The Las Vegas Strip is reopening into a different world, one that only a science fiction novel could have imagined: a world of Plexiglas barriers, unplugged slot machines and blackjack tables half empty, of body temperature scans and touchless cell phone check-ins and constant cleaning and disinfecting of everything from table rails and luggage carts to car door handles and elevator buttons, a world of hand-sanitizing stations and dealers in masks and gloves.
After a shutdown lasting 78 days, Nevada Governor Steve Sisolak gave the state’s largest industry the go-ahead to reopen at midnight on Thursday, June 4. Several of the Strip’s 35 or so resorts complied almost immediately. Fifteen were expected to be back in business by the weekend.
They are limited to 50 percent of their operational capacity under the state’s current Covid-19 containment rules. Many restaurants won’t be seating customers, and nightclubs and live entertainment venues and buffets will remain off-limits for now.
“(The state) Gaming Control Board is going to be very aggressive in terms of being on the properties, visiting the properties and making sure that the guests, the visitors, are complying with the regulations and that the companies are doing their part as well,” the governor said.
Yet, when the lights finally came back on at midnight last Thursday, the sigh of relief among operators and investors𑁋not to mention the roughly 480,000 people statewide who had been furloughed or laid-off, 200,000 of them in Las Vegas𑁋was almost audible.
Not that anyone on the Strip expects it will be business as usual. An estimated one in four American workers are jobless. Of those who can afford a Vegas vacation, many will be reluctant to fly as long as the risk of infection remains unpredictable.
And with the economy in tatters, large-scale group and convention business, the foundation of the market’s historically stellar occupancy rates and RevPAR numbers, will be, at best, subdued.
This was borne out in the first couple of days, according to news reports. The locals market, as expected, mostly roared back to life. On the Strip, some properties drew sizable crowds and others were nearly empty.
“I think it’s tough to call,” SunTrust Robinson Humphrey analyst Barry Jonas told GGB News. “My guess is we’ll see some pent-up demand and decent results at some properties. But just given what we know, it’s going to be a drive-in mix with a little bit of people flying in and no group travel.”
Like most observers who look at the Strip’s reliance on air travel and the MICE trade, Jonas believes the market will be slower to recover than its regional counterparts. Other factors playing into this, in his view, are the Strip’s greater dependence on non-gaming revenues. The scale and variety of such attractions have always made the Strip unique vis a vis the convenience markets. But they’ve been impacted by the pandemic to an outsized degree.
As Jonas put it, “If I’m in Southern California and I’m passing several Indian properties to get to Las Vegas—when the Las Vegas I know and love isn’t there—why would I not stay close to home, that is, if the experience is essentially the same?”
In terms of a recovery on the gambling side, he suggested that social distancing is likely to impact table games more than slots, which means the Strip’s greater dependence on tables as a share of total casino revenues𑁋around 48 percent versus less than 20 percent in many regional markets𑁋could also prove a liability.
The way he modeled it in a late May research report, Strip win is forecasted to stay at around minus-70 percent year-on-year into the fall and 2020 will end with win down some 57 percent for the year compared to 2019.
“It’s going to be challenging,” he said. “We’re looking to see data points, but for now the expectations are much lower for us than in the regional markets.”
Next year, though, things will start to look better. He forecasts 2021 Strip win to beat this year’s by 70 percent, at which point the market will have clawed back to close to three-quarters of the $6.59 billion won in 2019.
“Until we see the medical advances that are going to put people at ease and bring an end to the social distancing, they’re not going to get back to past revenue numbers.”
Deutsche Bank gaming analyst Carlo Santarelli suggests it could take upwards of three years before air capacity and load factors get back to 2019 levels.
So the challenges will persist.
In that respect, “The early going is going to be a little misleading, and we’re seeing something similar to this in the regional markets,” Santarelli told GGB News. “Any time you have casinos closed for two months, normally business will be greater early on than later. I do think you’re going to see fairly solid demand in the early going.”
The key is what happens afterward, “after the newness wears off,” as he put it, when more casinos open and competition intensifies in an environment of decidedly muted demand.
“Right now, operators will be spending and giving away a lot to get people to come in. The question is, once we see more properties starting to come on line, how they will manage demand, staffing, cost structures?”
But manage it they will, he says, and could come out the other side stronger for the experience.
“I think it’s an opportunity for these guys to be more efficient. And, let’s face it, that with top-line demand what it is, they will need to be more efficient.”
About 15 resorts opened on the Las Vegas Strip last week. Caesars Entertainment opened Caesars Palace, the Flamingo and the Linq, while MGM Resorts reopened Bellagio, MGM Grand, New York-New York and Excalibur. Las Vegas Sands opened the Venetian, while Wynn and Encore opened next door. Some individual properties reopened, and some with long-lasting changes. Casino Royale, for example, reopened without table games and no plans for their return. No buffets were reopened and most agree that loss leader has to be reimagined for them to open again.
Health and safety were at the forefront, although they varied widely. All employees were required to wear masks, but it was optional for players (except in some casinos which required player masks at table games). Temperature checks were required for hotel guests, but were used only spottily for casino patrons.
Downtown and locals casinos were also part of the reopening, with some loyal customers returning, but others staying away for a while. Reno casinos also were permitted to reopen.
