Two down, one to go. This morning, the Culinary Union tersely announced the reaching of a tentative deal with leading employer MGM Resorts International. That’s 24 hours after the local declared it had achieved a pact with Caesars Entertainment by dint of a marathon, 20-hour bargaining session. Bleary-eyed CZR and Culinary negotiators reached an agreement at 5:30 a.m. Wednesday. Wynn Resorts remains the lone holdout of the Big Three, with less than 24 hours to the strike deadline and a week before Formula One comes to town. The Culinary was loaded for bear and gaming execs ultimately realized that.
Deutsche Bank analyst Carlo Santarelli took a ‘told you so’ tone in an analyst note. “After much hand wringing,” he sneered, “it appears the negotiations for the two significant union contracts, for operators in Las Vegas, are at the finish line. Writing at the time of the Caesars announcement, he opined, “we expect tentative agreements with both MGM and WYNN, to follow in relatively short order. Given the inflationary environment in which the current negotiations have been held, it is our view that the likely outcome, as it pertains to the [salary increase] for year one, was towards the high end of our prior analysis range.” Which is just what the Culinary wanted.
Of course, besides a “record” wage hike, the Culinary desired a great deal more. Daily room cleanings appear to have returned (praise be!) and pension contributions will be upped, for starters. When jobs are eliminated in favor of robotics, Caesars will have to provide six months’ advance notice. The clearest crystal ball on this whole affair belonged to the execs at Golden Entertainment, who predicted that contracts would be resolved by mid-November, whereas Wall Street was guilty of drinking Big Gaming’s ‘imminent agreement’ Kool-Aid.
In a subsequent press release, the Culinary was more forthcoming about its MGM pact. It “includes the largest wage increases ever negotiated in Culinary Union’s 88 year history, workload reductions for guest room attendants, mandated daily room cleaning, increased safety protections for workers on-the-job, expanded technology contract language, extended recall rights, and the right for unionized workers to support non-union restaurant workers seeking to unionize through picketing, leafletting and other actions.” Meaning the Culinary got damn near everything it wanted. Playing hardball was a winning strategy. It’s also a rebuke to then-governor Steve Sisolak (D) and feckless Democratic lawmakers who sold housekeepers down the river in the Lege by ending the Nevada requirement that hotel rooms be cleaned on a daily basis, a shameful sellout to Big Gaming. Now that MGM has come to terms on the Las Vegas Strip, it has no further excuse for holding out in Detroit, where the casinos continue to stonewall workers.
Back in the spring, we covered Station Casinos‘ a-borning Durango Resort for Casino Life. At the time, property execs seemed to have all their ducks in a row for a Nov. 20 opening. It didn’t quite work out that way, as Durango’s debut has been pushed back to Dec. 5. Reason: The place simply isn’t finished yet. Reported Janna Karel, “The company shared that its Durango employees who were scheduled to start work on opening day will still be compensated with salaries and tips during the period of November 20 to December 5.” Good on Station, which is getting much better at PR. Vital Vegas took a deeper dive and found that “only about half the resort’s [201] rooms are done and ‘the suites are not even close to being finished, according to our source.” Tsk, tsk.
The postponement isn’t a bad thing. It gets Durango out from under the looming shadow of the Las Vegas Grand Prix, without putting into the other coming cloud front, the Dec. 13 debut of Fontainebleau Las Vegas. All of which means more press for Station. “No surprises,” claimed J.P. Morgan analyst Joseph Greff of the surprise announcement. The $780 million-for-now cost of Durango cut into Station 3Q23 profits ($68.5 million), which dropped 28%. Revenues were $411.5 million and cash flow $191.5 million, both in line with expectations. These were down modestly from last year, although not as much Boyd Gaming‘s. (In fairness, Boyd is exposed to many more jurisdictions than Vegas-only Station.) Execs also dangled two more real estate sales (undisclosed) in front of stock boffins, enticing news to be sure.
For 4Q23, Greff forecast $199 million cash flow and no return on investment (yet) from Durango. Next year’s numbers were lowered, too, despite “a modest initial contribution from Durango.” Although taking a “conservative” stance on cannibalization, Greff expects more of it than do his peers. While sticking with his Overweight rating, Greff lowered his price target on RRR stock to $50/share (down from $54). Santarelli was also pleasantly surprised by the Station numbers, relative to Boyd’s, citing “benefits from some well received gaming amenity additions.” He saw growth in both room sales (+8%) and F&B (+4%), as well as potent group business.
Santarelli wasn’t so crazy about the Durango delay and cost creep (probably in the neighborhood of $35 million), nor about the lack of new land sales. He also cited “a waning expectation” for Formula One weekend. (Told ya so.) But he was more optimistic than Greff, sticking by a Buy rating and $54/share target. Why? Positive stock growth post-Durango, “the strongest organic growth pipeline in gaming,” the “locals market remains desirable amongst the broader regional drive-to gaming landscape” and an enviable real estate portfolio.
The lone Station skeptic would appear to be Barry Jonas of Truist Securities. His Hold rating was accompanied by a conservative, $46 price target. Citing Durango caution, he wrote, “We continue to see RRR as a best-in-class operator though await some proof points around the Durango opening, its ramp and potential impact to other RRR properties.” Jonas continued that the F&B/hotel numbers were near-record ones, with occupancy running at 86%. Customer spending patterns haven’t changed much, with high-end business making up for any “melt” at the bottom. The C-suite “believes F1 will be positive for the company, though appears more bullish on the Super Bowl‘s impact in February.” (Again, we told you so.) There might be “some indirect wage pressure” from the Strip’s hikes and utility costs continue to be something of a bother.
Speaking of predictions that came true, we went out on a limb and prognosticated that the Seminole Tribe would move quickly to incept sports betting in Florida. After all, they already had the infrastructure in place. And that’s what they did. They’re offering “limited” sports wagering to legacy customers from their abortive 2021 launch. This was done despite multiple lawsuits being still before the courts. Speculated Bob Jarvis, a law professor and gambling expert at Nova Southeastern University, “There is a theory that … you are better off being up and running because it is harder for a court to stop a business that is up and running because, of course, it impacts both workers and customers. So maybe that’s the Seminoles’ thinking.” (Didn’t work the last time.) Jarvis opined that, “It doesn’t make any sense, frankly, for them to be doing this while there are still judges and justices who are yet to weigh in on the legality of mobile sports betting.”
Sure enough, both West Flagler Associates and Bonita-Fort Myers Corp. petitioned the Florida Supreme Court to enjoin Hard Rock Seminole from taking further wagers. Anticipating a 2024 ruling on the overarching issues by the high court, attorneys for the duo wrote that, “This exigency has been created by the launch of the Seminole Tribe’s mobile betting application on November 7, 2023, without prior warning.” Yeah, like the Seminoles were going to give their detractors a heads-up. The motion does raise the intriguing question of what happens to the money that Hard Rock International makes while the controversial betting is litigated. If the Seminoles ultimately lose, who gets it? The tribe? Gov. Ron DeSantis? The court? It seems like we’re bound to find out. Incidentally, the tribe will also go live with long-sought craps and roulette on Pearl Harbor Day, giving us an excuse to run this …
… don’t say we never gave you anything.
Jottings: The Tropicana Las Vegas has less than a year to live. According to Oakland Athletics shills at the Las Vegas Stadium Authority, the venerable casino resort must be closed, imploded and razed by the end of next year. Otherwise the wretched A’s won’t be able to start playing atop its grave by 2028 … “Skill game” operators in Virginia Beach have a month to disappear their black-market slots. The city wants them gone by mid-December … The government of Ireland had been mulling a total on advertising of gambling. Fortunately they are rethinking that wrongheaded measure, news reports say … Oklahoma Gov. Kevin Stitt (R) continues to lose, lose and lose again. The Sooner State Lege shot down a pair of compacts that would have granted off-rez gambling to a pair of minor tribes, Stitt’s signature achievement … Solons in Mississippi are debating online sports betting and even Internet casinos in the Lege. Welcome aboard, we say.
Quote of the Day: “The next best property [in Cripple Creek] is a pile of debris. It’s got the Caesars name on it but it was built by Isle of Capri, which we used to refer to as Pile of Debris.”—Full House Resorts CEO Dan Lee, touting his company’s soon-to-open Chamonix, in yesterday’s earnings call.
