Las Vegas Review-Journal (Sunday)
Big Six positive about prospects in 2018, beyond
ANOTHER earnings season has come and gone, and Southern Nevada’s Big Six casino companies had mostly positive news to report as they wrapped up 2017 and plotted their respective courses for 2018 and beyond.
For Southern Nevada’s dominant publicly traded companies — MGM Resorts International, Wynn Resorts, Las Vegas Sands, Caesars Entertainment, Boyd Gaming and Red Rock Resorts — the general tone was, yes, we were hurt financially by the Oct. 1 shooting, but prospects are looking good in the near and long term.
Impact of Oct. 1
It stands to reason that the companies with the most rooms on the Strip would be hurt the most by that act of violence. The initial shock frightened visitors away, and resorts were forced to reduce their room rates to draw people back. A combination of a reduced nightly rate and a lower occupancy percentage almost certainly leads to a downturn.
Caesars saw a 3.9 percent samestore decline in Las Vegas. The net revenue fallout for MGM was most noticeable at Mandalay Bay, the site of the shooting, and its neighbors Luxor and Excalibur.
Both companies are responding with investment. Caesars noted it will pour $600 million into room renovations and $250 million into new projects, including a convention center. Just last week, Caesars announced plans for Kind Heaven, a Southeast Asian-themed retail attraction at The Linq Promenade.
MGM, which also saw declines because of rooms taken offline for renovation at Monte Carlo, expects to see that pay off under the rebranding of that hotel to Park MGM and its new affiliation with NoMad Hotels. The company is nearing completion of its MGM Grand Conference Center expansion and is riding the Vegas Golden Knights’ wave of success with regularly packed houses at T-Mobile Arena.
Because MGM Cotai opened its doors in Macau last month, and MGM Springfield in western Massachusetts opens later this year, it appears everything’s coming up roses for the company — good enough that it decided to increase parking rates and resort fees.
Macau’s resurgence figured prominently for the company that faces the most questions going forward: Wynn Resorts.
What’s next for Wynn Resorts
Many were curious why Wynn reported fourth quarter and annual earnings on Jan. 22, earlier than normal. Normally, the company reports in the middle of the cycle, which would have been around mid-February. Now, the answer is apparent: to try to head off the massive negative publicity that was on the horizon for company founder Steve Wynn. He shared the details of his Paradise Park project and announced plans to develop newly acquired land across Las Vegas Boulevard for what he called Wynn West.
It was the last time Steve Wynn would talk at length publicly as chairman and CEO. By the end of that week, he had made international headlines over allegations of sexual harassment and misconduct.
Can the company recover from the Steve Wynn scandal? New CEO Matt Maddox appears to be pushing all the right buttons, meeting with employee groups, introducing new employee benefit packages and announcing the end of a festering legal fight with former Wynn business partner Kazuo Okada.
Shortly after Maddox took over, he launched a leadership program to create and measure initiatives that will drive equal opportunity and the advancement of women. The company now is offering employees six weeks of paid parental leave after the birth, adoption or foster-care addition of a family member as well as 10 full scholarships, five each for men and women, to qualifying Wynn Las Vegas employees and family members.
Wynn employees also will get paid time off to participate in company community programs during work hours.
Just last week, the company announced that it’s ending all litigation against Okada and his companies. That is being viewed as a move toward resolving a court fight that has lingered since 2012.
That should play well in the company’s efforts to win a concession to build a resort in Japan.
The moves have helped Wynn share prices at least partially recover from the swan dive they had taken when allegations against Steve Wynn were revealed. Just after Steve Wynn’s earnings call, the stock price was around $201 a share; by the time investors had digested the full extent of the scandal, the price had plummeted to around $161. In the first month under Maddox’s stewardship the price has returned to around $187.
But the big question that has yet to be answered is how regulators in Massachusetts and Nevada will treat the company when it concludes its investigations into Steve Wynn’s behavior.
It seems smart that Wynn would accelerate plans to develop two parcels in Macau because that market is hotter than Las Vegas and it’s far away from the storm surrounding Steve Wynn.
Sands plans
Another company riding success in Macau is Las Vegas Sands Corp., which has begun plans to transform existing infrastructure there into the Londoner, a themed attraction that will bring another piece of Europe to China, joining the new Parisian and the extremely popular Venetian Macao.
Sands also announced it is selling its Bethlehem, Pennsylvania, property to the Poarch Band of Creek Indians for $1.3 billion.
Sands Chairman and CEO Sheldon Adelson tells investors during his calls that his favorite topic is always returning value to shareholders. When Sands reported earnings in January, after Wynn, Adelson joked that the middle initial of his name, G, should stand for “growth.” With the sale Sands Bethlehem, he will have plenty of options.
The company could increase its quarterly dividend. It already pays 73 cents a share. Last quarter, it repurchased $75 million in shares, increasing share value.
Or, the company could put that capital into the Londoner and boost Sands’ already dominant presence in the Macau market. It could bolster its position in the bid to build in Japan, where Sands already is considered a strong contender for a resort thanks to its experience in Macau and Singapore.
The company already is behind Southern Nevada’s next big music venue, the MSG Sphere Las Vegas, on which Sands is collaborating with Madison Square Garden. The message finally seems to have gotten out that this “arena” isn’t for a basketball team; it’s for visual and musical performance.
Last month, the company took another step toward getting work started by getting permission from Clark County to build a pedestrian bridge over Koval Lane that will link the Sands Expo and Convention Center to the new venue just east of the Venetian-Palazzo complex. Ground will be broken this year for the Sphere, due to open in 2020.
The locals market
The other two members of the Big Six are focused on the Las Vegas locals market. Boyd didn’t hit some financial targets, causing some grief among shareholders, but the company is still focused on geographic diversity.
After a Southern Nevada spending spree, which led to the acquisition of the two Cannery properties and Aliante, Boyd will get even more in other U.S. locations once it takes over four properties in Missouri, Indiana and Ohio that are being divested through Penn National’s $2.8 billion acquisition of Pinnacle Entertainment.
For Red Rock (Station Casinos), earnings weren’t as robust as they were in past quarters. Like MGM, Red Rock took rooms offline for renovation. Palace Station and the Palms are undergoing transformations. The company plans to position the Palms as a hybrid property for locals and tourists.
The common bond of Red Rock and Boyd: Both are bullish on the Las Vegas market, recognizing that the billions of dollars in current Las Vegas investment — the Las Vegas Convention Center expansion, the Las Vegas stadium project, Resorts World Las Vegas and The Drew Las Vegas — will bring more rooftops to Southern Nevada, more local employees and residents and more customers.