After the year Las Vegas casinos had in 2020, investors may be looking for a recovery to take shape in the second half of 2021, and pick up speed next year. Yet from data that's available, there doesn't seem to be much to support that conclusion.
Certainly broadly distributed COVID-19 vaccines and easing of casino floor restrictions will help, but there's still no convention business occurring in Las Vegas and little in the way of gambling going on. It may pick up some, but there doesn't appear to be any momentum whatsoever to jump-start a full-throated casino revival.
Going nowhere fast
The Las Vegas Convention & Visitors Authority recently released its December data showing visitor volume to the city plunged 64% from 2019 and is down 55% year to date. It also indicates that after a brief rise in the summer, visitors are staying away from Las Vegas in ever-increasing numbers.
McCarran International Airport in Vegas reported there were 22.2 million arrivals and departures last year, a 57% decline from the 51.5 million people who went through the airport in 2019.
The lack of visitors meant occupancy at Las Vegas hotels was also negligible. Total occupancy for December was just under 31%, and for the year it was just 42%, or just 19 million people. It's the lowest turnout in over 30 years for the city.
It's also why numerous hotels are closing during the week and opening only on the weekend. Wynn Resorts (NASDAQ:WYNN) implemented midweek closures at its Encore hotel in October, while Las Vegas Sands (NYSE:LVS) completely closed the Palazzo. Similarly, MGM Resorts (NYSE:MGM) shut its hotels at the Mirage and Mandalay Bay resorts Monday through Thursday.
Its revenue per available room (revPAR) also cratered in December, plunging 71% from the year-ago period to just $30.93, and that is much worse than the year-to-date $50.65 revPAR recorded for 2020.
A global malaise
It's true that rising numbers of coronavirus cases have led to renewed crackdowns and restrictions, but there's just not any real demand for in-person gambling at the moment.
And it's not just Las Vegas, either. New Jersey, for example, continues to operate under some of the most oppressive guidelines in the country, and Gov. Murphy just extended for the 11th time his public health rules, though he did eventually allow for round-the-clock food and beverage service and for casinos to increase floor capacity from 25% to 35%.
Other casino operators in regional markets are also contending with tough social distancing and closure mandates, and even in the world's largest gambling market, Macao, China, casino operators are ailing.
The travel and tourism industry has been decimated. The American Hotel & Lodging Association predicts that while U.S. hotels will add 200,000 jobs this year, the industry will remain nearly 500,000 jobs below its pre-COVID-19 employment level of 2.3 million workers.
The AHLA doesn't expect the industry to return to 2019 levels until 2024.
The U.S. Bureau of Labor Statistics reports that over half a million workers in the leisure and hospitality industry lost their jobs in December, and since last February, employment remains down 23%, or some 3.9 million jobs.
The one thing that may allow individual casinos to survive this calamity is online gambling and sports betting.
A home run opportunity
MGM Resorts reported full-year earnings last week that showed revenue plunged 60% from 2019, generating an adjusted loss of $3.94 per share compared to an adjusted profit of $0.77 per share in the prior year.
Vegas Strip revenue was down 61%, regional revenue was down 45%, and Macao revenue was down 77%. Yet MGM's sports betting and online casino gambling BetMGM app gained "significant market share" across the country.
Sports betting is the fastest-growing segment of the market, and New Jersey has quickly become the sports betting capital of the country, yet MGM's Borgata is the third-biggest sportsbook in the state, behind FanDuel and DraftKings.
Wynn Resorts is also looking to expand its own market presence, while Las Vegas Sands, which has long been against online gambling because of late-chairman Sheldon Adelson's moral opposition to it, may even enter the picture.
Get smaller to grow bigger
What these results highlight is that there's little need to actually be physically present at a casino to gamble, and consumers are finding there are more opportunities in sports betting to get some action.
Even if restrictions on casino floors are eased, don't look for the industry to bounce back quickly. It seems more hope than reality that casinos will begin a recovery to any appreciable level later this year, or even next year.
Casinos have a long road ahead of them, and just as the pandemic exposed that retailers and restaurants had too many stores, casinos may find they have too many gaming halls and hotels and need to become smaller operations if they want to survive.