Vegas casinos try to find strategies to weather difficult times

The earnings reports for Vegas casinos for the second quarter of 2019 show that Vegas is rebounding from the downward trend of 2018. While Vegas casino online playing is on the upswing, like here at Grande Vegas Casino, visitation at on-site casinos is slow in the rebound. It will take a while before the casinos see the numbers start to rise again.

RevPAR -- revenue per available room, which is the most commonly-used metric to assess how Las Vegas casinos doing – shows that Las Vegas casinos are still making money but gaming income as a whole is declining . That makes investors nervous. Casino stocks have fallen and some analysts believe that Las Vegas has finally pushed its luck too far.

Even 20 years ago, Vegas was THE site for people to visit for gambling entertainment.  However, today most states have their own casinos. Vegas casinos have been forced to reinvented themselves as places to eat, drink, shop and watch shows. Gambling has become incidental and the industry has been forced to accept that gaming is a smaller piece of the pie.

The news that both visitation and earnings are not increasing is throwing a scare into investors. Casinos are examining their options more closely

Sands

Las Vegas Sands seems to have decided to focus its attentions, resources and energies on Asia. For now, the Sands Vegas property is stable but the company has decided to sell the Sands Bethlehem  in Pennsylvania and use the capital to invest more heavily in Asia.

Sands Bethlehem has never been a huge money-maker. The casino isn’t located in a big gaming market and it isn’t even near a major city. When an offer by the Poarch Band of Creek Indians of Alabama was made to buy the property, Sands jumped on it.  Sale price was $1.3 billion.   

Sands has expressed interest in investing the proceeds of the sale to expand its holdings in Singapore and Macau. The Sands Cotai Central in Macau will be renovated and a London-themed resort will be added. The company has already embarked on a $3.3 billion expansion of the Marina Bay Sands.

What Sands is really hoping for is to win one of the 3 Japanese IR gaming licenses. If it does it would, potentially, invest as much as $12 billion in the project. Sands has already presented proposals to several Japanese cities but, as of yet, no concessions have been granted and there’s no word on when construction will get underway.

Sands must decide whether it should hold onto its cash, which isn’t recommended in today’s low-interest-rate environment, increase dividends or buy back stock with the available cash reserves that it will become available after the sale of the Sands’  Pennsylvania property. Ideally, Sands would like to begin investing in Japan but the IR license is anything but a sure thing.

Another reason for the sale of the Bethlehem Sands is about the company’s interest in focusing on the markets where it has differentiation. Its Singapore and Macau properties seemed to be the best option for expansion so the company felt it wise to get out of the regional gaming market.

Parking Fees

When compared to the sale of a $1.3 billion property, parking fees in Las Vegas seem like a petty subject. However, parking fees have become a bone of contention in Vegas. Thee once-free amenity, for which visitors are now expected to pay, has generated a high level of animosity among Vegas customers.

Wynn Resorts, in an attempt to win back patrons, is returning to a policy of free self-parking. The massive backlash against paid parking convinced Wynn that the extra charge wasn’t worth the bother.

The company decided to drop fees for self-parking which they instituted in 2017. Guests were outraged and Wynn listened, reversing itself. The company announced that self-parking will be free for all guests of Wynn Las Vegas and Encore, without limitation.

Marilyn Spiegel, President of Wynn Las Vegas, said the company’s goal is to create a seamless experience for their visitors. It is, Spiegel said, a cornerstone of the five-star service they provide and that this “extends to [their] complimentary parking facilities, where [they] take great care to ensure they are safe, spotless, and accessible” for all guests.

The positive impact of the reversal of parking fees might, however, be offset by an increase in resort room fees from $39 to $45.

Layoffs at MGM

MGM Resorts International has decided to lay off employees from its Las Vegas property and other MGM properties across the U.S. Most of the employees are in non-union, management positions. 254 employees will be laid off and the company said that they will be announcing an additional round of cuts “in a few weeks.”

The changes are part of the company’s reorganization effort. “MGM 2020” will, if plans go well, save the company $300 million. CEO James Murren said, in a letter to stockholders “We need to create a company that is streamlined, nimble and empowers leaders. From the beginning, we have been transparent that our strategy would include reskilling, reorganization and — regrettably — a reduction in our workforce” and that the changes are part of a “comprehensive change that is meant to be transformative.”

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