Wynn winning; Flyover Country keeps Caesars aloft

Occupancy in Las Vegas was an anemic 39% but room rates still were healthy at $269/night. Unfortunately for Wynncore, revenue per available room plunged $164/night to $105. Table game drop was $325 million (with 25% less win) on tight hold. Slot coin-in was off 16.5% for $739 million in handle and win/slot/day of $302, down 15% but robust all the same. Table win was $63.5 million, down 23.5% and slot win was $48 million, -17%. Discounts, promotions and commissions were cut by 15%. Net revenue at Wynncore was $187 million, a 53% falloff. Encore Boston Harbor banked $117 million, a 33.5% decline. Wynn Macau eked out $51.5 million (-89%) and Wynn Palace must have bled red ink all over the carpet, with $16 million in net revenue, a dive of 97.5%. We’re confident about Wynn Macau’s future but the Palace seems to have a hard time getting traction, even in good months.

Greff colleague Daniel Politzer found Caesars Entertainment‘s 3Q numbers “solid,” including “gradual” improvement in Las Vegas despite an expected November-December slowdown. “Regionals remained strong in the quarter (ex-still challenged destination properties in [Atlantic City], New Orleans, Reno),” wrote Politzer, who liked the company’s focus on i-gaming. The William Hill shareholder vote takes place Nov. 19 by which time, God willing, the U.S. will have a president-elect too. Elaborated Politzer, “Similar to most domestic gaming operators, we see CZR continuing to achieve higher margins relative to history, given merger-related synergies and the domestic gaming industry’s ability to reduce/delayer marketing costs, close lower margin amenities (buffets), and trim labor opex.” In Vegas, recovery looks more like a slow thaw: “Finally, while we do not expect a quick recovery in Las Vegas, we think expectations are appropriately set, and look for meaningful improvement in 2022.” Can investors wait that long?

Cash flow was $463 million and revenue $1.85 billion (-34%). Las Vegas Strip revenue of $391 million was comparatively weak (-60%), while regionals continued to bounce back, posting $1.3 billion for only a 20% decline. Cost-cutting has already set in, with corporate expenses slashed from $54 million to $7 million. With only The Rio still out of action, Vegas occupancy stands at 60%, with weekends above 90%. The Rio is costing CZR $7 million a month to keep dark, so we have to assume that the projected operating cost would be higher still. Why else eat that 7 mil? The company also didn’t get full-quarter contributions for Planet Hollywood, Bally’s and Love Island, er, The Cromwell. Right now it’s a waiting game, re Politzer: “Looking ahead, CZR sees strong 2H21 group bookings; near-term, CZR is hopeful re: the NV governor’s recent comments that the state may move toward increasing group capacity limits to 50% in early 2021, which should help CZR save some 1H21 business.”

Burying the lead, Politzer identifies Horseshoe Hammond (!), Caesars Southern Indiana and Tropicana Evansville (already sold) as the three Indiana casinos on the chopping block. Why Caesars would keep two racinos but sell its hyper-lucrative Chicagoland casino is a mystery to us but there you have it.

Politzer also had clarification of yesterday’s Golden Entertainment 3Q20 results. The Strat is running at 55% occupancy and cash flow is at two-third of last year’s (construction-disrupted) levels. As for the wipeout of Nevada slot-route revenue, it “reflects locals bars being closed July 10–Sept 20^th.” We should have known that. We did know that. Sorry, folks. In other Golden news, Politzer expects it to eschew direct online-sports-betting action in Maryland in favor of signing up various “skins.” The company could also receive a $75 million windfall from the William Hill buyout. (Hill has sports books on some Golden properties.) As for his discounted price target of $18/share, Politzer says it “takes into account GDEN’s high leverage and the uncertain medium-term outlook for tourism and discretionary spend in Southern Nevada (though GDEN’s near-term trends have been stable).”

Despite a weak Democratic showing in Nevada (although Reps. Susie Lee [D] and Steven Horsford [D] cling to modest leads), that didn’t stop the Culinary Union from patting itself heartily on the back. Even with the Silver State too close to call, Secretary-Treasurer Geoconda Argüello-Kline crowed “The unprecedented turnout in Nevada, which was led by those most directly impacted by the COVID-19 pandemic, is a mandate on Donald Trump’s failed leadership … We are taking back our country and delivering Nevada for political candidates who will represent working families and fight for our issues. Nevadans need comprehensive COVID-19 relief now, a fair economy that centers workers, racial justice that ensures Black Lives Matter, and a democracy that includes all of us—whether we are Black or white, Native or new immigrant, Latinx or Asian.” While we’re usually in sympathy with the Culinary’s aims we think it muffed an easy ground ball, especially by not coming out for Joe Biden in time for the Nevada caucuses and being slow to endorse a candidate even after the handwriting was on the wall. Should Biden win in Nevada, it will be despite the Culinary’s blundering, not because of it.

Spectacle Entertainment‘s move to Terre Haute is stuck in the starting blocks but Hard Rock International is proceeding apace with its Gary casino. The property starting hiring dealers Nov. 17 and 19. Although 200 dealers are needed, former Majestic Star employees get precedence in hiring, per Hard Rock. Oh, and you get paid to learn how to deal. Sounds like a good gig.