Consultant: Masks at table games will boost visitation and revenue at Las Vegas properties

Consultant: Masks at table games will boost visitation and revenue at Las Vegas properties

  • Buck Wargo, CDC Gaming Reports
June 19, 2020 11:00 AM
  • Buck Wargo, CDC Gaming Reports
  • Other

A gaming consultant told Las Vegas business leaders Thursday a new requirement that casino patrons must wear facial masks at table games if there are no partitions should boost revenue and encourage more locals to visit properties and tourists to travel to Nevada.

Josh Swissman, a founder of The Strategy Organization, told 250 members of NAIOP Southern Nevada, the Commercial Real Estate Development Association, that a survey conducted during the virtual conference was telling.

The response showed 36% of the participants won’t go to a locals casino because of COVID-19.

“What this shows me, to be a bit somber here, is that there’s still a long way to go in getting folks comfortable (in going back to properties),” Swissman said. “We as a city (and) as a destination for those out of town need to continue to demonstrate that we have our team members and our guests’ best interest at heart with sanitation, cleaning protocols and additional security measures put in place – that we’re doing everything we can.”

Swissman applauded the Nevada Gaming Control Board’s decision late Wednesday to make masks mandatory at table games without the plexiglass partitions.

“But we still have a long way to go based on the percentage of people who aren’t ready and feel comfortable that it’s OK to go back into a casino and eat at your favorite restaurants and play there,” Swissman said.

Swissman said the mask requirement won’t impact revenues because those already going back to properties are “some of Vegas’ biggest fans and biggest advocates. Those folks are the physical embodiment of that pent-up demand. I think whether you have to wear a mask or not at a table game isn’t going to affect gaming revenues (in a negative way) and if anything it might help gaming revenues grow in the short term because that’s a more definitive step that the Gaming Control Board is taking and may make folks feel that much more comfortable with showing up to Vegas and staying at one of these resorts.”

Swissman said the pre-COVID universe in which resort properties earned 35 percent of their revenue from gaming and the remainder from rooms, food and beverage, and entertainment is increasing on the gaming side.

“I’ve been saying for a few weeks now that Vegas is going a bit old school,” Swissman said. “Gaming likely becomes the majority of the revenue stream, particularly on the Las Vegas Strip for some time. It gets back to hotel room revenue. Rates aren’t what they were pre-shutdown, and I don’t think hotel rates return to pre-shutdown levels for a significant period of time. You may see some strong rates on the weekend as folks start to come back for quick getaways and vacations. However, there’s a big chunk in the middle of the week that’s going to be tough to manage from a room-rate standpoint because there’s a lack of group and business volume. Without the volume on the group side of things, you are going to see lower rates during the mid-week time period.”

A report from Bank of America shows Strip room rates are down 38% year-over-year for June, down 47% year-over-year for July, and down 31% year-over-year for August.

Swissman also said there’s reduced revenue at restaurants with lowered capacity and because not all of them are open. There’s also a lack of entertainment, except for some small lounge acts.

“That’s going to push well throughout the end of this year as operators try to figure out how to have large-scale crowds at T-Mobile Arena and large-scale showrooms around the Strip operate in a healthy and manageable way,” Swissman said. “Gaming now takes centerstage and even though there’s 50% or so gaming positions available gaming revenues have started to show a nice uptick with that pent-up demand. Total revenues will be depressed, and gaming revenues will make up the bulk of those revenues with the others playing a back seat for some time.”

No mergers after Eldorado-Caesars

Michael Parks, a senior vice president and gaming analyst with CBRE, said once the $17.3 billion merger between Eldorado Resorts and Caesars Entertainment is completed this summer, he said he doesn’t expect any large merger and acquisition movement. However, he cited a “rumor that Wynn Resorts could be in play.”

Parks said he sees the trend of companies entering the Las Vegas market to continue over the next year and “likely that we see a new owner of the Tropicana” with possibly a real estate development company taking over that property and repositioning it.

Once the Eldorado-Caesars’ merger is completed, Parks said the merged company is likely to “sell one of their properties on the Strip” and that buyer is likely to come from outside the market, whether it’s a real estate development company or Native American tribe from California.”

Parks added a new player “is good for the Strip to have more competition.”

Swissman said large Strip operators are interested in mergers and acquisitions but outside Las Vegas. He cited Las Vegas Sands’ interest in looking at existing operations in Asia.

“If anything comes out of this, operators that have been a little bit heavy on the Strip are quickly coming to the realization that diversification of their revenues streams outside of the Strip in the terrestrial gaming market or moving into the online space is probably more along the lines of what they are looking at right now,” Swissman said.