Fitch Ratings: Las Vegas Strip Recovery Several Years Out
Posted on: October 15, 2020, 12:42h.
Last updated on: October 19, 2020, 11:21h.
Fitch Ratings says the Las Vegas Strip likely will not fully recover to pre-COVID-19 revenues until sometime in 2024.
In a note, analysts Alex Bumazhny, Colin Mansfield, and Connor Parks forecast that gross gaming revenue (GGR) will be down 60 percent this year, 50 percent in 2021, and 20 percent in 2022. The percentage declines are relative to the Strip’s GGR numbers realized in 2019.
A full recovery to pre-pandemic levels is not expected until 2024,” the Fitch analysts wrote. “The Las Vegas Strip will experience the slowest recovery relative to other major gaming markets and segments globally.”
Worse for the Strip is that roughly two-thirds of casino operators’ revenue comes from non-gaming. And that won’t be substantially improving, Fitch says, until there is a widely available treatment or cure for the coronavirus.
Much of that nongaming revenue comes from tourists and convention attendees. Air travel to Las Vegas remains down 60 percent from pre-coronavirus levels. Through August, visitor volume is down 55.3 percent — a loss of 15.7 million visitors.
Vaccine Needed to Spur Travel
Five straight months of zero convention attendance has greatly hampered visitor volume.
We don’t envision a material improvement in air capacity or consumer comfortability with flying until a widespread (COVID-19) health solution is present (e.g. vaccine, antiviral drugs), consistent with Fitch’s global airline group’s expectations,” the note stated.
With demand low and an uptick in crime on the Strip perhaps due to cheap hotel rooms, Wynn Resorts made what would be an unthinkable pre-COVID-19 decision to close Encore Las Vegas during the week. Effective next week, the Strip resort will close at noon on Mondays, and reopen on Thursdays at 2 pm.
“Midweek remains extremely challenging, given the lack of convention business,” Fitch explained.
“The convention business, which has begun experiencing first half of 2021 cancellations, hinges on participant and employers’ comfortability levels with larger-scale events,” Fitch added. “Positively, the 50-person cap on groups was eased on Oct. 1, with larger venues of 2,500-person capacity or more allowed 10 percent occupancy under certain protocols.”
Regional Casinos Faring Well
Outside Las Vegas and Nevada, state gaming industries have seen strong demand since coronavirus restrictions have been lifted and casinos unlocked their doors.
Despite capacity limits and numerous COVID-19 safety measures implemented, states like Maryland, Indiana, Ohio, and Pennsylvania have reported year-over-year GGR increases. Ohio casinos reported record months in July, August, and September.
Fitch says regional casinos have rebounded nicely since reopenings began in May. August GGR was down 16 percent year-over-year, excluding New York’s four upstate commercial casinos, which remained closed until September.
One concern for land-based casinos in Pennsylvania and New Jersey is that online gambling continues to surge. Fitch opines that some of that revenue might have “permanently migrated to online.”
While online gambling is beneficial to land-based casinos, brick-and-mortar gaming venues need to keep their restaurants, bars, sportsbooks, and entertainment venues busy with physical people.
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