Mission146
Posted by Mission146
Sep 15, 2020

Introduction

Everyone is well aware of what Coronavirus, COVID, or CV-19 (hereafter, ‘CV’) is by now, so we’re going to skip the part where I tell you what you already know about that.

Back in the time of March-April, what was somewhat unknown, though easily speculated, is the impact that CV would have on casinos. If you think about it, everything that the casinos do is directly related to an industry that was negatively impacted by CV, and the shutdowns, so we could see how this would have a great cumulative impact on casinos properties.

Airlines & Travel Bans: When we look at travel bans and decreased air travel (as well as de facto limitations on state-to-state travel, in some instances) it’s pretty immediately clear that this would not bode well for the casino industry. Of course, that’s even more true in destination markets such as Las Vegas and Atlantic City, who might garner a greater percentage of revenues from overseas travelers than do casinos in other markets.

Of course, we haven’t had the opportunity to see how this plays out in the Vegas market long-term, because we don’t know how long countries with travel bans to the United States will continue to have same. Another unknown is how effective the highly-anticipated vaccine(s) is(are) going to be in countering CV. It could end up being nothing more than an additional layer of protection that makes contracting CV less likely, but not quite to such an extent that it becomes completely eradicated.

Restaurants: Of course, the Vegas market thrives not even on gambling in the majority on the Las Vegas Strip, but now garners more than half of its revenues in other venues---such as hotels, clubs and restaurants. With the limits on social gatherings in place, the effect is that it substantially cuts out the party crowd and gatherings such as conventions.

Even gambling-related conventions have been cancelled, and we also know that the even Cowboy Christmas has moved to Arlington, Texas for this year. They say they’re coming back to Vegas in 2021, but we’ll see what happens.

Anyway, all of the restaurant and club type venues are also feeling the pinch with CV afoot.

Economic Uncertainty: Naturally, nothing is worse for the casino environment than long-term economic uncertainty. The fact of the matter is that we don’t know, even if a vaccine is highly effective, whether or not all of these different industries impacted will make a full recovery.

There also remains some question about how different industries will operate long-term in terms of in-person conventions, and such, which kind of butter the bread in the Las Vegas markets.

As we have seen in many different industries, those who could reasonably transition to work-at-home and online based activities have largely done so.

All told, Vegas will probably be one of the last large-scale places to make a full recovery from everything CV-related because it basically relies on all of these other arenas to get back to, “Business as usual,” before that can happen.

Casino Exposure

With that, we can conclude that the casino companies with the most exposure to negative consequences of CV-19 are destination type casinos in destination type markets such as Las Vegas and Atlantic City.

Casino companies that primarily operate regional/local casinos were actually better positioned, geographically speaking, to handle the business downturn from CV.

Primarily, they are just more geographically diverse, so different states had/have less restrictive measures than some others. For the most part, though, almost all casinos have watered down food/beverage operations at this time. Additionally, most markets (if not all) are subject to different social distancing, cleanliness and capacity guidelines.

Still, it’s no secret that local/regional casinos generate a not insubstantial percentage of their revenues from...we’ll say, “Hardcore gamblers.” Naturally, these are the sort of gamblers that can be most counted on to appear even with the various guidelines and watering down of other casino services. Many casual gamblers go to casinos for an overall experience, including drinking and restaurants...but at this time, most casinos in the country are just glorified overgrown slot parlors.

SHORT-TERM V. LONG-TERM

The immediate impact on stock valuations was a sharp downturn as the states, one after another, began closing down different operations as CV (they felt) was such that only, “Essential businesses,” could operate for a time as they, “Flattened the curve,” so that the hospitals would not be overrun with a ludicrous number of CV patients.

Traders and investors were also able to connect the dots as relates the travel bans and everything else, so everybody just bailed.

Of course, savvy traders and investors were able to make some serious money here. There’s nothing better for savvy players than a massive overreaction to uncertainty, which is precisely what they saw happen.

Even assuming the worst in the early stages, it was pretty commonly theorized that a CV vaccine would be available in no more than eighteen months. Even without, like it or not, you can’t shut down the entire discretionary income economy forever, or soon enough, there won’t BE a discretionary income economy anymore because nobody will have jobs.

Still, I feel like traders and investors blew the economic impacts of COVID way out of proportion in the early stages. If there’s a MAJOR corporation of any kind out there that literally cannot survive eighteen months without revenues, then they were in precarious financial position to begin with. It’s not like everything basically shut down and 75% of the corporations out there were forced into bankruptcy...you really want your balance sheet to be a little more stable than all of that.

Market capitalization is a stock term that refers to the theoretical overall value of a company. Simply, you take the outstanding shares of stock and multiply them by the share price to get the market cap. It’s not a metric that I typically pay very much attention to because it’s based on little more than investor confidence, (as in, nothing having to do with actual financials) though I think it is pretty useful in seeing how massive the overreaction was as relates casinos and casino related companies:

Here comes a table of casino stocks where we will look at the share price on January 2, 2020, the low share price for the year, the current share price, the market cap on 1/2/2020 and the market cap at its low point to illustrate:

(Market caps are approximations)

Corporation Share Price 1/2/20 Share Price (Year Low) Share Price Today Market Cap 1/2/2020 Market Cap (Year Low) Market Cap Today
Penn National Gaming (PENN) $26.14 $3.75 $59.84 3.58B 515.8M 8.24B
Caesars Entertainment Inc. (CZR-Merged with El Dorado) $59.51 $6.02 $51.78 9.589B 971.5M 8.34B
MGM Resorts International (MGM) $33.66 $5.90 $22.98 16.61B 2.911B 11.34B

This is enough of a sample to see the different things at play here.

The first thing that I want to note is that I made one stock pick to different members of the forum here (can be confirmed to Wizard privately) and that pick was that PENN was AWESOME at a $9.00 share price. Of course, I set my one year price target at $19.00...so we can see that was very bad, but those who had it still made over 100% profits at my buy point.

Anyway, my reasoning was absurdly simple:

1.) I don’t care what happens in this world short of nuclear war...a fundamentally sound stock does not lose 85.65% of its value in two months' time. Not CV, not anything. The underlying notion that a company with a theoretical (confidence) valuation of 3.58 BILLION dollars can suddenly be worth only 515.8M is fundamentally absurd.

2.) In an earnings call, PENN straightforward indicated that they could go a full year with zero revenues and be perfectly fine. I later picked American Eagle Outfitters (AEO) for the same reason.

With something like CV, yes, there is a risk that some businesses are not going to survive. More likely, they might have to rework financials due to debt maturities and such, so for a company to come out and say they’re just fine without changing a thing is a great confidence indicator.

3.) Earlier in the year, Penn National Gaming had purchased Barstool Sports, which is a fairly well known sports news outlet. Perhaps one of the better-known podcasts was that of Pat McAfee, former Indianapolis Colts punter and ridiculously hilarious dude, though he’s no longer with Barstool.

Some investors were concerned about the timing, especially given that PENN shelled out 450M on the investment.

But, even that looks like its going to pay off in the long run. PENN has recently gotten approval from the Pennsylvania Department of Gaming to launch its Barstool Sports betting app and website, which is certain to bring in some money in the long-term.

It’s also no secret that many gamblers, particularly as relates sports betting, are turning to online casinos to make their picks. While the purchase may have given some investors sticker shock, it’s quite likely that it will pay dividends (maybe literally) in the long run.

4.) While some companies were laying off (CZR) and other companies were royally screwing over employees (looking at you, Whole Foods) PENN had announced (before we had any knowledge of what the Federal Government might do) that they were going to pay workers who could not work due to any casino closures for at least a month.

If you really think about this, that’s not the sort of thing a scared company is going to do. In fact, it’s not a thing that even a reasonably well-positioned company would do...it’s the sort of thing that a company would only do if it KNOWS it will be fine, whatever happens.

PENN would also go about donating any of their foodstuff that they had on hand (and could even be donated) as well as PPE from all of their temporarily closed properties.

So, you have a company doing the right thing by its employees...more than just what is right, really...helping out the local community, indicating confidence and getting favorable coverage all at the same time. That’s a good look.

---

One difference we see in the share prices is that PENN is, dare I say inexplicably, doing better than they were to start the year. I’m sorry, but I just can’t fathom that. Even my price target for the company is more than double current book value, but it currently trades at more than 5.5x book value as of the time of this writing.

I guess people have long-term confidence in the company, as well they should, but this just seems like an incomprehensible level of confidence.

We see with the other two companies that they are off from the beginning of year numbers. MGM more so than CZR. That makes complete sense to me because both of those companies have more exposure (percentage of revenues) to the mostly tourist markets of Atlantic City and Las Vegas than does PENN. The majority of PENN”s casinos are local and regional casinos, the kind where the policies of individual states (and consumer sentiments) will decide how quickly they come back. Overseas tourism does not matter much at all to local/regional places.

We see that trend with a few other companies, such as Churchill Downs Inc.

Churchill Downs Inc. (CHDN)

1/2/2020: $135.79

CURRENT: $163.98

LOW: $52.90 (Briefly, did not even hover around there for an hour)

HIGH: $168.02

With this one, like PENN, we can see that they’re inexplicably doing better now than they were to start the year. I could probably identify some reasons for that if I really dug into it...maybe an expansion into the online market of their own, (?) but I think to take any casino company higher than were they started the year is highly speculative. Obviously, revenues are going to be way off compared to the prior year.

Finally, and there’s no need to go into great detail, but Boyd Gaming (BYD) is down a little over 5% compared to where they started the year. Once again, this really just comes back to having more Las Vegas exposure (percentage of revenues) than does a company such as PENN.

Anyway, PENN was the best pick of the bunch by far, not that there was any such thing as a bad pick if you were buying up casino stocks in late-March.

CASINO REITS

That will take us to the topic of Real Estate Investment Trusts (REITs) having to do with casinos.

For anyone who doesn’t know, the concept of a Real Estate Investment Trust is essentially that it owns properties associated with a specific industry, or industries. The biggest reason to have a REIT is essentially to protect the physical property in the event that a (sort of) different company that operates at the physical property undergoes a bankruptcy.

Anyway, even when a company reorganizes, any physical property it owns can be used as collateral. When a company liquidates, then obviously the physical property (if owned) has to be sold for basically whatever they can get.

One way of protecting physical property is to have it be owned by a Real Estate Investment Trust...and often, the only function it serves is to own the company on paper and lease it back to the company who operates on the property.

Another aspect of a REIT is that it can also be used for a quick cash infusion, if needed, as we see here.

In this, PENN sold the Tropicana Las Vegas to Gaming and Leisure Properties (a company that PENN spun off of itself) in exchange for not having to pay rent for five months at any of its other properties or, of course, Tropicana. That accomplishes a few things:

  1. PENN gets to save some cash.
  2. It puts another property under Gaming & Leisure Properties’ ownership.
  3. Gaming and Leisure Properties acquired the physical property without transferring any actual cash to PENN, again, PENN sold it in exchange for not paying rent for five months.

Anyway, if it seems like both companies went out of their way to make a mutually beneficial deal...that’s pretty much the goal. Each company has a pretty clear and direct interest in the long-term health of the other because, without the concept of REITs, they would just be the same company anyway as PENN would simply own the properties.

Another example of a casino REIT is Vici Properties, who most notably, works with CZR and had even prior to the merger with El Dorado Gaming.

With the merger, the combination of Caesars Entertainment and El Dorado Resorts (now also called Caesars Entertainment) finds itself as the outright owner of a number of casino properties. In the event that the merged company ever needs cash, it will hardly come as a surprise if any of those properties find themselves sold to Vici Properties.

With that, let’s take a look at the two companies in terms of stock price performance. We won’t look at Market Cap just because I was using it before to highlight the ridiculous disparities in implied value of casino operator stocks.

Company Share Price 1/2/20 Year Low Share Price Today
Vici Properties $25.28 $9.85 $24.70
Gaming and Leisure Properties $42.73 $13.04 $37.95
MGM Growth Properties $30.34 $11.43 $28.68

What we see is that, in terms of percentages, these types of companies are all below where they started the year, but did not dip quite as far (percentage-wise) as did the casino operator companies.

The reason for that is pretty simple: As long as the casino companies can make rent, none of this affects the REITs too terribly. We see at the point of 52 Week Low that people were concerned about whether or not casinos would ever move forward as a going concern and panicky investors/traders (I would assume) thought it was possible these properties would never operate again.

Even with that, you didn’t see the REITs losing anything crazy like 90% of their stock value. The reason for that is simple: They own the physical properties. In theory, that at least gives them some degree of stability. Not to say that you would find a new casino operator instantly, but even if a current operator pulled out of a given property (if they even could) the REIT would probably get someone else in sooner or later.

So...why do we see them where they are compared to the beginning of this year? The first reason is because there’s no reason that their values should have improved pre-CV. In the case of Gaming and Leisure Properties, we can also kind of gather than investors/traders might have thought that PENN got the better end of the Tropicana LV deal, and even if not long-term, that’s still five months that GLP committed to going without any revenues via PENN.

Another aspect is that GLP gained a property located in Las Vegas which, for reasons mentioned before, might be one of the last areas to make a comeback if/when the CV thing is completely over. Perhaps investors thought that GLP could have had Tropicana cheaper for that reason.

In short, their values didn’t change too much (relative to 1/2/2020) because there’s really no reason for them to have done so. The casinos are going to survive, ergo, business as usual for the REITs.

CASINO-RELATED COMPANIES

That brings us to some companies related to casinos.

The first thing that we are going to look at is the gaming device manufacturers who are almost certainly not having a very good year. It’ll also be tough to anticipate when a full price recovery will come about.

The main problem that they have is the fact that most casinos that are operating now are going to have occupancy limits and their industry relies on casinos wanting to bring in new machines. They might have to offer extremely favorable machine lease terms just to get new products on the floor because casinos are almost certainly taking losses this year.

The occupancy limits also serve to reduce the need for new machines as people shouldn’t have any trouble finding ones that they like.

Once again, we’re just going to look strictly at stock values:

Company Price 1/2/20 Year Low Current
International Gaming Technology (IGT) $15.08 $3.59 $12.25
Aristocrat Leisure Limited (ARLUF-OTC) $23.84 $4.00 $20.61
Konami Holdings Corporation (KNAMF--OTC)*** $41.08 $29.60 $42.19
Scientific Games Corporation (SGMS)*** $26.90 $3.76 $2

With this, we see these types of companies didn’t make a full rebound*** which makes total sense.

***Konami doesn’t deal exclusively in casino games, in fact, they are actually much better known the world over as a maker and developer of video games. For that reason, you wouldn’t see them fall as sharply as stocks only (or in the majority) related to casinos as that is only one aspect of their business.

***Scientific Games Corporation only had a recovered share price due to a sale of over 30% of the stock (held by an insider) in the company to an outside investor (with casino gaming experience) at a price of $28/share. Prior to that, the high price since March was about $21.98, well below where they started the year and similar to IGT and Aristocrat.

One perhaps saving grace for these companies is the development and licensing of many of their titles to online casinos. Otherwise, I wouldn’t even have expected IGT to make the recovery that it has in the short-term. That’s not to say that the market for new games is never going to come back, just that they probably can’t command the sort of lease prices they were once able to in the present environment.

Finally, let’s take a look at a few stocks primarily related to online casinos:

888 Holdings (EIHDF---OTC)

1/2/20: $2.14

LOW: $0.85

Current: $2.58

Kindred Group PLC (STO-KIND-SDB)

(Prices SEK)

1/2/20: $58.50

LOW: $20.35

Current: $62.62

That all makes sense, other than the precipitous drop in price early in the year...not that the precipitous drop prices ever made complete sense. I get it, disposable income and all of that, but those with money who like to gamble online are still going to do so.

More than that, even in a downturn, they don’t have to worry about operating costs eating them alive like a land casino would. Anyway, I think it’s pretty fair to say there was a pretty huge overreaction that, even in a near worst case scenario, never really made much sense.

CURRENT EFFECTS

We’ve already covered the way the markets overreacted to the CV environment (and what’s to come after) in the first half of the year, but now we’ve reached the point where I think that the overall reaction isn’t enough. It seems like investors and traders (mostly traders) were only too happy to ride the upward momentum all the way to the point where the current prices are, in my opinion, basically unjustified.

There’s no two ways about it: This is going to be a terrible year for the casinos. Next year’s probably not going to be the best year either, especially not in the markets that rely on tourism.

At some point, ongoing revenues have to play a factor in the valuation of a company, right?

Let’s say in a hypothetical world that land casinos were made completely illegal overnight...Penn National Gaming becomes instantly near-worthless as does MGM, CZR and innumerable others. There’s no source of revenues for those companies. The REITs also become something close to worthless because they are now the owners of HUGE properties that (other than the hotel areas) are not particularly easy to repurpose.

In short, revenues matter. They matter a lot. For any company that’s engaged in a consumer-facing business, your revenues (current and projected) are what goes into the valuation of the company. Obviously, even if your books look pretty good, they start to look a LOT worse really quick without money coming in.

There’s not time to go over every casino in the United States in this regard, so we can temporarily turn our attention to Atlantic City, especially since some variant of the same exact story is/has been taking place everywhere.

The most recent available report for 2020 (as of the time of this writing) is for July, so let’s go ahead and take a quick look at that for the Atlantic City market for all types of gambling:

July 2020 Casino Win July 2019 Casino Win July YTD Win 2019 July YTD Win 2020
334,386,358 264,485,561 1,925,091,903 1,291,833,698


Okay, I’m not an industry expert, but I’m pretty sure that month-to-month revenues being down by more than 20% compared to prior year is, like, really bad. I’m also fairly confident that revenues on the year being down by nearly 33% is extremely bad.

The only bright spot for Atlantic City is that online gambling revenues have been awesome in the CV environment:

July 2019 Online July 2020 Online July YTD Online 2019 July YTD Online 2020
39,315,731 87,492,952 256,775,046 510,202,128

As we can see, online gambling revenue was up 122.5% just for the month of July 2020 which is flat out ridiculous! It’s also up 98.7% for the year to date.

Also, online gambling is pretty much saving the day for the casinos. As we know, casinos in other states are not necessarily so fortunate. Land casino slot and table win in Atlantic City is actually down 58.26% for the year and was down 46.8% for the month of July...YIKES!!!

I would expect that some of this goes back the other way next year, assuming all goes basically well with CV. While Atlantic City online gambling has trended significantly upward one year after the next, certainly some of this disparity comes from folks playing online who would prefer to be gambling in the physical casino who would either prefer not to do so out of health concerns, or alternatively, just don’t consider the current environment (with the watered down amenities) to be significantly better than gambling at home.

How much was land casino revenue for Atlantic City in April? $0.

Of course, if CV absolutely had to happen, it picked a good time of the year for many industries. In the case of Atlantic City, for the shutdowns to have occurred in the Summer months would have been much worse. When it comes to general retail, obviously, the CV peak and accompanying shutdowns occurring during the Holiday Shopping Season would have been nothing short of devastating.

So, not that there’s a good time for something like this, but losing something like 208M in revenues due to not operating is better than losing 334M (If they hadn’t operated at all in July).

We also note that spots wagering was up, but that’s not exactly apples-to-apples as the racetracks are also allowed to have it. Meadowlands, for example, made more money off of sports wagering than did every Atlantic City casino combined.

It’s frightening to think that Atlantic City can consider itself luc---well, not as unlucky---because they do have the online gambling to fall back upon. When we look at the total impact of the lockdowns in those states without online gambling, those casinos did not make money anywhere during the time that they were shuttered.

Anyway, you can’t have annual revenues drop off by some 20% for an entire year (my best guess-all told) for an entire industry and tell me that those companies should be considered, in some cases, worth MORE than they were prior to that year occurring. I’m sorry, but that just doesn’t make fundamental sense.

I get that all stocks buys, at least theoretically, have forward-looking elements priced into them. For that reason, one looks not only at current and past year revenues, but also projects out what they expect future revenues to be.

My issue is that I don’t necessarily expect future revenues to improve compared to 2019, at least, not any time in the next few years.

The effects of CV are going to linger well into next year, and that’s assuming the best case scenario of the vaccine working near flawlessly. In what world can we assume that the casino industry is going to be doing as well in 2022 as it was in 2019, much less 2021 compared to 2019.

SEPTEMBER AND EVERYTHING AFTER

I don’t want to go all, “Doom and gloom,” on you, but I think I’m being realistic.

The fact of the matter is this: If you’re a person who is in questionable health, then you should really think twice before exposing yourself to the petri dish known as land casinos. Farbeit from me to straight up suggest you don’t go, that’s a decision that it’s for you to make for yourself, but these are not the world’s most sanitary places.

The thing about CV is that something like this very well could happen again, and while I think that everyone (if asked) would have admitted that something like this was theoretically possible; this is the sort of thing that it takes actually happening to, “Become real,” in someone’s mind.

Is CV going to be the only communicable illness of this nature that we ever see in our (expected) lifetimes? Who the hell knows? It could be a century, it could be three centuries, it could be ten years; or we could have another one before we even get this one fully dealt with.

I also tend to think that many people are going to be more health-conscious after all of this is over, just in general terms. That’s obviously a good thing for preventing the spread of CV as well as the different illnesses we already had, but perhaps not such a great thing for casinos unless they are able to considerably improve sanitization...which naturally comes at a monetary cost.

Allegedly, they’re doing that right now, but I haven’t seen it. I have seen social distancing measures such as:

  1. Not serving alcohol.
  2. LImited dining options---especially self-serve things and buffets.
  3. No smoking. (Some places)
  4. Partitions between machines for social distancing.
  5. Shutting off every other machine for social distancing.

But, if the casinos are going around sanitizing the units more often in some places, that certainly hasn’t been my experience. If anything, and as one might fully expect, the casinos seem to be less staffed with floorpeople than they were before. Financially, that makes total sense as they’re not bringing in as much money and have to save where they can, but it doesn’t seem to add up from a cleaning perspective.

Of the few casinos I’ve been to, all are requiring mask-wearing unless actively taking a drink of something, but this seems to be selectively enforced. Of course, now that these casinos have done away with the smoking, people have fewer reasons to take off their masks. With that said, I’ve seen some fifty people without masks covering their mouths and noses (some covered the mouth only, some were worn around the neck and not covering anything) and a grand total of two people who were asked to wear them properly.

I don’t think I’ve seen anyone clean a machine, as yet. I’ve just seen the usual thing where someone comes around and picks up the trash people leave behind, though there’s of course less of that than there usually would be.

Cocktail waitresses are still roaming the floor, though limited in number, asking folks if they want pop/soda, water or coffee.

The only area I’ve seen with increased personnel is that one casino is doing actual temperature checks at all of the entrances, so they have at least one (but usually two) people on each entrance to do the ID (as needed) checks and temperature checks. Other casinos are not doing temperature checks. All casinos seem to have a list of the different symptoms you should not enter the casino if you’re experiencing...which I suppose is on the honor system, or something.

The point is that we know we’re dealing with a pandemic, but it doesn’t seem like anything additional is happening from a cleaning standpoint during operating hours. Most of these casinos are closed for a few hours in the early a.m., (not that they’d operate profitably during those hours anyway) so I would assume there is some more detailed cleaning going on during those times.

Either way, I think people are going to be more conscious of what they already knew: casinos are not the best place to be if you have a certain health risk factor. They’re breeding grounds for disease, you’re in close proximity to other people who could have who-knows-what and be asymptomatic, etc. etc.

Therefore, I expect a certain percentage of more at-risk patrons to go to the casinos less frequently, if not refraining entirely, even after the CV ordeal has been fully addressed. It just stands to reason that it will be something folks are thinking about for the next few years. Unfortunately for the industry, I would assume there’s a good deal of crossover between those folks and the folks who have the most disposable/discretionary income.

We also don’t know precisely when the casinos can go back to being the full experience that everyone is used to, in terms of amenities, entertainment, dining and events. Judging from most of the casino websites that I’ve seen (based on when they are booking concerts/shows) it looks like the consensus on this is early next year. I suppose some of the shows might take place even in light of the occupancy limits that may well still be forced on the venues by then, where applicable.

One thing that will be interesting to see is how many people still choose to go around with a mask even if/when the whole CV thing is over. There might be something of a perception that the masks can also help to curtail the transmission of other communicable illnesses, which is certainly true. It’s also possible that housekeeping type staff and customer service employees (particularly foodservice) will still be asked to continue with the masks even after all of this has been addressed, but that remains to be seen.

A second interesting thing is that I can’t help but wonder how many casinos will go back to allowing smoking if/when the CV thing is over. Obviously, I can’t be sure, but if everything with CV goes well; I’d be extremely surprised to see very many properties convert entirely to non-smoking, though I guess it’s possible. I have to imagine that some customers would be lost long-term if they were never able to smoke again.

We also don’t know how long it will be before various occupancy restrictions are lifted, so that could put us into 2021. Of course, in the current environment, it’s tough to say how closely casinos are monitoring occupancy (I’ve certainly not heard of anyone being turned away yet) or if they are really paying that much attention to it at all.

It’s a bit different than something like a bar where someone from the health department can just go in and count people, then multiply by four and determine if the result is more than the usual building occupancy. Sometimes, it seems like small businesses just can’t catch a break. Either way, it’s not like they’re going to (or that patrons would even comply) walk in and ask everyone in the casino to line up in a particular place to be counted.

You shouldn’t get into a line anyway---social distancing.

It’s pretty well-known that buffets are a loss leader in many casinos, but equally well-known that this is very much by design. Casinos will generally throw free buffets to just about everyone, particularly so in locals markets. The goal, of course, is just to get the person in the building and gambling.

If there’s one restaurant segment that’s going to have a difficult time making a comeback, or one staple of casinos that’s going to have a difficult time---it’s buffets. The places weren’t particularly sanitary to begin with, given that everyone is going around touching all of the same serving utensils, including some folks with questionable personal hygiene practices. That combined with a public who---I would think---are more health-conscious at-large than they used to be is not a good combination for the segment.

I guess you can replace the buffets somewhat with different types of food comps, but there’s no changing that they’re a big part of the overall casino experience for a good many folks.

THE CURRENT ENVIRONMENT

Maybe you’re a person who is kind of on the fence about going to casinos in the present environment where CV is still something of a factor. I’ve been to a few local/regional type casinos and can offer the following observations:

1.) Table Games minimums are generally higher:

-Given the social distancing guidelines, part of that is that the table games are set up such that people can’t be arm to arm anymore. In effect, the tables can simply have fewer players than they used to, so they have to make up the lost revenues somewhere.

For some local and regional casinos, it’s being made up for by having higher minimums. While you probably won’t see a casino that used to have $5 tables on the staple games (Blackjack, Craps and Roulette) bumping it up to $25, most of these games have went to $10 minimums. At one casino, other games that were $5 (such as Pai-Gow Poker and Three-Card Poker) had also been bumped up to $10 midweek based on one visit. Games with a higher house edge or an artificially high house edge due to player mistakes seem to have mostly remained at $5, such as Ultimate Texas Hold ‘Em, Mississippi Stud and those types of games.

You might find that MORE tables are open midweek than there used to be, which is by necessity. Obviously, the casinos want to have enough tables open to cater to the number of players who are actually there, otherwise, they’re just leaving money on the table.

Overall, if you prioritize not playing at a full table--now is your moment. The tables can’t be full even if they wanted to be, but expect that to come at the expense of higher minimums depending on what game you play.

2.) Cocktail service is basically non-existent.

-The casinos I’ve been to are not serving alcohol right now, though they were in the early stages, but you had to walk up to the bar. They’ve since stopped serving it altogether.

In the meantime, the self-service beverage stations that once existed, at least at some casinos, are obviously now closed. Therefore, you’re pretty much counting on cocktail waitresses if you want something to drink.

Naturally, the casino is trying to save as much money as possible, and the waitresses are not doing as well in tips anyway, due to no alcohol. The combined effect of these two factors is that, even though there are fewer patrons, cocktail service is significantly slower than usual.

While my sample size is limited to only a few casinos, I will say that it seems slower in the areas of video poker and slots than it does in table games.

3.) NO ALCOHOL!!!

Not in Pennsylvania. By order of the Governor’s Office, all casinos in the state are not serving alcohol at this time. Some casinos might violate the order, but if there are, I haven’t heard about it...not that I would tell anyway.

This likely varies in other states, though I imagine other casinos might be limiting alcohol to certain hours or not serving it at all of their own volition.

Either way, it mostly depends on where you are and what casino you’re visiting.

4.) Limited dining options.

As mentioned earlier in this article, virtually all casino buffets are closed at this time. There may be a couple here and there across the country, but those would definitely be exceptions to the rule.

Some casinos are not offering much in the way of sit down dining at all simply because it cannot be done profitably due to various occupancy restrictions. Other casinos might have a few of their restaurants open, but not all of them. Some are focusing exclusively on the grab & go and quick eats type places, such as in the food court.

The short answer is that this will very much vary from casino to casino, so we would recommend either calling and asking or going to the website of your casino of choice.

5.) Virtually no entertainment.

-This might not be true in every area, but many casinos have suspended live entertainment (even the small bands at the bars on weekends) for the time being. Most concert venues have rescheduled this year’s acts for next year.

This is something else that might vary with your casino of choice and where you’re located, so we would recommend calling and asking. I can say that from checking random local/regional casino websites across the country, it seems that most have suspended these forms of entertainment.

6.) Nightclubs.

-Yeah, not happening.

7.) Casino Hotels.

-Casino hotels are much different across the country than they were pre-CV. Some properties are not even allowing individuals under the age of 21 to stay at the property simply because there’s really nothing there for them---so we DEFINITELY recommend looking into that if you’re travelling with family to a specific destination.

Many casinos that would normally feature an arcade for kids are currently not operating the arcade. Virtually all fitness rooms, pools and hot tubs are closed, particularly at local/regional casinos. If your casino has something akin to a TopGolf Swing Suite, that’s probably not operating at the present time, either.

In other words, just like virtually any other hotel across the country in most states, they’re pretty much operating on a, “No frills,” type basis.

8.) Comps suck.

Well, unless you’re one of the highest level players. Some regional casinos who had a policy of free alcohol for all (when they were allowed to serve alcohol, in this case) changed it to only free alcohol for holders of the top two players card levels.

Additionally, many gamblers have reported here (and on other forums/sites) that comps such as free play are not as good as they were pre-CV. That comes as no surprise. The casinos have made---are making---and will make---substantially less money this year. Less money = less free stuff. They need to focus mostly on the most profitable customers.

There’s really no reason for them to try to attract marginally profitable customers right now.

9.) Social (Sort of) Distancing

-Yeah, I mean the guidelines are technically there, but you should just avoid casinos altogether if social distancing is massively important to you. It’s just not going to happen.

For one thing, people going to and from the different tables and the machines aren’t going to spend a lot of time being focused on maintaining a distance of six feet from one another at all times. If you’re playing at a machine...think about it: Are the rows between slot machines even six feet wide? Spoiler Alert: They’re not.

There are some measures being taken that are somewhat effective. The biggest one is probably that most casinos seem to have a plexiglass between the machines, or in the alternative, have every other machine shut down. In some cases, areas with only two machines sitting side by side will only have one chair, or three chairs for a bank of five machines.

Even with that, it doesn’t mean that there aren’t going to be people who pass through that row of machines while you’re playing. It doesn’t mean that there aren’t going to be people sitting behind you, but still within six feet. It doesn’t mean that there’s not going to be someone on the opposite side bank of machines who’s within six feet of you...it just means that there generally will not be someone directly next to you.

So, if you’re one of those people who believes that everyone can and should absolutely abide by the, “Six foot rule,” do yourself and everyone else a favor and avoid casinos. It’s just not going to happen. Also, if you go into a casino and make a big issue out of the whole thing, then you’re just detracting from everyone else’s enjoyment...and they already weren’t enjoying themselves as much as they would normally be.

As far as table games go, I’m not sure how wide the casinos think that the tables are, but tables (other than craps) usually only have one dealer, so you don’t have to be great at measurement to immediately understand that three seats occupied will not result in players who are strictly six feet apart. Although, some casinos have put dividers even between players.

The other thing you get into is that it’s impossible for you (or the casino) to know who lives/or is traveling together and who doesn’t/isn’t. For that reason, you’re not going to see casino staff running around telling people to separate every single time one person is watching another play a machine (or table game) or two people are playing side-by-side.

In direct terms, most casino patrons don’t seem to really care about all of that, anyway. I can think of exactly zero occasions where I’ve come within six feet of someone and they (staff or the patron) have said anything to me about it. I did see one lady go absolutely ballistic about a cocktail waitress being, according to her, “Too close to me,” but just get the hell out of the casino if you’re going to do that.

I’m sorry, but you’re in a casino. I’ll never understand people who feel the need to go around policing every little thing. They seem like the sort of people who would donate their life savings to a fund trying to get smoking banned in bars by ordinance...just don’t friggin’ go to bars if you don’t like the smoke. Good grief! Certainly there would be a bar somewhere who would ban smoking of their own accord if they thought it to be profitable.

In essence, it’s no different than it always was. If your health is your #1 concern, then casinos were and are a place best avoided.

10.) Overall.

-Overall, the casino experience simply is not the same as it was before. It’s nothing more than a watered-down version of itself that becomes significantly MORE boring (ironically) when the clientele consists exclusively of people who have just come to gamble.

Even though it annoys some players, casinos really aren’t the same without the partiers who are there primarily to drink and gamble to pass the time while they do so. There’s a certain energy and electricity in the air that’s lost without them.

What once sounded like a roar coming from table games to occasionally overcome the overall cacophony now just sounds like a few guys cheering a touchdown while watching a football game in a bar. If nothing else, it makes you jerk your head up because you haven’t really heard anything except the machines themselves for several minutes.

If the surrounding atmosphere isn’t as loud, then you simply don’t need to be as loud to get your point across.

For some reason, the casinos I’ve been to seem to be playing the music more quietly than usual, whereas I would be rocking it to try to create as much noise as possible. With all of the players mostly keeping to themselves, few cocktail waitresses, no drinkers/partiers and fewer people at table games or just milling about...it really just feels like a big slot parlor.

On one visit, there was a sports commentary show on one of the TV’s and I could hear what was being said...that was staggering.

Even the announcements over the loudspeaker are fewer in number simply because there aren’t as many events for the casino to talk about. Hell, it seemed like half of the announcements were geared towards getting people to check out their online casino!

You also don’t hear the hooting and hollering of those slot players lucky enough to hit jackpots as frequently. For one thing, fewer players is obviously going to mean fewer jackpots. Secondly, again, even those people who do hit a jackpot probably tend to realize how much they would stand out by getting loud in such a quiet environment.

Anyway, it would be fine for me if I were inclined to play -EV Games. (though I’m not) While I occasionally enjoy visiting casinos during really busy times, I definitely have a general preference for this new parlor-type environment, as well as for slot parlors over casinos...except the casinos are where most of the advantage plays are.

Oh, I also don’t drink anymore, so that’s probably a factor.

Even with all of that, I have to admit that it’s heads and tails and even the midweek environment is substantially lacking. If you’re there primarily for the environment, I’d say maybe avoid going...you’ll just be disappointed, and possibly, bored.

I’m going to say this one more time: If you’re going to go there and freak out over social distancing or a person who doesn’t have the mask on properly...just don’t go. Stay home until you feel like everything is safe. The only reason for you to be there is if you intentionally want to make an environment that’s not as fun as usual even worse.

CONCLUSION

As far as the stock valuations go, I feel like traders/investors over-exaggerated the effects of CV around March-April and then it corrected back to where it should be. Naturally, uncertainty was a substantial component of all of this and they say the, “Market fears uncertainty.” Of course, stock valuations would just have a fixed upward trajectory if everything was 100% certain at all times.

Even with that, now I tend to think that the market is ignoring (based on valuations compared to the beginning of the year) uncertainty. More importantly, it’s ignoring actual revenue declines that represent money that there’s no quick way to get back. The only casino-related stocks that make total sense to me right now are primarily online casino companies and casino game manufacturing companies.

I also think that there’s still some lingering uncertainty that hasn’t been accounted for. The markets (in my opinion compared to the beginning of year) seem to be taking it for granted that the vaccine is going to work. The markets also seem to be taking it for granted that consumer sentiment on casinos will be relatively unchanged when all of this is over, but it at least seems possible to me that a global pandemic might change the health-related sentiments towards going to a casino with some people.

The one thing that I agree with the markets (and probably almost everyone else) about is---at least this year’s mostly over.

Comments

odiousgambit
odiousgambit Sep 17, 2020

I wasn't expecting all that about the stocks, that's for sure

thanks for the rundown on what changes are like in casinos, looks like I might go a full year or so without stepping in to one

Mission146
Mission146 Sep 18, 2020

You’re welcome; it would be hard to blame you.

Yeah, crazy year for casino stocks. Was fun to watch for a time! My call to buy PENN was outstanding, my price target to sell might be one of the worst calls in all of human history.

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