Specialist
Former Senior Executive at MGM
Agenda
- Coronavirus pandemic headwinds on US casino industry operators including Las Vegas Strip’s largest, MGM Resorts International (NYSE: MGM)
- Implications of regional government-mandated casino and entertainment venue closures
- Operating levers and casino operators’ ability to mitigate losses during closures
- Recovery scenarios and changes to long-term strategy on potential changes in gambler sentiment
Questions
1.
What was consumer sentiment towards casinos going into 2020? Were there any noteworthy trends in January and February?
2.
Do you have any figures on Vegas traffic? Vegas’s gross gambling revenue for January increased by 7% from the seasonality of this year’s lunar year. What might you expect for February and March given the chain of events?
3.
What impact do you think the novel coronavirus pandemic will have, or is having, on major casino operators, particularly the Las Vegas Strip?
4.
Which players do you think are potentially most or least exposed to the novel coronavirus pandemic?
5.
What do you think will happen to MGM? Its US market generates about 70% of its annual EBITDA. How should we trim our expectations for 2020 or the next few quarters?
6.
You mentioned April is usually a softer month because of tax season. Given that the IRS [Internal Revenue Service] pushed tax filing deadlines to mid-July, what could we expect in April, should casinos reopen by then?
7.
You mentioned Las Vegas mayor, Carolyn Goodman, who has been pressuring for re-opening as soon as possible, and is ardently opposing the 30-day shutdown ordered by Nevada’s governor. Do you think that 30- day closure will stand? Do you think it will get trimmed to just 14 days, or could it get pushed further than 30 days?
8.
In a scenario where they do get pushed, how far can closures last before casino operators start to worry? Cirque Du Soleil, an adjacent entertainment operator, temporarily laid off 95% of its workforce. When would casinos come to that sort of optionality?
9.
MGM has cited a Macau OPEX impact of about USD 1.5m per day across two of its properties there. Macau is still limiting visas to the country. How should what happened in Macau inform our expectations for MGM’s US casino operating losses?
10.
If you were still at MGM, what sorts of levers would be at your disposal? What cuts would you make to operating expenses to mitigate further losses?
11.
What percentage of costs would you say are fixed, assuming a percentage of sales?
12.
How big are rental expenses, traditionally or on average, for an operator as a percentage of sales?
13.
Are there any other events we can draw from to evaluate the relative impact of the novel coronavirus pandemic on players such as MGM, Caesars, Las Vegas Sands or Wynn? There have been hurricanes, other natural disasters, the 2008 recession, and other pandemics such as H1N1 and Sars [severe acute respiratory syndrome].
14.
Is there anything else casino operators can do to maintain liquidity, assuming that depressed win and room sales will not cover fixed costs?
15.
Where can insurance come into play, assuming operators have insurance they can file against potential lost revenues?
16.
Having discussed the potential levers an operator such as MGM could pull, is there any way we can quantify what operating losses would come to per day, evaluating MGM’s US footprint? What might be the range of the daily impact?
17.
Assuming smaller players may not have sufficient liquidity to weather the storm, could there be an opportunity for bigger players such as MGM or Las Vegas Sands to acquire smaller names?
18.
What do you think is the likelihood of approval for online gaming in states other than New Jersey where it is already legal? Could the novel coronavirus pandemic have any impact on the timetable for this happening?
19.
Could online gambling be an offset for operators that do have an online gambling arm?
20.
What is your sense of gambler enthusiasm returning once the coronavirus crisis blows over? Are people going to flock back to casinos? Is there any pent-up demand? What is recovery going to be like? How long before people go back once closures are lifted?
21.
If we consider it a short-term thing, what is the potential for negative working capital to reverse with business recovery? What could be the timeline for that?
22.
How significantly do you expect CAPEX to be reduced?
23.
Which vendors are most exposed to a reduction in CAPEX?
24.
Do you think the government will step in to support casino operators?
25.
How is marketing going to play a role in reinvigorating gambler enthusiasm to get people back into casinos?
26.
You mentioned players with good loyalty programmes. Which players have made investments in loyalty programmes that may now have them pay off?
27.
Which line items would you adjust for any given player and by how much? How should we trim our full- year or quarterly expectations?
