Caesars Entertainment CEO Tom Reeg said Thursday there are encouraging signs for his company and the hospitality industry as it tries to do business during the coronavirus.
Reeg also said that “media fear mongering” over the coronavirus ahead of the Fourth of July weekend muted visitation across the country. But he touted Caesars’ strength compared to their Strip competition and that second quarter group bookings for six months to two years out were “dramatically in excess of last year.”
Reeg said during an earnings call that their Las Vegas properties did about $100 million in revenue in June and about $25 million in (earnings). That softened in the first week of July before returning to that original pace.
Reeg said Caesars mid-week occupancy in Las Vegas is running about 50% and starting to climb again. Weekend occupancy is in the high 70s despite a self-imposed cap because of what customers can be offered in non-gaming, food and beverage limitations, not being allowed to open bars, and social distancing at pools.
“Caesars was capping occupancy as properties reopened (starting June 4) at 80% and was running that on weekends and pulled back to 70% as (COVID-19) cases rose in Nevada,” Reeg said. “We’ve started to move that back up as we took over.”
Other Strip reports have cited midweek occupancy in the 30s and weekend occupancy in the 50s.
Reeg said Caesars is different from its peers in Las Vegas.
“We are putting customers into rooms and supremely confident as to how much revenue we’re going to get from that room during the visit,” he said. “We’re far less dependent on the random guy who books (outside) and you don’t really know what you’re going to get. It has shown us the power of Caesars Rewards that’s clearly a different mix and occupancy level than our competition here. That is prior to Eldorado customers coming into the Caesars’ database so we think that is going to continue to get better.”
Reeg said COVID-19 numbers in Las Vegas are in a better place than they were two weeks ago by stabilizing. Unless that goes in the wrong direction, he said Las Vegas as a whole will do better.
“Every hotel (of ours) that is open is positive (in earnings),” Reeg said. “We feel we’re going to build from there. If you think about a stable virus situation, the next step in Las Vegas is bars would come back, which we think is a reasonable possibility relatively soon. Then you will be looking at socially distanced entertainment as a possibility.
“We’re unique in our mix of entertainment in that we’re not as dependent on headliners and Cirque as the rest of the market. We have a lot of shows that are in smaller venues, multiple times a day and would be profitable at typical social distancing guidelines. As those come online, we should have a mix of entertainment that isn’t matched in the market because of the structure of how us and our peers have tackled entertainment historically.”
Reeg dismissed any fears that “this level of business is not unsustainable. It’s undoubtedly true that we have benefited from customers that have little other entertainment options other than visiting their properties.”
Reeg said as those other options -- movie theaters, cruise lines and sporting events come back, the gaming industry will see the return of its softest segment -- those 55 and older.
“Those are people fearful of leaving their house at this point,” Reeg said. “Despite seeing some softness there, we’re putting up the numbers we’re putting up. Our unrated business is up substantially since reopening has replaced the lag in 55-plus. We’re going to keep some of that unrated business, and I think the 55-plus is coming back. Regional is very strong now and going to get stronger.”
Reeg said existing group business is canceled for the near term because of a state cap of 50 people gathering for conventions and events. Once the cap is lifted, bars reopen, entertainment restarts, Caesars will be able to fill to any caps established.
Caesars booked $200 million in group business in the second quarter vs. $120 million in the same period in 2019 with 85% of that new business rather than rebookings, Reeg said.
Eldorado Resorts closed its $17.3 billion merger with Caesars on July 20. Some 51 of its 54 nationwide properties, minus the Rio, Planet Hollywood and Cromwell of its nine in Las Vegas have reopened. There’s no timeline to reopen the properties at this time.
Reeg said they still intend to sell a Las Vegas property. Previously before the coronavirus hit, there was an expectation it would be within a year after the merger closing. That could be extended to 18 months, he said.
There are drags on business in Atlantic City, New Orleans and Reno -- locales where customers come beyond an hour or two drive. Atlantic City is hurt by closed restaurants and inability to serve alcohol and 25% access to the casino floor.
Reeg said don’t expect a return of promotional spending in regional markets. Those are deemed to be unnecessary by everyone in the industry, he said. The industry has also come to the conclusion that buffets aren’t money earners and not needed.
With William Hill taking over Caesars’ sportsbooks, Reeg said he was excited about the partnership and expected $600 to $700 million in revenue in 2021 including Caesars’ iGaming portfolio.
“It’s similar to others out there, but the difference is we’re making money,” Reeg said.
Without providing details, he said there would be an announcement in the sports betting realm by the end of the year. He said it will be part of a comprehensive strategy on how to prosecute the sports opportunity.
“This is the biggest growth opportunity I have seen since riverboats were being legalized in the early 1990s,” he said. “We’re looking for what’s the best path operationally for running the business and what makes the best sense for our shareholders. The marriage of that is what we’re hoping to be able to announce by the end of the year.”