Vegas reopening: Big events key in helping Strip casinos ‘pivot to prosperity'

LAS VEGAS — Concerts, sporting events, headliner acts, elaborate stage productions and citywide conventions helped bring 42.5 million visitors to Las Vegas in 2019, fueling some $60 billion of economic output.

The Strip reopens this week following an unprecedented two-a-half-month shutdown to slow the spreading coronavirus pandemic. Remaining on the sidelines, however, are the arenas, showrooms and convention spaces utilized for non-gaming attractions that have become part of its financial lifeblood and attracted so many tourists last year.

Mass gathering events are not included in Phase Two of the state's reopening plan, primarily because of social distancing protocols suggested by the Centers for Disease Control and Prevention and other health and safety organizations.

Las Vegas resorts have grown less dependent on gaming revenues over the past two decades and have focused millions of dollars toward expanding non-gaming aspects of the tourism industry, including a wide variety of entertainment choices, scores of restaurant options, a multitude of retail attractions and many high-profile special events.

Marketing expert Josh Swissman, a founding partner in The Strategy Organization, said Las Vegas needs to get back to the basics.

“A major piece of the overall Vegas experience is not going to be there right away, but it won't be gone forever,” Swissman said. “One thing Vegas does best is service, and that's what we're going to have to deliver.”

There are now 43 states with commercial and/or tribal casinos. A person doesn't have to drive far to play a slot machine or find a seat at a blackjack table.

That fact has changed Las Vegas' focus.

In the Nevada Gaming Control Board's most recent Gaming Industry Abstract, 44 Strip casino-resorts produced more than $18.7 billion in revenues for the 2019 fiscal year. Gaming accounted for 34.5 percent, or $6.45 billion, while hotel rooms, dining, and entertainment made up 65.5 percent, a spread that hasn't varied in the last five years.

The growth of non-gaming amenities, analysts said, allowed Las Vegas to prosper when faced with increased casino competition for neighboring states, such as California, where tribal casinos produced an estimated $9 billion in gaming revenues annually before the pandemic. Non-gaming spending didn't even top $1 billion at California Indian casinos, according to economist Alan Meister's most recent Indian Gaming Industry Report.

“This has been a solid strategy to broaden the city's revenue base and smooth out its tourism calendar,” said Nehme E. Abouzeid, president of consulting firm LaunchVegas who spent 13 years in marketing roles with Wynn Resorts, Las Vegas Sands and the Golden Knights.

“Surveys consistently cite entertainment as a top driver of new Vegas visits,” Abouzeid said. “We need it since 80 percent of Vegas visitors are repeat visitors. We constantly need new products. Live entertainment also drives casino play and fills the restaurants at resorts.”

Abouzeid cited sports tourism as the most recent phenomenon that has shown success with the Golden Knights. The Knights' home, T-Mobile Arena, cost MGM Resorts International and AEG $365 million to build in 2016, and is also used for concerts and college basketball tournaments.

The $2 billion Allegiant Stadium, home of the relocated Las Vegas Raiders, will also host non-conference college football games. A Garth Brooks concert was announced earlier this year – pre-COVID-19 – for August.

However, the utmost concern is the notion of people packing an 18,000-seat arena or 65,000-seat stadium while COVID-19 spread is still greatly unknown.

“The investment will not be lost, just interrupted temporarily,” Abouzeid said. “Ultimately, Vegas will pivot to prosperity, as it has done so many times in the past.”

Focus on gaming

Less than half of the Strip's major resorts have announced reopening plans beginning Thursday under state mandated health and safety protocols that hold a facility's capacity to 50 percent while increasing space between active slot machines and reducing the number of seats at table games. Casino operators are promulgating social distancing guidelines and cleaning and disinfecting efforts.

MGM Resorts and Caesars Entertainment are reopening six of their combined 18 Strip resorts. Caesars will also bring back the High Roller Observation Wheel.

Showrooms are still dark and restaurant options are limited, with dining attractions having decreased seating. Caesars Palace, for example, is reopening just two of full-service restaurants Thursday along with several “grab and go” type offerings.

John Restrepo, principal of Las Vegas-based RCG Economics, said there are many unknowns as the Strip moves into the recovery phase. He said resort operators have to base their plans on not having mass-gathering large entertainment venues available for several months. For now, nightclubs and concerts won't be a reason to visit Las Vegas.

Restrepo also said the divide between gaming and non-gaming revenues will have to narrow somewhat until the major events return. The question is how much gaming contributes to the bottom line at a time when unemployment is running at 44 percent nationwide.

“We don't know what it means to operate in 50 percent capacity,” Restrepo said. “Many restaurant operators say it's challenging to make a profit at 75 percent capacity. There are a lot of unknowns. We don't know when mass gathering meetings are going to come back. What business is lost because of new technology, such as Zoom meetings?”

UNLV professor and gaming historian David Schwartz predicted the pandemic will change the atmosphere inside Las Vegas casinos. He said security inside resorts became more heightened after the Sept. 11, 2001 terrorist attacks, and the recession changed Las Vegas, somewhat, from being a value-oriented destination.

MGM resorts and Caesars have announced they are eliminating paid parking fees, and Schwartz hopes the casino operators can get together and eliminate – or greatly reduce – resort fees attached to hotel room bills.

An immediate impact could be cashless gaming initiatives, such as mobile wallets connected to player loyalty cards and electronic table games.

“We were heading in that direction and coronavirus has now seemed to quicken that effort,” Schwartz said. “We will see a push toward innovation.”

Swissman said a focus on the casino to enhance the gaming experience – safely – will be the overall initial effort.

He also believes cashless gaming technology will become common more quickly than what had been originally anticipated. Automation seen in other areas of a property will soon find its way into the casino.

“Parts of the Vegas gaming experience will forever change,” Swissman said. “As a people and a culture, we need to get back to a place where we're comfortable.”

Swissman expects Strip properties will see a fair amount of business this week.

He and Schwartz said a good sign was the promotion by downtown casino owner Derek Stevens. He gave away 1,000 one-way airline tickets to Las Vegas, good for this weekend, with no strings attached other than the person was responsible for their return flights and hotel rooms. Two hours after selling out the promotion, Stevens gave away another 1,000 airline flights.

“That's the attitude you want in Vegas,” Schwartz said. “The casino owner with the image that he doesn't care about money. His customers will come in with the same attitude and will spend more.”

Strip gaming revenues fell from $481.6 million to $3.39 million in April – a decline of 99.6 percent. McCarran International Airport saw a 96.4 percent decline in passenger volume during the month. Similar drops are expected when May's totals are released.

Restrepo said airline capacity will be a foremost element in any Las Vegas recovery.

Bringing back events

It was announced last week that Las Vegas is being considered as a location by the National Hockey League for an abbreviated play-off format. But it's unclear whether fans would be allowed into T-Mobile Arena for the games.

MGM Resorts acting CEO Bill Hornbuckle said last month that canceled conventions and meetings at the company's Strip properties, originally planned for the spring, have rebooked for the fall and winter and into 2021.

As for Strip entertainment, showrooms will continue to remain dark. The trouble extends beyond Las Vegas. Cirque du Soleil, the Montreal-based entertainment company with six different shows at MGM properties, needed a $200 million cash infusion from the Quebec government last week to help manage its losses.

Another ominous sign was The Smith Center's decision last week to postpone its Broadway Las Vegas Series through the fall.

Abouzeid said the short-term concern is how long it will take Las Vegas to bounce back under the safety protocols and distancing measures. But he's optimistic the resort corridor will evolve. What that resembles remains the unanswered question.

“Vegas will be a leader in whatever the new normal is,” he said. “The standard setter in cleanliness, preparedness, and fun at scale.”

Howard Stutz is a freelance gaming reporter for The Nevada Independent and the executive editor of CDC Gaming Reports. He has been a Nevada journalist for 30 years. He can be reached at howardmstutz@gmail.com. On Twitter: @howardstutz.

The Nevada Independent is a 501(c)3 nonprofit news organization. The following people or entities mentioned in this article are financial supporters: Caesars Entertainment - $152,500.00; John Restrepo - $210.00; MGM Resorts International - $957,500.00; RCG economics - $100.00; and Wynn Resorts - $75,000.00.