Vegas News August 2, 2020
This week’s COVID-19 update from Las Vegas will be super short. There’s a lot of related news from Boyd and MGM earnings reports that center around the impact of COVID in Las Vegas.
Nevada Governor Steve Sisolak changed how Las Vegas will reopen from phases to a method he considers more targeted. You can read about it here. There should be new directives on Monday so I’m not going to get too lost in his most recent announcement.
I don’t expect changes at casinos as long they comply with his orders. However, I do expect we’ll see changes to gaming areas outside of casinos. I’m guessing that bars with video poker will be able to reopen this week. That’s a guess based on his most recent press conference where I thought they’d already be open.
The Nevada Independent has even more data than it did in previous weeks if you’re curious.
Boyd Gaming Earnings
Boyd Gaming was the first casino corporation to report earnings this week (MGM Resorts was later in the week). In brief, the second quarter wasn’t good but things are looking better now that casinos are reopening. That shouldn’t be much of a surprise. Businesses should make more money being open than when they’re closed.
Overall, the Boyd Gaming reps sounded positive about the future in Las Vegas and around the country. The call itself was upbeat and forward-looking. You can see the numbers and corporate speak here.
Boyd Gaming Earnings: Say Goodbye To Deals
The overarching theme of the call is that Boyd Gaming is laser-focused on high margin customers and venues inside the kitchen. This isn’t new as Boyd Gaming, Caesars, and MGM Resorts have mentioned this in the past. This really started for Boyd Gaming when they updated the B-Connected rewards club in 2018.
Boyd has turned a corner on creating a more efficient company and they say the company won’t go back to doing business the way it used to. The company is not looking for customers that want to maximize marketing deals.
Customers That Will Generate Profit
Boyd wants customers that will generate profit. For example, if one customer generates the same profit as two customers, Boyd will target one customer instead of two. In fact, the average spend per visitor was up in the last quarter so they’re practicing what they preach.
Again, this isn’t new for Boyd or other casino operators but they spent the downtime really honing in on this effort. Overall, this was the main theme but there was much more information during the call.
Something that stood out about this came in a question from a stock analyst towards the end of the call. He asked what the promotional environment was like from the competition. CEO Keith Smith said that offers from all casinos “seem rational” in Las Vegas and around the country. The “deals” you’re seeing now will probably be the best you see in the future.
The prevailing thought was that Las Vegas casinos would boost the offers to levels we haven’t seen since the last recession. Not so fast. The Las Vegas Review-Journal is reporting that Las Vegas hotel room rates are low but above the US average. That’s not always the case for leisure travelers.
Boyd Gaming Earnings: Las Vegas Biz
Downtown Las Vegas is a challenge because there are almost no visitors from Hawaii and low traffic on Fremont Street. The California (The Cal) was the only Boyd Gaming property of 26 open in the US with a negative EBITDAR.
The Fremont did well enough to almost cancel out the revenue at The Cal. The company didn’t say this but it sounded as if Boyd regrets opening the property since guests from Hawaii are almost non-existent.
The Las Vegas locals casinos are doing well right now. The Orleans and Gold Coast are seeing slightly more interest from tourists than usual.
It sounds like mergers and acquisitions are on hold for the time being. There are no casino purchases being planned right now. That doesn’t mean they’re not looking but there’s nothing in progress.
This was a general statement, but Smith doesn’t see how buffets return to Boyd Gaming properties. Between spreading of COVID-19 and an inefficient business model is sounds like most buffets will close. There was nothing specific mentioned for the future but expect to see more profitable eateries replace some or all of the buffet. This is something we’ve been hearing from other casino operators this year.
I was impressed with Boyd on the business side of things. I almost purchased shares of the company after the call but didn’t feel like selling anything else in my IRA to buy some shares.
At the same time, I was equally turned off as a customer. I’ve barely visited my local Boyd casino since the company changed the B-Connected rewards club and I don’t see that changing any time soon.
MGM Resorts Earnings
MGM Resorts also reported second quarter earnings last week and it was similar to Boyd. The company makes more money when casinos are open than when they’re closed. The similarities don’t stop there.
MGM Resorts continues to streamline how it operates. This is beyond the original MGM 2020 plan. MGM is reevaluating expenses based on new demand as a way to save money.
The company is managing labor to match demand. You may have heard the company laid off most of its sports and entertainment staff this week. At this point, MGM doesn’t plan to have any entertainment in its theaters through August. They have no idea when T-Mobile Arena will see events either.
The company is questioning everything it offers guests. Hornbuckle used the following examples: Does every property have to have a buffet? Do they all need full room service? I expect premium buffets like Bellagio and Aria to return but it’s not a no-brainer that they will remain for all properties.
Room service can be taken two ways – food room service or daily room cleaning services. Caesars has been offering discounts to guests for more than a year if they decline housekeeping services. It wouldn’t be a surprise to see MGM go this route.
Hotels around the country started limiting or removing food room service a few years ago. We might see cheaper hotels like Excalibur and Luxor remove this option sending guests to a food court or other takeout option to bring food back to the rooms.
Dealing with COVID-19 has pushed the company forward quicker than expected digitally. During the call, CEO Bill Hornbuckle mentioned that 25% of guests are now checking into the hotels in Las Vegas digitally (kiosk and mobile). That appears to be a major change from before casinos closed. This has been part of MGM 2020 but it’s happening quicker than the original vision.
It’s no surprise that customers driving to Las Vegas are returning quicker than those flying. Since more people are driving than flying and there are no events or conferences, the booking window is only five days since there’s no reason to make plans far in advance. As you’d imagine, the regional guests are responding to Mlife Rewards offers.
One of the more interesting notes about the Las Vegas properties is that Mandalay Bay is the only MGM Resorts Las Vegas property that isn’t cash flow positive. When asked about why they’ve reopened most of the properties, Hornbuckle said 1) it’s important to keep the brand names alive and 2) Open properties burn less cash being open than being closed.
After reopening in June, MGM Resorts saw a lot of pent up demand. Demand stabilized (decreased) in July. He mentioned that weekdays were slow (30% occupancy) in July but weekends (50% occupancy) were as busy as June.
Something else stood out to me because I’ve never heard the numbers before. Las Vegas locals visit MGM properties about once a year. Mlife customers from outside of Las Vegas visit three to five times a year.
You can read a more traditional Vegas News roundup of the earnings here. You can see the earnings press release here. The easier to read earnings presentation is here. Lastly, Bill Hornbuckle is now the full-time CEO instead of “acting” CEO.
Circa Announces Bars and Lounges
Circa officially announced the bars, lounges, and coffee shop this week. The coffee shop will be called Jack Pots and the name is killing me.
I’ll probably spend most of my time at Overhang Bar because it’s by the sportsbook. However, I’m most looking forward to the Legacy Club which doesn’t open until December. It will be a nice escape from the casino floor.
The lobby bar, Vegas Vickie’s, will definitely be a popular hang and place to grab a sweet pic for the gram. Circa was kind enough to include me on their promo list for the announcement. I had a sweet drink (literally sweet) from VV’s bar.
Circa Bar will be the bar outside on the Fremont Street Experience. This kind of bar is a staple of all Derek Stevens properties. Lastly, Circa will have MEGA BAR. This will replace Longbar at The D as the longest bar in Las Vegas. There will be 120 beer taps. Since the bar is so long I expect a lot of the beers will repeat similar to Longbar. You can read the press release with all the details here.
Quick Hits – Vegas News
This will be the largest Vegas News Quick Hits in months! There’s so much more news that I haven’t had a chance to tackle this week. Frankly, I’m leaving some news out to focus on what seems to be the most important happenings in and around Las Vegas.
- MGM Shows are canceled through August. Read more here.
- The Venetian is playing its employees though October. Read more here.
- CES canceled its 2021 convention. Read more here.
- AVN is going digital next year. Read more here.
- The Shot Show hasn’t canceled yet. Read more here.
- VICI did a casino real estate thing. Read about it here.
- Boyd Gaming is laying off its entertainment staff. Read more here.
- The D Las Vegas is now welcoming people with face and neck tattoos. Read more here.
- Rumor of the week: Sahara isn’t being imploded to make room for a baseball stadium. Read more here and here.
- You probably know this but the Tropicana is available if you want to buy a Las Vegas casino. Read more here.
- Carl Icahn is dumping his shares of Caesars now that the merger is complete. Read more here.
- In the mood for a virtual wedding with Elvis? Read more here.
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