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The Long Road Back

A gaming industry recovery may represent buying opportunities for the savvy investor

The Long Road Back

We’ve reached the point in the Covid-19 pandemic where it’s time to look forward to when the economy—and the gaming industry—reopen.

The timing of reopening is unclear. If the U.S. is past the pandemic’s peak and the number of new cases declines steadily, casinos might start to reopen in May or June. But if the decline is slow and/or new hotspots erupt, reopening could be months later, in some unpredictable future.

Regardless, there will be a reopening. Here are some thoughts as to how it might look, and who may be the first to benefit.

There will not be an all-clear signal bringing pent-up crowds of gamblers rushing to casino doors.

The reopening is likely to be measured, cautious and in stages. Governments will not want to risk renewed epidemics. Customers are more likely to be wary than celebratory. Many will also be financially damaged, having gone through a stretch of time with no or reduced income, and they will have more immediate uses for their money than gambling.

Finally, social distancing will be the rule for some time. A bank of eight slot machines might become four operational games. A bank of six might become two. The number of seats at table games will be halved, and no standing, please. A restaurant that sat 150 might now seat just 75.

Casinos will have to bear more costs in cleaning supplies and in policing social distancing. On the flip side, customers will be encouraged to not accept daily room cleaning, which will help casinos save money and let the cleaning staff avoid handling soiled personal items of guests.

Regulators will implement rules to assure a safe environment. Regulators from key states have shared some of their ideas in that regard in Fantini’s Public Policy Review. You can get a free copy and trial of this service by contacting Alex at or by calling +1-302-730-3793.

There has been considerable discussion that the Covid-19 crisis will change the way people act, do business and are entertained. Maybe some, but not entirely. Eventually, normal interaction will resume.

Human nature was developed over millennia of being hunters and gatherers. It will not change overnight. Human beings are social creatures, and so they shall remain. Risk-taking is an essential part of human nature; gambling is atavistic. People need entertainment.

Combine those three elements and you have people patronizing casinos for the foreseeable future.

Consumers have rebounded from greater crises than Covid-19, as serious as it is. For example, the twin traumas of the Spanish Flu and World War I were followed by the Roaring ’20s—an era of flappers, speakeasies, the golden age of sports and one of the greatest bull markets in history.

So, the question isn’t whether the casino industry will survive and prosper. It’s who the survivors will be and how long will it take for them to prosper again.

Go Local

One plausible scenario is that locals casinos will recover first, followed by larger regional markets, and the Las Vegas Strip last.

When people tire of sitting around the house, it will be a relatively easy choice to hop over to the local casino for the night, especially as locals casinos are structured for neighborhood entertainment—movie theaters, fast-food courts, and even bowling alleys and day care centers in some cases.

This column is not intended to look at the financial health or cash positions of companies. The intention is to look at which businesses might bounce back quickest. Here are a few candidates:

  • Slot route operators. If regional casinos are local, slot routes are hyper-local. A patron goes down to the corner bar or off to the legion hall or, in Nevada, even to the corner pharmacy.

The pure-play slot route operator among public companies is Accel Entertainment. Golden Entertainment gets 30 percent of its revenue from routes.

  • Red Rock Resorts is nearly a pure play on the Las Vegas locals market. And it’s worth remembering that, regardless of any current problems, Las Vegas is a fast-growing Sun Belt metropolitan area and is likely to remain so.
  • Boyd Gaming is also a big Las Vegas locals operator. Plus, its regional casinos throughout the country are really locals casinos. Boyd has a peculiar part of its business that it controls—chartering Hawaiians to Las Vegas to fill its Downtown casinos.
  • Churchill Downs likewise operates locals casinos. Its other businesses, horse racing and Twin Spires account wagering, can take advantage of remote gambling. Finally, the Kentucky Derby is a unique franchise. The current Churchill leadership has demonstrated it knows to grow and develop that brand into what will become a global franchise.
  • Monarch Casino gets half its Reno business from locals, and much of the rest from Californians driving over the Sierra Nevada Mountains. Monarch also has a growth kicker—the transformation of its Monarch Casino in Black Hawk, Colorado, into a destination-quality resort, and one that’s just a drive—not a flight—from potentially lucrative Denver.

Other companies can surprise:

  • Eldorado. The stock price has collapsed along with other casino stocks, but the still-planned merger with Caesars has transformational potential.
  • Golden Entertainment, as mentioned before, is big in slot routes, but it also has two Las Vegas locals casinos and the Stratosphere, which, while a destination property, is not as sensitive to group business or high rollers as its more upscale competitors on the Strip.

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