Nearly one month has passed since Black Thursday, a day when at least eight major professional sports leagues worldwide temporarily shut down in response to the threats posed by the spread of COVID-19.
The measures came one day after a positive test by Utah Jazz center Rudy Gobert prompted the NBA to suspend the 2019-2020 season on March 11.
Since then, the dominoes have fallen. Days later, a slew of governors ordered the closure of all non-essential businesses across their respective states, including casino properties. Nevada Governor Steve Sisolak followed suit by closing every casino property throughout the Silver State, effective March 18. For the first time in more than 50 years, The Strip went dark.
Within days, practically every casino in the nation shuttered its doors. The booming sports betting industry has been tag-teamed by an unexpected, unprecedented force. Not only is every retail sportsbook in the nation closed, the sportsbook industry has been besieged by a global sports freeze that has limited offerings to niche sports such as table tennis, chess, sumo wrestling, and Belarusian soccer.
Sports freeze contributes to revenue drain
The cancellation of March Madness combined with lengthy postponements in the Major League Baseball, NBA, and NHL seasons may result in the loss of $350 million or more in revenue for sportsbooks nationwide, according to a high-level industry source. If the freeze remains in place through the end of June, the figure could rise to $500 million and beyond.
In Nevada alone, there are roughly 5,000 to 6,000 sportsbook employees across the state, the source said. The shutdown has affected numerous areas of sportsbook operations, leaving ticket writers, book supervisors, accounting personnel, and compliance specialists on edge regarding their employment status.
William Hill US, which operates more than 100 sportsbook properties across eight states, has been forced to lay off and furlough some employees, sources say. William Hill is not alone, as virtually every major casino nationwide has announced payroll reduction initiatives in some form.
In late March, the American Gaming Association (AGA) issued a dire warning, cautioning that nearly $74 billion in annual casino employee wages could be at risk due to the closures. In the event the shutdown lasts through mid-May, the closures could be responsible for an estimated $43.5 billion in lost economic activity, according to AGA estimates.
— David Payne Purdum (@DavidPurdum) March 24, 2020
Here is an overview of the furloughs, layoffs, and other cost-cutting measures as casinos attempt to navigate through the difficult period.
Nevada
MGM Resorts International, one of the world’s largest casino corporations, has also dealt with significant corporate governance changes in recent weeks. While outgoing CEO Jim Murren lobbied for the Las Vegas hotel industry March 16 at the White House, Murren formally left the company six days later handing the reins to Bill Hornbuckle on an interim basis. Murren immediately accepted Sisolak’s offer to become the head of Nevada’s coronavirus relief taskforce, providing the casino industry with an influential voice in federal lobbying matters.
Given the economic strain presented by the shutdown, the casino industry emerged as a viable candidate to receive a portion of the $2.2 trillion federal stimulus package signed into law last month. But to the AGA’s chagrin, the federal government excluded the casino industry from receiving economic aid April 3, under the U.S. Small Business Administration’s newly established Paycheck Protection Program (PPP). Interim regulatory guidelines preclude small gaming entities and their employees from receiving economic support under PPP.
“This decision will affect hard-working Americans from Pennsylvania to Nevada, Ohio to Colorado, and everywhere in between who need and deserve the same level of support as anyone across the country during these unprecedented times,” American Gaming Association President and CEO Bill Miller said in an April 3 statement.
The AGA urged Small Business Administrator Jovita Carranza to amend the initial guidelines, which it says will “irreparably harm one-third of the U.S. casino industry” and thousands of employees. The program is expected to provide up to $349 billion in forgivable loans, backed by the SBA.
MGM Resorts
A comprehensive relief package could ease payroll concerns for a number of major casinos. Since MGM Resorts temporarily shut its doors last month, the company has furloughed at least 70,000 workers.
While MGM Resorts does not plan on accepting any direct payments through the federal bailout, the company has indicated that it may consider accepting federal loan guarantees should the pandemic force casinos to remain closed for a lengthy period.
The Company is making swift decisions to significantly reduce expenses to protect its financial position. The Company estimates that 60-70% of its domestic property level operating expenses are variable and is undertaking a thorough review to significantly minimize these costs, such as the implementation of hiring freezes, furloughs, and other headcount reductions. —MGM Resorts, March 27 statement
Wynn Resorts
Wynn Resorts announced April 1 that the company decided to extend payroll coverage to all salaried, hourly, and part-time workers through May 15.
The plan covers more than 15,000 Wynn and Encore employees at properties in Las Vegas and Boston.
“It is our shared responsibility to follow the direction of health and safety professionals to stay home, and limit social contact,” Wynn Resorts CEO Matt Maddox said in a statement. “We owe it to each other, our families, and to our community.”
Wynn Resorts estimates that it is spending approximately $3.5 million a day in full salary and benefits continuation along with other cash operating expenses, according to an April 7 SEC filing.
Caesars Entertainment
Caesars Entertainment announced a strategic business update April 2 in response to the COVID-19 pandemic. After careful consideration, Caesars has decided to employ the “minimum workforce needed to maintain basic operations,” the company said in a statement. Under the plan, Caesars expects to furlough about 90% of employees at its domestic, owned properties, as well as its corporate staff.
“Given the closure of our properties, we are taking difficult but necessary steps to protect the company’s financial position,” Caesars Entertainment CEO Tony Rodio said in a statement. “The Company entered this crisis with strong operating performance, which, combined with the steps we are taking now, are critical to the future of our company.”
The coronavirus ramifications could push back the completion of Caesars’ proposed $17.3 billion merger with Eldorado Resorts to June, CNBC reported. In turn, the delay may impact William Hill, which has been rumored to take over a bevy of sportsbook properties under the proposed umbrella. Eldorado received a 20% stake in William Hill U.S. as part of a wide-ranging partnership reached by the companies in September 2018.
Boyd Gaming
Boyd Gaming announced additional measures on April 8 to mitigate the financial impact of COVID-19 related closures. The company will place most of its 25,000 team members on unpaid furlough, effective Saturday, April 11.
“This is by far the most difficult decision we have ever made,” Boyd Gaming CEO Keith Smith said in a statement. “We care deeply about the well-being of our team members, which is why we maintained full pay and benefits through April 10. Implementing furloughs was a last resort for us, but a necessary step to protect our company, especially given the current lack of visibility regarding property re-openings.”
Boyd Gaming operates 29 gaming properties in 10 states, including The Orleans Hotel and Casino in Las Vegas.
Though Sisolak’s order remains in effect until April 16, there is a strong likelihood that the governor will extend the closures when the 30-day order expires next week.
New Jersey
The casino closures, as expected, have hit Atlantic City hard. During the week ended April 4, all nine casinos in the city announced layoffs in some form. Top Boardwalk properties such as Ocean Casino Resort, Tropicana Atlantic City, and Harrah’s Resort Atlantic City are among the casinos that have issued temporary layoffs to employees in recent weeks.
The layoffs enable nearly 16,000 Atlantic City casino workers to file for unemployment benefits, according to multiple media reports. Over a seven-day period through March 28, more than 206,000 New Jersey residents filed for unemployment applications, according to U.S. Department of Labor figures. By comparison, 6,894 residents filed for unemployment during the 13th week of 2019, representing a nearly 30-fold increase year-over-year.
Ocean plans to reinstate some employees once a statewide closure on casinos is lifted, according to an internal memo obtained by The Press of Atlantic City.
Pennsylvania
Penn National Gaming implemented unpaid furloughs affecting approximately 26,000 employees, effective April 1. As of March 27, the company contributed over $1.2 million to the COVID-19 Emergency Relief Fund under the Penn National Gaming Foundation to support team members and local relief organizations, the company said in a statement.
Penn National also announced the sale of the Tropicana Las Vegas’ real estate assets and a new ground lease of a planned Category 4 mini-casino in Morgantown, Pa., to Gaming & Leisure Properties on March 27. In return, Penn National will receive $337.5 million in rent credits, according to the company.
“While this transaction will help to relieve liquidity pressure in terms of rent obligations, we are committed to taking further steps to reduce our ongoing operating expenses in order to ensure we have a healthy business to return to when we are able to re-open our doors,” Penn National CEO Jay Snowden said in a statement announcing the transactions.
Penn National operates 41 properties across 19 states, including Hollywood Casino at Penn National Race Course in Grantville and The Meadows Racetrack and Casino in North Strabane Township.
Tribal casinos
The Pullayup Tribe, headquartered in Tacoma, Wash., announced a round of cost-cutting measures April 4, as both of its Emerald Queen Casino locations remained closed due to the pandemic. Following the announcement, roughly 85% of Emerald Queen Casinos’ staff has either been furloughed or laid off, the Tacoma News Tribune reported.
San Manuel Casino announced April 3 that it is pushing back temporary closure plans until the end of April. Although the San Manuel Band of Mission Indians did not announce any layoffs at the Highland, Calif., casino, the tribe plans to cut wages of some senior staff members.
While sportsbooks search creatively for ways to engage customers, the sports betting industry received a speck of encouraging news early this week. One MLB plan under discussion may result in the resumption of training camp by next month, with regular-season games to follow in Arizona, ESPN reported.
NEWS: Major League Baseball and the MLBPA are focusing on a plan backed by federal health officials that could have players in training camps by May and games soon thereafter.
Details at ESPN on how MLB may return — and the difficulty in doing so: https://t.co/zDoNa3k4pm
— Jeff Passan (@JeffPassan) April 7, 2020
Following the cancellation of March Madness, the report is arguably the most uplifting news for sportsbooks in a month full of despair.
Given the fluidity of the situation, this story will be updated as more cost-cutting measures are announced.
