The world is different as a result of the COVID-19 pandemic and the US casino business hasn’t escaped unscathed. Las Vegas in particular is being hit hard, from closures to layoffs. While regional casinos are seeing visitors within driving distance, Las Vegas depends on visitors flying in from all over the world. However, Hard Rock International Chairman and CEO of Seminole Gaming Jim Allen says things won’t be this way forever.
In a recent interview with Fox Business, Allen said:
“I think Las Vegas is kind of in a unique category right now.”
“We certainly believe long-term that market will come back as … people feel more comfortable with traveling,” he continued. “Certainly if we look at regional gaming markets, actually they’re performing very well so it’s really based upon geographic area at this particular point in the gaming industry.”
Casino customers are visiting regional casino resorts in their home states as they slowly ease back into life outside of quarantine. But even them visiting these casinos outside of Las Vegas is a good sign — the interest is still strong and it’s a first step in a long road back for Vegas casinos.
There’s an assumption that leisure travel will resume once there’s a vaccine for COVID-19. Additionally, conventions and business travelers are expected to return to Las Vegas when there’s a vaccine available, or perhaps when case counts become scarce.
Where’d everybody go?
Las Vegas is indeed in a unique category compared to other casino markets. This isn’t anything new. Other casino markets depend on tourists within driving distance as customers, while Las Vegas has always depended on a variety of customer segments. There is something that appeals to every type of customer: luxurious big spenders, business travelers, celebration travel including bachelor parties, foodies, budget trips, family vacationers.
Visitors from all over the world travel by airplane and car to Las Vegas. According to the Las Vegas Convention and Visitors Authority (LVCVA), 42.5 million people visited Las Vegas last year. That was up slightly from the previous year.
The visitor report shows that 6.6 million visitors were in Las Vegas for a convention or meeting. The last time the LVCVA tracked international visitors was in 2018 when 5.8 million people visited Las Vegas from another country. Together, these groups account for approximately 12 million of the 42 million visitors in Las Vegas in 2018 and likely again in 2019.
Without conventions and limited international travel, Las Vegas is losing around 25% of its visitors this year.
A different report from the LVCVA shows that regional traffic to Las Vegas by car was only down by 9.9% in July. That could be a lot worse. Las Vegas is expecting to see a bounce in visitation on Labor Day weekend that’s similar to the increase in visitation during the July 4th weekend.
There’s a road back for Las Vegas
The slow road back to “normal” starts with changing how the casino-resorts market to customers. There are fewer people traveling for business and pleasure by airplane in the US and around the world. The city is changing how it markets itself and who it markets to.
While weekends are relatively busy in Las Vegas, for now, the weekdays are pretty quiet. For example, in July weekend hotel room capacity was 54.4%. Midweek occupancy was lower at 36.9%. This includes a slight increase from holiday travel for July 4th weekend.
During Caesars’ most recent earnings call CEO Tom Reeg said the company had hotel room occupancy as high as 70% with a goal of reaching 80% this quarter. MGM Resorts has a “Work From Vegas” promotion to help boost its midweek occupancy. Meanwhile, Wynn Resorts is focusing on becoming a “Super Regional” property targeting potential visitors in California, Arizona and Washington with a special offer with luxury airline JSX.
Focusing on the short-term is about all the casino operators can do while waiting for governmental restrictions to be lifted. Capacity is limited in restaurants and on the casino floor. Bars, including high revenue-generating video poker bars, that don’t serve food are closed.
Entertainment is slowly returning to casinos. Rose.Rabbit.Lie and the Barbershop at the Cosmopolitan, for example, are offering ambiance entertainment for a limited number of guests. It will take some time before business gets back to pre-COVID levels but its slowly coming back.
Allen remarked, “as far as the overall aspect of entertainment, live music, shows, sporting events, I do believe that once we see some type of cure or vaccine for the pandemic that people will slowly graduate back into wanting to come out…
We certainly think, and frankly we purchased our rights back about two, three months ago, right in the middle of the pandemic because we are a believer in the Las Vegas market on a long-term basis.”
Looking ahead at Las Vegas
The journey back to the “good days” will trickle in for the foreseeable future, but casino operators are doing their best. Non-gaming accounts for approximately 70% of the revenue for properties on the Vegas Strip. The properties can change strategies but the business will still be down until COVID-19 is less of a threat and restrictions are reduced.
Some day in the future, conventions, live events, and nightclubs will reopen. There have even been unsubstantiated rumors about New Year’s Eve re-openings. It’s likely the Electric Daisy Carnival (EDC) will proceed with its May 2021 festival dates, after being postponed twice.
Eventually, even something seemingly small like the ability to open all bars will help the bottom line. Unfortunately, for Las Vegas businesses there’s no “Total Reopening” on the way quickly.
Macquarie Securities Gaming Analyst Chad Beynon doesn’t see a completely full recovery anytime soon. In a recently published note, he said “we believe with a (COVID-19) vaccine, the Las Vegas market will see a quick recovery and our bull case scenario points to 2023 being the break-even year.”
The date sounds very far off but it’s almost 2021. Capacity limits will keep conventions and large scale live events on hold for a while. The casino corporations are operating with a new business model. When visitors return the casino operators should be lean and more efficient than ever. In turn, they should be more profitable.
Business in Las Vegas looks scary today but the future should be bright for Las Vegas casino operators when more visitors are comfortable traveling again.