Analyst on Vegas casino reopenings: 'Long haul before we start to see some heavy duty activity'

Moody's Senior VP and Lead Gaming Analyst Keith Foley joins Yahoo Finance’s Zack Guzman to discuss the reopening of Las Vegas casinos amid the coronavirus pandemic.

Video Transcript

ZACK GUZMAN: Las Vegas is back. After 78 days of being dark, casinos there opening again, offering the first chance for a lot of people to get back out there and enjoy the sights of the strip as well as some gambling action. But does that mean that a full return is on the horizon? For more on that, we're bringing on our next guest.

Keith Foley is Moody's senior VP and lead gaming analyst. And he joins us now on the phone. And Keith, what are we seeing here? What's the promise offered by this return here on day one of action? What are you seeing? And what does it mean for the recovery?

KEITH FOLEY: Well, it's nice that these facilities are starting to open up. I think there's some pent up demand. But I think it's going to be a long haul before we really start seeing some heavy duty activity.

So this is going to be very interesting because this will be a test, to some degree, for what's going to happen throughout the United States in terms of casinos. You know, casinos basically rely on a lot of people socializing and being in an enclosed space. So what's happening today in the environment is pretty much the opposite of that.

I think we're going to see people waiting in lines to gamble. I don't think they're going to be at full capacity because a lot of the machines and other facilities have been limited to adhere to some state guidelines. But I would expect that people are going to start showing up. The real question though, is will they be spending.

ZACK GUZMAN: Yeah, and I guess that that is a factor to be considered in the equation of kind of different-- different fronts. You can look at it as how many people are actually coming back and then also how much will they be spending. But that's kind of a function of what's going to be available for them to spend on. We've seen gambling floors come back with limited occupancy there, about 50% rates of what they used to be. Some shows not necessarily coming back in the opening weekend, clubs. I mean, what is the revenue breakdown that investors should be considering when we're talking about reopening and how different it looks from what we saw last year?

KEITH FOLEY: Sure. When you're talking about Las Vegas, you're probably talking about 50% of the revenue coming from traditional gaming activities including tables and slots, the remainder coming from restaurants and other non-gaming amenities. A little bit different on the regional side for the regional casinos, which we think will probably ramp up faster than Las Vegas, that being one of the reasons.

But if you're running at about 50% capacity of slots at this time-- and what we're hearing is-- I can't verify this. But what we're hearing is the win per unit in some of the facilities, some of the Native American facilities that have opened up, if that's any indication, you're probably going to have each individual machine perform pretty well because people-- because of the limit and the supply of those machines and the people waiting to play them. I don't know how long that will last.

But I would expect that revenues are not-- not going to be near the, quote, 50% of what a casino normally asks. I would expect it's going to be well below that and that, you know, the cash flow from that is gonna also-- is going to be also a lot lower that it has been in the past. It's going to be a long, hard ride

ZACK GUZMAN: Yeah, we had an analyst on yesterday estimating it'll probably be-- it'll probably take until 2023 before you start to see things return to normal. But it's also worth noting, as you pointed out, that Las Vegas is not necessarily the entire take for a lot of these gaming companies when you look at Macau and the way that Las Vegas Sands and Wynn have expanded over there. You can look at Boston with Wynn's expansion with the Wynn Encore there. I mean, how, I guess, has Vegas become less important to some of these names? And how important should it still be when we're thinking about the overall gaming economy?

KEITH FOLEY: Well, I think it's-- it's a big part of gaming in the US. So I think it's a big part of the economy, particularly for Nevada. Interesting about companies like Wynn and Las Vegas Sands. In terms of the Las Vegas opening, they probably learned a lot from what's been happening over in China. Most of their revenue and capital comes from China at this point. Las Vegas is a very, very small part of what they do. And that's been the case for-- for a number of years. But that really doesn't diminish the importance of how well Las Vegas does in the United States here, because it will be a leading indicator, to some degree, of what will happen across the region, not entirely, but it will be a very, very good leading indicator of what's going to happen.

One of the challenges though, is in terms of what we'll find out in terms of what's exactly spent at these casinos-- you may not be aware of this. But most of the states do report publicly the amount of gaming revenue that they receive. But it probably comes out close to a month after the actual activity. So we won't know for a little bit of how well it's doing.

But Las Vegas-- I don't think Las Vegas is ever going to be not a major consideration when it comes to gaming in the United States. I don't think-- you know, it might decline a bit for a long time and take a while to get up. But it's been an excellent place for businesses to do conventions for a lot of midweek traffic. And I think at some point that'll still be the case.

ZACK GUZMAN: Yeah, especially considering the decline of Atlantic City that we've talked about here on the show as well with Barry Friedman policing-- sorry, Barry Friedman's gonna be coming up in a little bit. Keith Foley, appreciate you taking the time to chat with us about Las Vegas on day one of reopening. Exciting times. Keith Foley, Moody's Senior VP and Leading Gaming Analyst. Appreciate it

KEITH FOLEY: Thank you, Zack.