Nevada casinos have high hopes for 2022 in the wake of the pandemic

Nevada-based casino companies are poised for a strong 2022, judging by upbeat comments from executives at an investment forum this week at Wynn Las Vegas.

Casino executives said business was approaching or exceeding pre-COVID-19 levels, many businesses are posting favorable group business schedules, and leisure visitors continue to flock to casino floors. .

Joe Greff, gaming industry analyst for New York-based JP Morgan, released several reports on Monday and Tuesday following presentations from executives at the JP Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum.

Two key takeaways are that consumer demand is strong and younger customers are heading to casinos.

Greff detailed presentations from Caesars Entertainment Inc., Wynn Resorts Ltd., MGM Resorts International, Boyd Gaming Corp., Red Rock Resorts Inc. and Las Vegas Sands Corp.

Caesars

“Demand is strong and strongly correlated with viral trends,” Greff said of Caesars. “Inflation, which has been around for several quarters now, has had no impact on demand, and management expects any potential weakness in spending performance to be offset by continued improvement in visitation.”

Following a presentation by Caesars CEO Thomas Reeg, Greff said COVID-19 cases and subsequent mask mandates and restrictions have a very strong correlation with gross gaming revenue, while gasoline prices have historically had very little correlation.

“In Las Vegas, pricing power is incredibly strong and Caesars expects group business to improve over the course of the year,” he wrote.

Caesars recently said it was reducing its marketing efforts which included ads featuring actors JB Smoove and Halle Berry.

“Caesars’ reduced marketing spend was due to gaining market share faster than expected,” Greff said. “Caesars doesn’t care what its peers do, having launched a brand synonymous with sports betting. Loyalty is quite strong, and more so than investors give it credit.”

MGM Resorts

MGM Resorts Chief Financial Officer Jonathan Halkyard made the MGM presentation.

“Overall, MGM has a positive consumer outlook, with demand turning positive from October – the only issue being omicron, which has now calmed down,” Greff said of the release. society. “In Las Vegas, the recovery has been bifurcated between the leisure weekend and the midweek group.

“On the first, demand remained strong given a healthy consumer backdrop and a high savings rate,” he said. “On the latter, MGM sees a buildup of business in Q1 and Q2, and management expects to be 90% of pre-COVID levels by the end of 2022. For 2023, Group business is expected to equal or exceed 2019.”

Wynn Resorts

Similar to its peers, Wynn Resorts saw strong term bookings from leisure customers.

“The longer-term investment has allowed them to double the younger, more affluent demographic, with the average age of customers dropping by eight years,” Greff said. “Management is confident in its ability to take pricing going forward. On the labor side, full-time equivalent numbers are down from 2019 levels, but Wynn expressed concern. continued confidence regarding hiring, referring to thousands of applicants, a relatively positive sign that we haven’t heard from his peers.

Wynn, who offered a presentation from CEO Craig Billings and Amir Markowitz, a corporate finance director, explained Wynn’s strategy in game development in Ras al Khaimah in the United Arab Emirates.

“With more than double the air travel capacity of the Las Vegas market and approximately 85 million passengers per year, opening a property in the United Arab Emirates will allow 95% of the world’s population to access a brand Wynn in an eight-hour flight,” Greff said of Wynn’s strategy. “Having a property near the beach offers a new set of challenges, although management feels confident in their ability to execute given their complete control over the design. Importantly, Wynn is excited about regulatory progress in the UAE, with a Singapore-like approach being taken and expectations of a reasonable tax rate.

On the local front, officials from Boyd Gaming and Red Rock Resorts said the companies have found greater stability.

Boyd Gaming

Boyd CEO Keith Smith and CFO Josh Hirsberg said demand was described as largely sustainable and business trends began to normalize in January with steady demand from higher-priced customers. value.

“Traffic out of town was a bit of a headwind during the initial delta variant,” Greff said. “Omicron’s impact was more prevalent in the database, especially with older people. Boyd is starting to see more stability in the segments and noted that the younger demographic has come back. Interestingly, additional competing equipment had no negative impact on the consumer.

“Finally, gas prices have historically not had a significant impact on the business given the localized and drive-in nature of its properties, although he noted that if gas prices were to hold at higher prices for an extended period, that could have an impact,” he said.

red rock

Red Rock Resorts chief financial officer Steve Cootey said management saw a nice inflection in demand with the removal of the mask mandate in February.

“By demographics, Red Rock has seen strong retention in the younger base, which remains superior to pre-COVID,” Greff said, “while the older segment has seen a recovery as COVID- 19 have subsided. Spend per visit across the portfolio is above 2019 levels. Weekend demand has been sustainably strong, while midweek has seen improvement with momentum from groups and conventions.

The company noted that it continues to evaluate reopening its three closed properties — Texas Station, Fiesta and Fiesta Henderson — planning to do so only if it can generate additional cash flow on a net basis. “Notably, the company has already recovered or redirected nearly all traffic to its open properties,” Greff said.

For the new Durango Drive property it is building, Red Rock reiterated favorable market demographic trends, high gambling propensity and limited nearby competition.

Las Vegas Sands

Las Vegas Sands, which last month completed its $6.25 billion sale of The Venetian, Palazzo and Venetian Expo to Apollo Global Management Inc., is focused on its Asian markets of Macau and Singapore.

Daniel Briggs, senior vice president of investor relations for Sands, said the company is considering a possible return of demand to Macau, similar to what is currently seen in Las Vegas.

“China’s zero COVID policy will likely need to evolve, and without knowing how this may evolve, uncertainty about recovery will remain,” Greff wrote.

He said the Singapore market is expected to benefit from the high level of COVID-19 vaccinations and additional air travel.

The Review-Journal is owned by the Adelson family, including Dr. Miriam Adelson, majority shareholder of Las Vegas Sands Corp., and Patrick Dumont, president and chief operating officer of Las Vegas Sands.

Contact Richard N. Velotta at [email protected] or 702-477-3893. To follow @RickVelotta on Twitter.

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