Something different today from the Boardwalk: A first glimpse of new-look Caesars Atlantic City. That $400 million in capex reinvestment didn’t go to waste. There’s now a Nobu (above) and a Hell’s Kitchen (below), “both high-quality work and high prices,” says our East Coast photojournalist. Wild Wild West is all but completely gutted, its next iteration as yet unknown—something less rinky-dink, we hope.
Wall Street analysts were across-the-board upbeat on Wynn Resorts‘ 3Q22 performance, as high-end casinos in Las Vegas continue to flourish. Although he categorized himself as “neutral,” given the evolving situation in Macao, analyst Joseph Greff of J.P. Morgan encapsulated third-quarter sentiment with “Upside in Las Vegas and smaller than forecasted losses in Macau.” Sounds pretty good to us. More specifically, Wynn beat expectations, largely on the strength of Sin City, backstopped by Boston. Interestingly, as Greff said, in Macao the company’s casinos—absent the junket middlemen—picked up a solid amount of direct VIP play during Golden Week, better even than in 2019. (Its retail component recovered to three-fourths of pre-Covid business.)
Greff was dismissive of the significance of Tilman Fertitta‘s big buy-in of WYNN shares, writing, “we think this relates more to an industry person seeing value in the stock rather than eventually angling for a transaction or M&A.” Wynn CEO Craig Billings agreed, telling investors, “What I can say is kudos to him, because he’s done quite well since it appears he has started acquiring during the second quarter when the stock was excessively cheap. It’s actually right around when we were buying back stock as well. It’s a great recognition of the value of our equity.”
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Although only 41% of all precincts have reported, it’s clear that both tribal and private-sector gaming suffered a stunning defeat in California last night. Both the tribes’ Proposition 26 and Big Gaming’s Proposition 27 are losing—and by wider margins than expected. 70% of Californians voted “no” on Prop 26 and 83% nixed Prop 27. The only clear winners in this scenario are the Golden State’s card rooms, which surely would have been litigated out of existence had Prop 26 passed (due to some fine print in the ballot measure).
Prop 27’s backers are now spinning that this was just a dry run for 2024. Before anybody files another ballot initiative, we urge both sides to come to the table and try to hammer out their differences. This would include A) tribal-private partnerships, B) a lower cost of entry, unlike Prop 27’s minimum of $10 million, C) a reasonable tax rate such as Prop 26’s 10% and D) no more dissembling about what your proposition is about, like ending homelessness. It’s about sports betting—and voters saw clear through you. Oh, and ixnay the hundreds of millions of dollars in attack ads; it’s a surefire path to defeat.
In other news …
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Inflation or no, there is one quantifiable, incontestable fact about the American consumer. He or she is spending more—way more—on gambling than before Covid-19 and more than last year, when they had stimulus money to burn. So if there are fewer presents under the Christmas tree, maybe the economy isn’t to blame. Big Gaming’s poster child for its current prosperity has to be Maryland, where last month’s gambling losses were 37.5% higher than 2021 and 48% over pre-pandemic 2019 for a total haul of $213 million. That may be peanuts by Las Vegas standards but it’s the biggest casino month in the history of the Free State.
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“It’s kind of fun to do the impossible,” said Walt Disney. For the leadership of DraftKings, “the impossible” would include finding a path to near-term profitability. DKNG reported 3Q22 numbers late last week and J.P. Morgan analyst Joseph Greff called the projected, year-end negative return on investment “worse than expected.” And it gets more adverse next year, when DraftKings is expected to return [sic] $110 million more negative ROI than Wall Street anticipated. “This is disappointing as this outlook follows recent 3Q22 earnings commentary from DKNG’s OSB/Digital competitors … who have talked up an accelerated path to profitability and suggests that DKNG is lagging peers on a path to positive EBITDA generation.” Oh sure, DraftKings might produce a positive ROI … in 14 months or maybe break even in 2024. But the company continues to get less bang for its buck, in terms of revenue and market share than (privately held) rival Fan Duel.
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Dragged down the golden albatross that is Macao, earnings of MGM Resorts International missed analysts’ projections by a whopping $1.61 per share for a 3Q22 loss of $1.39/share. More’s the pity, as MGM did so many things right. Wall Street expected 91.5% Las Vegas Strip room occupancy; MGM delivered 93%. The Street anticipated $3.2 billion in quarterly revenue; MGM saw that and raised it by $200 million. But Macao missed analyst estimates (which can’t have been very high to begin with) by 18%, eking out $87.5 million. J.P. Morgan analyst Joseph Greff dismissed the quarterly numbers as “more of the same,” while Deutsche Bank‘s Carlo Santarelli was slightly more clement, calling the results “some bumps, but broadly solid.”
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In the end, all that talk of Caesars Entertainment selling a Las Vegas Strip asset was just a sham. The company probably couldn’t find any takers for the Flamingo at CEO Tom Reeg‘s preposterous asking price (ditto his equally preposterous conditions for vending Planet Hollywood). Reeg’s explanation was “We ran into a market where the cash flow of the asset continued to increase and the ability of buyers to raise financing made it a very easy decision for us to keep.” Never mind that his decision blows a $1 billion-$2.5 billion hole in the strategy to pay down the company’s groaning $13.3 billion debt load. (If there is a recession, God forbid, Caesars will be in a boatload of trouble.) In the end, nobody was going to pay $2.5 billion for the Flamingo and even Planet Ho would be a heavy lift at that price.
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“Did Bally’s open a casino in Atlantic City and forget to tell anyone about it?” So asks our East Coast correspondent. “This is Bally’s yesterday (Sunday). A few casinos here would have more customers during a snow storm than this.” As though to prove their cluelessness, Bally’s Corp. mailed its faithful Boardwalk customers a lengthy flier touting the Tuesday promotions (including the blue-plate specials) at Dover Downs, right? Nope … Bally’s Vicksburg. What a waste of time, money and bandwidth. And this is the company that’s supposed to elevate Chicago into the casino major leagues?
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Do Station Casinos execs really want to double their footprint in seven years? Yesterday they reported flat 3Q22 revenues of $414.5 million, all but $3 million of which were Vegas-derived, unwittingly highlighting the company’s exposure to a single market. Company leadership promised better times ahead—and soon. CFO Stephen Cootey spun the disappointing first blush by pointing out that, on a same-store basis, it was the best third quarter in the company’s history. Although foot traffic was flat with 2Q22, Cootey said spending trends are strong, with F&B recording its best third quarter ever. While pledging not to look into his crystal ball, CEO Frank Fertitta III said, “We don’t see anything that would suggest that it will be any different than it has been historically, other than the last third quarter, when we had a bunch of stimulus money in the economy that may have made things a little harder to read.” In other words, comparisons to to 3Q21 don’t count.
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Nevada scored yet another $1 billion-plus month in September, up 8% from 2021. As you might expect, the Las Vegas Strip drove the big gain, booking $693 million in win, up 8%. Strip slot revenue was $409.5 million, a 17.5% vault in coin-in. Table games not called ‘baccarat’ saw 10.5% more wagering and the whales appear to have returned to the baccarat table, where betting volume was 34.5% larger. Luck wasn’t with the house, which saw 3% less baccarat win.
This more than compensated for a Las Vegas locals market that has leveled off from last year. Downtown was more like its old self, gaining 1.5% to reach $74 million while Laughlin hopped 5% to $39 million. Boulder Strip casinos took a hit, down 8.5% to $74.5 million. This negated most gains in the rest of the locals picture. North Las Vegas was up 5% to $23.5 million, proving out Station Casinos‘ contention that demolishing two casinos wouldn’t hurt the region. Miscellaneous Clark County climbed 4% to $142 million.
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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.
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In their rush to book a Formula One racing event, Las Vegas city fathers have intentionally or otherwise conducted a 20,000-person human sacrifice in the form of a forfeited convention. Congratulations, Sin City, you’ve just lost the 2023 NAR NXT, a major conference of Realtors. Your loss shall be Anaheim‘s gain. Let’s let the official press release tell the story, shall we?
Continue readingSince a picture is supposed to be worth a thousand words, we’ll let these photos do the talking.
In a major reversal of fortune, Louisiana casino revenue vaulted 18.5% over September 2021. Foot traffic rose 41.5%, which more than made up for thriftier gamblers: On average they lost 16% less per player. It helped the year/year comparison that Louisiana in autumnal 2o21 was still reeling from Hurricane Ida. However, even compared to the previous peak (2019) the numbers were 3% higher. Even sports betting is showing signs of life, with $32 million in revenue derived from handle of $207.5 million.
Not all markets benefited. Baton Rouge was in the doldrums with even L’Auberge Baton Rouge (pictured) flat at $13 million. Belle of Baton Rouge tumbled 21% to $1 million and Hollywood Baton Rouge slipped 10% to $4 million. Lake Charles saw a bonanza though, with Golden Nugget rocketing 41% to $32 million, past L’Auberge du Lac‘s $30 million (+14%), while Delta Downs gained 12.5% to achieve $13.5 million. Boyd Gaming‘s two rural properties fared poorly, however, with Amelia Belle sinking 10% to $3 million and Evangeline Downs down 12.5% to $6 million.
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Cash flow at Vegas-less Las Vegas Sands during the third quarter came in far above Wall Street‘s expectations, driven by “accelerating” business at Marina Bay Sands. As Credit Suisse analyst Ben Chaiken reported, “Macau is still largely uncertain pending the travel/COVID policies within China.” Still, he thinks a speedier-than-anticipated recovery in Singapore bodes well for Macao eventually. Once the government gets its act together, that is. He felt that at its current $36.50 a share, LVS stock is fairly priced, even a bargain when one looks to the future. For instance, when Shanghai denizens are allowed back into Macao (where they have represented 55% of visitation), favorable monetary demographics bode well for the premium mass-market segment, the new must-have customers in the enclave.
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Adding more and more casinos isn’t ‘growing the pie’ in Pennsylvania. Instead, the bottom fell out of September’s numbers, which were 8% below 2019 ones (i.e., the good old days). Against last year, they were 1% lower, for a tally of $280 million. Parx Casino, the Keystone State’s only smoke-free gambling den, was 5% off last year’s pace but still was rolling in dough to the tune of $49 million. Next best in the Philadelphia market was Philadelphia Live, having picked itself up off the canvas, posting a 1.5% gain to $18.5 million. Rivers Philadelphia (above) fell 10% to $17 million, Harrah’s Philadelphia slid 11% to $13 million and Valley Forge Resort brought up the rear with $11 million, a 5% slippage. Outstate, the runaway winner was Wind Creek Bethlehem, up 2% to $43 million and a great success story for tribal gaming.
In the Pittsburgh area, Rivers Pittsburgh clobbered the competition with $30 million (-3%), as Hollywood Meadows also ceded 3% to hit $16 million and Pittsburgh Live gained 1.5% for $9 million. Smokers flocked back to Mount Airy, which jumped 9.5% to $17 million, whilst Penn National tumbled 11.5% to $14 million. Presque Isle Downs was down 4% to $10 million, Lady Luck Nemacolin plunged 17.5% to $2 million, Hollywood York vaulted 20% to $9 million and newbie Hollywood Morgantown contributed $5 million. Returning to Philadelphia Live for a moment, since 2019 it has cost Harrah’s 34% of its revenue and Rivers Philadelphia 28%, while leaving Parx unaffected. Really, how wise was it to site five casinos in the greater Philly area? Not very.
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Atlantic City casinos grossed $252 million last month, up 1% year/year. A 2.5% hop in slot revenue ($186.5 million) on 1% more coin-in more than made up for a 2% dip in table win ($63.5 million) on 5% lower wagering. Borgata was comfortably in front with $62 million (+3.5%), outdistancing Hard Rock Atlantic City‘s $44 million (+6%) and Ocean Casino Resort‘s $30.5 million (+5%). Caesars Entertainment‘s threesome suffered a -15.5% reversal at Harrah’s Resort ($23 million) while Caesars Atlantic City was revenue-positive ($22.5 million, +2%), but Tropicana Atlantic City wasn’t ($23.5 million, -4%). Caesars’ official position is ‘Let’s wait and see when the $400 million capex kicks in’ but it may have to settle for middling status in a market dominated by relative newcomers. By contrast, Bally’s Atlantic City enjoyed a comeback month, leaping 13% to $16 million. Resorts Atlantic City sagged 3% to $17 million, while Golden Nugget enjoyed one of its better months, climbing 4% to $13.5 million, not enough to keep it out of last place.
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Landing a meeting with Caesars Entertainment CEO Tom Reeg, as well as several top execs, J.P. Morgan analyst Joseph Greff didn’t hear so much as a peep about the mooted Las Vegas Strip asset sale, which he assumes is on hold “given present financing terms for sizable asset sales and that CZR retains until market conditions improve.” Even so, Reeg & Co. asserted that “demand remains strong” and that neither macroeconomic conditions (read: inflation) nor gas prices were putting a dent in business. They expect even better things from next year thanks to Formula One, which they say will bring in “hundreds of thousands” of tourists, just as it drove 300,000 people to visit Singapore. It will also shore up one of the traditionally weakest weekends of the year.
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Happy Indigenous Peoples Day, especially to our tribal readers. We’re spending it nursing a nasty case of strep throat and distantly following Global Gaming Expo, which convenes today at the newly expanded Las Vegas Convention Center. This year’s G2E, like last year’s and every one before it will be smoke-free … that is, no discussion of smoking in casinos whatsover. Rest assured that Americans for Nonsmokers Rights will show up and make a fuss over what seems an unconscionable oversight. Now to the main business of the day …
In another triumph for the Marty Small (D) administration, the first anniversary for groundbreaking of Atlantic City‘s subsidized ShopRite has come and gone without a shovelful of sand being turned. The megamarket was proposed three years ago and seems no closer to happening now than then. Mind you, ShopRite is not only juiced in for annual rent of $1, it gets a yearly subsidy of $500,000. At least that would have been the sleazy deal had the Casino Reinvestment & Development Authority signed off on it. Fortunately, wiser heads at the CRDA prevailed. It’s not clear why Atlantic City needs subsidized supermarkets anyway, as it already has two Acme marts (one near the Marina District) and a Save A Lot. But the Small administration never saw a bad deal it didn’t want to make.
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Alas, today’s top story is of the “If it bleeds, it leads” variety and is written out of sheer necessity, not desire. A thirty-something Latino man, Yoni Barrios, is in custody after going on a knife-wielding spree in front of Wynncore. It seems that the individual, who was packing a large kitchen knife, didn’t take well to being spurned in his request to have his photo taken with a group of showgirls. The latter, who were employed as Wynn Resorts greeters, were among the eight people who were subsequently stabbed, two fatally. Several tourists also fell victim to this Sin City iteration of Jack the Ripper, who fled the scene only to captured in front of Venelazzo, slashing one person during his attempted getaway. The assailant’s sleeves were coated in blood, so he’ll have a hard time explaining that away in court. We thought we’d seen the last of the Las Vegas Strip as a lawless frontier once tourists starting returning en masse but evidently not. And with that … words fail us.
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