We’ll soon learn what a post-Covid world will look like for gaming, as Nevada is ending pandemic restrictions beginning June 1.
Actually, we’ll get a glimpse earlier. Gaming regulators will resume control of their industry from the governor’s office starting May 1, and will be free to loosen restrictions.
As mentioned in this space before, one of the key pieces of information to listen for in coming weeks, as companies hold their first-quarter investor calls, is the pace of business recovery as represented by future bookings, whether of tourists, gamblers or conventions.
Analyst David Katz of Jefferies has already given a peek from Golden Entertainment, which says business is not only returning—such as hotel rooms at the Strat in Las Vegas being fully booked on weekends—but that customers are spending 20 percent more than before.
Part of that is attributable to property enhancements made over the past couple of years. But some portion of increased spending may be evidence of the pent-up demand many expect to see.
Now, with the all-clear being sounded in Nevada and restrictions loosening elsewhere, we may get an acceleration of recovery. And we can’t forget those $1,400 stimulus checks that will no doubt help feed many slot machines.
The question for investors is whether all the good news is in gaming stocks, which have had a heck of a run since the pandemic panic of last March.
It was interesting that gaming stocks, while generally positive on the day after the Nevada announcement, did not appreciably outperform the overall market.
That should be cause to take a sober look at valuations and the realistic opportunities to grow profits to meet expectations. Meanwhile, those $1,400 checks, once spent, are gone.
A Cryptocurrency Concern?
The low-profile issue of requiring a Chinese government cryptocurrency in Macau casinos is getting more prominence, with Macau Chief Executive Ho Iat Seng now saying he will study a possible implementation.
When the idea of a cryptocurrency was first reported in December, Bloomberg speculated that it could be the end of the junket system of recruiting and financing VIP gamblers from the Chinese mainland.
Casino operators have basically downplayed any decline in VIP play. Las Vegas Sands CEO Rob Goldstein noted that such players comprise only 3 percent or 4 percent of his company’s gaming volume, and they can be converted to direct marketing by his casinos.
Now, however, there is simmering concern that the threat to business of requiring the use of government-issued cryptocurrency may be greater than thought, given that such usage would create a permanent transaction record that could scare gamblers away.
The Chinese government will say such tracking is only to guard against money laundering and other illegal activities, but the suspicion that the Communist government will do what it pleases for whatever motivations can be a powerful deterrent.
Scaring players away from Macau wouldn’t mean a boon for the casinos in countries on China’s periphery as China is increasingly cracking down on foreign casinos trying to lure its citizens.
Those who are confident of the future of Macau casinos note that the national Chinese government has a record of being pragmatic.
But it’s also worth remembering that Communist ideology has historically been anti-gambling.
And Closer to Home
As of this writing, the Alabama legislature, at the urging of Governor Kay Ivey, is a step closer to passing a constitutional amendment to legalize a lottery and a half-dozen casinos pending voter approval in a November referendum.
Alabama casinos would crimp business at Biloxi casinos, both by keeping many Alabamians at home, and by shortstopping gamblers from Georgia, a big feeder market. It might also give Georgia legislators more incentive to finally legalize casinos in the Peach State.
For investors, such developments present opportunity and risks, though gaming expansion generally should outweigh cost of cannibalization.
