Big Gaming meets the Street

Deutsche Bank analyst Carlo Santarelli has been in town and conducting a busy schedule of meetings. Pride of place must go to Wynn Resorts, which declared the wynn-palace-macau-image_largeopening of Wynn Palace “very clean,” with “solid” VIP business. Hotel occupancy is running a 70%, although two-thirds of those rooms are comped. No cannibalization of Wynn Macau business has been seen, “noting the bifurcation of the market remains pronounced between Cotai and Peninsula customers.” Closer to home, the company sees “stable” group business and “rational” pricing. Gaming business was described as “flattish,” with all-important baccarat “less bad,” even stable. The Wynn board continues to withhold judgment on Wynn Paradise Park, while construction continues to ramp up at Wynn Boston Harbor, which has 500 workers on staff. A May 2019 opening is planned.

Strip-centric MGM Resorts International is enjoying growth in room rates, due in part both to a continuation of the rise in visitation and a growing number of airline capacity into Las Vegas. The company expects continued improvement for several quarters to come. “MGM sees convention room nights in 2016 as record breaking and believes 2017, given current bookings, is going to be at least as strong, if not stronger, than 2016 with respect to room nights and pricing.”

The imminent failure of the New Jersey casino referendum is expected to fatten Borgata‘s coffers, as its domination of Atlantic City grows. (Glenn Straub‘s Ten can borgata_exterior_sunsethardly be anticipated to pose a serious threat.) MGM’s domestic development timeline remains unchanged. Overseas, Macanese mass-market trends are not only observed to be stable but displaying growth. A rising tide apparently lifts all boats, as absent VIP and mass-market players have returned during the Parisian and Wynn Palace openings.

Confronted by largely flat trends in regional gaming, Pinnacle Entertainment is looking to cost-cutting as a means of growing the business and profits. Despite being in the process of being taken over by Gaming & Leisure Properties Inc., Pinnacle is still looking for acquisition opportunities of its own. The company “opened two new Asian gaming areas at the St. Louis assets and expects these new areas to drive table game growth at the assets.”

At Station Casinos, “management spoke favorably of the continued housing, job, population, and wage growth dynamics in the locals market at present. Management sees very little in the way of potential pitfalls that would create a sustained deceleration of the palacestation-piccurrent [gross gaming revenues] cadence, while noting spend per visitor and wage growth as the two most likely sources of a potential acceleration.” Comping and promotions are “tame” at the moment, but salary increases. new overtime rules and healthcare “cost creep” are causing some contrary pressure. Reinvestment in core properties is management’s leading priority, with small-scale diversification into Reno having apparently taken the spot in the queue ahead of eternally deferred Durango Station. Of course, the union vote at Palace Station and its outcome remains the great unknown hovering over Station at this point.

Last but not least, Boyd Gaming “is not seeing any change in customer behavior or demographics from 2015, noting instead that the combined effect of events in 2016 have been the primary driver of trends ([Louisiana] flooding, Gulf Coast competition, [Illinois] gaming expansion, etc).” Las Vegas remains a bastion of strength, both for gambling revenue and non-gaming spend. As with Station, Boyd sees a stable promotional environment, except in Lake Charles, where it’s heating up. IP Biloxi, though, has gained some breathing room now that the Scarlet Pearl opening is in the rearview mirror.

Of Boyd’s new trophies, Aliante Casino is expected to be a significant long-term
aliante_stationcontributor, more so than the Cannery Casino and Eastside Cannery. “Importantly, both Cannery and Aliante are performing better today than they were at the time of the acquisition announcements, setting up well for early success towards achieving the targeted goals … Management is starting to see the $10 [billion] of underway construction benefiting the local labor market, but noted it is too early to see if that customer is showing up in the gaming performance to date.”

In California, Boyd could begin construction at Wilton Rancheria early next year. As for its outlying assets, the company seems to be in a selling frame of mind. It told Santarelli that it had non-strategic assets for which it was hoping to receive offers … but hope gotten none that made sense so far. However, that doesn’t rule out future purchases by Boyd itself as “there is a heavy sampling of assets for sale in the regional markets at present.”

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