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The Las Vegas Strip Is Shutting Down Again (Sort Of)

By Travis Hoium - Nov 16, 2020 at 7:16AM

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This time it's lack of demand hitting the Las Vegas Strip.

The Las Vegas Strip seemed to be having a relatively remarkable recovery from its spring shutdown compared to gambling locations like Macao and Singapore. But the momentum may be shifting now that COVID-19 cases are spiking again and casinos are closing their doors once more, at least during the week. 

MGM Resorts ( MGM 7.65% ) followed Las Vegas Sands ( LVS 4.74% ) in announcing that Park MGM will be closed Mondays at noon to Thursdays at noon, primarily because of a lack of business travelers. And this shows that a full recovery in Las Vegas may take longer than hoped. 

The Las Vegas sign at sunset.

Image source: Getty Images.

The shutdown (version 2)

I'll start by pointing out that the shutdown taking place in Las Vegas right now is not the same as the one in March. So far, Park MGM and Palazzo have stopped taking weekday reservations and Park MGM will also close its casino. Think of this as a pullback in capacity during the week to meet demand or lack thereof. 

I'll note that both MGM and Las Vegas Sands have other places to put consumers that come to their resorts. The Venetian Las Vegas is one of the biggest resorts in town, and if customers have to be shifted from Palazzo to The Venetian Las Vegas that's OK with Las Vegas Sands. MGM Resorts owns nearly half of the Las Vegas Strip and can certainly move customers around. So a small shutdown is notable, but not all that alarming today. 

Las Vegas is still on decent footing

The recovery of the Las Vegas Strip has been impressive, but it has to be put into context. In the three months ended Sept. 30, Las Vegas Strip gambling revenue was down 39.2%, which is a lot. But that's better than Macao's 93.1% decline, similar to other Asian locations. 

What hasn't come back is vacation travel in general, and weekday travel specifically. In September, 3.1 million people visited Las Vegas, down 51% from a year ago. Air travel was down 60% in the month. And the biggest drop in demand is during the week. 

It doesn't look like business travelers are returning anytime soon

The reason MGM and Las Vegas Sands have shut down resorts during the week is that business travelers simply aren't traveling. Conventions and meetings used to fill the Las Vegas Strip during the week, and now that business has dried up. 

When it comes to COVID-19, the risk tolerance for business customers is simply different from that of other Las Vegas customers. A business that's gathering large groups of people together has to worry about multiple people getting sick and the public relations from a potential outbreak. An individual or small group of people can have a different risk tolerance, and that's what's driving Las Vegas' recovery so far. 

A light at the end of the tunnel

The good news for long-term investors is that a vaccine (maybe a few) might be on the way, and sometime in 2021, the pandemic may be in the rearview mirror. The fact that casinos and hotels are shutting down due to lack of demand is jarring, and the loss of business travelers could last for a while. But there's a light at the end of the tunnel for consumer discretionary stocks, and casinos could be back to more normal operations within a year. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

MGM Resorts International Stock Quote
MGM Resorts International
$41.23 (7.65%) $2.93
Las Vegas Sands Stock Quote
Las Vegas Sands
$35.59 (4.74%) $1.61

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