In March 2020, as the reality of the Covid-19 pandemic was setting in, Tilman Fertitta told Texas Monthly his companies were on borrowed time.
“I don’t think anyone can survive past the end of the year,” said Fertitta, the billionaire owner of Golden Nugget casinos and Landry’s restaurants. “If the country is shut down come October or November, it’ll be anarchy in the streets.”
Fertitta was both right and wrong. The pandemic caused scores of businesses to falter, and some to close. Yes, there was a little anarchy along the way. But surprisingly, though the virus persisted far beyond 2020, gaming has proven resilient. With some serious belt-tightening and a little help from iGaming, the strongest survived and in many cases, outpaced their pre-Covid performance.
For example, in 2020 Golden Nugget Online Gaming’s third-quarter revenues were up 93 percent from 2019. By then, Fertitta had changed his tune, and called the company “pandemic-proof.”
In Atlantic City, revenues plummeted 69 percent during the first month of the shutdown. But like a kid on a trampoline, the industry bounced back. In 2021, retail betting, sports betting and iGaming hauled in $4.737 billion—64.5 percent more than 2020 and 36 percent more than 2019.
A lot has changed in the past two-plus years, and some changes are for keeps. Let’s take a look back and a glimpse ahead.
In early 2020, U.S. commercial casinos closed for months in response to the pandemic, then reopened with a tight-ship strategy that buoyed the bottom line. Nevada-based Red Rock Resorts, for one, negotiated new terms with lenders and vendors, streamlined marketing and pared back non-gaming amenities. In doing so, it saved $150 million in costs that year.
“That’s been the story for months now—reduced revenues but greatly improved margins,” says Brian Wyman, senior vice president of operations and data analytics for The Innovation Group. “Operators reduced marginally profitable or unprofitable outlets, and that did great things for the bottom line.”
But that was then. Adds Wyman, “Initially there was so much pent-up demand, people were comfortable with less” when they visited their favorite casinos. “But we’re hitting a point where the closure of amenities, which really drove a lot of the margin improvement, comes at the expense of experience. Now there’s more clamor for things to be the way they were”—as in more F&B, more entertainment, more fun. “Operators are being very thoughtful and metered about the pace at which they bring things back, and deciding which things to bring back at all.”
Which brings us, inevitably, to a time-honored tradition: the casino buffet. Buffets were “on thin ice” prior to the pandemic, says Wyman: “The concept is a little tired.” And these days, a buffet protected by a “sneeze guard” is few people’s idea of appetizing. Nationwide, Caesars Entertainment has reopened just one of these all-you-can-eat feasts—the aptly named Bacchanal at Caesars Palace, at $94 a pop.
Other casinos are phasing out the concept altogether, opting for food service that’s easier to operate, attracts a younger crowd and generates less surplus (according to a 2017 study, half the food at hotel buffets goes to waste, making buffets a king of the loss leaders).
On reopening, casinos offered fewer table games at higher minimums and yields, with fewer player positions, for savings all around. They installed more electronic tables and removed some slot inventory for social distancing and to make room for Plexiglas shields.
At that time, online gaming was the ace in the hole, says gaming and hospitality expert Bob Ambrose. “There’s no doubt iGaming saved the industry during the shutdown, and it continues to grow. Yes, brick-and-mortar does share this revenue stream in third-party arrangements, but when the land-based doors were closed, it was a lifeline.
“Legal sports betting added another pathway to the future, and the acceleration into the mainstream has been driven by the pandemic.”
The Perfect Storm
Hard Rock Casino & Hotel Fire Mountain faced unusual challenges during the pandemic. The $440 million Sacramento property had opened the previous October with almost 1,600 slot machines, 57 tables, a hotel, meeting spaces and of course, a buffet. That same month, half a world away, a market vendor in China became Patient Zero, the first human being infected with the mystery virus now known as Covid-19.
Four months after opening its doors, Fire Mountain—operated by the Enterprise Rancheria and Florida’s Seminole Tribe—was compelled to close.
General Manager Mark Birtha calls it a “perfect storm—not only the pandemic, but everything that followed: employment issues, challenges with the airlines, commodity challenges, supply-chain disruptions, higher prices. How do you manage all that?”
Two months later, when the resort reopened, Birtha’s goal was to “understand the market and drive efficiency. The delicate balance is ensuring we don’t focus so heavily on efficiencies that we dilute the hospitality experience. Say you’re not running valet or offering entertainment, or you’ve turned off your buffet. Those may be things guests can live without. But we don’t want to go too far down that road. We are in the hospitality business—people taking care of people.”
On reopening, one staffer memorably said, “You never know how many doors you have until you have to sanitize them all.”
“It was humorous at the time,” says Birtha, “but a year and a half later, it’s still very relevant.” In response, Hard Rock International created its Safe & Sound protocols, “well over 100 pages of sanitation and safety precautions that were vetted through the CDC and other medical and health experts.”
And while cost-cutting was essential, the property also made prudent investments, including a $500,000 air-filtering system that “literally creates hospital-quality air purification,” says Birtha.
“So you make capital investments like that for the benefit of your employees, your owners and your guests. And I think the guests truly appreciate it—they feel safer to come and stay. But who would ever have thought this would be a key point of our advertising and messaging?”
Covid-19 has reminded the world it’s still vulnerable to broadsides outside anyone’s control. So how do operators in a changing environment prepare for the unknown?
“It seems we’re in a newer normal every three to six months,” Birtha observes. “It’s incumbent upon us as operators to be fluid and flexible—it’s not so much about having a ‘Plan B,’ but being very much in touch with the needs and expectations of our companies, our owners, and more importantly, our guests and team members. It’s just new challenges all the time.”
Hard Rock Fire Mountain is roaring back. It will open its 3,000-capacity Hard Rock Live indoor concert venue in spring in collaboration with Live Nation. Importantly for a tribal endeavor, it’s part of a larger $75 million expansion that also includes a gas station, a convenience store and other “economic engines” that are less subject to pummeling by a health crisis.
The Human Touch
At this point in the Covid saga, some people remain wary of close quarters, and technologies allow them to keep their distance. As the industry moves to contactless technologies, could it diminish the fundamental experience of hospitality—of dealing with “my bartender, my dealer, my host?”
“It’s a strategic fine line,” says Ambrose. “There’s always a chance that the lack of personalized employee service can be a negative for some guests.” That said, “the future of the hospitality industry is bedrocked in technologies that will interact with both the physical and virtual world for customers.”
Cashless gaming has become a priority, of course. “In many ways the casino industry is catching up to other industries where experience has shown that ecommerce is the present and future model. We’re in an age of smart technology. This will be so important moving forward.”
Virtual experiences aren’t always ideal, but they may have to do until the pandemic is well and truly over. And they may remain optional for the long term.
“We’ve seen the new format for conventions,” says Ambrose. G2E 2021 was “a perfect example, where attendees had a choice of physical or virtual. Maybe this model is short-term. Maybe it’s a permanent option for some industries. Personally, I think this should have been an option years ago. It has its value.
“There’s a loss to the revenue stream for hotels, restaurants, casinos and a city when people attend a conference or convention virtually, as well as a loss of networking opportunities. But at least in the short term, as companies try to recoup their decimated budgets, it’s a great cost-saving on the way to a gradual ramp-up.”
What can operators do now to ensure a successful post-pandemic?
“On the employee side, they have learned an entire new meaning to the term, ‘front-line,’” Ambrose says. “Company leadership must make time to communicate and encourage them. Operate with transparency. Have meetings. Remember, they, too, have to adapt to the new environment in the workplace. They are the face of the property to the guest, even if they’re still masked.” And that kind of support may help restore a bottomed-out workforce.
Last November, when the Omicron variant came along, customers who had relaxed about gathering became alarmed once more. “We were back on the merry-go-round, masking up again,” says TIG’s Wyman. Those kinds of jarring shifts may happen again before the virus finally recedes. It’s frustrating. “On the other hand, it’s a great opportunity to hit the reset button, to rethink the business and make smart changes that are permanent.”
Birtha adds, “A post-pandemic industry could literally be learning how to live with this at some level. The industry has been through so many challenges over the last few decades, from the Gulf War to 9/11 to the Great Recession and now the pandemic. We’re a very resilient industry. We’ll survive this too.”
Andrew Tottenham, Tottenham & Co., International Gaming Consultants
Andrew Tottenham has a long history in gaming in Europe, both in operations and development, with broad expertise both in land-based development and iGaming. He explains the ongoing repercussions of the global pandemic on gaming around the world.
GGB: A lot of gaming expansion plans were in the works before Covid-19 hit. How has the virus affected those plans, in places like Asia, Europe and Brazil?
Tottenham: To a great extent, a casino’s success will depend on whether it’s dependent on inbound tourism and the policies of the governments in the main feeder markets. Macau, for example, is dependent on gamblers from mainland China. As long as China follows its zero-Covid strategy, Macau will suffer.
If Europe doesn’t keep bouncing in and out of lockdowns, casinos should open up and the new casinos in Cyprus and Greece should do OK. Brazil would be an exciting market, and by the time legislation has passed and major resorts have been built, Covid should be in the rearview mirror.
In the short- to medium-term, the strategy has to be to preserve cash, because we don’t know what’s coming around the corner, and focus on local and not on VIP, a market that is going to take time to come back. Longer-term will depend on how this disease progresses.
If we see the emergence of a highly transmissible virulent strain that evades vaccines, people are going to be increasingly reluctant to go places where there are many other people. This is unlikely, but possible.
Has the outbreak strengthened online gaming at the expense of land-based operations?
Inevitably, Covid restrictions have had a devastating impact on the hospitality sector. The impact has been twofold. The negative impact on balance sheets has been immense, despite government grants and loans. Companies are in a much weaker position than before the pandemic, and some will struggle as we emerge from the pandemic. The other impact has been on staffing. Many people have left casinos, hotels and restaurants. Many have made the decision not to return. The industry has lost a great deal of human capital that will not return.
Online betting suffered initially because of the lack of events to bet on, but recovered and has gone from strength to strength. As long as we don’t go into more prolonged lockdowns, I tend to think the land-based industry will come back. It still has to deal with the problems it was facing pre-Covid, like an aging customer base, but land-based gambling is a social activity, a shared experience, something the online sector cannot offer. Barring further lockdowns, I’m confident the land-based sector will return to pre-pandemic levels in the next year or so, and online will continue to benefit.
For convenience as well as safety and cost savings, the industry is moving toward cashless, touchless, contactless. Will these technologies change the essential nature of hospitality, making it less hospitable and human?
There are already hotels where you can put your credit card into a machine that dispenses your room key and stay without ever speaking to a soul. This is a niche market, but I think the move to cashless provides companies with the means to offer more personalized services. Front-line personnel will be freed from mundane tasks and can spend more time interacting with guests.
However, if management sees the move to cashless purely as an opportunity to save money, then human interaction will decrease and it will become less hospitable.
What will a post-pandemic industry look like, if we ever get there?
I’m optimistic we’ll get back to “normal” over the next two years. There will be casualties. Balance sheets will be badly battered. But management will learn how to make their businesses more robust, and innovation will provide solutions to make the industry more resilient.
Once we’re through this, management can get back to trying to attract a wider segment of society, turning around political efforts to shrink the industry and attracting and retaining talent.