Covid-19 kind of threw a monkey wrench into the year 2020 for just about everyone, from retail workers, to healthcare providers to people who just wanted to go out for a haircut. Casinos were certainly no exception to this fact as many of them had to change their operations up in response to the pandemic and, in many jurisdictions, were forced to close completely for a time.
The purpose of this Editorial will be to chronicle the impacts that Covid-19 had on casinos leading up to the closures (or mitigation efforts), during the better part of 2020 and what changes we might see in the future as relates casino operations.
Let’s get started.
Part I: The Early Days
The first period of time that we will chronicle is the months leading to the mitigation efforts and, in some cases, outright closure of casinos. We will begin our focus with March of 2020, when it first began to be realized that Covid-19 would be a serious problem.
For further reading, you might also check out my article on the subject at Wizard of Vegas. Just search, “Corona Crashes Casinos”.
Our own Dejan Gavrilovic also covered the early days of Covid extremely well in this May 2020 Editorial that you can find right here.
That should give you a few different perspectives on the early days of Covid. I’d say that Dejan’s predictions for what reopenings would look like were pretty darn good!
In terms of Covid-19 response, many different corporations responded differently. Caesars properties, for example, announced layoffs of 3,200 employees in late-March due to imminent closures in Nevada.
In part:
"Given the unknown certainty surrounding COVID-19," wrote Servando Lara, Caesars' director of labor relations, "we are unable to make a determination as to whether the layoff will be temporary or permanent."
Of course, Caesars was hardly the only company to announce layoffs and Nevada was hardly the only state in which casino employees were laid off. Between two casinos in Pennsylvania (Parx and Caesars-owned Harrah’s Chester) roughly 3,000 layoffs were announced in May, according to an article published in Penn Live. Harrah’s accounted for more than 1,100 such layoffs.
Similar to Nevada, Pennsylvania was another state to close businesses deemed, “Non-Essential,” for a matter of months.
Of course, you have to cut jobs and salaries as a result of casino closure, unless the employee in question is a CEO or other high-ranking board member.
Good look, Caesars.
This followed the merger of El Dorado Resorts and Caesars properties (with the combined entity retaining the Caesars name, as it is more widely-known), so the article linked above states that it’s possible that these raises for executives were already in place prior to the layoffs and Covid-19 shutdowns.
That’s possible, of course, but just as likely is the fact that Executive bonuses are revenue-based, and knowing there were going to be year-over-year revenue losses (closing a business completely tends to do that) the corporation decided it would be best to increase the base pay of these executives, at least, for that year.
These closures most-heavily impacted companies with disproportionate exposure in tourist markets such as Las Vegas and Atlantic City. Even if the casinos had been open during these times, the travel bans still would have resulted in substantial lost revenues due to the fact that nobody would be coming from overseas to visit these towns.
Casino companies with heavy exposure in tourist markets also faced the most uncertainty related to Covid-19, because even when things started to get back to, “Normal,” (which was unknown at the time) there still remains the question of when people would feel comfortable travelling to these tourist markets again, particularly from overseas.
Casino companies (and individually-owned casinos) who are more spread out in terms of being mostly in Local/Regional markets still had uncertainty, of course, but it wasn’t quite as serious. Since they don’t rely too much on tourism anyway, it was mainly a matter of when they could get back to operating at full capacity and with the full scope of offerings and amenities.
In certain jurisdictions, while there was certainly some impact, it wasn’t as bad as others depending on how the exposure was in a particular state.
Some casino companies, including Penn National Gaming, took a different tactic.
Many casino companies said that they had to do the layoffs, but would pay all employee salaries and benefits for two weeks. Prior to the first stimulus being passed, Penn National Gaming also announced that they would compensate staff and provide benefits for a full thirty days, so great on them!
Penn National Gaming also scores some serious points for donating their non-perishable foodstuffs (to local food banks) and Personal Protective Equipment to hospitals (who were running critically low at the time) in those jurisdictions in which those properties had been closed.
Those following casino stocks also noted significant plunges, as I wrote in my WoV article:
Corporation Share Price 1/2/20 Share Price (Year Low) Share Price Today Market Cap 1/2/2020 Market Cap (Year Low) Market Cap Today
Penn National Gaming (PENN) $26.14 $3.75 $59.84 3.58B 515.8M 8.24B
Caesars Entertainment Inc. (CZR-Merged with El Dorado) $59.51 $6.02 $51.78 9.589B
971.5M 8.34B
MGM Resorts International (MGM) $33.66 $5.90 $22.98 16.61B 2.911B 11.34B
This is enough of a sample to see the different things at play here.
The first thing that I want to note is that I made one stock pick to different members of the forum here (can be confirmed to Wizard privately) and that pick was that PENN was AWESOME at a $9.00 share price. Of course, I set my one year price target at $19.00...so we can see that was very bad, but those who had it still made over 100% profits at my buy point.
1.) I don’t care what happens in this world short of nuclear war...a fundamentally sound stock does not lose 85.65% of its value in two months' time. Not CV, not anything. The underlying notion that a company with a theoretical (confidence) valuation of 3.58 BILLION dollars can suddenly be worth only 515.8M is fundamentally absurd.
2.) In an earnings call, PENN straightforward indicated that they could go a full year with zero revenues and be perfectly fine. I later picked American Eagle Outfitters (AEO) for the same reason.
In short, the prices tanked as if there would never be casinos again! Obviously, being closed for an indefinite period of time is obviously very bad, but to suggest that an unknown takes off as much as nearly 90% of a company’s implied value (market cap) is just crazy.
Of course, I’m also the guy who said that I wouldn’t look for PENN to recover beyond $19.00/share anytime soon, and they are at $81.01/share as of the time of this writing. Why are they above their one-year high before Covid-19 even happened? I have no idea! Either way, $19.00/share was clearly NOT the optimal selling point.
In fairness to me, if you bought at $9.00 and sold at $19.00, that’s still more than a 100% gain in a period of just a few months...most traders/investors would call that at least pretty good.
PENN also did a creative move with their real-estate investment trust, Gaming and Leisure Properties. For those who don’t know, real-estate investment trusts (REITs) are basically companies that exist to hold physical property and protect said physical property in the event that property operators (such as Penn National Gaming) have to file bankruptcy for one reason or the other.
The way that it works is that the REIT leases the properties over to the management company (and many casino companies do this, Vici Properties is a major REIT for Caesars) and the company pays them on a monthly basis. Penn National Gaming would sell the Tropicana Las Vegas to the Gaming and Leisure Properties Inc. REIT in exchange for rent credits totaling 307.5 million, which essentially meant that they traded the physical property for not having to make lease payments for a few months during the closures.
Legally, the REIT is a totally separate company that acts in its own best financial interests. As a practical matter, Penn National Gaming essentially sold the Tropicana to itself.
Basically, they effectively transferred the property to the REIT, and in exchange, they did not have to pay the REIT on their leases at that, or any other, property for the next few months.
This REIT later sold to Bally’s Inc (not affiliated with Bally’s casino on The Strip), from the article above:
Another big real estate deal changes the landscape of the Las Vegas Strip. This time, Rhode Island-based Bally’s Corp. agreed to purchase the Tropicana in a deal valued at $308 million from landlord Gaming & Leisure Properties Inc., according to the Las Vegas Review-Journal.
Gaming & Leisure Properties Inc. plans to keep the land and lease it to Bally’s for 50 years at $10.5 million in annual rent, while Bally’s agreed to spend $150 million to operate the Tropicana.
Basically, Penn National Gaming effectively sold the property to themselves by way of the REIT so they wouldn’t have to pay cash money on their leases for the next several months. The REIT then sold the operating rights to the casino to Bally’s Inc. for 150M and kept control of the physical land, which they have a fifty-year lease agreement (10.5M annually) by which Bally’s Inc. will pay the REIT annually for use of the physical land.
And, if you found that hard to follow, all I can say is: You’re not alone.
These and other moves were done in the early days of Covid-19 to somewhat assuage the fact that the operating companies for casinos weren’t, you know, operating very many casinos.
In the case of Penn National Gaming, they had recently acquired Barstool Sports, so it was pretty important for them to keep cash on hand as strong as possible during the pandemic to increase investor confidence and make it clear that they could weather the storm.
More than that, as highlighted in my article, PENN Executives directly stated that they could make not a single dollar for the remainder of the year in revenues and would still be perfectly fine. I might be wrong, but a statement that direct, I would think, could be legally actionable if proven to be deliberately deceptive.
During this time, casino REITs also plunged in share value, but not quite to the extent of the casino operating companies. While we similarly saw a, “U-shaped,” over the course of several months with them, we also saw that they were slower to recover to their previous values, or exceed them. As I pointed out in the WoV article:
Even with that, you didn’t see the REITs losing anything crazy like 90% of their stock value. The reason for that is simple: They own the physical properties. In theory, that at least gives them some degree of stability. Not to say that you would find a new casino operator instantly, but even if a current operator pulled out of a given property (if they even could) the REIT would probably get someone else in sooner or later.
So...why do we see them where they are compared to the beginning of this year? The first reason is because there’s no reason that their values should have improved pre-CV. In the case of Gaming and Leisure Properties, we can also kind of gather than investors/traders might have thought that PENN got the better end of the Tropicana LV deal, and even if not long-term, that’s still five months that GLP committed to going without any revenues via PENN.
In fact, Gaming and Leisure properties is currently trading at $46.42/share, which is less than 10% over the $42.73 at which they started 2020. The REITs usually shouldn’t change that much day-to-day, by design, because most of their share value is built into what they are bringing in on leases and the fact that they have a certain, relatively fixed (at least, less variable) underlying value due to the fact that they own the physical properties.
Therefore, unless the value of the physical properties changes remarkably, the value of the REITs should also not face a remarkable change.
With Covid-19, we did see a substantial dip for the REITs, but again, that was due to a ridiculous level of uncertainty. In theory, it was possible that no Covid-19 vaccine would be found and then there might be some question as to how many years, not months, it would be until casinos ever opened again.
In order for a REIT to work, they have to be getting paid on their leases. If the casinos went years without operating, then it would only be a matter of time before the REIT could not possibly get paid. Furthermore, casino properties are really only designed to be casinos...it’s not like it’s a retail store which is basically just a square interior of a certain square footage.
That is to say that, if you cannot operate a casino, then the physical property of a casino is borderline unsellable. Showboat Atlantic City is probably one of the only former casino properties that have been able to rebrand as hotel-only...most former casinos either get shut down or just sit in place and rot if not sold within a certain amount of time. The same fate would have certainly befallen the Revel in Atlantic City, had it not sold for pennies on the dollar.
Leading up to Closures and Shortly After
I was able to talk to some people in the casino industry leading up to the closures and Covid-19 mitigation efforts. Originally, I had intended to do some full-length interviews, but apparently, most casino employees sign non-disclosure agreements...even regular security, slot techs and cocktail waitresses!!! Most of the casino employees I could track down were either uninterested (even though I offered compensation) or cited their NDA’s.
Anyway, I can talk about my discussions with some of these people that took place, “Off-the-record.” While I hate the concept of, “Anonymous sources,” I’m afraid that my only other option is not to talk about it at all.
As with other companies, casinos weren’t really prepared for something like Covid-19, so as the first dominoes started to fall (in terms of state-mandated shutdowns) employees in casino states that had not ordered a shutdown didn’t even know on a day-to-day basis whether they were going to walk in just to have management tell them to go home.
In mid-March 2020, one employee at Wheeling Island Hotel Casino Racetrack, who will have to go unnamed, told me, “We know we are here until at least the end of this week. After that, management says they are not even sure what is going to happen and it is being evaluated on a week-to-week basis.”
Publicly, Wheeling Island would announce that they had no intent of closing of their own accord, as was reported on WTOV9 news around March 12th.
Of course, West Virginia Governor Jim Justice (many other states had already done this) would issue a stay-at-home order effectively shuttering the casinos within two weeks of that news report.
Oddly enough, the West Virginia businesses with Limited Video Lottery Terminals kept their terminals operating, even with the casinos closed! Generally, this was because they fell into one of the other categories (food service with take out, convenience stores) that were permitted to stay open.
If you have the services that would otherwise allow you to stay open, then you could continue to operate video lottery services!
Just before this, Nevada’s Governor, Steve Sisolak announced a ban on all gambling operations that was to go into force March, 18th, 2020, as reported in this editorial from LCB’s own Tamara Tam.
That editorial is short, sweet and gets the job done!
If there’s one thing we learned in Pennsylvania (where I live) it’s that the lottery is the LAST thing to go. Pennsylvania even closed its liquor stores (all liquor stores in Pennsylvania are owned and managed by the state itself) for a few weeks, but you could still go to the gas station just to buy a lottery ticket!
Prior to the closures, the casinos paid lip-service to, “Cleaning more thoroughly and more often,” but I personally saw nothing of the sort. Of course, casinos weren’t alone in saying they were taking mitigation efforts that they were not actually doing.
One grocery store chain, for example, said they were doing a, “Full cleaning,” nightly by which all products were removed from the shelves---which were then thoroughly cleaned and sanitized. That would have been a great thing in theory, of course, but having worked grocery stores before, I knew that there was no practical way to do that unless you had 100 employees (or so) working during that six hour period.
Sure enough, I went to one of the chain’s stores and looked under an item that doesn’t get sold often (specialty olives) and, sure enough, it was pretty evident that the shelf had still not been scrubbed in months---if not a year.
The point is that it wasn’t just casinos, in the early stages of the pandemic, many businesses paid lip-service to enhanced cleaning and sanitization efforts, even though most of them were doing nothing different.
But...they would.
Part II: During Covid
The first thing that I will state is that various states, “Opened back up,” in waves, so specific dates for specific casinos are going to vary based on the jurisdiction and aren’t really worth listing. Specific dates are also no longer relevant, if any casinos in the United States remain closed as a result of the pandemic, then it’s as a result of them choosing not to open yet.
I’d imagine that almost all of them that are going to reopen have done so, at this point. I did notice that some Native American (Tribal) casinos did not open as quickly as the state in which they are located might have allowed, but my assumption is probably because they don’t operate at a profit during those months, anyway. This is particularly true for those in less densely-populated locations, many of those casinos can be presumed to only operate at profitable numbers during fair weather seasons.
As relates to actually opening back up, most casinos did what they did based on the guidelines for a particular state. For this section, I am mostly going to compare Pennsylvania to West Virginia because those are two of the states in which I frequent casinos quite regularly.
Pennsylvania: For a time, casinos reopened with mandatory mask and social distancing requirements. Apparently, temperature checks upon entry were not strictly required as I am ware of two casinos that definitely did them (Meadows, Wind Creek) and one casino that I don’t remember doing them, though they may have briefly (Rivers-Pittsburgh).
While social distancing was mandatory, it was rarely enforced as I do not recall ever seeing anyone say anything to people who were sitting side-by-side or security saying anything to small groups of people who were bunched closely together. All casinos that I visited (six, in total) maintained social distancing at the entrances, (with little places to stand as you awaited your turn to enter) but once you got past the security podium, social distancing was largely ignored by patrons.
Briefly, casinos were allowed to reopen, but were NOT permitted to serve food of any kind. Beverage service, which, at first, included alcohol was permitted, but then the state said that the casinos could not serve alcohol for a time.
Consequently, bars in casinos were either completely closed, or in some cases, were unstaffed, but had every other machine on.
Many casinos in Pennsylvania instituted plastic dividers between machines, or alternatively, would have every other machine shut off so that two machines would not be operating side-by-side. The only casinos I visited enough times to really notice differences were Rivers Pittsburgh and The Meadows:
The Meadows: It seems that every other machine was shut off in this casino OR there was a plastic divider between a machine and the machine next to it. The plastic dividers seemed to mostly be the case for banks of machines that went in a circle, or banks of machines for which there were only one or two machines on each side. I do not recall seeing any side-by-side machines whatsoever that were both on and lacked a divider.
The Rivers: The Rivers seemed to shut off every other machine in certain parts of the casino, but not in others. This was most notable with banks of Ultimate X machines, most of which had all machines on with no dividers. Most slot machines did not have dividers, but did have every other machine shut off.
The Rivers (Cont’d): Common decorum seemed to be that you would ask someone that you didn’t know whether or not you could sit at the machine. At no point did I ever see casino staff ask for one person to move in situations in which two people were sitting side by side.
Back to All Casinos
Masks were required in all Pennsylvania casinos and could only be down in the event that a person was actively taking a drink of a beverage, or eating something, when food was permitted again. Makss were one thing that were proactively enforced across all casinos. In fact, as with my visit to Atlantic City, I was admonished for having my mask down, and then holding my cup of coffee up, was told my mask could only be down if I was actively taking a drink from it. Of course, when I have a cup of coffee, I take a sip approximately every five seconds, but I guess that doesn’t matter.
Casinos also had varying occupancy limits that depended on what the state was doing, at any given time, with indoor occupancy percentages---but at no point do I remember any casino being busy enough for that to potentially apply. Even if it had, it’s not like someone from the state would have any practical way of going into the establishment and counting every single person to make sure that the casino was within the percentage.
Very briefly, it seemed that smoking was allowed in Rivers and one was permitted to have one’s mask down if one was smoking. I could be misremembering, but I think that later guidance from the state clarified that this should not be permitted, so as a result, PA casinos effectively became entirely non-smoking. In the case of Atlantic City, casinos were issued no-smoking guidance prior to reopening in the first place.
All entertainment venues, such as concert areas, were closed in all PA casinos for the entire year of 2020 after the initial shutdowns. That was pretty much the case across the entire country with very few, if any, exceptions.
In short, Pennsylvania casinos were basically stripped down to the bare essentials of gambling operations with no other perks---aside from free coffee and soda/pop.
West Virginia
Wheeling Island Hotel Casino Racetrack was the only WV casino I went to during this time with any meaningful frequency. This casino had temperature checks at the door, social distancing in the casino’s only (during Covid) entrance and mandatory masks.
Of course, infrared thermometers are quite unreliable, as just about any Google Search on them would tell you.
And, often (all casinos that were even doing temperature checks) would let you in if the stupid thing failed to register a temperature.
After getting ID (all patrons, which even PA was not doing) and the temperature checks, the casino would have you take down your mask and look up at the camera. That was not the case in Pennsylvania as The Meadows and The Rivers did NOT have one lower one’s mask upon entry, but I am aware that casinos in other jurisdictions sometimes did.
The big difference between Wheeling Island and the Pennsylvania casinos was that you could smoke in Wheeling Island, which was one reason that a patron could have his/her mask down. Furthermore, while the food court only had limited service, patrons were permitted to eat in the casino at all times that I can remember.
The only change in beverage service was that there were no self-service beverages. Unlike Atlantic City, the casino always served beverages, but that’s probably because the casino floor was not open 24 hours, so they simply made sure at least one cocktail waitress was on duty during all operating hours. Same thing with The Meadows and The Rivers in Pennsylvania which, for a time, also did not operate 24 hours.
While the initial procedure to enter the casino was a bit tighter, especially compared to Rivers, for Wheeling Island...patrons were pretty much permitted to go with their masks down if they wanted to. The only time that I saw anyone asked to put their mask back up is if they were in transit from machine-to-machine or at a Table Game, but patrons were otherwise left alone as long as they were sitting at a machine. At least, that’s how it seemed to me.
Plastic dividers at machines in Wheeling Island were very few as the casino mostly opted to shut down every other machine throughout the property, at least, in side-by-side banks. That was pretty consistent with the only machines to frequently have plastic dividers being some of the more popular titles---which makes sense, as the dividers themselves cost money.
Unlike the two Pennsylvania casinos mentioned, Wheeling Island is home to its own hotel on property. Upon reopening the casino, the hotel was basically only open Thursday-Sunday and closed during the typically slower days of the week.
West Virginia Limited Video Lottery, “Parlors,” were mostly left to do as they wished. While many of them got the plastic dividers between the machines, some of them did not.
In my opinion, gambling at the parlors might have been preferable to gambling at the casinos. While all casinos made statements to the effect that machines were being cleaned and sanitized, “More frequently,” I never saw any evidence of such actually taking place anywhere. Occasionally, someone would come along and spray a machine (with what might have just been water) and wipe it down, but that didn’t seem any more frequent than usual.
Parlors, on the other hand, DID clean the machines frequently. If you think about it, it’s much easier for the parlors to do that. The reason why is because you have one employee who is in charge of anywhere from only five to a maximum of ten (if a private fraternal club, otherwise seven max) machines. People also do not switch machines as frequently in parlors (many machines, particularly Game Kings, have the same sets of games), so it’s simply easier for one person to keep up with.
All Casinos
Even in jurisdictions in which casino restaurants and food outlets were permitted to reopen, buffets generally remained closed with many still not having opened back up. In addition to all of the shared space and shared utensils involved with buffets, buffets are also a loss leader for casinos...but more on that later.
Revenues
For revenues, we will take a look at only one jurisdiction, Atlantic City, because those numbers are very easy to find. Obviously, Atlantic City (which saw casinos completely closed longer than many other jurisdictions and also somewhat relies on tourism from outside of the region) saw revenues dip more than other jurisdictions, but almost all, if not all, casinos felt the effects of Covid to some degree.
Looking at Page Two of this report.
We see that Atlantic City gambling win for the year 2020 was $2,881,382,588 compared to $3,468,633,795 for 2019, which reflects a dip of 16.9% and a year over year difference of more than 587 MILLION dollars across all casinos.
Online gambling assuaged the pain slightly, increasing more than 100% from $482,695,308 in 2019 to $970,337,571 in 2020.
Sports wagering was also up for 2020 compared to 2019, by more than 33%. Believe it or not, Atlantic City had sports betting throughout 2019, so these increases were in spite of Covid, not due to sports betting not existing throughout parts of 2019, as was the case in other states.
The bleeding could have been much worse, and the wound deeper, if New Jersey had not already been home to online gambling. Had those revenues stayed the same as 2019 even, the state would have saw a decrease of over one BILLION dollars in total gaming revenues. Such would have reflected a dip of over 33%.
It would be tough to do year-over-year for many other states, because as reported for us by Dejan Gavrilovic.
Some states took the opportunity to get sports betting going last year (2020), many of which were likely sped along because of the punishment that casino operations had been taking so far that year:
Not that there’s ever a GOOD time for a pandemic, but the Atlantic City closure also impacted New Jersey mostly during periods of 2020 that aren’t great months for the city anyway. They missed all of June and a small part of July, but much better than missing the entire Summer...especially with some segments of the gambling public VERY eager to get out and play. They were probably quite fatigued with being grounded to their rooms to that point.
While I have already looked at some of the changes during the pandemic for West Virginia and Pennsylvania, I also had the opportunity to visit Atlantic City in January, and I reviewed the situation for a Wizard of Vegas article. If you want to read it, just hop over there and search, “Atlantic City Covid Review.”
While overall gambling revenues for Atlantic City in January 2021 CRUSHED January 2019 numbers, most of that was due to online gambling and sports betting. Slots + Table Game (Live) revenues for January 2021 combined for 160.01M compared to 177.28M for 2019, so we’re starting to get back to normal, but might not be quite there yet.
In fact, for live casino win, no month in 2021 (through and including April) has even come close to matching 2019 revenues. As one would expect, online gambling continues to---if you’ll excuse me for being so bold---kick serious ass.
And...My Review
Basically, my Covid Review (though I encourage you to still go to WoV and read it) is basically pretty similar to what was going on above in West Virginia and Pennsylvania. Here are the cliffnotes:
1.) Most dining options were either completely closed, or only open on weekends. In fact, during the early morning hours, I couldn’t find ANYWHERE in the entire casino (Harrah’s Atlantic City) to even get a cup of coffee, so that totally sucked. I’m an early riser.
2.) The casino was serving alcohol, but did last call around 10:00p.m., and with no self-service beverage options, there was nowhere in the casino (after the grab and go place closed at midnight) to get any beverages of any kind! Certain types of alcohol remained free of charge to players and could be ordered directly at your machine.
3.) Some banks of machines had every other machine shut off and others didn’t. For the banks that had every machine on, clearly the intent was to only have enough chairs there so that everyone would stay spaced out, roughly equal to every other machine, but obviously, people could just move chairs from somewhere else. Anyway, when it came to the handling of the slot floor as relates to social distancing, Harrah’s was the least consistent of any casino I visited anywhere.
4.) Some table games had partitions and some didn’t. If they were emphasizing social distancing at all, they were only doing so in theory. The Baccarat tables practically had people atop of one another!
5.) At that time, smoking was not permitted indoors and the casino had two designated outdoor smoking areas. In practice, people basically smoked wherever they wanted to, provided they were outside. I did not see anyone smoke indoors.
6.) Harrah’s Atlantic City was another location where I was told to put my mask up, which I semi-protested by displaying my cup of coffee and was again told, “Only if you are actually taking a drink.”
To be clear, I have been complying with the mask requirements everywhere without ever complaining (they really don’t bother me), but this guy got within six feet of me to tell me to keep it up unless actually taking a drink and, other than him, there would not have been anyone within ten feet of me at any point!
Here is the first paragraph of my conclusion from that article:
If you’re big on the vast offerings that major casinos have, such as entertainment, shows, pools, restaurants and fast service, then Atlantic City is probably not for you at this time. At least, not the Harrah’s. If you only really care about a wide variety of restaurants to choose from, then Harrah’s is probably okay on weekends for dinner.
Even now, I would VERY much recommend going to the website of any casino in the United States that you intend to visit this year. It’s probably going to be awhile before all casino offerings get back to what they were pre-pandemic, and depending on the casino, some amenities (such as buffets) are never coming back.
Post-Pandemic
I guess we’re not quite out of the woods yet, but we can at least see the final treeline. I guess we’re close enough to talk about post-pandemic casinos.
Health
The first thing that I think might be the case is that there’s going to be some carryover from the current pandemic as well as fear of Covid variants, or possibly, a different pandemic altogether for at least some time. For that reason, I don’t expect year-over-year casino revenues (particularly in tourist markets) to compare favorably with 2019 levels until next year at the earliest.
Many casino patrons bemoaned the fact that pandemic guidelines (in their opinion) were often not stringent enough or inadequately enforced. The only advice I can give them is this: If you’re REALLY worried about your health, then perhaps physical casinos, in general, are not the best places to be visiting.
Slot machines and Table Games are petri dishes. Even with the Covid protocols in place, they weren’t cleaned what I would call frequently and any such cleaning was suspect, at best. As in, I suspect the solution in the bottle to generally just be water. I’m not going to name any specific casino because I don’t want to make specific health-related claims that might get me sued!
Either way, you have a bunch of people all touching the same buttons, screens and cards. When it comes to trying to avoid, not just Covid, but any communicable illness in general, such conditions are not ideal. I think that people are more likely to be cognizant of that fact coming out of a pandemic, and as such, some people who may have been inclined to visit physical casinos circa 2019 might not be so inclined for the foreseeable future.
When it comes to tourist markets, you also have the question of out-of-state or travel from outside of the country---airplanes are just petri dishes that can fly.
On a positive note, and on net, we can at least assume that those who do visit casinos will be more health-conscious. If nothing else, hopefully this pandemic has given people at least a basic respect for rudimentary health measures, such as washing/sanitizing hands after using the restroom, sneezing, touching one’s face or mouth, etc.
Casino Niceties
The main thing about being in business is that business are usually not inclined just to take losses, such as those that come by way of being shut down for months, without trying to make them up somewhere. For that reason, we see a few things happening:
1.) Poker rooms in casinos generally underperform and are not profitable. It usually depends on the market, but long gone are the days of the, “Poker Boom.” For that reason, we saw many casinos reinstitute Table Games (even sometimes including those where players handle the cards) but keep the poker rooms closed.
Many of these casinos will end up reopening the poker room eventually, but you can bet (especially for Regional and Local casinos) that it will only be after taking a hard look at the numbers. You have to figure that there are going to be certain costs associated with reopening, including the retraining of staff to get them, “Back in the game,” if you’ll forgive the expression.
If there are slot machines where your poker room used to be, then chances are the poker room is not coming back. There will certainly be a few exceptions, but those locations to get rid of their poker rooms/areas completely, especially early in the pandemic, are basically indicating that those poker rooms were likely hovering on the precipice of being closed, anyway.
2.) As we discussed earlier, casino buffets are the casino’s loss leader, in fact, it’s by design.
Why would a casino have an eatery that is relatively cheap (for what you get) and loses money?
The answer to that is to keep the players in the casino. Pre-pandemic, casinos wanted all players not to leave the property for food, but post-pandemic, there will likely be a focus on medium-rollers to high-rollers and casinos will not be as likely to care about the players who would bat an eye at the prices of the other eateries on-property. In other words, if the buffet was the only sit-down establishment in which you were willing to eat, then expect to either do grab & go or just go elsewhere for your meal.
Las Vegas’ Station Casinos have already indicated, in an earnings call, that they are not coming back. A quote from the earnings call, Frank Fertitta, the Chief Executive Officer of Red Rock bluntly stated, "We’re going to put the dollars into the place where we make money. It’s going to be a focus on slot machines and table games, our primary business. We’ll have several restaurant options. We will not have a buffet."
Chief Financial Officer Stephen Cootey, essentially affirmed by saying "I’m going to say ex-buffet because obviously, it would be down year-over-year because of the buffet, which I think we can fairly say will never return."
With Stations, we’re talking about a company that owns many properties in the Las Vegas area that didn’t even look at their buffets on a case-by-case basis. Instead, they just said they are closing all of them---which includes the quite-popular Garden Court Buffet at Main Street Station. Main Street Station, for whatever reason, tends to attract many Hawaiians to the property and such was reflected by the buffet’s offerings.
Whether or not buffets will be coming back to local/regional casinos is almost certainly going to vary depending on the property. For those properties with buffets, it’s pretty well-known that free buffets are a fairly easy comp to get---so casinos might be inclined to determine whether or not the buffet could be profitable exclusive of free buffets. In other words, some buffets might return, but earning them as a comp might be more difficult.
For example, I called Rivers Pittsburgh and was told that, while it hasn’t been announced to staff (who have asked) whether or not the buffet is permanently closed, they have been given no indication that it will ever reopen and any indication they have been given points to indefinite closure.
This is obviously just one man’s opinion, but pre-pandemic, I would have said that Grand View Buffet at Rivers is (surprisingly) in the very top-tier of casino buffets and would have survived as an independent restaurant (if it were located outside of the casino) without even changing its pricing. It was honestly THAT good and clearly had consistent quality standards for both food and cleanliness. If you were to visit the buffet, then I’d suggest the comped/paid ratio was probably about 1:1, which is really saying something for a casino buffet.
Buffets are, in light of the pandemic, probably going to become another casualty of greater health-awareness, in general. Simply put, people are probably going to be less likely to want to share utensils, touch one another’s plates (when getting a plate from the serving area) and potentially risk eating food contaminated by hands and saliva droplets.
It’s a shame, too, because buffets are one venue that could REALLY benefit by a simple precaution such as hand sanitizers (one restaurant I like, Hoss’s, has disposable gloves that must be worn at the salad bar) and masks being mandatory if one is up getting food. There’s definitely a perfectly safe way to do buffets.
Still, I do not expect buffets to reopen in casinos that decide that they are a loss leader and do not keep enough low-rollers in the casino to justify the spend. I imagine that some properties will buck this trend as many players will, I would assume, make their casino choices based on whether or not the property has a buffet.
3.) Free Play and Other Comps:
Another change that will apply mostly to low-rollers is that casinos are going to focus on their more profitable customers in the middle-roller to high-rolling tiers. For that reason, low-roller customers can probably expect that their Free Play and comps will be cut, which will probably be even more in higher-end casinos, but will probably apply in most places---except maybe those that almost exclusively are low-roller locals casinos.
The reason is that marketing costs a non-zero amount of money and requires non-zero staff effort. During the pandemic, we’ve also seen it widely reported that many casinos decided to go with offers being available only online, by E-Mail, or both and did away with physical mail. We would expect that some of these properties will decide to save on direct mail costs (most of it is handled by a contracted third-party) and to remain some form of online marketing only to low-rollers.
In their earnings calls, companies such as El Dorado Resorts (now Caesars-post merger) and Stations Casinos also indicated that they would be pulling back on player incentives to the extent that incentives would be focused on their more profitable customers. For Stations Casinos, that’s really saying something, as, until recently, they were considered one of the more, “Locals-Friendly,” casino chains.
In areas with high competition, such as Off-Strip Las Vegas, we expect that other casino companies might step in to fill the void to some degree. No matter how low the roller, as long as they are at least minimally profitable customers, some casino or another will want their business.
When it comes to Regional/Local casinos in less-competitive environments, the micro-rollers are probably going to be cut out entirely with fewer incentives for lower-tier players. That’s especially true in the case of casinos that opt not to reopen their buffets, as that was one of the easier perks/comps to give people on the less profitable end of the spectrum.
Increased Costs
In addition to getting rid of certain niceties, many gamblers around the country can expect increased costs in various markets.
1.) What the Hell is an Energy Fee?
In addition to a Resort Fee, at least one Vegas-area hotel has created an, “Energy Surcharge.”
How in the Hell is the cost of electric/water not already worked into room rates?
Unfortunately, indications are that this might make its way, eventually (if tolerated) to Las Vegas Strip casinos. Of course, these things usually don’t stay in Las Vegas for very long, as we saw with Resort Fees, even some Native American owned Tribal Casinos---often in the middle of nowhere---charge a Resort Fee.
2.) Resort Fees
We expect that those few properties to temporarily suspend Resort Fees will reinstitute them approximately 100% of the time and that Resort Fees, in general, will continue to increase across casino properties. Additionally, we would not be surprised if some Regional/Local casino properties that did not have Resort Fees in 2019 choose to institute them anywhere from tomorrow to within two years from now.
Once tolerated, Resort Fees had a tendency to increase for Las Vegas, Atlantic City and other properties to have such fees to begin with. While that trend may have been temporarily suspended due to Covid-19, as the occupancy numbers begin to improve, we expect the trend of increasing fees to pick back up.
3.) Parking Fees
Yay, parking fees are coming back!
MGM Resorts was one of the first, if not the first, to announce that parking fees would be reinstituted in the early Summer months. Who else would be the first to do it? You knew it had to be either them or Caesars.
Why? Because, screw the customers, that’s why. If you’re not going to gamble/spend enough to get your parking fee waived, then we don’t even want you visiting...unless you pay a parking fee, of course.
We expect the trend of new/increasing parking fees to pick back up where it left off in 2019, even if the revenues and occupancy percentages aren’t where they were to end the year.
4.) Table Limits
If Atlantic City was any indication, we expect increases to Table Minimums during weekends, and particularly weekend evenings, compared to where they were in 2019. While that’s not a direct fee, per se, it certainly represents an increased cost to play by way of the House Edge.
I mean, Table Limits were higher in Atlantic City DURING Covid, during slow times, than I remember them even being in 2019.
In Summary
To summarize, the focus is mainly going to be on medium to high-rollers and getting more money out of people who are basically going to go to the casinos no matter what the casinos do to them in fees. Some Regional/Locals casinos might be exceptions, but even most of those are going to pull back on comps somewhat---even if they don’t start charging parking fees and increasing Table Minimums.
Conclusion
I hope that you enjoyed this look at the broader casino industry before, during and after Covid.
Unfortunately, for the future, we expect casinos to generally pick up right where they left off in terms of cutting comps, instituting fees, increasing existing fees and reducing return-to-player anywhere they can, as was the case in 2019.
The lone bright spot has been online gambling, which has seen increased revenues in both state licensed and regulated casinos, as well as off-shore online casinos, partly due to physical casinos being shuttered during parts of 2020 and otherwise seen as undesirable, by some. Online gambling has also been a bright spot in the sense that it almost universally (almost because, strangely, Keno games are usually a BIG exception) offers better returns-to-player than comparable games in land casinos-as has almost always been the case.
We see physical casinos starting to, “Return to Normalcy,” which means back to increasing fees and finding new, creative and sometimes ridiculous, ways of separating visitors from their money. The more things change, the more they stay the same.
Everyone reading this lived through Covid (at least, so far), congratulations! Unfortunately, “Value Gambling,” at least in physical casinos, continues to die a slow death.
