Top executives of several of the largest gaming operators in the country presented optimistic outlooks for the gaming industry this year in remarks at the J.P. Morgan Gaming, Lodging Restaurant and Leisure Management Access Forum in Las Vegas last week.
Caesars Entertainment CEO Tom Reeg arrived at the conference on Tuesday, September 14, stating that pent-up demand for hospitality remains high and ample consumer savings should boost the gaming industry into next year.
Joseph Greff, gaming analyst with J.P. Morgan, reported on Reeg’s remarks in an investor note.
“Caesars expects to run 50 percent-plus (adjusted earning) margins in Las Vegas and 40 percent-plus in regionals, driving 40 percent-plus consolidated margins through the foreseeable future,” Greff said.
“Helping the Las Vegas Strip segment is the ramp-up of Caesars Forum and high-margin midweek business, which pre-Covid was a significant (adjusted margin) generator. If viewed as a single property, it was one of the largest in the portfolio.”
Boyd Gaming CEO Keith Smith and CFO Josh Hirsberg at the conference the same day , with similar optimism “Boyd described the regional gaming consumer as resilient and ‘amazingly consistent,’ with minimal impact seen from mask mandates and higher Covid-19 new-case trends,” Greff said. Downtown Las Vegas, however, has been a bit more challenging, given the segment’s reliance on Hawaii travel, he added.
Similar to other casino operators, Boyd management said it is seeing spend-per-customer tracking above 2019. “The database today is intentionally different from pre-Covid, with no marketing to the lower end of the database,” Greff said. “From a demographic standpoint, the 55-plus core customer is coming back, though still has room to grow toward 2019 levels.”
Two other speakers Tuesday were Gaming & Leisure Properties CEO Peter Carlino and CIO Matthew Demchyk. GLPI will sell Tropicana Las Vegas to Bally’s Corp. for $308 million in a deal expected to close by early 2022 at the latest.
“The company sees ample white space with its existing tenant base in regional markets, noting that its newest tenant, Bally’s, remains very active,” Greff said. “The key driver of deals for GLPI is the spread to its cost of capital, so this could resemble both single-asset and portfolio transactions. While the market for gaming real estate is at the highest point ever, this still resembles a discount to traditional REIT assets.”
Meanwhile, rumor has it that MGM Resorts International may be interested in two big acquisitions: of the Cosmopolitan Las Vegas and sports betting and gaming giant Entain. But CEO Bill Hornbuckle isn’t talking… about the rumors, that is.
Speaking to analyst Joseph Greff September 13 at the JPMorgan Gaming, Lodging, Restaurant & Leisure Management Access Forum, and without specifically naming the Cosmopolitan, Hornbuckle said, “There are probably some synergies to be had there, for sure, that only we could probably unlock. I don’t want to comment on it any further than that. I do want to diversify. We have a lot of Las Vegas to begin with, but it’s a compelling asset. But time will tell.”
Cosmopolitan owner Blackstone is said to be seeking a buyer willing to ante up at least $5 billion, a figure sure to reduce the number of suitors. MGM, with a growing cash stockpile and existing relationships with Blackstone has fueled speculation that the two might make a deal.
Blackstone tried to sell the 3,000-room casino hotel in 2019 for $4 billion, but ultimately was unsuccessful. According to Bloomberg, this time around, Apollo Global is also among the interested suitors exploring a deal to purchase the Cosmopolitan. MGM operates the properties on either side of the resort, Bellagio and CityCenter.
Talk also turned to Entain, MGM’s 50/50 partner with BetMGM. Earlier this year, Entain rebuffed an $11 billion takeover offer from MGM. However, the growth of sports betting in the U.S. has led to speculation MGM will come back with another offer.
“The reality is we’re number two in the marketplace today,” Hornbuckle told Greff. “When you add it all up, we are, because we got there so quickly. And so as much as we bang ourselves in the head why we gave away half of our business, the reason we did is so that we could be in these markets, and it’s clearly been proven first to market, it has one.”
Hornbuckle did venture about other U.S. markets as far as expansion. Texas and Georgia. He scratched off Florida because the Seminoles dominate. He called Chicago complicated.
“I don’t know that you can win in Chicago based on the set of rules that we understand today,” he said.
