Horseshoe returns to Vegas; LV Sands thinks big

In the year’s worst-kept secret (or least surprising news story), Caesars Entertainment is finally rebranding Bally’s Las Vegas as the Horseshoe to end all Horseshoes. We were all over the story yesterday, in case you want the full monty. A game of musical chairs will ensue, since the displacement of the Bally’s name frees it up for Bally’s Corp. to slap it on the long-suffering Tropicana Las Vegas, part of a full rebrand of all of Chairman Soo Kim‘s assets except (sensibly) Hard Rock Biloxi. In at Horseshoe-to-be is “a handcrafted feeling with tooled leather, dramatic colors, and the brand’s signature gold horseshoe iconography.” Out, we hope, will be Real Bodies and some of the other low-rent aspects of the property as it is.

The return of Horseshoe to Vegas where it belongs overshadowed today’s revenue report on Nevada casinos. Strip gross gaming revenue of $651 million was up in December by 10% over 2019, while locals momentum slowed a bit, to +5% and $229.5 million. Players were openhanded on the Strip, with slot coin-in up 22% (driving an 18% increase in win to $377.5 million) and table wagering 13% higher (a robust +32% and $188 million once baccarat is factored out). Baccarat was, indicated, a weak spot, down 15% in volume albeit 16% higher in revenue and despite low hold. Visitation to Las Vegas remained 9% below 2019, at least with regard to travelers passing through Reid International Airport. Domestic travel was only 5% off but international flow was down 58.5%.

Downtown continued to show strength, up 17% to $74 million, while Reno was up 6% to $56 million. Laughlin slipped 9% to $30 million, North Las Vegas tumbled 16.5% to $24 million and the Boulder Strip slide 15.5% to $64.5 million. Miscellaneous Clark County provided redemption, up 27% to $136 million, while “Other Nevada” was 10% higher to $166 million.

Leading off earnings-call season was Las Vegas Sands. The company managed to extract $643 million from its Macao operations and $368 million from Singapore (all that revenue from just one casino!). However, Sands posted a loss of $315 million for 4Q21, even with a significant—$266 million—depreciation writeoff. Cash flow from both Macao ($89 million) and Singapore ($145 million) was markedly better than what Wall Street was expecting, $82 million and $86 million respectively. “Given the travel restrictions impacting LVS markets, we don’t think there was estimates bar that needed to be met,” wrote Credit Suisse analyst Benjamin Chaiken.

Although LVS no longer reports numbers for Las Vegas, Chaiken was able to gain visibility into Venelazzo‘s performance. Table wagering was up 12% and slot revenue rose 7%, and hotel occupancy was actually, if incrementally, above 100%, all adding up to $162 million in cash flow. “This seasonally makes sense, but with such strength seen recently we view the continued momentum as a positive,” Chaiken opined. The company is sitting on $2 billion in cash and has another $6 billion coming from the Venelazzo sale, so management decided to up its capex investment in Marina Bay Sands—where VIP play is up 190%—by another $1 billion, to be dedicated to even better suite product. Top Sands execs downplayed the idea of new investment in the digital sphere, preferring to take a wait-and-see attitude. Their priorities are land-based, especially New York City, then Florida and finally Texas (“a few years away”). Sands excels at building better brick-and-mortar mousetraps, so it’s reassuring to see it sticking to what it does best.

Added Deutsche Bank analyst Carlo Santarelli, “We continue to see LVS as a name with true ‘reopening’ elements, limited near-term expectations, and earnings power that, if and when realized, make the shares inexpensive at current levels. We find this combination to be unique within our coverage universe at present.” He added that management was encouraged by New York Gov. Kathy Hochul‘s acceleration of the casino-selection process and that a brigade of lobbyists have been dispatched to the Empire State. (A repeat of the Texas overkill?) Florida, execs conceded was “a struggle.” Wrote Santarelli, “In the event LVS is able to achieve the required number of signatures, we expect the pushback to be fairly meaningful, and as such, we see New York as the market with more potential for LVS at present.”

A busy man, Santarelli also had this bulletin from the Sunshine State: “The public equity operator push for OSB legalization in Florida appears to be finished for 2022, as the Florida Education Champions, the group sponsored primarily by [FanDuel and DraftKings], appears likely to fall short of the signatures required to get on the November ballot. This effectively ends hope of the public operators running sports betting operations in Florida prior to 2025, at the earliest, as the next ballot initiative effort would be November of 2024.” Even the latter would be a challenge, Santarelli thinks, especially if the Seminole Tribe is able to get OSB back up and running in the interim.

Indiana has failed yet again to put Internet gambling over the top in the Lege. The House Public Policy Committee couldn’t advance enabling legislation, ending i-gaming prospects for the year. It’s still in play in Illinois and Iowa but Santarelli is skeptical. Sports betting, meanwhile, remains stymied in Massachusetts. The votes to pass it are present in the lower chamber but the state senate president was described as “noncommittal” about whether he’d even schedule a vote on the issue, “also insinuating there may not be enough votes to pass the measure in the Senate at present.” Then why be afraid to bring it to a vote? As Havelock Ellis once said, “The Promised Land always lies on the other side of a wilderness.”