Covid-19 is taking a brutal toll on gaming nationwide, but it’s dealing out a special kind of pain on the tourism- and convention-dependent Las Vegas Strip.
This was clear from last week’s release of the first official tally of gaming revenues since Nevada’s casinos began reopening on June 4. For those 27 days, North Las Vegas and the Boulder Strip, suburban markets patronized mainly by residents, were down 23.2 percent and 32.4 percent, respectively, compared to June 2019. Downtown was off by 55.5 percent, the Strip by 61.3 percent.
Of course, this is a vast improvement across the board over April and May, when there was barely any business at all. But gaming revenues tell only part of the story, and on the Strip, where hotel rooms, food and beverage and entertainment have been the big money drivers for years, gaming is not even the largest part.
Macquarie Securities gaming analyst Chad Beynon noted this in a new research report. Strip gaming win in 2019 was less than 1 percent below the record high of $6.5 billion in 2007. But over the same period, revenues from hotel rooms, shows, dining and retail were 30 percent higher: $12.07 billion versus $9.3 billion.
This is a problem, because entertainment venues are closed, the celebrity performers are gone, many restaurants are still shuttered due to slack demand, and major trade shows and conferences have been canceling since March.
“Midweek business (in Las Vegas) is soft due to the lack of business travel, which plays a significant role in generating profitability,” said Michael Lawson, senior research analyst for the state Gaming Control Board.
“Without large events that drive visitation and demand like concerts, shows and athletic events, the ability to fill rooms and increase gaming revenue will be difficult.”
High hopes for the National Football League Draft, which was supposed to come to the Strip in April, are history. The four-day Global Gaming Expo won’t be held this fall. CES, the tech industry extravaganza that kicks off Las Vegas’ annual convention calendar, won’t return in 2021, spelling the loss of 175,000-plus attendees and more than $280 million in economic impacts. Scheduled to begin January 6, CES was expected to include the debut of the Las Vegas Convention Center’s new $980 million West Hall expansion and the Boring Company’s $52.5 million underground transit system, developed by Elon Musk.
“Undoubtedly a setback,” said Jeremy Aguero of Las Vegas-based economic research firm Applied Analysis.
At least 18 conventions with at least 10,000 visitors each were scheduled to take place in Las Vegas between August and the end of the year, according to data from the Las Vegas Convention and Visitors Authority. Of those, nine are still planning to hold events in 2020, and nine have been postponed to 2021 or canceled.
“I suspect that we will see other conventions scheduled during the same timeframe taking pause to re-evaluate their 2020/2021 programming,” said Josh Swissman, founding partner of the Strategy Organization in Las Vegas.
There’s speculation that this year’s National Finals Rodeo, the city’s premier December event, could be next to drop off the calendar. Also, it’s unclear if the NFL’s Las Vegas Raiders will be welcoming fans in September to its maiden season at the $2 billion Allegiant Stadium.
“Following five years of 42 million visitors, 2020 was expected to break that mark, given major demand drivers,” Beynon said. “However, Covid-19 disrupted these plans, setting up 2020 for some of the worst visitation trends in decades.”
People still want to come to the Strip, Beynon said, but a lack of flights and the weak convention and meetings trade are holding them back.
McCarran International Airport reported the return of more than 1 million travelers in June, up significantly from May’s 392,712 and April’s dismal 150,000 or so. Overall, nearly 11.7 million passengers passed through the airport during the first half, less than half of 2019’s 25.2 million over the same period.
June’s volume was down more than 76 percent from last year. Domestic arrivals and departures were off 74.7 percent. Internationally they were down 99.98 percent from 327,127 in June 2019 to just 70. And the sharp rise in new coronavirus cases in Las Vegas since the reopening could take a bite out of the demand that was expected in July and August.
“We’ve seen a dramatic impact to our trends, as far as traffic, revenue and bookings,” said Gary Kelly, CEO of Southwest Airlines, the city’s largest carrier.
“We expect the rest of the summer to remain challenging for us and the industry,” said Spirit Airlines CEO Ted Christie.
As Brendan Bussmann, director of government affairs for industry consultants Global Market Advisors, summed it up: “Until (convention) business can come back, Vegas is going to continue to suffer.”
Aguero, for one, doesn’t see that happening for another 18 to 36 months, and believes the timing will depend heavily on development of a vaccine. “That will be a key turning point for our economy and that of the nation,” he said.
But even that is being re-examined in light of the vast cultural shifts the pandemic is likely to leave behind.
“As the technology improves and convention and trade show attendants get younger, meaning they’re very comfortable doing business remotely, we expect the industry to fundamentally change,” said John Restrepo, principal of RCG Economics, a consulting firm based in the city. “Anyone who thinks Las Vegas will return to a pre-Covid convention and trade industry is not being realistic.”
Meanwhile, Nevada’s June gaming revenues are in, and as expected, the year-on-year decline was steep—45.5 percent versus June 2019—but considering the state’s win had fallen 99.6 percent in April and 99.4 percent in May, it’s not too bad.
Results released by the state Gaming Control Board show the industry collected $566.8 million from gamblers during the 27 days casinos were open in June, compared to $1.04 billion a year ago.
The Las Vegas Strip recorded the biggest decline in relative terms, down 61.3 percent at $238.2 million, compared to $616.6 million in June 2019.
Downtown Las Vegas was down 55.6 percent at $23.1 million. The Boulder Strip won $45 million, down 32.4 percent. North Las Vegas was down 23.2 percent at $17.4 million.
In the north of the state, Reno fared not too badly, recording $46.4 million, down 8.5 percent. South Lake Tahoe at $5.7 million improved on last June’s results by 6 percent.
The state’s sportsbooks suffered their first monthly loss since July 2013, taking in only $483,000, a decline of 102.9 percent on a massive $75.8 percent drop-off in volume to $78.2 million. The loss was due to the payout of over-the-count football betting tickets on previous games that were cashed in during June.
And in related news, Nevada’s recent surge in new Covid-19 infections has prompted Governor Steve Sisolak to announce an overhaul of the phased reopening of the state’s economy that was developed back in March.
The governor and his advisors have come up with a “long-term mitigation strategy” that will rely on more local indicators of the spread of the virus and hopefully provide more accurate indicators of what’s safe for businesses, residents and local officials.
The new plan will replace industry and statewide guidelines and evaluate data in a more narrow fashion, using contact tracing data to identify and place limitations on high-risk businesses. The state will also narrow county-by-county guidelines and evaluate data by municipalities and zip codes.
Sisolak said also that any gaming property not complying with the state’s Covid-19 guidelines could have part or all of their property closed by regulators. This includes a mandate imposed at the end of June, three weeks after the state’s casinos reopened and new infections began to spike, that masks be worn in all public places.
“We’re close to five months in, no more excuses. If people aren’t following the rules to keep us safe, there needs to be consequences,” he said.
