Things have changed quite drastically for you in Vegas, with the Strip currently on lockdown. Have you ever seen anything comparable to this at all?
There’s nothing comparable to this but the two instances where Vegas was shocked by events happening externally were 9/11 in 2001 and then the market crash in 2008.
In 2001 the whole world was shocked by a terrorist incident and it affected for a while people getting on planes and coming to Vegas, but Vegas was very resilient and within a matter of months we worked our way through issues related to supply and demand; and things rebounded quite nicely in a period of about a year.
In 2008 the economy went through a depression and that affected not only the tourism industry but it affected Vegas as a community because a lot of people had money invested in real estate and the housing market crashed. We worked our way through that. It took a few years.
We were stronger than ever for the last couple of years and we were on a trajectory to go above and beyond that. But I would say coronavirus is probably 10 times worse than any of those situations because it’s worldwide and it stops people feeling safe in a public environment with large crowds, which is the definition of Vegas. Does that mean we’re done for? Of course not. But it does mean that we have to adjust our expectations in terms of how we work our way out of it.
Based on your experiences in 2001 and 2008, what would be your advice for casino owners in the current crisis?
First and foremost the number one criteria has to be keeping employees and patrons safe. There have been a number of plans that have been released including Wynn casino and others. There are certainly ways for the casino industry particularly in Vegas in providing a safe work environment, and a safe environment for patrons to come back. The question is, at what pace, at what volume can we both keep people safe and give them an experience? The answer is: very incrementally.
It’s going to be very different to where we were because people will be wearing face masks; they’ll have their temperature taken. But after 2001 people had to stand in long security lines and people got used to it at the airport. In 2008 people had to adjust their family budgets but the discretionary spend came back and people spent money at casinos.
To think we will always be in this situation is wrong but how we come out of it has to be very incremental with a focus on safety. The good news is there is a lot of technology available now to allow casinos to run more efficiently because if you have fewer patrons you have to find a way to operate from an overhead standpoint that is more efficient. This means you’re going to need fewer employees in the long run and that is unfortunate for sure.
Recently, Wynn Resorts CEO Matt Maddox suggested he expected a mid-May opening of the Vegas strip. What are your own expectations for when Vegas will be open again?
The Governor of Nevada has said that he is not in agreement with the Matt Maddox approach but he appreciates the wisdom that has gone into Wynn's planning. I estimate that we will be able to open in the June/July time frame. I think this will be at historical lows in terms of occupancy, so an operator like MGM will start by opening one property at a time. Wynn would start by opening one tower at a time and they would bring back employees based on the occupancy. It’s going to be a very slow process.
My estimation is that it will take a few years for Vegas to return to anything that approximates normal. The normal will be a different normal than what we’ve ever known. But Vegas has shown an ability to adapt itself and still come out as a top destination in the world and I suspect that it will do so again. But it will take longer for Vegas than most locations in America.
The local casinos, so the regional and tribal casinos, have an easier path back because they’re local and people drive to them. In an average casino, 30% of the customers make up 70% of the revenue so if you cater to those customers you can return to some level of sufficient occupancy to support overheads and you can make a profit. But it will still take a year and a half to two years similarly for regional casinos to come back.
In the Betting in the Face of COVID-19 conference you mentioned that you’re still bullish about the future of US sports betting, but surely this is a huge blow. How does the market recover post-COVID?
All you have to know is that between gaming and sports you have over 5% of the GDP of America. There is too much money invested in the infrastructure of entertainment for it to wither away. The professional leagues will find a way to return to competitive play so that there is content for people to bet on. States will increasingly move towards mobile sports betting and mobile casino so that if we have shutdowns people can still access the content. It will take time but professional sports will come back. Maybe initially this will be without fans, which isn’t ideal, but the sports betting market is adaptable.
Are there any positives to take from this situation in regards to sports betting?
Each business owner is reflecting on what is essential to them, what the gaps in their business are, how they recover in a post-COVID world technologically and on their content. It used to be that you never gave certain content a chance, but now you have to give it a chance whether its esports, virtuals or other types of streamed content.
A pandemic happens every 100 years so it’s not like we necessarily could prepare for it but something good always comes out of something bad. It’s just hard to know what that is when you’re in the middle of it. We’re in the middle of it and it could last an unknown length of time which makes it much more anxiety producing.
For Betfred specifically, what has been the contingency plan to deal with the crisis?
Obviously in the UK they’re putting more focus on their digital business during the shutdown. They’ve thought about how their retail shops can change and be better in the post-COVID world and they’ve expanded their notion of content. It’s a strong brand with a long history and has strong leadership in Fred Done so they will find their footing in the post-COVID world.
As far as the US goes, we haven’t stopped our efforts to create a top-tier footprint in the US in terms of market access. We’re already going forward in Colorado and Pennsylvania where we received licenses. We were live in Iowa and will get back to it when the state reopens. We have commercial deals in close to 15 jurisdictions in the US that are in different stages. We have an operating team that is first class in the US. The US still represents the best opportunity as far as an emerging market given the strength of the market place for sports betting.
So you would say this hasn’t really affected Betfred’s plans for development in the US?
Not one bit so far. We’re still making investments, we’re still expanding. Obviously we need professional sports to come back online and we need the economy to open up but we’re in a strong position in the US.
