Bracing for the next wave in Vegas

Nov 18, 2020 3:00 AM

With skyrocketing coronavirus cases in Nevada, casinos in Detroit and New Mexico being shuttered temporarily, others across the country getting hours and operations cut back, and California Gov. Gavin Newsom urging his residents to remain in the state or quarantine when they return, Las Vegas is wondering what’s coming for the casino industry here.

Nevada Gov. Steve Sisolak’s request last week that the state’s residents voluntarily stay home for two weeks and how he might be forced to take drastic action if the situation doesn’t improve, has raised a red flag after Nevada shuttered its casinos for 2½ months earlier this year.

There’s no indication that will happen this time, and Wall Street seems to be taking Sisolak’s warning in stride, especially with news Monday that Moderna is the second pharmaceutical firm to announce it has an effective vaccine.

“With two notable companies putting up pretty strong vaccine trial results, the market is feeling a lot better about the prospects of a real recovery and see light at the end of the tunnel with the pandemic,” said John DeCree, the global head of institutional research at Union Gaming. “Like everywhere, there’s a little bit of concern about what politicians might do in the near term to help slow down the winter surge, but the bigger picture is the vaccine is close as ever right now.”

DeCree said it’s different from last March when people didn’t know what to expect and how long casinos would be closed and the impact it would have on the gaming industry. Some spot closures would be a “headwind and another bump on the road” but the announced closures might be an outlier, he said.

“Sisolak has asked the population to do its best over the next two weeks or there could be some mitigation measures,” DeCree said. “It seems like it would be more of a scalpel than a blanket shutdown. Our expectation is we would see increased mitigation measures before a closure again. Hopefully, those measures, if needed put the trajectory of cases and positivity rates back in the right direction and avoid a full closure.”

Las Vegas casinos have responded to the market conditions of a lack of conventions by reducing restaurant hours and other steps. ParkMGM recently joined Encore and the Palazzo in closing its hotel midweek. The Rio will do the same when it opens in December.

In third quarter earnings reports, casino executives warned of a slowdown of business in November and December and a potential change in operations. The most recent traffic numbers from California border crossings have slowed slightly from September and October.

Brian Gordon, a principal with research firm Applied Analysis, said the California drive-in traffic has been even more important since the reopening of casinos because people aren’t flying as much to Las Vegas. Traffic at McCarran International Airport has been down 60%-plus since June.

“People are more comfortable traveling by car than air and to the extent there are restrictions on travel that is likely to have a direct impact on Southern Nevada tourism,” Gordon said.

Any drop in visitation caused by a reduction in travel from California could cause more properties to cut back operations midweek, Gordon said.

“Without conventions and meetings activity, hotel properties are likely to struggle during that midweek time frame,” Gordon said. “What you’re seeing by some of the operators is the new market reality that exists. It’s a possibility that more could do that given what’s happening with meetings and fewer leisure travelers seeking that midweek time frame.”

It’s not just travelers but even some of the locals’ casinos could be impacted by Sisolak asking local residents to stay home, Gordon said.

Casey Clark, senior vice president of strategic communications for the American Gaming Association, said it continues to work with and take guidance from local, tribal, and state leaders like Sisolak.

“Every state is handling this differently, so adaptations based on the ever-changing landscape continue to be made on a property-by-property basis,” Clark said.

Casinos are monitoring what’s next and preparing for whatever happens.

“We are fully supportive of the Governor’s efforts to keep Nevadans and our guests safe,” according to a statement from Wynn Resorts. “We began implementing various work-from-home programs for all back-of-house employees.”

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Virginia Valentine, president of the Nevada Resort Association, said she doesn’t want to speculate on what Sisolak will do, but the industry is doing everything to keep the COVID-19 numbers down and maintain a safe environment. As for California Gov. Newsom’s advice on traveling out of state, Valentine said those visitors will make their own decision.

“What we’re doing is making sure the guest experience is as safe as it can possibly be,” Valentine said. “We’ve been open since June 4th operating with these enhanced safety plans. I think it’s important for everyone to know we’re in a highly regulated environment here. We’re taking extraordinary measures to make sure everyone who visits here is safe.”

Stephen Miller, a UNLV economics professor, said there should be concerns about what might happen in Las Vegas with new restrictions if the COVID-19 spike doesn’t slow down. Any shuttering of businesses means a loss of jobs and income that is spent throughout the community, including in casinos, he said.

There continues to be a deadlock at the federal level for any financial relief, and Miller said the first round of relief in the spring made a big impact on Nevada incomes, which in turn spurred consumer spending.

“We could use another relief package at the federal level now that we can see the end,” Miller said.

The relief, however, might have to wait until after Joe Biden is inaugurated on Jan. 20, Miller said. He said despite the spike and impacts it will have, there should be a lot of optimism about vaccinating people in the first half of 2021.

“Once that’s distributed in 2021, that means 2022 could be a pretty good year,” Miller said.