December marks the end of the year, and every December, people are inspired to draw up lists of the most important events of the passing year. Last year in keeping with that trend, I drew up a list of significant events in gaming in 2018. I called it “A Wild and Crazy Year.” The column concluded with this statement: “Sports betting goes national, new casinos open up and down the East Coast, Steve Wynn exits, Atlantic City gets a makeover, Pennsylvania opens Pandora’s Box and REITs come to town; what a year.” Those trends and events were still around in 2019.
Encore Boston Harbor
Steve Wynn is gone, although he and the Nevada Gaming Control Board continue to argue about whether the state of Nevada retains any authority. At issue is a fine and a permanent ban for Wynn that would label him unfit to hold a gaming license in Nevada. The company he founded, Wynn Resorts, has, meanwhile, moved on. The $2.6 billion Encore Boston Harbor opened in June, and while, to this point, it has neither met projections nor been quite as successful as the comparably priced MGM National Harbor in Maryland, it is improving each month and, under new leadership, is focusing on marketing and the local market. Encore increased the competitive pressure in the region. As a consequence; 2020 will be a very difficult year for the smaller and more remote properties as Encore, MGM National Harbor and Resorts World and other multi-billion-dollar properties up their marketing efforts.
Sports betting was even more significant in 2019 than it was in 2018. According to Legal Sports Report, $13.932 billion has been wagered on sports legally in the United States since June 2018. The win was $1.009 billion; that includes results from 10 states. Two additional states, New Mexico and Arkansas, have legal sports betting but do not report the numbers. This year, another 7 states legalized sports betting but have not yet begun taking bets, and nine more states will likely either legalize in 2020 or at least consider enabling legislation. In 2019, the sports narrative started to split into two parts: retail and online/mobile. That trend is likely to become even more pronounced in 2020 as the numbers from the cyberbooks begin to roll in. For now, New Jersey can serve as a good analytical model. Through the first 11 months of 2019, online revenues in New Jersey grew by 60 percent from 2018, and online sports handle represents 80 percent of the total handle. That trend is starting to be evident in the other states with online/mobile sports gambling, as well.
Real estate investment trusts were also as important in 2019 as 2018. The REIT rule – namely, that no big deal now gets done without a REIT component – certainly applied in 2019. The two gaming industry REITs, GLPI and VICI, own the real estate of 73 casinos in 26 states. Considering that GLPI was created in 2013 to hold the real estate assets of Penn National, and VICI was formed in 2017 for Caesars post-bankruptcy, it is not a only a new trend, but one that reached warp speed soon after liftoff. According to a recent CDC article by Howard Stutz, activist investor Jonathan Litt wants the two companies to merge. If that were to occur, it would be as significant as the Eldorado-Caesars merger was for operating companies. Over the next year, look for REITs to acquire the real estate of as many casinos as are willing to sell. There is a limit to the potential of REITs, but we have not reached that point yet.
These three trends – increased competition in the Northeast, the continued growth of online sports betting, and the impact of real estate investment trusts – will certainly continue. Next year should also see the completion of the Eldorado-Caesars merger and the sale of some of those operational assets to other gaming companies. In 2020, Illinois, Pennsylvania and Indiana will be building out to the new limits set by the recently passed expansion legislation, a process that will undoubtedly continue in 2021 and 22. Sports betting and video slot routes can ramp up reasonably quickly, but building new casinos will take several years. And the Chicago casino may take even longer, as it does not yet even have the necessary legislation to get the process started.
#commentary – The year’s end – a glance back and a peek forward. -Ken Adams, CDC Gaming Reports. https://t.co/MSJTxyh8FT #CDCGaming
— CDC Gaming Reports (@CDCNewswire) December 30, 2019
Sports betting will have the biggest impact on the gaming industry and on American culture, and it will continue to spread nationally in 2020. It is, in itself, creating separate trends: in the media coverage of gambling, the growth of sports gambling companies, and the now-widespread sponsorship agreements between gambling companies and sport franchises. Online and mobile betting will make the most significant contribution to the changing landscape; even states that did not initially authorize cyberbetting will be watching the revenue it generates and likely begin rethinking their stances at budget time. That is the oldest trend in the gaming industry; every year when states are struggling to find the funding for a state budget, they look to gaming. As long as there are any opportunities to expand, that trend will continue. That is it. Looking back I see increased competition, REITs and sports betting. Looking ahead, I see the same trends changing and evolving: subtly different, but essentially the same.
