MGM Resorts International CEO Bill Hornbuckle told a gaming forum on Monday that the re-institution of a mask mandate in Nevada in late July to deal with rising COVID-19 cases has done little to dampen leisure travel to the Las Vegas Strip. Weekend business remains strong, especially with a sellout this past weekend ahead of the Raiders first regular-season game in front of fans on Monday Night Football.
Hornbuckle, who participated in the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum, said demand in Las Vegas and across regional markets has been driven by leisure casino customers.
“Notably, spend per visitor has been impressive, tracking 10% above pre-COVID-19 levels, and the reintroduction of a mask mandate in Las Vegas has had no impact on demand,” J.P. Morgan analyst Joseph Greff said about his conversation with Hornbuckle. “While some normalization in leisure business is an eventuality — weekend occupancy remains at/near sold out (this past weekend was 98.5%) — this should be partially offset by increasing convention business, which also represents a larger revenue potential opportunity.”
Hornbuckle said that conventions remain the key item to watch, “with cancellations ticking up slightly over the past few weeks, tracking with higher new coronavirus case counts, though these remain constrained to the next 30 days,” according to Greff’s notes.
That’s in line with a report released Monday by Bank of America Securities, which hosted management teams last week at its 12th annual gaming and lodging conference. Research analyst Shaun Kelley said the key takeaway was that gaming trends remain healthy, with a “positive tone around Las Vegas,” while the industry awaits results from week one of the NFL.
“Revenue for both the Las Vegas Strip and across regional gaming sounds healthy, despite concerns about the Delta variant and slowing stimulus and confidence,” Kelley said in his takeaway from Strip management.
Kelley discussed Caesars’ advance announcement on Thursday about its third-quarter results, in which management noted the strength of the first two months of the quarter.
Caesars is continuing to see strong demand in Las Vegas and regional properties, despite the Delta variant and stimulus-related slowdowns, with trends pointing to low-to-mid-90% occupancy, Kelley said. Like MGM executives also said last week, Caesars has seen modest convention cancellations, but has had no problem replacing this with leisure demand, he added.
“MGM and Caesars both noted incremental group cancellations due to Delta, but we think these are limited and have been rapidly backfilled with strong transient demand as occupancies remain high,” Kelley said. “Tone-wise, Caesars was confident, while MGM again cautioned around gaming and margin sustainability.”
During the J.P. Morgan event today, MGM also stressed its competitive advantage in growing gaming revenues, given the size of its M life loyalty program, Greff said.
“Historically, just 7% to 8% of its gaming customers in Las Vegas have originated from its regional properties, well below (Caesars Entertainment) at about 20%,” Greff said. “Management sees ample opportunity to both attract these customers to Las Vegas and better retain them at MGM properties.”
MGM Management also highlighted its push into online sports betting and igaming with BetMGM, Greff said. Of these two, igaming has more attractive economics, even though it is currently limited to just five live states.
“On New York, management feels that at the current projected tax rate (50%+), generating profits in the market will be a long game,” Greff said. “Still, the MGM brand has a competitive advantage, given both its Empire City and Borgata properties in the region. Acquiring customers early remains key; once players are in, they tend to be relatively sticky.”
Management noted that even if MGM controlled 100% of the business (versus its current 50% joint venture with Entain), neither the operating performance nor the level of investment in the business would be any different, Greff said.
As for MGM’s proposal for an integrated resort in Japan, which would be several years away, and the only “real” ongoing investment in BetMGM, the company’s cash position and strong balance sheet should drive steady capital return, Greff said.
“Separately, MGM remains focused on simplifying the corporate structure, something that management feels will drive improved valuation credit,” Greff said.
Regarding the Cosmopolitan, rumored to be for sale for $5 billion, Kelley said they didn’t get the sense that either MGM or Caesars is looking to add to their Las Vegas footprint, though MGM hinted at possible regional interest.
Penn National Gaming provided further insight into its acquisition of Toronto-based Score Media and Gaming, one of Canada’s largest betting platforms for $2 billion, Kelley said.
Caesars continues to believe it has the ability to be a top-three digital player, given its size, scale, customer database, and deployable capital, Kelley said.
“We believe both Caesars and Penn are expecting to see sequential improvement in market share this fall, and both are targeting strong debuts in Arizona, with Penn also indicating New Jersey could be its largest state,” Kelley said. “(Caesars) hopes to see rapid market-share progress in new launch states like Arizona, and sequential improvement in more mature states, especially those where the Liberty platform is live.”
Kelley said DraftKings is excited about growing sports betting awareness, as well as its opportunity in igaming (via the Golden Nugget Online Gaming acquisition) and does not believe it is feeling the impact from competition or rising customer-acquisition costs.
Given the rapid expansion of online sports betting, DraftKings is on the cusp of reaching national marketing scale at 30%, but that will be a gradual transition, Kelley said.
“In terms of new states, DraftKings remains excited about all of its new opportunities, including Arizona, Louisiana, Maryland, and Ontario (plus potentially New York),” Kelley said. “DraftKings believes its execution and playbook for Day 1 launch has improved with each successive new state, further highlighting some of its first-mover and scale advantages.”
