Despite the July 30 revelation of an 11% drop in visitation to Las Vegas in June, Vici Properties Chief Operating Officer John Payne pooh-poohed such concerns the next day. During the company’s glitch-plagued, second-quarter earnings call, Payne minimized Vegas’ difficulties as “a period of normalization.”
“We remain confident in the city’s long-term growth,” Payne maintained. “Our Las Vegas Strip real estate portfolio remains well-positioned. We have conviction in the staying power of the city as a global epicenter. Experiential innovation is evident on the Strip.” Payne went on to cite Formula One, the Brightline train and an in-progress baseball stadium as “long-term tailwinds.”
Payne said “all the big operators” in Las Vegas were confident, citing attendance projections for forthcoming sports contests and other events, and dismissing several months of revenue declines as “a short-term blip.” CEO Edward Pitoniak added that Sin City benefited from longer-term booking visibility than other markets: “It definitely de-risks the business.”
Pitoniak praised the casino industry for its habit of reinvestment, saying, “we cannot identify another real estate category where tenants invest more,” except for data centers. “The capital investment in our buildings is unlike any other category.”
Warming to his theme, Pitoniak said the hotel-and-convention industry had been “seeing significant underinvestment” since 2010, except for Las Vegas properties like Vici’s The Venetian. “The urban hotel landscape is one that has not been invested in. There is a lot of tired convention-hotel property across major American cities,” unlike the Las Vegas Convention Center and Vici’s Mandalay Bay.
Added Payne, “during COVID, many cities cut their sales teams selling conventions. Las Vegas did not do that,” thereby booking more group business.
Even so, Vici has not decided on whether to exercise its option on the Caesars Forum convention center in Las Vegas. “We’ve got a little bit of time,” said Chief Financial Officer David Kiesge, by way of explaining the apparent inaction.
Ditto the undeveloped Caesars Entertainment real estate near the Strip. “But it definitely has potential as a land bank,” interposed Pitoniak, noting that it would only appreciate in value.
However, “we have been very pleased with the performance of the (Vici) assets in Canada,” Payne continued. “More Canadians are staying home.”
As for the proliferation of igaming, Payne said “it’s something we continue to monitor. It’s something that’s of concern to our tenants.”
Referring to the motto of his home state of Rhode Island, “a lively experiment,” Pitoniak added, “American gaming is engaged right now in a lively experiment over how the sector will evolve. Clearly, brick-and-mortar casinos employ a lot more people than online casinos.”
“When we started the company,” Payne took over, “there weren’t any states that had igaming. It definitely is a factor in the way we think about underwriting.”
“Investors should always be selective,” Pitoniak resumed. “The regional gaming landscape is a landscape where the investor needs to take care. We will be monitoring each and every regional opportunity with particular care.”
One regional operator about whom Pitoniak was particularly enthusiastic was Station Casinos. He pointed to its ongoing expansion, saying that one must show a growth strategy in order to receive a premier valuation on Wall Street.
Added Payne of the Vici/Station partnership, “nothing’s on the table (in Las Vegas). When you do good things together, other opportunities happen,” however.
Kiesge said Vici has no debt maturities until the latter half of 2026, plus $2.9 billion in liquidity. The company was leveraged at 5.1 times cash flow, he said, “well within our target range.”
Referring to Vici’s technical mishaps during the call, which frequently muzzled executives, Pitoniak closed by saying that, next time, “we are very determined as well not to have these issues.”
