Those resorts that haven’t reopened in Las Vegas in the weeks since Nevada lifted the 79-day gaming industry shutdown imposed in response to the coronavirus pandemic attracted some unusual attention from the investment community this week.
Maybe it’s the oddity of the situation.
Beginning June 4, reopened casino-hotels were subject to protocols covering health, safety, cleaning, and social distancing, as well as guidelines concerning capacity limits in public spaces and hotel towers.
More than two months later, several major Strip and off-Strip resorts have still elected not to reopen, which reflects the fact that there really isn’t a need for every resort to be open right now. On Friday, the Las Vegas Convention and Visitors Authority said visitation in Southern Nevada was down 70.5% in June, with room occupancy off 40.9%. The lack of air travel and the restrictions on mass gatherings have greatly reduced tourism.
Gaming revenues on the Las Vegas Strip, as a result, are off 47.9% for the first six months of 2020.
It’s no surprise that Red Rock Resorts hasn’t reopened four of its Las Vegas area hotel-casinos, including the off-Strip Palms Casino Resort. Combined, the four casinos cost the company roughly $1.4 million to maintain during June.
“That will remain fairly consistent in July, (but) we think we can get it a couple of hundred thousand dollars lower going forward,” said Red Rock CFO Stephen Cootey.
Translation: It’s cheaper to keep the casinos closed than to try to operate them in the challenged COVID-19 environment.
Red Rock, which operates primarily in the Las Vegas locals market under the Station Casinos brand, has reopened seven of its hotel-casinos and a valley-wide chain of smaller casino-only facilities.
Red Rock CEO Frank Fertitta III wouldn’t say if or when the closed properties would reopen.
Palms Casino Resorts in Las Vegas, owned by Red Rock Resorts
“We think it’s too early to make that decision at this time,” Fertitta said. “I think so far, we are very pleased with the results that we’ve had.”
To this point, the company has successfully been able to move customers from the closed casinos to existing properties.
“We are going to continue to try to get clarity and navigate the situation to make well-informed decisions,” Fertitta said. “But rest assured whatever decisions we make will be in the best interest of shareholder value.”
The Palms’ situation is unique, however, when compared to the company’s Texas Station and Fiesta casinos in North Las Vegas and Henderson, respectively.
Between its $360 million acquisition cost four years ago and the $690 million the company has since spent to renovate the 700-room hotel-casino, the property has been a drain on Red Rock’s finances.
In the months prior to COVID-19, Red Rock had absorbed almost $34 million in one-time charges at the Palms, shut down the much-maligned KAOS nightclub, and fired the general manager. Three months ago, Fertitta denied reports the Palms was for sale.
Selling a Las Vegas resort is not an issue for Caesars Entertainment. The company, now overseen by the former Eldorado Resorts management team, has said it will sell at least one of its eight Strip properties, three of which have yet to reopen – Planet Hollywood, Cromwell, and Rio, which the company manages for a New York investment group.
“We look at Las Vegas as the city,” said Caesars CEO Thomas Reeg. “So if we can open a property and it’s additive to incremental (cash flow) citywide, that’s when we’ll pull the trigger.”
Red Rock and Caesars are not outliers.
Boyd Gaming, which has 29 casinos in 10 states, hasn’t reopened three of its properties, all in the Las Vegas Valley – downtown’s Main Street Station, Eastside Cannery on Boulder Highway, and the small Eldorado in Henderson. CEO Keith Smith said reopenings depend on a return of business levels.
MGM Resorts has not reopened The Mirage and Park MGM, and Penn National Gaming has kept the lock on Tropicana Las Vegas, which it sold in March to Gaming and Leisure Properties for $337.5 million in rent credits. The company will continue to operate the resort under a lease agreement, and has lately been accepting room reservations starting Sept. 1.
“As of right now, September feels right,” said Penn CEO Jay Snowden. “But we have several more weeks to nail down an exact date, and if it’s not right then we’ll wait a little bit longer to reopen until it is right. These are fluid times.”
It’s already been announced that the Las Vegas Raiders will play their inaugural National Football League season in an empty $2 billion Allegiant Stadium. Country music legend Garth Brooks has postponed his planned August performance at the 65,000-seat venue – slated to be the first event of any kind held there – until late February. And three of the city’s largest tradeshows – the Consumer Electronics Show, the auto industry’s SEMA show, and the Global Gaming Expo – have outright canceled their events.
The fall and winter months are starting to look a little deserted for the Las Vegas Strip.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
