197 million) on 33.5% less coin-in. Even tighter holds didn’t help. Overall, Strip casinos grossed $350 million. Downtown the story has to be Circa, whose first full month coincided with a 2% increase in gaming revenues ($53 million), Derek Stevens‘ rising tide lifting all boats. North Las Vegas was off 2% ($19 million) but the Boulder Strip was boffo, up 18% to $68.5 million, while the balance of Clark County was flat at $105 million. Laughlin missed the boat, flopping 19% to $33 million. Mesquite was off 8% to $11 million while Wendover slipped 17% to $15.5 million.
Gaming revenue dropped last month in Maryland and precipitously so in Ohio, where the good times had really been rolling. Maryland’s $130.5 million gross represented a 7.5% dip, motivating JP Morgan analyst Joseph Greff to write that “We note the sequential year-over-year deceleration reflects the resurgence of new COVID-19 cases in recent weeks. We expect a similar trend to play out in other regions, which points to a retrenchment relative to 3Q revenues/EBITDA results.” (Two fewer weekend days didn’t help either.) MGM National Harbor was immune to the trend, up 2.5% at $55 million, with high-tax slots off 8% up low-tax table games hopping 18%. MGM’s accountants won’t complain. It held 42.5% of market share, comfortably above Maryland Live‘s 34.5%. The latter plunged 15% (to $45 million) and Horseshoe Baltimore 17% (a meager $15 million). Hollywood Perryville had a good month, up 1.5% to $6 million, while Ocean Downs declined 6% to $5 million and Rocky Gap had a 14% setback, to $4 million.
Over in West Virginia, revenues toppled 28%, with slots and tables falling almost equally. Hollywood Casino at Charles Town Races did only slightly better than the average, tumbling 27% with tables down 39% and slots 26% off the pace. When Maryland catches a cold, West Virginia gets pneumonia.
