Casino companies rarely admit defeat but Penn National Gaming is bagging it where Hollywood Casino Jamul, near San Diego, is concerned. Hollywood Jamul’s debut was disastrous and Penn’s “essentially exiting” its management contract (as Deutsche Bank 
analyst Carlo Santarelli put it) suggests that business never recovered. As a contributor to Penn’s bottom line, Jamul was a no-show: $5 million in cash flow to date and $400,000 more expected by the time the contract terminates on May 28. “Despite the inconsequential, though negative, financial impact on our estimates/[price target], we view the removal of the Jamul distraction as a modest positive,” wrote Santarelli. Penn also takes a $29.5 million hit from an unfunded loan to the tribe. “At present, PENN has $98 mm of face value debt outstanding to the Tribe and roughly $30 [million] in additional funding requirement obligations, of which $1 [million] have been drawn. Thus, PENN has in total $99 [million] of current loans outstanding to the Tribe and $128 [million] of potential total outstanding commitments. PENN has written down the value of the $98 [million] of face value debt outstanding on the balance sheet” to $21 million. In other words, Penn would rather take a bath on Hollywood Jamul that continue to agony of propping it up. Will anyone step forward to fill the void — and how will Jamul hang on without Penn? Those questions await answers.
* Santarelli also colors himself “skeptical” of Las Vegas Convention & Visitors Authority numbers showing revenue per available room on the Las Vegas Strip going up 7.5% in January. Why? “1) occupancy was down 180 [basis points] y/y, 2) visitor 
volume was down 3.3% y/y, 3) convention attendance was down 16.7% y/y, and 4) slot volume was down 2.6% and domestic table game volumes were down 8.7% year over year. This, in our view, is not a recipe for RevPAR growth, especially given continued softness in our checks.” As Santarelli adds, “it is rarely the case for high single digit pricing power to be evident, when occupancy is negative.” He blames the discrepancy on fuzzy math, otherwise known as “new revenue recognition accounting policies,” effective Jan, 1. How will these affect the casino sphere? Less casino revenue, more hotel dollars and increased F&B revenues. “Overall net revenue will be largely unchanged.” This kicks y/y revenue comparison for the rest of 2018 into a cocked hat but with the State of Nevada the biggest gambling junkie in America, any diminution in casino revenue is a recipe for budgetary crisis.
* Fans of Churchill Downs have to take some discouragement away from JP Morgan analyst Daniel Politzer‘s bulletin this morning. While he likes the company’s renewed focus on gambling, particularly yesterday’s acquisitions of Presque Isle Downs and Lady Luck Vicksburg, he had bad news regarding the company’s parimutuels in Illinois and Florida. He puts the likelihood of racino legalization in the Land of Lincoln at only 15% and the decoupling of racing from slot machines in Florida is given no more than a 33%. An omnibus gambling bill has crept from state House committee in Florida onto the floor but many discrepancies with the state Senate’s version remain.
* Days after Year One casino revenues from three private-sector gaming houses landed with a thud in Albany, another body blow was dealt with yesterday’s opening of the tribal Point Place Casino. This is the Oneida Indian Nation‘s third casino and it was built for a thrifty $40 million. Considering that this is the 20th casino in New York State, it creates what one scribe called “a very delicate situation when it comes to the revenues of the said gaming venues and the potential of cannibalization in the sector.” Sitting 15 miles outside downtown Syracuse, Point Place is enviably located and offers 500 slots along with 20 tables. The Oneida aren’t focused on volume so much as ROI and, at Point Place’s scale and site, they’ll probably achieve it.
Meanwhile, Resorts World Catskills CEO Kevin Kline seems to have drunk his own bathwater. He’s predicting that the megaresort, 90 miles from Manhattan will be a 
player magnet, even though Resorts World New York is far closer, in the Bronx, and even though his paltry allotment of hotel rooms is earmarked for high rollers. “Our property’s been designed to accommodate the premium Asian customer. We’ve built a very authentic Asian gaming and food offering, that provides both traditional and modern cultural influences,” Kline says. Whether that romances Asian players away from Sands Bethlehem remains very much to be seen. One doesn’t take on Sheldon Adelson lightly.
