The S&P 500 Casino & Gaming subsector index has seen its market value plunge by 47 percent since the close of business on Jan. 17, the last trading day before COVID-19 was first reported in the U.S. Gaming giants like MGM Resorts have seen their stock prices take hits of 75 percent.
|MGM||MGM RESORTS INTERNATIONAL||40.88||-0.31||-0.75%|
|LVS||LAS VEGAS SANDS CORP||61.00||-0.61||-0.99%|
|WYNN||WYNN RESORTS LTD.||129.82||-0.12||-0.09%|
“The question now, more than anything, becomes who has the liquidity, meaning who has the cash flow, who has access to a revolver, to be able to weather this storm,” Barry Jonas, New York-based analyst at SunTrust Robinson Humphrey, told FOX Business.
“There's a lot of uncertainty in terms of how long the casinos will close," he said. "For now, it's 30 days, and then on top of that, once we do emerge from this, there's a real question as to how the consumer psyche is affected.”
The COVID-19 pandemic has brought the global economy to a near standstill, forcing governments to issue “shelter in place” orders, people to practice social distancing and the cancelation of non-essential travel.
In a first since former President John F. Kennedy’s death in 1963, Las Vegas casinos were shuttered on Wednesday, for at least the next month, in an effort to prevent the spread of COVID-19.
The American Gaming Association warns the shutdown of U.S. casinos, who draw the lion's share of their revenue from Las Vegas, will “rob the U.S. economy of $43.5 billion in economic activity if American casinos remain closed for the next eight weeks.”
To gauge what's at stake, consider that Clark County -- where Las Vegas is located -- by itself raked in $10.36 billion from the industry in 2019, according to Nevada Gaming Control Board data.
Even when Las Vegas reopens, it could take a while before the Strip roars back to life, Jonas says.
“We see the recovery starting in the regional markets and then sort of making its way to the Strip once we really get a sense of normalcy,” Jonas said. “You can look at 2008 or 2009, you can look at 9/11, and think about long-term repercussions that happened for years and years, if not even up until today.”
In a worst-case scenario, where companies have to cut 75 percent of their costs, gaming giants MGM, Wynn Resorts and Las Vegas Sands would be fairly insulated, able to survive 15 months, 18 months and 24 months, respectively, according to Jonas.
Others, such as Caesars Entertainment and Penn National Gaming, which owns the Tropicana Las Vegas and recently purchased a 36 percent stake in the blog Barstool Sports for $163 million, would be more at risk with just eight months and four months, respectively, until having to close their doors, Jonas said. Without the Barstool acquisition, Penn National would be able to survive for 5 months.
Vegas hotels have slashed their rates in an effort to attract customers. Quoted rates at MGM Resorts, which Jonas uses as a proxy for the Strip, have seen sequential declines of 24 percent to 72 percent for late April and May.
One area of growth for the gaming industry, while currently a small portion of revenue, is sports betting, but even that stream is dry right now as the sporting world has come to a grinding halt.
“It's a 100 percent loss; it's completely devastating,” Jason Adler, CEO of the New York-based independent sponsor and buyout firm Spring Owl Asset Management, told FOX Business.
“NCAA is not coming back. English Premier League might be completed, might not. Eurocup is not happening. Maybe next year they're saying, Monaco Grand Prix canceled.”
In the meantime, the casino industry has joined others in asking the Trump administration for emergency help, which could come in the form of grants, loan guarantees or tax credits.
“There have been plenty of TIME magazine covers that questioned whether Vegas was done,” Jonas said. "And clearly, it always evolves. And I don't doubt that will be the case this time.”