MGM dumps Springfield; Gaming recovery a proven fact

MGM Resorts International isn’t quitting Springfield but it’s taking a bath on its eponymous casino in order to reduce its exposure to the (disappointing) market. MGM spent $960 million on the resort, which has never performed up to expectations, and is selling it to affiliated REIT MGM Growth Properties for $400 million, a serious writedown of what was once a trophy asset. MGM will pay $30 million a year to lease the property from MGP and will continue operating it. All involved were at pains to save face. MGM CEO Bill Hornbuckle said the “has exhibited strong financial performance as it emerges from the pandemic, and the property delivered record EBITDA in the first quarter of 2021.” Which leaves hanging the question of why ditch the place now and at such a bargain price? Were we MGM shareholders we’d be hopping mad and the stock did indeed dip 2%. Looking for a silver lining, JP Morgan analyst Joseph Greff wrote, “for MGM, it improves its already strong liquidity position, enhancing its ability to invest in its land-based casinos or BetMGM and return capital to shareholders.” $400 million in sale revenue may be a quick way to manufacture a dividend but this is an ignominious retreat, no two ways about it. (In one bit of unambiguously good news for MGM, its Strip resorts got green-lit by the Nevada Gaming Control Board this morning to go to 100% capacity.)

Perhaps MGM can make up some of that forfeited $560 million on the Las Vegas Strip, where paid self-parking and paid event parking are making an unwelcome return. Locals are exempted—provided that they vamoose within three hours. Four hours costs you $15, then it escalates to $18/day at CityCenter and Bellagio. Other MGM properties are $3 cheaper. Not so coincidentally, the re-introduction of paid parking takes place on May 19, the same day that the Las Vegas Golden Knights begin NHL playoffs at T-Mobile Arena. Customers of Caesars Entertainment casinos continue to enjoy a paid-parking holiday … until October. Enjoy it while it lasts.

Casino gambling is back—and as big as ever. That’s the news from the American Gaming Association, which reported 1Q21 revenue of $11.1 billion, as much as was recorded during the high-water mark of 3Q19, driven by a record $4.5 billion in March. That’s also a 4% increase over the same period in 2019, when Big Gaming recorded its two best months ever. Addressing his constituency, AGA President Bill Miller said, “Despite a slow start to the year, March 2021 broke the all-time monthly revenue record for U.S. commercial gaming, and I’ve heard from many of you that April also trended in that positive direction.” Miller said that significant contributors to that were sports betting and Internet gambling (Sheldon Adelson is rolling over in his grave) but that terrestrial casinos were also “nearing pre-pandemic levels.” Actually, many are exceeding them (as you’re read here) but the Las Vegas Strip and Atlantic City are laggards. Says Miller, “In fact, multiple regional markets set new records in Q1, an impressive feat and a testament to our industry’s progress despite widespread restrictions on amenities and casino capacity.”

Adding that he’s not yet ready to raise the “Mission Accomplished” banner (in an allusion to George W. Bush), Miller says he’s “never been more optimistic” about the industry, pegging its continued to prosperity to further increases in vaccinations. Translation: Get your shots! Going back to betting, slot play (-4%) and table-game revenues (-23%) are still lagging their 2019 numbers, but sports betting (+450.5%) and I-gaming (+645%) are plain off the charts. Unlike slots and tables, they’re still in the millions, not billions, but they’re getting close: $961 million for sports betting (more than all of 2019) and $784.5 million for I-gaming. Overall, gaming is outperforming the national Gross Domestic Product and doing so despite what the AGA describes as “limitations on live entertainment, dining, hotel bookings and meetings and conventions that are essential to the industry’s bottom line.” Even casinos proper, with the exception of South Dakota, were operating under constraints.

“Today’s report shows gaming’s comeback is ahead of schedule,” Miller told The Associated Press. “The gaming industry is generating these impressive results with one hand tied behind our back as capacity and amenity restrictions remain across the country.” Heck, there was no gambling in New Mexico until early March, ending a year-long shutdown. Ocean Resort Casino CEO Terry Glebocki chimed in to report increasing visitor volumes at her property, telling reporters, “There’s a ton of pent-up demand out there. People want to go out and have fun, and that’s what you do at a casino.” According to the AP, Arkansas, Colorado, Iowa, Maryland, Michigan, Missouri, Montana, Ohio, Oklahoma, Pennsylvania, South Dakota and Virginia all set monthly gambling records in March, as slot and table play narrowed to within 1% of March 2019 levels.

Within moments of the AGA’s announcement, Americans for Nonsmokers Rights, not missing an opportunity to drive home its message, pointed out that these first-quarter records had been achieved in an often non-smoking environment. CEO Cynthia Hallett lit up with “it’s not surprising that casino visitors prefer smokefree casinos. The old myth about the impact of going smokefree on revenue has been flipped on its head. We urge casino operators to embrace this new reality and support permanently going smokefree.” She’s got a point—and a good one.

Nothing says pigskin like going to a nightclub. The latest ‘WTF?’ add-on to Allegiant Stadium is an end-zone danceteria, Wynn Field Club. Just about the only proposition more expensive than NFL tickets are nightclub admissions and bottle service, so you’d better be really well-heeled if you’re going to patronize this new concept. Eater Las Vegas has all the daffy, douchebaggy details.

They’re mad for sports betting in Tennessee, which has reached a cumulative $1 billion in handle faster than any other state. In April, handle was $172.5 million, down somewhat from March (because college basketball). Revenue is expected to be $14 million—take that, New York State with your “record” $3.5 million! Perhaps in reaction to the recent Action 24/7 kerfuffle, involving suspect wagers, supervision of Tennessee’s OSB will be transferred from the Tennessee Education Lottery to the Sports Wagering Advisory Council. Its early remit will include considering four new OSB applicants. Incumbents are led by BetMGM but DraftKings and FanDuel are reported to be not far behind. Of the Volunteer State’s betting fever, PlayUSA analyst Nicole Russo said, “With an online-only launch during the NFL season and at the beginning of a month, Tennessee kicked off its sports betting industry under nearly perfect circumstances … but Tennessee has still outperformed its expectations. Few predicted just how quickly the Volunteer State, a state with no legal betting history, has embraced online sports betting.”

Jottings: Our Atlantic City correspondent reports a “totally frightening experience” at Philadelphia Live, which may explain the presence of metal detectors at the entrance … Ocean Casino Resort must have got the memo about the menu at its players club not being up to snuff. It now offers lamb chops, described as “excellent.” Both it and Hard Rock Atlantic City were said to be very crowded, a good augury for the Boardwalk or at least its newer precincts … Wynncore is promising a “full remodel”of its hotel rooms, starting early next year, to the tune of $200 million. This may seem a belated reaction to Resorts World Las Vegas but capex investment is always to be applauded … The Strat is now operating at 100% capacity, having vaccinated 80% of its workforce. That’s 4,800 arms pricked, in case you’re keeping score at home.