With the kick-off of third-quarter earnings season just weeks away and with no dominant theme, it’s time to play Potpourri and present a collection of loose thoughts (and no wise cracks about that being typical, please).
- Q3 UGH. Talking about the third quarter, it might not be a pretty one for gaming operators, especially those of the desert-dwelling brick-and-mortar variety.
One big indication is recent Nevada gaming revenues. Everybody knew July would be punk thanks to an unfavorable calendar comparison to last year. But August had 10 weekend dates compared to last year’s eight, a calendar turn that had regional gaming revenues sporting positive comparisons. Not so for Las Vegas, where revenues fell 3.49 percent along the Strip, 8.78 percent downtown and 6.44 percent in locals joints.
Combine that with anecdotal reports of continued weakness in September and another quarter of higher labor cost comparisons and Q3 doesn’t look too exciting. Likewise, the fourth quarter might include some challenges with reports of soft forward bookings for Formula 1 week in November.
On the more encouraging side, hotel biz might make up for some of the weakness with August Strip RevPAR 20 percent over last year.
- Doing the Beijing Bounce, the rhythm that really counts – NOT. As of this writing, Macau casino stocks are soaring because the national Chinese government has decided to goose the economy with cheap money. A couple of weeks earlier, stocks sank because the likely new Macau CEO said the city is too dependent economically on gaming.
Aside from creating short-term trading opportunities, such reactions indicate a lack of confidence by many investors in the underlying long-term fundamentals of the market given the antipathy that the Communist national government has for gambling and the market’s need to tap into Mainland China to fulfill its gaming potential. The Communist government isn’t going to kill the golden goose, but it isn’t likely to let it fly free, either.
To borrow a line once used to describe Russia after the fall of Communism: If I were young and ambitious and had $100,000, I’d put it in Macau. If I were an established billionaire, I’d put $100,000 in Macau.
- Who’d a thunk it? Flutter Entertainment stock spiked to new highs following its bullish investor day in which the Dublin-headquartered sports betting-iGaming giant forecasted compounded 25 percent EBITDA and 36 percent free cash flow growth through 2027.
Further, the company described how it can continue to grow market share in a still fragmented but rapidly growing global industry by taking advantage of its scale, continuous product improvement and its proven ability to do successful acquisitions.
In retrospect, Flutter’s success, especially in the U.S., is obvious. It lived and breathed sports betting and had considerable iGaming experience when it acquired FanDuel, one of the two biggest daily fantasy sports operators.
The big U.S. casino companies boasted casino player databases of tens of millions of players but their strength – what they lived and breathed – was slot machines, gaming tables and resort experiences, not single-game parlays.
Thus, we can see why FanDuel and fellow fantasy sports giant DraftKings won the market share game in sports betting, and why Flutter is winning the overall digital business, including iGaming.
That doesn’t mean that Caesars won’t make money from digital, as it is determined to do, or that MGM Resorts won’t continue to have modest market share success along with its more experienced online partner Entain, but it is a good reminder that often the most successful players in an industry expansion will be those who already are the most successful players.
- AI, AI SIR. We’re a couple of weeks away from G2E and here’s betting that one of this year’s buzzwords will be artificial intelligence.
Last year, few companies wanted to talk about it. This year, it probably will be hard to get executives to stop talking about it. Every new gizmo and every software enhancement designed to gather player data will be dubbed AI.
Our thinking is that AI will be of value by introducing lots of efficiencies and labor saving, but that it will not be revolutionary to gaming. That is because there comes a point at which knowing more to better serve your player crosses into knowing so much that you can manipulate your player. That point would be a public policy no-no, whether regulatory, legislative or both.
