Penn has big plans for Trop; DFS sites feel the heat

High rollers aren’t spending as much as they used to at Penn National Gaming casinos, reports JP Morgan analyst Joseph Greff, after meeting with CEO Tim Wilmott. Penn logoOverall, Penn says its springtime revenues have been tracking with its expectations. Greff writes that “overall trends for its consumers remain relatively positive with stable housing prices, modest wage inflation, and job growth in its major markets.” The sanguine outlook of casino executives, whose job is to look at the bottom line, continues to contrast starkly with the free-floating rage encountered in the body politic.

That being said, Penn had predominantly good news to disclose, although it seems no closer to finding outside financing for Hollywood Jamul (which just cleared a significant hurdle). It could happen in a month or it could take a year and a half. Profit margins at Plainridge Park continue to be “better than expected” and management has set $15 million in gross gaming revenue as its target for the racino.

At the Tropicana Las Vegas the good news is that occupancy is running in the low 90th percentile and the bad news is that most of those bookings are coming from online travel TROPICANA VIEW 1B_LO 042010agencies (which might get you one of the lesser rooms) or the property’s Hilton marketing affiliation — although it’s much too soon to expect traction from Marquee Rewards. Penn expects to “increase customer stickiness” with a range of improvements, whether they be 150 new slots or a Robert Irvine restaurant slated for next year. Over the next four years, Penn is committing $200 million to upgrade parking (much needed), improve food and beverage offerings, and upgrade its pedestrian bridges. A new hotel tower is a distinct possibility, but that decision won’t be made until late 2017. It would be 500-700 rooms and would cost $100 million to $140 million. But that’s only if Penn could make a 15% to 20% ROI on the project — a lofty goal at present.

* Isle of Capri Casinos came up a bit short of Deutsche Bank expectations for 1Q16, largely due to underperformance at Isle Pompano Park and Isle Blackhawk. Corporate expenses were up, too, with former CEO Virginia McDowell taking a lovely parting gift to the tune of $800,000. In spite of all that, analyst Carlo Santarelli seems to regard this as a good quarter for Isle, saying that the industry’s anemic May “will be important” in today’s conference call.

* Both Assemblyman Vincent Mazzeo (D) and the Chamber of Commerce of Southern New Jersey have thrown their weight in against the closely contested ballot Mazzeoquestion of whether or not to end Atlantic City‘s casino monopoly. In a prepared statement, Mazzeo said that “this fight isn’t just a fight about gaming — it’s about protecting the livelihoods of thousands of middle-class families who will lose their homes and their jobs.” Battleaxe state Sen. Loretta Weinberg (D) pushed back, blaming the victim by saying of Atlantic City casinos, “If they’d like to continue giving that revenue to other states, we have a difference of opinion.” As for Jersey City Mayor Steve Fulop‘s retraction of support for casino expansion, Weinberg gave him short shrift, saying, “If he doesn’t want a casino in Jersey City, it’s okay with me,” she said. “I would think that we’ve got one site selected that we already know we want. There’s nobody up here who doesn’t want it, that I’m aware of.”

* Ugh. I turned on the MLB Network and those obnoxious FanDuel and DraftKings commercials are back, the whoopee cushions of TV advertising. In a move probably intended to crush all competitors at one fell swoop, the two daily fantasy sports firms are talking merger. The rumored negotiations come as the companies’ valuation has plummeted 50% and they’re heavily beset with legal bills (the price of pioneering uncharted waters). They also need to stave off new DFS aspirants like MGM Resorts International. It’s been a risky bet for investors like Time Warner. According to gaming attorney Daniel Wallach, the upside includes reducing duplicative courtroom and marketing expenses. However, since the two control 90% of the DFS market, this raises antitrust concerns, as well. If the duo of DFS giants do combine, Funny or Die has already cut the first ad:

* There’s a misconception about millennial gamblers, says University of Nevada-Las Vegas professor Daniel Sahl. They’re not antisocial creatures fetishistically fixated on their smartphones: “Everyone thinks that the millennials are, like, locked in their phones and just completely oblivious to the world around them, but the millennials are using their phones to engage in social conversations and social interactions with other people. Millennials are actually extraordinarily social.” Sahl, who teaches UNLV’s Gaming Innovation class argues that it is traditional players who are shutting the world out. “Traditional gambling right now… with the exception of certain gambling like craps tables, for the most part, it’s very [isolating]. You have a machine and you’re isolated.” Sahl sees competitive casino as the way of the future and — who knows? — maybe the next generation of games is being hatched in his classroom.

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