Data, trends, opinions, and wild guesses

Sunday, January 26, 2025 9:16 AM
Photo:  Shutterstock
  • Commercial Casinos
  • Ken Adams, CDC Gaming

Deutsche Bank analyst Carlo Santarelli is the go-to guy in gaming these days. His opinions on the Las Vegas Strip and such big corporations as Las Vegas Sands, MGM Resorts, Wynn Resorts, Boyd Gaming, Churchill Downs, Penn Entertainment, and Caesars Entertainment are followed closely by investors, other analysts, and the corporations themselves. Santarelli is the modern-day 21st-century version of Jason Ader.

Ader was the 1990s guy. Like Santarelli, Ader followed gaming closely and offered opinions that were ultimately quotable. Ader’s opinions also caught the attention of operators who thought Ader understood the gaming industry better than most. He parlayed that position into other opportunities in the industry. Later, he became a major investor and is still on the fringes of the industry in some investments.

Santarelli is still a working analyst. He joined Deutsche Bank in 2011 after seven years with another firm. His focus has always been gaming. The industry needs smart well-educated observers to help it see the trends in the midst of a confusing mass of detail.

A friend of mine was a mathematician in his youth. After getting a degree in mathematics in London, he came to the United States and obtained an accounting degree. While working as an intern in a casino, he decided the industry was tailor-made for him. My friend said it was an industry built around statistics, but few people understood statistics. Now with big data sets, player-tracking systems, and artificial intelligence, the industry has more sophisticated statistical ability, but it still struggles to make sense of the jumble of data.

In one of Santarelli’s latest notes, he tackled regional gaming. Unlike most of us, Santarelli has a very large database. He took that data and analyzed a 10-year period for 80 casinos, covering Iowa, Louisiana, Maine, Michigan, Maryland, Missouri, Ohio, Pennsylvania, and West Virginia. Two states had experienced “meaningful growth,” while the rest struggled to keep their head above water, especially when revenue is adjusted for inflation. And when Ohio was removed, the entire group was down 0.2 percent over the 10-year period.

Santarelli tried to factor out competition, but he could not ignore the impact of igaming and I would add mobile sports wagering since 2018. That analysis is the broadest scope I have ever seen in a career of attempting to identify trends. Looking for the trends has been a part of my life for over 30 years. After Nevada’s November gaming revenue figures were published, a reporter from the Reno Gazette-Journal called me. In the old days, I got a call like that every month, but there is a trend in reporting; all major news outlets have reduced or eliminated their coverage of gaming, except the Las Vegas Review-Journal and The Nevada Independent.

Anyway, Jason Hidalgo from the Gazette-Journal wanted a quote on the Reno numbers. Reno was down in November from 2023. The usual cast of characters could be called up: special events, weather, hold, and the less favorable calendar. But the truth lies deeper and not just in November 2024. Reno is no longer the major casino resort it once was. Thirty-five years ago, Reno was one of the leading casino destinations in the country. It trailed Las Vegas and Atlantic City, but in 1990 nowhere else was equivalent.

However, 1990 was the beginning of the expansion of legalized gaming that has led to an industry that today generates $70 billion a year in revenue. That is just the conventional commercial gaming. On top of that, the Indian-gaming industry generates another $40 billion. That $110 billion in gaming revenue did not exist in 1990; Reno was a big fish in a little pond. Indian gaming in particular has come to dominate the landscape in Reno’s feeder markets. You cannot understand the numbers in Reno without having a sense of the competition it faces.

And that is my point. The gaming industry needs the likes of Carlo Santarelli. He sees a bigger picture and a deeper picture. In his last analysis, he looked at a wide area over a long period of time. Others rarely do that. Local commentators look from month to month, or at most from one year to the next. Wall Street is notoriously shortsighted, looking at a quarter at a time. Worse, the intense focus of the investment community on a quarter at a time forces management teams to do the same thing. It might be better to use a decade model when analyzing, planning, and investing. And not just for gaming companies. Many industries would benefit from a long perspective.