Gaming industry looks to survive casino closures through the stimulus carve-out

Gaming industry looks to survive casino closures through the stimulus carve-out

  • Howard Stutz, CDC Gaming Reports
March 27, 2020 11:19 AM
  • Howard Stutz, CDC Gaming Reports

Gaming leaders said Thursday that the industry’s inclusion in the $2 trillion stimulus package will allow companies to pay sidelined employees while also supplying much needed financial liquidity to withstand the nationwide casino shut down, which continues to have an uncertain timeframe.

American Gaming Association CEO Bill Miller said that the much-debated CARES Act bill, approved by the U.S. Senate in a 96-0 vote, marked the first instance in which gaming was included with the overall hospitality industry in a large government financial aid measure. The House is expected to take up the measure Friday morning. President Donald Trump has said he will sign the legislation.

“There was no discrimination and gaming was aligned with travel, lodging and other groups harmed by this health crisis,” Miller said, adding that gaming equipment providers were also included in the gaming group.

“The bill is an important step to preserve the gaming industry’s ability to continue to serve as a valuable job creator and community partner,” Miller said.

The AGA said 980 commercial and tribal casinos in 43 states have closed in the past two weeks in an effort to slow the COVID-19 coronavirus pandemic. Some 650,000 direct gaming employees have been put out of work.

The AGA said the shutdown will cost the U.S. economy $43.5 billion in lost economic activity if casinos remain closed for two months.

Miller couldn’t say how much of the stimulus will be directed toward the casino industry.

In a joint statement, Nevada U.S. Senators Jacky Rosen and Catherine Cortez Masto said more than $6.5 billion is being set aside for organizations and programs that will help mitigate the local economic crisis and rebuild impacted industries, such as tourism or manufacturing supply chains.

“This package includes funding, financing, and tax relief to help Nevada’s travel and tourism industry so that Nevadans can get back to work,” the senators said.

According to the National Indian Gaming Association, $8 billion was set aside in CARES Act to help tribal governments address the added stress on their budgets from the coronavirus outbreak, including tribal casino closures.

NIGA Chairman Ernie Stevens Jr. said in an email to his membership Thursday the organization will assist tribal governments in applying for the relief fund.

AGA CEO Bill Miller addresses the NCLGS in San Diego/ Photo by Howard Stutz

Good Timing

The funds will come at a time when gaming company leaders are concerned not only with having enough liquidity to keep their businesses alive while paying employees, but also in accomplishing those tasks with zero revenues or cash flow for at least a month and possibly longer.

“Importantly, this bill generously funds the unemployment system,” Miller said. “But more importantly, it provides a way to get the economy back on track as quickly as possible, and allows companies to retain their workforce.”

In an interview this week with CNBC, Wynn Resorts CEO Matt Maddox said the company was paying workers at its Las Vegas and Boston resorts through the shutdown because he wants them back on the job as soon as the green light is given.

“I can’t imagine going out (to) rehire and retrain 13,000 people,” Maddox said. “I’d rather keep the knowledge and experience that we have now in the service standards.”

Borrowing money

Several companies – including Wynn, Penn National Gaming, Boyd Gaming, and MGM Resorts International – have said they will pay employees during the shutdown. Other companies have furloughed workers or conducted layoffs. Several CEOs, including Maddox, Everi Holdings’ Mike Rumbolz, and William Hill U.S.’s Joe Asher, are foregoing salaries during the closures.

Churchill Downs announced Thursday that it was temporarily furloughing employees at 10 casinos and racetracks in eight states. The company plans to provide health coverage and benefits to furloughed employees. All remaining salaried Churchill Down employees will receive a salary reduction that will be in effect until company operations are back to normal.

Numerous gaming companies have borrowed billions of dollars from credit lines to shore up balance sheets. On March 12, Red Rock Resorts borrowed $997.5 million from its credit facility, but didn’t make it public until Thursday through a filing with the Securities and Exchange Commission.

Macquarie Securities gaming analyst Chad Beynon said in a note to investors this week that eight casino operators are spending a combined $27.5 million a day just keep the facilities ready for the shutdown’s end.

Miller agreed with Maddox that continuity of the workforce was important for when the casinos relaunch.

“You want to bring back the basic foundation,” Miller said. “You want to keep your employees.”

Group effort

Miller, who took over as the Washington D.C.-based trade organization’s CEO in January 2019, praised gaming industry leaders, the Nevada congressional delegation, and congressional representatives from other gaming states with coming together on a cohesive message.

In 2005, Hurricane Katrina wiped out the Mississippi Gulf Coast casino market. Rebuilding efforts were accomplished through insurance claims and changes in state gaming regulations. A small amount of federal money went toward infrastructure repair.

The coronavirus pandemic, however, is a national health crisis, and the casino industry has greatly expanded in 15 years.

Former MGM Resorts CEO Jim Murren was one of several hospitality industry chief executives who met with the president and vice president at the White House two weeks ago to discuss the stimulus efforts. Bloomberg News reported that Las Vegas Sands CEO and majority stockholder Sheldon Adelson – one of the largest donors to Republican campaigns – made calls to contacts in Washington to spur passage.

“The industry has massively evolved, with a much larger footprint, and we are able to show what we mean to the economy,” Miller said.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at Follow @howardstutz on Twitter.