Commercial and tribal casinos in more than a dozen states have slowly begun the process of reopening after being closed for more than two months due to the coronavirus pandemic.
There are some casinos, however, that may not ever reopen.
In heavily competitive markets, gaming companies may choose to permanently close under-performing casinos, in the hopes that the location can either be sold at a bargain-basement price or reopen in the future if financial conditions improve.
Last week, the operators of Diamondjacks Casino in Bossier City, Louisiana said they wouldn’t reopen the small facility. On Monday, Las Vegas-based Golden Entertainment said it would close the Colorado Belle in Laughlin, Nevada.
Other properties are certain to follow as companies look to bolster sagging balance sheets.
COVID-19 has cost the gaming industry billions of dollars in lost revenues and cash flow, which has reduced the businesses’ market value. The casino closures sent thousands of gaming employees to the unemployment rolls.
Shutterstock/Colorado Belle in Laughlin
“One of the side effects of this pandemic will be that operators will likely dispose of under-performing assets as they focus on their core operations and facilities,” said Global Market Advisors Partner Brendan Bussmann. “This will provide several acquisition opportunities for other operators and new market entrants that see opportunity and are well-capitalized. It is likely that certain operator portfolios will become much different as a result of this pandemic.”
Cost-cutting and consolidation in competitive markets – there are 43 states with commercial or tribal casinos – had already been discussed in gaming circles, long before the coronavirus became the overriding factor that will hover above the industry for the rest of 2020 and into 2021.
This coronavirus is not the terrorist attacks of September 11, 2001, which ultimately disrupted airline travel in the U.S. for more than a year and caused economic hardship in destination travel markets, such as Las Vegas. Nor is it the Great Recession of 2008 and 2009.
In truth, COVID-19 could be viewed as a combination of both events. Airline travel has been hindered, and consumers’ discretionary income has been reduced. The gaming and tourism industries are each on a long path toward recovery.
“It’s going to take time,” American Gaming Association CEO Bill Miller told The Wall Street Journal. “But I think that the industry will get its swagger back.”
In 2005, Hurricane Katrina blasted New Orleans and the Mississippi Gulf Coast, closing casinos for several months. A handful of properties were shuttered for up to a year. Some operators decided it was easier to close the buildings, sell the sites, and accept business interruption insurance.
However, we’ve learned this year that business interruption insurance doesn’t cover global pandemics.
That means it’s easier for some companies to close under-performing or aging casinos.
DiamondJacks in Bossier City, Louisiana
DiamondJacks had the smallest gaming revenue totals in Northwest Louisiana, a market that includes larger casinos operated by regional operators Eldorado Resorts, Penn National Gaming, and Boyd Gaming Corp.
The Colorado Belle is one of three casinos Golden Entertainment owns in Laughlin, a gaming community on the Colorado River roughly 95 miles south of Las Vegas that is beholden to drive-in traffic from California and Arizona.
Laughlin’s 10 total casinos produced gaming revenues of $512.2 million in 2019, a less than 1% increase over 2018. But with Indian casinos reopening in both the Phoenix area and in Southern California, Laughlin casinos will likely need a hefty marketing campaign to bring back business. It’s also not yet determined when Nevada’s casinos will reopen.
The Colorado Belle isn’t for sale, and Golden President Charles Protell told the Las Vegas Review-Journal that any future plans for the casino “will be highly dependent on the business volume at our other Laughlin properties and the Laughlin market in general.”
MGM Resorts International said it will open just two of its 10 Strip gaming properties when Nevada gives casinos the green light to reopen. Red Rock Resorts will reopen six in the Las Vegas Valley, and hold back four.
“Operators will first open those facilities that have been their key performers that can best accommodate consumer demand and provide operators with the best opportunity for returns,” Bussmann said.
Golden said it would try and find jobs with other company businesses for the 400 Colorado Belle employees who were laid off, but those chances may be slim. According to The Nevada Independent, Golden was one of the dozens of Nevada companies, including MGM, Red Rock, Caesars Entertainment, and Eldorado Resorts, that filed letters with the state under the Worker Adjustment and Retraining Notification Act of 1988. The federal law requires companies to give advance notice of mass layoffs, plant closures, or a significant reduction in the workforce.
Golden filed WARN Act letters in early April for 13 businesses, including the corporate offices.
If there is a reasonable hope, it’s the lines of customers that casinos were seeing in Louisiana and California on Monday, and Arizona, Oklahoma, and South Dakota last week – even with reduced capacity guidelines, social distancing rules, protective face masks and seating limits at slot machines and table games.
“The first properties to open are experiencing an initial pop due to pent up demand but overall will not reach pre-COVID levels,” Bussmann said.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
