Wynn Resorts defended; Trump stiffs hotel employees

JP Morgan analyst Joseph Greff came riding to the aid of Wynn Resorts this week. “COVID-19’s evolving impact has created a lot of share price carnage in the gaming and lodging sector, to state the obvious. Its impact should be significant and its magnitude and duration uncertain, but it should not have a permanent, forever impact. And one of the more interesting values, in our view, when we look across this carnage, is WYNN,” he wrote. That isn’t because Macao is improving (“it’s really not”) or that China‘s government is easing up on visas (it isn’t) or even that Las Vegas will rebound speedily (it probably won’t). No, Wynn’s “low levels are good entry points for those with a longer time horizon and a buy-and-hold view.” Although it’s wallowing around $57/share right now, Greff sees WYNN shooting back up to $93/share.

Greff argues that the market is crediting “almost zero net value” to Wynn’s Las Vegas and Boston assets. “To us, this seems overly

harsh.” Greff adds, “We think the long-term economics of these assets are intact [10% ROI], with decent, if not solid, economics.” He continues that the value of Wynncore is $1.5 million per room, compared to Bellagio‘s $1 million or MGM Grand‘s $476K per key. Greff goes on to remind investors of Wynn’s excellent cash position “and given its ample breathing room for a prolonged period of low to no revenues, we believe WYNN should be able to last ~17 months.” Monthly fixed costs are $75 million in Macao, $40 million in Las Vegas and $20 million in Boston. Greff assumes “no major cuts to maintenance capex” and concludes, “we are leaving our estimates unchanged until we have greater confidence in assessing the magnitude and duration of COVID-19.”

Over at MGM Resorts International, the timing of ex-CEO Jim Murren‘s departure is telling. Gov. Steve Sisolak (D) appointed Murren to head Nevada‘s Coronavirus task force after MGM had announced that COO Bill Hornbuckle was taking over the company. Murren joined furloughed and laid-off MGM workers on the unemployment line 24 hours ahead of schedule. The CityCenter visionary had planned to step down this year but MGM accelerated the timeline. Murren will now be donating his time and services to the Silver State. Good man. Covid-19, incidentally, has claimed an ink-and-paper casualty in the form of the weekly Reno News & Review, which went dark last Thursday.

* Donald Trump‘s hotel empire is definitely feeling the effects of the Covid-19 bug. Last week, Mar-a-Lago was among the hospitality properties ordered closed by Florida Gov. Ron DeSantis (R). “We hope that this suspension is short-lived,” said a Trump surrogate. Trump International Las Vegas is already dark and of a flagship Manhattan property, the Trump Organization warned, “we cannot predict the duration of this unprecedented event; however, the hotel expects a significant shortfall in revenues.” Already 51 employees have been let go. Added spokeswoman Kimberly Benza, “We anxiously await the day when this pandemic is over and our world-class facilities can reopen.”

In Washington, D.C., the Trump International hotel is a ghost town, with 5% occupancy and 160 workers cut loose. Unite-Here exec John Boardman said the Trump hotels are “no different than anybody else except that they’re staying open, which amazes me.” Why? “He’s in leisure,” explains Trump biographer Tim O’Brien. “He’s basically in the tourism business. And it’s an easy place for consumers to cut back.” (This certainly gives Trump more incentive to see hotel-industry relief included in any economic-stimulus measures coming out of Congress.) Trump’s hotels, which he owns directly, are carrying $300 million in Deutsche Bank loans. Virtually the only concession made to Covid-19 was a one-day deep cleaning at Mar-a-Lago, even as customers fled the Trump brand. Most of its closures—like that of Trump Las Vegas—only happened because of government intervention at the state level.

One thing has not changed since Trump’s casino days: his chintziness. A veteran employee, now jobless, says he got “Zero, nothing. We live paycheck to paycheck. We’re screwed.” He’s not the only one.

* Gambling and drinking don’t mix. Just ask SoCal player Mark Johnston, who lost $500,000 to the Downtown Grand while admittedly inebriated. What’s worse, he says, the casino extended him credit and free drinks even after he was blotto. “Just picture a drunk walking the street and he’s drunk, and someone pickpockets and takes his money from him,” Johnston wailed to Tech Times, although his bad betting decisions can hardly be blamed on the casino. According to Johnston, who must have the constitution of a sailor, he was three sheets to the wind when he hit the casino floor and remained drunk for an amazing 17 hours during which he ran through that $500K, for which the casino is now suing him.

“I am not a sore loser,” Johnston claims, less than convincingly. “I’ve lost half a million. I’ve lost 800,000. I’ve lost a lot of money. This has nothing to do with that.” This guy must be the biggest degenerate gambler since Terrence K. Watanabe. “Obviously I can afford what I lost. This is about you almost killing me. What if I had gone to bed that night, with all those drinks in me, and I threw up on myself and I choked and died?” Yes, well what about a little thing called personal responsibility? Is the casino supposed to tuck every guest into bed with a warm blankie and perhaps a teddy bear? In Johnston’s suit against the Downtown Grand, he claims that he started boozing at the Burbank Airport and had at least 10 drinks in him before he started gambling. If it’s true that he was visibly inebriated at the tables, dropping chips and unable to read cards, he may have a case against the Grand, which would have been legally required to stop serving him. (The Nevada Gaming Control Board is taking the matter seriously enough to investigate.) Expect a quiet settlement and the write-off of some bad debt.

* Among the firms hanging tough during the time of Coronavirus is Bet365. The English firm announced a $5.85 billion support package for its employees. The funds are intended to last through the end August, during which time no workers will be laid off or terminated. That’s guaranteed income for 4,389 people. Said the company, “In times of uncertainty is was essential that we reassured our people of the commitment we have to them and the wider community. They have been instrumental in our success and will continue to be so throughout these troubling times and beyond, when normality will inevitably be restored.” This is despite co-founder Peter Coates‘ prediction of “very difficult times ahead.” We applaud Coates for his sense of priorities and Bet365 for its generosity. The company is coming off a year of record revenues, incidentally: almost $4 billion.

* Julia Carcamo advises casinos not to cut back on marketing but to rethink it for when customers are ready to return. Despite the air of denial coming out of the federal government, more and more industry voices are saying the Coronavirus crisis will be as bad, if not worse, than the Great Recession. Warns Carcamo, “When you cut marketing spend, your brand’s ‘share of mind’ starts to erode, but conversely, an increase in share of voice can lead to an increase in the share of market. As a marketer, I am focusing on three things that you should be looking at as well.” These are: A) Exploring your customer database so you’ll be better able to court players when the worst is behind us; B) Keep advertising, lest you should lose ground to the competition, i.e., stay top of mind, perhaps using more TV and social media; C) Switch emphasis from promotion—which really has no value at this point—to brand, which can be metaphorically cashed in during the near—we hope—future.

* Here’s something safe you can do in Nevada during this otherwise depressing period: Walk the Fly Geyser trail near Gerlach. It’s a natural marvel (with a little help from man) and we wish we’d seen it while we lived in the Silver State.

* Prolific playwright Terrence McNally has become Covid-19’s first celebrity casualty. A McNally fan I was not but R.I.P.