And another one bites the dust

And another one bites the dust

Station Casinos announced the permanent closure and demolition of three of its casinos: Fiesta Henderson, Fiesta Rancho, and Texas Station.

The casinos have been closed since March 17, 2020, when Station closed its 20 casinos in Las Vegas on the order of Governor Steve Sisolak. All Nevada casinos closed that day and remained shuttered until June 4. The reopened casinos were restricted to 50 percent capacity until the end of May 2021, in addition to social distancing, mask, and entertainment-limit mandates. In Las Vegas, not every casino company reopened all of their casinos. Station chose not to operate four of its properties, one of which, the Palms, it sold. Now, the other three are set to become dust. In the meantime, Station has announced two properties in Vegas and is working with North Las Vegas on a third, the location of which has not been disclosed. Those decisions do not necessarily indicate a change in strategy, but rather a reevaluation of operating tactics; it is a common outcome of COVID-19.

The pandemic had an impact on everything in our lives. It changed the way we think, work, buy, play, and plan for the future. The pandemic kept people at home, in some cases for months. People learned to work, shop, and entertain themselves without walking out their front doors. Netflix and Amazon stood by ready to provide anything and everything consumers wanted and to bring it to them. Most of the workforce has returned to work and people are once again going out to restaurants, concerts, and movie theaters. But Netflix and Amazon have not lost their hold. Streaming and delivery services existed before the pandemic, but they gained a much stronger foothold when people were unable or unwilling to go out. In the aftermath of the COVID crisis, online shopping, home delivery, and streaming are firmly entrenched.

Even when people go out, they do it differently. Like Station Casinos in Las Vegas, while locked inside, people started to rethink their basic tactics — and sometimes even their life strategies. The rethinking has led to career changes, with fewer people willing to return to a regular job, increased savings, and more long-term planning. Long-term planning, although always extremely important, was not as common as one would think. Previously, once people had chosen a career field and set up a 401K program, they commonly fell into a simple day-to-day routine life. The coronavirus shocked everyone. No one, except possible Nassim Nicholas Taleb, the author of The Black Swan, foresaw the possibility of a complete shutdown of the world economy. Working part-time from home, no social contact, and living off savings were unimaginable until they became a reality.

Once a thing becomes imaginable, planning for it becomes possible, indeed necessary. Every business that survived the crisis, regardless of its size, realized the need for larger cash reserves. Planning for a year or two without any cash income meant having a year or two of cash reserves was essential. Individuals and families learned the same lesson. We cannot just go from day to day without a contingency plan for a catastrophe. The rethinking also led to reassessing the value of some of the things and activities in people’s lives. Here again, businesses were in lockstep with individuals in making the reassessment.

For casinos, that covered a large range of things. Buffets were at the top of every list. Buffets are expensive to operate and had become marginally effective as a marketing tool. When every casino has a buffet, every casino needs a buffet. But when suddenly there are no buffets, whether a casino opens or reopens a buffet can be carefully reconsidered. Most buffets, at least in Nevada, failed to pass the rethinking test. Other facets of the business, such as restaurants, bars, table games, slot machines, and entertainment options, were put to the same test. As a result of the reevaluation, most casinos now have fewer slot machines, table games, restaurants, and entertainment options than they did before the Great Shutdown.

With 20 casinos in the Las Vegas Valley, Station Casinos could treat its individual properties in the same way other casino companies were treating slot machines and buffets. The location and success of each property could be separately evaluated. In the case of Station, it was not just four outdated and underperforming casinos that were put to the test; four locations were also reevaluated. Those four simply did not make the cut. From a financial point of view, the optimum solution was the Palms. The San Manuel Band of Mission Indians paid $650 million for the property. The Palms might not have been worth further investment by Station. But the tribe is an experienced and successful casino operator from California and will probably make a success of the Palms.

The other three Station properties apparently did not find a buyer. Actually, Station probably did not want to sell them to another casino operator. The competition among casino operators for locals is intense. Keeping a competitor out can be an effective and worthwhile strategy. Station does plan to sell the land once the casinos have been demolished. The city of North Las Vegas hopes for a community-minded development, not big box retailers. The mayor says the city would not object to a casino, but Station is likely to put restrictions on the sale to prevent that.

Whatever the outcome, the market approved of Station Casinos making those properties bite the dust. The stock of the Station parent company, Red Rock Resorts, rose nearly four percent.